Easy Come, Easy Go

The meteoric rise and fall of defense contractor MZM offers lessons for feds.

According to its Web site, MZM Inc. "has been solving enigmatic problems for an ever wider range of government and private sector entities" since its founding in 1993. The Washington-based company, whose avowed mission is "to assist leaders of government and private industry prepare for and adapt to the increasing perplexities and challenges of the 21st century," is facing its own enigmatic problem just now. The Justice Department is investigating the increasing perplexities surrounding the company's financial dealings and business practices.

MZM's troubles began in June when the San Diego Union-Tribune reported that MZM founder Mitchell J. Wade bought a house from Rep. Randy "Duke" Cunningham, R-Calif., for $1.7 million in October 2003, then turned around and sold the house a month later at a $700,000 loss. However faulty Wade's real estate judgment might have been, MZM's business with the government began to soar: According to General Services Administration records, MZM's earnings under the Federal Supply Schedule that allows the company to provide information technology services to federal agencies went from zero in September 2002 to more than $10 million in September 2003.

While in Washington, Cunningham lived rent-free aboard Wade's yacht, which was named the Duke-Stir. Cunningham, a former Navy commander and decorated combat pilot in Vietnam, is a member of the House Defense Appropriations Subcommittee. He announced last month that he would not seek reelection next year, saying in a statement that he showed "poor judgment" in his dealings with Wade, whom he described as a personal friend, but insisting he did nothing wrong. Wade was a Navy reservist and former Defense and Navy program manager, according to the Los Angeles Times. He resigned from MZM in June. Wade could not be reached for comment.

Wade wasn't the only member of MZM infused with the spirit of generosity. Public campaign finance records show that Wade and dozens of other senior company officials and their family members, individually and through the company's political action committee, contributed tens of thousands of dollars to the campaigns of Cunningham, Rep. Virgil Goode, R-Va., and Rep. Katherine Harris, R-Fla. Some company employees told the Union-Tribune they were pressured to make the contributions.

It was certainly in MZM's interest to be seen favorably by Goode and Harris. The company received hundreds of thousands of dollars in grants and tax breaks from the state of Virginia to open a facility in Martinsville, in Goode's district. A statement by Virginia Gov. Mark Warner said Goode was "instrumental in securing this project for Virginia." MZM was reportedly pursuing a deal to open a facility in Harris' Florida district as it sought business with U.S. Central Command and U.S. Special Operations Command.

Just how much MZM employees knew about the company's lobbying efforts is unclear. What is clear is that MZM wasn't courting just lawmakers. When MZM came under federal scrutiny in June, Kay Coles James, former director of the Office of Personnel Management, had just become the company's senior executive vice president for national security transformation, replacing retired Lt. Gen. James C. King, former head of the National Imagery and Mapping Agency (now the National Geospatial-Intelligence Agency). After Wade stepped down in late June, James resigned, along with MZM's chief operating officer, Frank Bragg. King became the new chief executive, and is reportedly looking for a buyer for the company.

Because MZM is privately held, little public information is available about its operations. Many of its federal contracts involve classified intelligence work and therefore are shielded from public records. MZM had a five-year blanket purchase agreement with the Defense Information Systems Agency, which allowed Defense agencies to contract with the company without competitive bidding.

A March 2004 audit by the Defense inspector general criticized the Defense Contracting Command-Washington for misusing GSA information technology schedules in awarding a contract to MZM to provide 21 linguists for work in Iraq. According to a copy of the contract, obtained by Washington-based watchdog group The Center for Public Integrity under a Freedom of Information Act request, MZM was, among other things, to "provide interpreting during interrogations, investigations, briefings, meetings, presentations, negotiations, etc."

Much of the company's work for Defense appears to be with the Army's National Ground Intelligence Center in Charlottesville, Va. The Washington Post reported last month that more than 15 staffers from the center have gone to work for MZM in the past three years, including the senior civilian official, Executive Director William S. Rich Jr. In July, the Pentagon stopped new work on the NGIC contract while the company is under investigation.