The penalty, the second-largest ever imposed by the commission in its 32-year history of enforcing federal election laws, culminates an investigation into claims that Wade tapped funds from his company, MZM Inc., to reimburse employees and their spouses who made $78,000 in political contributions in 2003, 2004 and 2005 to Reps. Virgil Goode, R-Va., and Katherine Harris, R-Fla.

The watchdog group Citizens for Responsibility and Ethics in Washington triggered the investigation by filing a complaint that cited a June 22, 2005, article in The San Diego Union-Tribune.

That story quoted unidentified MZM employees saying they were coerced into making political contributions to the political action committee, MZM PAC.

The article came 10 days after the Union-Tribune  reported that Wade had taken a $700,000 loss on the Del Mar home he had bought in 2003 from Cunningham, who at the time was helping steer federal contracts to Wade's company.

Cunningham, who initially denied wrongdoing, later admitted that Wade had bribed him. He is serving an eight-year prison sentence in Arizona.

Federal law prohibits corporations from coercing employees to make contributions. It also bars reimbursement for the contributions.

The FEC complaint against Wade alleged that salaries at MZM were “artificially inflated” to enable employees to make campaign contributions.

As the Union-Tribune  also reported, Goode and Harris sought earmarks on behalf of MZM. Earmarks are line items that individual members of Congress insert into spending bills, often with little or no oversight.

Earmarks frequently benefit defense contractors and their lobbyists, who in turn often contribute heavily to congressional campaigns in what congressional scholar Norman Ornstein of the American Enterprise Institute calls “a self-reinforcing loop” of money and influence.

But while the FEC concluded that employees had been pressured to contribute directly to the politicians, its report cited “insufficient information to conclude that employees were coerced into making contributions to MZM PAC.”

The FEC announced the action yesterday, the same day that a federal jury in San Diego began deliberations in the case of Poway defense contractor Brent Wilkes, who is accused of bribing Cunningham in order to receive earmarked funds that Cunningham helped supervise as a member of the defense appropriations subcommittee.

Wade testified for the prosecution in the case against Wilkes, who in the late 1990s worked with MZM on defense contracts. Wade, who last year pleaded guilty to conspiracy to bribe Cunningham, is expected to be sentenced early next year in a federal district court in Washington, D.C.