Wednesday, July 6, 2005
Second boat deal surfaces
By: WILLIAM FINN BENNETT - Staff Writer
California's North County Times
Questions continued to surface Tuesday about Rep. Randy "Duke" Cunningham's business dealings, this time concerning a yacht that he sold to a New York businessman in 2002 ---- a yacht that U.S. Coast Guard records show is still registered in Cunningham's name.
In fact, Coast Guard officials said Tuesday that in May, Cunningham requested and received a reissuance of the certificate of documentation, a document which shows him as the registered owner.
If the Coast Guard had evidence that someone other than the owner had been issued a certificate of documentation, the document would probably be rescinded, a Coast Guard official said.
In 2002, a company controlled by the family of New York businessman Thomas T. Kontogiannis bought the yacht, called the "Kelly C," from Cunningham for $627,000. Kontogiannis said Tuesday that he paid $30,000 down and took over a $143,000 bank loan of Cunningham's that was outstanding on the boat as part of the deal. He added that he repaid the outstanding $454,000 balance as part of a deal to pay off Cunningham's mortgage on a new Rancho Santa Fe home.
He added that he carried the note on the $454,000 balance owed.
While he received a bill of sale on the boat, he asked Cunningham to retain the title on the yacht so that the outstanding $143,000 bank loan would not have to be paid off immediately, Kontogiannis said.
"I asked him, 'Please, can I leave the boat in your name?' He said, 'OK, but I have a bill of sale,' " Kontogiannis said Tuesday.
He added that the purchase price was one dollar, plus other "valuable goods." After his family company, Axxiom LLC, bought the boat, he immediately transported it to a Long Island marina, where it remains, he said.
In a report by Copley News Service on Tuesday, Kontogiannis said that at the time he bought Cunningham's boat, he had spoken with the congressman for advice on seeking a pardon from President Bush for a 2002 conviction for fraud. Kontogiannis and others had pleaded guilty to charges that stemmed from an alleged bribery scheme to obtain $6 million in computer contracts from New York public schools. Kontogiannis told reporters that Cunningham had steered him to a Washington law firm that he could talk to about the matter.
The 2002 boat sale, news of which broke in press reports Tuesday, is the latest twist in the ongoing controversy surrounding Cunningham and is indirectly related to two other business deals involving Cunningham that have raised questions about his relations with a Washington defense contractor.
When the eight-term Congressman sold his Del Mar Heights home to a company owned by the president of Washington-based MZM Inc. in late 2003, the $1.675 million sales price was apparently hundreds of thousands of dollars more than what other similar-sized homes were selling for in the area at that time. MZM President Mitchell J. Wade then resold the home for a $700,000 loss in October 2004.
Those real estate transactions are believed to be the focus of an ongoing federal grand jury investigation into Cunningham's ties to Wade. On Friday, federal agents raided Cunningham's Rancho Santa Fe home in search of documents, as well as MZM offices in Washington and another yacht that Cunningham had been living on in Washington until recently. That yacht, called the "Duke-Stir," is owned by Wade.
Questions have arisen whether Cunningham used his position on a powerful House subcommittee on defense to steer millions of dollars in defense contracts to Wade's company and whether Wade's business dealings with Cunningham were a payback for those contracts ---- allegations Cunningham has denied.
Around the same time that Cunningham sold the Del Mar Heights home to Wade, he bought the 8,000-square-foot, Rancho Santa Fe home for $2.6 million. When he did so, he took out two loans for the purchase. Property records show that both loans ---- one for $595,000 and a second for $500,000 ---- were financed by New York-based Coastal Capital Corp., a company controlled by Kontogiannis' daughter and his nephew.
Kontogiannis said that the loans were perfectly legitimate and at prevailing interest rates.
"Nobody did anybody any favors," Kontogiannis said. "I bought the boat, (but) both mortgages were recorded and there is no hanky-panky."
On Tuesday, Cunningham's Washington-based attorney, K. Lee Blalack, had this to say about the boat sale to Kontogiannis: "Duke's business dealings with Mr. Kontogiannis were entirely proper and any suggestion to the contrary is simply false."
A source close to the investigation said Tuesday that Cunningham had allowed the certificate, which must be renewed annually, to lapse in 2003. Recently, Cunningham approached Kontogiannis and began negotiating to repurchase the boat, the source said. In the expectation that the deal would go through, Cunningham then applied for a reissuance of the Coast Guard's certificate of documentation, the source said, adding that it was a clerical error.
The fact that Kontogiannis' company applied with the Coast Guard in 2003 to receive documentation on the "Kelly C" shows that no one was trying to hide anything, the source said.
Coast Guard officials on Tuesday confirmed that Axxiom had applied for the document in 2003. However, the certificate was not issued because the company did not present any bill of sale or other documentation showing that it owned the boat.
"We couldn't accept it because there wasn't any title change," said Marcia A. Barrett, Coast Guard records and research manager.
Coast Guard officials decided to reissue the certificate to Cunningham in May because Axxiom never responded to a letter from her office asking for additional documentation that would prove its ownership of the boat, Barrett added.
Contact staff writer William Finn Bennett at (760) 740-5426, or
[email protected].