James sensed trouble at MZM

Legal papers show she quickly left job, citing questionable conduct

12 Jun 2006 // Within two months of joining defense contractor MZM Inc., former Bush administration official Kay Coles James quit after questionable conduct by the company's president, she said in legal papers.

MZM founder Mitchell J. Wade is at the heart of a national bribery scandal involving former Rep. Randy "Duke" Cunningham, R-Calif., who has gone to prison in the case.

Details about James' short stint at MZM have emerged in court filings related to a claim filed against her by MZM's successor company in a contract dispute.

James, a Portsmouth native, served as a Virginia Cabinet secretary under then-Gov. George Allen. From July 2001 to Jan. 31, 2005, she was director of the U.S. Office of Personnel Management.

In May 2005, Wade trumpeted the hiring of James, who received a $150,000 signing bonus and a $350,000 base salary, although the compensation details were not made public at the time.

"We look forward to Ms. James providing the same quality leadership for the employees and clients of MZM Inc. as she has so successfully demonstrated on behalf of our country," Wade, who was MZM's president and chief executive officer, announced in a news release.

In recruiting her, Wade represented that neither he nor his company would ever do anything illegal, immoral or unethical, James said in the legal papers in U.S. District Court for the District of Columbia. She filed a counterclaim responding to a lawsuit against her by MZM's successor, Athena Innovative Solutions Inc.

But on June 12, 2005, a San Diego newspaper reported that Cunningham had sold his house to Wade, who later sold it at a $700,000 loss, while the lawmaker was trying to support MZM's efforts to get millions of dollars in Pentagon contracts.

Around June 16, Wade asked James to take the position of chief operating officer, according to the legal papers. When she asked if there was any other alleged wrongdoing of which she should be aware, beyond what had been reported, he said there were no such instances, according to the legal papers.

On June 17, it was reported that the FBI was looking at Cunningham's sale of his home to Wade. On June 22, the San Diego newspaper reported that Wade had pressured MZM workers to donate to a political fund that benefited Cunningham and others.

James gave her resignation in a letter "on or about" June 24, according to her counterclaim. She wrote of her belief that Wade had "engaged in conduct that he had substantial reason to believe would cause harm to my reputation if discovered or willfully disclosed."

In addition, she contended that Wade "misrepresented the circumstances that led to my eventual employment less than two months ago," the counterclaim said.

Cunningham resigned in disgrace. He was convicted of accepting bribes and sentenced to eight years and four months in prison. Last week, a special election was held to fill his seat.

James' involvement with MZM has been little more than a footnote to a larger national story. She declined to talk about it last week, or about the legal proceedings related to her employment there.

Athena Innovative Solutions sued James on Oct. 13. It sought $83,599.17 that it contended it should have been reimbursed from her signing bonus under terms of their agreement. James denied the claims and filed the counterclaim.

The legal papers disclosed that James was promoted around June 16, 2005, to chief operating officer with a raise to a base pay of $500,000. Afterward, Wade stepped down as president and CEO, according to James' counterclaim.

On Dec. 13, the initial lawsuit and her counterclaim were dismissed in a one-sentence court order. The case apparently was settled.

Athena's lawyer refused last week to discuss the case. Lawyers for James did not return a reporter's calls.

MZM's compensation for James fit a pattern for the company, said Keith Ashdown of Taxpayers for Common Sense, a watchdog group.

Wade's "business plan was to bring in the best and the brightest by offering more money than they'd seen in their careers in government," Ashdown said.

James had a salary of $158,100 in 2004, according to the most recent available data from a guide to government salaries called the Plum Book.

MZM's actions have touched other politicians than Cunningham. When Wade pleaded guilty in February, he acknowledged making illegal political donations to two lawmakers.

They were identified through campaign finance records as Republican Reps. Virgil H. Goode Jr. of Virginia's 5th District and Katherine Harris of Florida. Both lawmakers have denied wrongdoing and have not been charged.

Wade has not been sentenced yet.

James, meanwhile, is working as senior partner for Watts Consulting Group, headed by former Republican Rep. J.C. Watts Jr. of Oklahoma, according to the company's Web site.

When she left the Office of Personnel Management, James said she would look for ways to "maintain a voice in national policy discussions while participating in private and nonprofit solutions designed to improve the lives of our fellow citizens and further meaningful reforms."

Before her appointment by President Bush, she was a nationally known social conservative. She had served as a dean at Regent University in Virginia Beach, had worked in the national drug policy director's office and the U.S. Department of Health and Human Services.

When Wade announced her hiring, he boasted that James had "the distinction of being appointed to federal appointments by three United States presidents": George W. Bush; his father, George H.W. Bush; and Ronald Reagan.