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Former CIA No. 3 indicted for steering contracts to friend

Story Highlights

NEW: Contractor's bribes allegedly included prostitutes for congressman
• Dusty Foggo, a former CIA official, indicted on multiple criminal charges
• The two accused are expected to surrender Wednesday morning
• Probe linked to bribery scandal involving ex-Rep. Randy "Duke" Cunningham
From Kelli Arena and Terry Frieden
CNN Washington Bureau
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SAN DIEGO, California (CNN) -- The CIA's former third-ranking official and a California defense contractor have been indicted on corruption charges in the same bribery probe that sent former congressman Randy "Duke" Cunningham to prison, federal prosecutors announced Tuesday.

Kyle "Dusty" Foggo quit his post as the CIA's executive director in May 2006 after prosecutors began looking into his ties with longtime friend Brent Wilkes.

On Tuesday, prosecutors alleged that Foggo, in exchange for lavish gifts, pressured subordinates to award water and procurement services contracts to Wilkes and his company, ADCS Inc.

"Among the gifts that are provided are these lavish overseas gifts, including a $44,000, one-week stay at a Scottish castle," Assistant U.S. Attorney Sanjay Bhandari said. "Beyond that, there's a pattern of promises of future gifts -- a job at Wilkes' company."

The indictment alleges Wilkes paid for private jets, limousines, antiques and prostitutes for Cunningham.

Wilkes has been charged with bribery, conspiracy, money laundering, wire fraud and depriving taxpayers of honest services in a 35-count indictment. In addition to counts relating to Foggo, he is accused of bribing Cunningham -- now serving an eight-year prison term -- to the tune of $700,000 to get the congressman to steer government contracts his way.

Foggo faces an 11-count indictment charging him with conspiracy, wire fraud, depriving taxpayers of honest services, conflict of interest and money laundering. He "affirmatively hid" the gifts from his superiors at the CIA before his resignation, U.S. Attorney Carol Lam told reporters.

"These two indictments describe patterns of self-dealing and corruption that spanned years and reached deep into our country's system of procurement for the defense industry," Lam said.

Efforts to contact lawyers for Wilkes and Foggo were unsuccessful Tuesday evening. Lam said the two men are expected to surrender Wednesday morning.

Prosecutors will also try to reclaim $12 million in profits they say Wilkes received as a result of the schemes, Lam said.

A third man, New York mortgage banker John Michael, was charged with obstruction of justice. Prosecutors said he lied to a grand jury about Wilkes' role in paying off a half-million-dollar second mortgage on Cunningham's home.

The indictments stem from an ongoing corruption probe of Cunningham, a decorated Navy veteran who held seats on the House Intelligence Committee and the appropriations subcommittee that oversaw Pentagon spending. The Republican pled guilty in November 2005 to accepting $2.4 million in bribes from defense contractor Mitchell Wade.

Wade has been cooperating with prosecutors. Lam would not say whether Cunningham would testify during trials for Foggo or Wilkes.

Foggo was named to the executive director's post, which runs the spy agency's day-to-day operations, by then-Director Porter Goss. He resigned a week after Goss was forced out by widespread criticism of his management, and federal agents raided Foggo's home days later.

Goss has not been accused of wrongdoing in the case. His replacement, Michael Hayden, said Tuesday that the CIA has cooperated with the investigation, and "that cooperation continues today."

Wilkes' indictment states that the contractor paid for Cunningham's limousine travel around Washington; bought a $14,000 speedboat and a $1,500 laptop computer for the congressman; and flew him to and from his San Diego, California, district to Washington on a private jet.

The indictment also accuses Wilkes of picking up the tab for all or part of Cunningham's outings to Idaho; the Florida Keys; Palm Springs, California; and Hawaii, where the document states Wilkes had an employee line up prostitutes for him and the congressman on two consecutive nights.

In October, a House Intelligence Committee report concluded that Cunningham used his committee seats to steer more than $70 million in federal contracts to Wilkes and Wade before his indictment. Lam, who is being replaced as San Diego's U.S. attorney, subpoenaed records from three House committees in December.

Lam's removal is one of several that raised eyebrows on Capitol Hill, where Senate Democrats questioned the Justice Department's motives for replacing several federal prosecutors with interim appointees who don't have to face Senate confirmation.

But in a January hearing before a Senate committee, Attorney General Alberto Gonzales said there was nothing sinister about the shakeup, which he called "a sign of good management."

Lam did not address the controversy during her news conference Tuesday, but said she did not speed up the investigation in order to bring charges against Wilkes and Foggo before leaving office.

CNN's Paul Vercammen contributed to this report.


Kyle "Dusty" Foggo resigned last year from his job overseeing the CIA's day-to-day operations.



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