[Mb-civic] Earmarks Became Contractor's Business - Washington Post

[William Swiggard]

Earmarks Became Contractor's Business
Fee Reportedly Included Share of Firms

By Charles R. Babcock
Washington Post Staff Writer
Tuesday, February 21, 2006; A03

In the fall of 2003, Randy Beck, the president of a small San Diego 
manufacturing company, showed a new acoustics technology he was 
developing to his neighbor, defense contractor Brent Wilkes. Wilkes soon 
came back with an unusual proposition.

Wilkes said that Congress had set aside or "earmarked" $25 million in 
the military budget for the Navy to develop an acoustical system. He 
promised he could win the government contract to develop the system for 
Beck's Horizon Sports Technologies, according to allegations in a 
lawsuit. In return, Wilkes wanted $1.5 million up front to cover his 
lobbying expenses and a 51 percent interest in a new company they would 
set up to collect the government cash.

Wilkes's dealings with Beck -- outlined in court records after a 
falling-out -- provide insight into how one businessman set out to 
exploit the Washington system of earmarking -- the practice of members 
of Congress setting aside pots of money for pet projects. That practice, 
involving billions of dollars annually, is vulnerable to abuse because 
much of the lobbying and decision making takes place behind closed 
doors, according to critics. And Wilkes, who has been implicated in the 
bribery-related conviction of resigned Rep. Randy "Duke" Cunningham 
(R-Calif.), pushed the limits of that system.

Although it is common for lobbying firms to charge clients large fees to 
pursue earmarks, Wilkes's demand for a majority interest in the 
resulting contract is highly unusual, experts said. "It has a strong, 
bad odor about it," said Kenneth A. Gross, a Washington lawyer who 
specializes in ethics law. He said many states, including California, 
have banned such contingency, or success, fees, though there is no 
federal prohibition.

"My client did nothing inappropriate or illegal in trying to obtain 
funding for his clients' projects," said Wilkes's attorney, Michael 
Lipman of San Diego.

Wilkes was an obscure California contractor and lobbyist until his name 
surfaced last year as one of two defense contractors alleged to have 
given Cunningham $2.4 million in cash and other benefits in return for 
Cunningham's steering government business their way. One of Wilkes's 
companies received more than $80 million in Pentagon contracts over the 
past decade that stemmed from earmarks that Cunningham slipped into 
spending bills.

Although he has not been charged in the case, Wilkes's attorney has 
confirmed that he is the "co-conspirator" identified in the federal 
charging documents who allegedly made $625,000 in illegal payments to 
benefit Cunningham in 2000 and 2004. Prosecutors say the investigation 
is continuing.

Wilkes, 51, grew up in San Diego and graduated from San Diego State in 
1977 after studying accounting. He worked in Washington in the 1980s but 
did not make his first federal political donation until 1991. Wilkes 
then went to work for a Southern California software company that was 
seeking federal contracts for converting paper documents to digital ones.

In 1995, Wilkes started a competing business, ADCS Inc., which stood for 
"automated document conversion systems." With Cunningham's help, he 
began winning contracts from the Pentagon.

He snared a $1 million Pentagon contract in 1997, which Cunningham 
proclaimed "an asset" to San Diego. In 1999, ADCS was awarded a $9.7 
million contract to convert documents in Panama. Subsequently, the 
company began collecting more than $20 million a year in defense business.

As his business grew, Wilkes bought new homes in San Diego and Northern 
Virginia, started a charitable foundation and built an $11 million 
headquarters for his privately owned company. The San Diego 
Union-Tribune reported that he took expensive vacations to Hawaii and 
Idaho, and treated his staff and congressional friends to meals in fancy 
restaurants.

Defense officials asked the inspector general in 1999 to review the 
program because they were bothered by the aggressive style of Wilkes and 
Cunningham in seeking additional earmarks for ADCS.

Business was so good for Wilkes that he allegedly gave Cunningham 
$100,000 in 2000, according to the former congressman's recent plea 
agreement. And the following year he expanded his business by setting up 
his own lobbying firm, Group W Advisors, in the Washington suburbs, to 
pursue earmarks.

