By Elana Schor, The Hill, February 13, 2007

14 Feb 2007 // A federal grand jury yesterday charged two allies of imprisoned former Rep. Randy “Duke” Cunningham (R-Calif.) with fraud, conspiracy and money laundering, reopening a scandal that crimped the GOP’s electoral fortunes and fueling debate over the controversial dismissals of several U.S. attorneys.

The CIA’s No. 3 until he resigned last spring, Kyle “Dusty” Foggo, and defense contractor Brent Wilkes face at least 11 felony counts in San Diego stemming from their illicit courtship of Cunningham. Federal authorities say Wilkes’s web of businesses reaped federal contracts while Cunningham served as a House appropriator, with the then-lawmaker netting a litany of lavish gifts in return.

A second indictment charged Wilkes with steering more than $700,000 in bribes to Cunningham, and a New York mortgage banker with obstruction of justice for allegedly masking that Wilkes paid off Cunningham’s mortgage. Cunningham’s earmarking sent $70 million to companies owned by Wilkes and his associates, according to an October House Intelligence Committee report.

“High government positions and powerful connections should not be tickets to corrupt self-enrichment,” U.S. Attorney Carol Lam, who spearheaded the ongoing probe of Cunningham’s network, said in a statement. “The public trust is not for sale.”

Foggo and Wilkes “created and used shell companies and straw men to conceal … Wilkes’s financial interest and role in CIA contracts, and to launder money obtained from CIA contracts,” the first grand jury indictment stated. The indictment against Wilkes and his mortgage banker expanded on the tales of influence-buying that — along with the case against imprisoned GOP lobbyist Jack Abramoff — drove Democratic outcries for ethics reform and helped the party regain the majority last year.

The second indictment asserted that Cunningham, who served on the Appropriations subcommittee for defense spending, “agreed to use his public office and take other official action to influence the ... Congress’s authorization and appropriation of funds in a manner that would benefit” Wilkes’s company, ADCS, and MZM, another contracting business owned by Mitchell Wade.

Cunningham’s favor-trading with Wilkes began as early as September 1996, according to the indictment, when the then-lawmaker began pushing for funding of a Pentagon document-conversion program that would benefit Wilkes. That year Wilkes began treating Cunningham to thousands of dollars in meals at K Street’s favorite boîtes, including the Palm, Ozio’s, Mr. K’s and Capital Grille.

Wilkes provided Cunningham with talking points in 1999 to help him pressure Pentagon officials for more funding, the indictment stated. A year earlier, Cunningham had called a document-conversion manager 30 minutes after Wilkes left his office to push for payment of invoices for projects that showed no evidence of completion. Wilkes also paid for a 2003 Hawaii trip that included prostitutes for himself and Cunningham.

The indictment against Wilkes calls for him and the mortgage banker, John Michael, to remit to the government property valued at about $12 million. A separate indictment against Foggo and Wilkes includes no monetary-repayment obligations. Wade agreed to share information with the government early in the process, which may have kept him from the threat of a jail term.

Justice Department officials have praised the Cunningham probe as the linchpin of their growing pursuit of public corruption cases, yet prosecutor Lam is nonetheless slated to step down tomorrow after the Bush administration cited unspecified “performance” issues in requesting her resignation late last year. Six other U.S. attorneys, several involved in ongoing corruption investigations, were dismissed at about the same time.

Disturbed lawmakers are moving quickly on a bill that shifts power to appoint interim federal prosecutors back to the judiciary, reversing a provision included in last year’s Patriot Act reauthorization. Deputy Attorney General Paul McNulty, who faced skeptical Senate Judiciary Committee members last week, will be on the Hill today in a closed briefing for panel members on Lam’s dismissal.

Senate Majority Leader Harry Reid (D-Nev.) said yesterday that he plans to ask for unanimous consent to move the U.S. attorneys bill today, although Republicans are likely to block that move over concerns that giving courts the power to name prosecutors would overstep the separation of powers.

House Democratic Caucus Chairman Rahm Emanuel (Ill.) has called for Lam to continue her cases against Wilkes, Foggo and others reportedly ensnared in the probe, including former House Appropriations Chairman Jerry Lewis (R-Calif.), via a special prosecutor appointment.

“We will demand answers and we will not allow this issue to go away,” Emanuel spokesman Nick Papas said yesterday.