Contractor Linked to Cunningham Defaults on Homes

Thursday, Feb. 1, 2007 | A defense contractor linked to former Congressman Randy “Duke” Cunningham’s bribery scandal has defaulted on a $7.5 million loan linked to two of his homes, according to notices of default dated Dec. 29, 2006.

The pre-foreclosure notices on the properties, one in Poway and one in Chula Vista, represent the latest evidence of the financial trouble faced by Brent Wilkes since his name was first tied to the Cunningham case in mid-2005. Wilkes’ business, ADCS Inc., received millions of dollars in federal contracts after allegedly bribing the now-imprisoned Cunningham with monetary gifts, meals and trips on Wilkes’ corporate jet.

Wilkes has not been indicted, though his former attorney confirmed in 2005 that the Poway contractor was one of the unnamed co-conspirators listed in a plea agreement signed by Cunningham in which the congressman admitted to taking $2.4 million in bribes from four co-conspirators. Wilkes’ association with the case has leveled lasting damage to his business, a paper-to-electronic document conversion company that garnered nearly $100 million in contracts from the Defense Department. The company has not secured a federal contract since 2005.

The notices of default, documents mailed when borrowers miss at least one payment on a loan secured by property, show that damage has rippled into Wilkes’ personal finances as well.

One of the properties facing the possibility of foreclosure is a 5,325-square-foot home on Paseo Valle Alto in the gated Green Valley Estates community in Poway. Wilkes and his wife, Regina, purchased the home in 1999 for $1.4 million, 5 years after Wilkes started ADCS, and two years after ADCS landed one of its first big-money Pentagon contracts.

Also in the first stage of foreclosure is the couple’s 1,526-square-foot home, built in 1950, on Second Avenue in Chula Vista.

A third property, on Pacato Way in Rancho Bernardo, is up for sale. The couple purchased that home in the Gatewood Hills community in March 1996. It was listed on Jan. 20 with an asking price of $680,000.

Wilkes also missed the Dec. 11 deadline to pay county property taxes for three of his four residential properties. The outstanding payments, plus the delinquent fees, total $5,786.56, said Dan McAllister, the county tax collector. Taxes for the fourth property, his Poway home, were paid by the bank as part of a courtesy program tied to Wilkes’ mortgage, McAllister said.

Recent news reports have indicated that San Diego U.S. Attorney Carol Lam, who has been asked to resign by the Justice Department, has told her prosecutors to wrap up the Wilkes investigation and bring charges before she steps down Feb. 15.

A spokeswoman for Lam declined comment. Neither Nancy Luque nor Mark Geragos, Wilkes’ attorneys, returned requests for comment this week.

Wilkes’ Rancho Bernardo home was listed on the market Jan. 20, two days after Union Bank of California announced it was placing the ADCS headquarters on the block to recover more than $12 million in debts.

Shawn Martin, law professor at the University of San Diego, said the liquidation of assets isn’t always a deliberate strategy employed by people under investigation, but is indicative of Wilkes’ financial plight caused by his connection to the high-profile case.

“This is a sign that you can no longer make ends meet,” he said. “The nature of the investigation makes his business plummet. Legally, you’re innocent until proven guilty, but people are free to deal with whomever they like.”

In an August interview with The New York Times, Wilkes maintained his innocence and lamented the adverse financial effects caused by his name’s association with the Cunningham’s case. “I’m a dead man. I wouldn’t be able to get a meeting. I wouldn’t be able to get a phone call returned,” he said. “There’s no way I could get a deal.”

Employee lay-offs and scaled back operations at ADCS haven’t been enough to save the headquarters on Stowe Drive in Poway, which entered the foreclosure process because of more than $12 million in outstanding debt. An auction originally scheduled for Thursday has been postponed to March 29, said Arlene Bowditch, senior trustee sale officer and supervisor for First American Title Insurance Company. A three-way transaction with the Poway Unified School District and developer Will Gustafson has been proposed.

Wilkes also owes more than $590,000 in back taxes and delinquent fees to San Diego County on the Poway business property as of Feb. 1, McAllister said. The contractor hasn’t paid property taxes on the $16.2 million ADCS property since 2004.

“This is one of the highest amounts owed by an individual,” McAllister said. “We are very interested in seeing the money come to us.”

Wilkes has refinanced each of his four homes at least once since purchasing them, pulling out thousands of dollars from his real estate holdings. The Wilkeses established a family trust for the properties, removing them when they refinanced their mortgages, and replacing them into the trust after the new loans were secured.

To secure a $7.5 million business loan for Wilkes’ companies from Merrill Lynch Business Financial Services Inc., in January 2004, Wilkes and his wife pledged their Poway and Chula Vista homes as collateral, records filed at the county Recorder’s Office show. It is that loan that is in default.

Months later, in May, Wilkes allegedly paid $525,000 toward the mortgage of Cunningham’s Rancho Santa Fe home in May 2004, according to the Cunningham case documents.

In February 2006, eight months after Cunningham’s corruption and Wilkes’ connection to him were first exposed by Copley News Service and The San Diego Union-Tribune, the couple refinanced the home again with two loans, one for $1.5 million and one for $400,000, county property records show.

They also refinanced their Rancho Bernardo properties in June 2005 — the for-sale Pacato Way house and a three-bedroom, 1,655-square-foot home on Montero Road.

In December, Wilkes’ wife, Regina Gail Wilkes, filed for a formal separation from Wilkes after a 16-year marriage, citing irreconcilable differences, The North County Times reported Tuesday.

In the 2005 plea agreement, Cunningham admitted that “co-conspirator No. 1” (later identified to be Wilkes by his attorney) wrote two checks to Cunningham, one for $70,000 and one for $30,000, in May 2000. Wilkes also allegedly paid $11,116.50 for a mortgage on Cunningham’s yacht, the Kelly C. Cunningham admitted that he took gifts from Wilkes and others in exchange for steering military contracts their way.

And Wilkes is included as a benefactor for a list of unreported gifts to Cunningham, along with co-conspirator Mitchell Wade, who pleaded guilty last year to conspiring to funnel more than $1 million in bribes to Cunningham. Between January 2000 and spring 2005, according to Cunningham’s plea agreement, Wade, Wilkes and others lavished more than $10,000 in gifts, meals and travel and hotel expenses on Cunningham. Wilkes and his lawyers have maintained his innocence, saying he did nothing to merit an indictment.

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