He became an active supporter of leading House Republicans and began 
flying Cunningham and several others around on a corporate jet. As he 
cultivated new political friends, he became less dependent on Cunningham 
to win him earmarks.

For example, in June 2002, Wilkes and an associate, Max Gelwix, 
established PerfectWave Technologies LLC, which was trying to perfect a 
way to delete background noise from radio communications. According to a 
knowledgeable source, Wilkes held a 51 percent interest in the company, 
as became his practice.

A month later, Wilkes hired the Alexander Strategy Group, a lobby shop 
run by former aides of then-House Majority Leader Tom DeLay (R-Tex.). 
Wilkes, Gelwix and their wives and associates then began donating to 
DeLay, Rep. Roy Blunt (R-Mo.) and Rep. John T. Doolittle (R-Calif.), a 
member of the Appropriations Committee, among others.

They donated more than $85,000 to Doolittle's campaign and political 
action committee between 2002 and 2005. Doolittle acknowledged to The 
Washington Post recently that he sponsored earmarks, totaling $37 
million, in defense funding bills for PerfectWave Technologies, 
beginning in 2002. Wilkes divested his majority interest in PerfectWave 
late last year after the Cunningham charges and his role in them became 
public.

Wilkes's pitch for seeking earmarks and a partnership with his neighbor 
Beck is outlined in a lawsuit filed by Beck's Horizon Sports last year. 
Wilkes's pledge of snaring the $25 million Navy contract soon led to 
other promises, according to the suit, with Wilkes saying he could get 
Beck part of another $25 million earmark for energy-efficient vehicles.

By early 2004, Beck's group had wired $1.2 million to Wilkes while Group 
W had registered to lobby for two newly created companies, according to 
the lawsuit. Wilkes suggested the names -- Acoustical Communications 
Systems for the Navy project, and Optimum Composite Design, for the 
energy-efficient vehicle.

But the relationship soon soured. Horizon Sports complained in its 
breach-of-contract suit that Wilkes did not deliver on his promise of 
big cash from Congress. Only a single earmark for $1 million was 
included in the fiscal 2005 defense appropriations bill for "advanced 
shipboard acoustical communications," a term for Beck's technology. 
Wilkes and his companies insisted that they lived up to their contracts 
with Beck, and the case was settled out of court last fall. Neither side 
will discuss the details because of a confidentiality agreement.

In a court filing Friday, prosecutors in the Cunningham case said that 
in May 2004 the congressman demanded that Wilkes give $525,000 to pay 
off a second mortgage on Cunningham's new home in Rancho Santa Fe. 
Wilkes agreed, the document said, on the condition he receive an 
additional $6 million in government funding, which he did through a 
Pentagon subcontract.

Last year, Group W registered to lobby for another new company, Pure 
Aqua Technologies, in another partnership deal. According to a paper 
circulated at an industry trade show in Hawaii in late 2004, Pure Aqua 
was created by Wilkes's ADCS Inc. and Pure-O-Tech Inc. of Escondido, 
Calif. The company makes water purification technologies, including one 
to treat contamination from percolates, an oxidizer in rocket fuel and 
explosives.

In mid-2004, $3 million in funding that was not requested by the Bush 
administration was added to the fiscal 2005 defense appropriations bill 
in the House. The measure was cut to $1.5 million when it reached a 
House-Senate conference committee. An additional $2.7 million for the 
specific technology Pure-O-Tech used was added to the Pentagon 
appropriation in the House committee last June but did not survive in 
the final bill.

Can Sirin, Pure-O-Tech's president, said in a recent interview that 
Wilkes "assisted us in getting earmarked money through a congressman, 
which we were grateful for." He recalled that the earmark was for $1.5 
million and said the description in the fiscal 2005 conference report 
matched his technology. But he said he could not remember which 
congressman sponsored it and was not aware of a second attempt to 
earmark $2.7 million.

His company discussed an equal partnership arrangement with Wilkes, he 
said. But Sirin said he ended the talks when Wilkes's relationship with 
Cunningham surfaced last summer.

"We just didn't need that," he said.

http://www.washingtonpost.com/wp-dyn/content/article/2006/02/20/AR2006022001154.html
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