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Sources: CIA's No. 3 official to quit

Foggo under investigation for ties to contractor in bribery case

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Kyle "Dusty" Foggo directs the CIA's day-to-day operations.

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WASHINGTON (CNN) -- The third-highest official at the CIA, under investigation over ties to a defense contractor linked to a Capitol Hill bribery inquiry, has decided to step down, intelligence sources told CNN Monday.

Kyle "Dusty" Foggo was plucked from relative obscurity by CIA Director Porter Goss to become the CIA's executive director, the agency's No. 3 position. As such, Foggo was in charge of day-to-day operations at the spy agency.

Goss announced his resignation Friday after what intelligence sources described as a power struggle with National Intelligence Director John Negroponte.

Intelligence officials said Foggo's departure would be "pretty standard" because the executive director "tends to follow the CIA director's career trajectory."

On Monday, President Bush nominated Negroponte's chief deputy, Air Force Gen. Michael Hayden, to replace Goss. (Full story)

Foggo is being investigated by both the FBI and the CIA's inspector general over ties to a defense contractor linked to the bribery case against former U.S. Rep. Randy "Duke" Cunningham of California.

The investigations stem from Foggo's relationship with defense contractor Brent Wilkes. The two men have reportedly been friends since childhood.

Legal filings in the Cunningham case allege that an unindicted co-conspirator gave Cunningham $525,000 in bribes in return for $6 million in government contracts. Officials have identified the unindicted co-conspirator as Wilkes.

Cunningham, a Republican, resigned his seat in the House after pleading guilty in November to accepting $2.4 million in bribes. He is serving an eight-year prison sentence.

The CIA's inspector general is now looking at a contract Wilkes had with the CIA, awarded by Foggo, to see if there was anything improper in the deal.

The contract, valued at $2.4 million, was for providing water and household items to CIA agents operating in war zones such as Afghanistan and Iraq.

In addition, federal law enforcement sources told CNN the investigation continues into "outstanding issues" in the Cunningham bribery case, and that Foggo is part of those issues.

After media reports surfaced last week alleging Wilkes provided Cunningham with limousines and prostitutes at two Washington hotels, Foggo said he had attended poker parties thrown by Wilkes at the hotels.

In a statement issued by the CIA, Foggo said he never saw prostitutes at the games and he said any allegation to the contrary would be "false, outrageous and irresponsible."

CIA spokeswoman Jennifer Millerwise said Foggo maintains that any government contracts over which he had responsibility "were properly awarded and administered."

"If he attended occasional card games with friends over the years, Mr. Foggo insists they were that, and nothing more," she said.

The FBI is investigating allegations that Wilkes contracted with a Virginia company, Shirlington Limousine and Transportation, to procure prostitutes for Cunningham and deliver them to the hotels.

Through his attorneys, Chris Baker, CEO of the company, denied wrongdoing.

Shirlington holds a $21.2 million contract to provide shuttle buses and other transportation for the Department of Homeland Security, even though Baker has a criminal record that includes two felony convictions and a number of misdemeanors.

DHS said the contract was properly awarded under a Small Business Administration program and that the criminal background of the company's CEO was not an issue.

While DHS does background checks on drivers, it does not have the resources to investigate company officials, spokesman Larry Orluskie said.

CNN correspondent John Roberts contributed to this report.

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