Rep. Duke Cunningham (R-Calif.), under fire for his dealings with a military contractor, announced that he will not seek re-election to a ninth term in the House following the end of the 105th Congress.

Cunningham also plans to sell his house in San Diego and donate part of the proceeds to three local charities.

Cunningham is under investigation by the FBI and several other federal agencies over his relationship with Mitchell Wade, founder of defense contractor MZM Inc. FBI agents raided the homes of both Cunningham and Wade last week, as well as the MZM’s offices and boat that Wade owns in Washington that Cunningham has been living on until recently.

In explaining his decision to retire, the 64-year-old Cunningham said the growing controversy over his ties to Wade was preventing him from carrying out his official duties, and was likely to carry over into 2006, an election year. Cunningham again insisted that he had done nothing wrong and said he was cooperating with the federal task force probing his financial relationship with Wade.

“But my attorneys tell me that the government’s inquiry will not conclude in a matter of weeks or even a few months,” Cunningham said in a press conference at California State University at San Marcos. “As a result, there is every reason to believe that this investigation will extend into the political season. I do not believe that a political campaign in the midst of such an investigation is in the best interests of my family or my constituents.”

Cunningham added: “I can do my work in Washington and I can defend myself against these allegations, but I don*t think I can do either of these things effectively in the midst of a political campaign.”

Wade purchased Cunningham’s home in San Diego in 2003 and later resold it for a $700,000 loss. At the same time, MZM was winning dramatic increases in the scope of its federal contracts. Cunningham also lived for more than one year on a boat owned by Wade, and MZM’s 527 organization donated more than $50,000 to Cunningham’s political campaigns and leadership PACs, with the California Republican being the only lawmaker to receive such donations.

The Center for Responsibility and Ethics in Washington, a liberal watchdog group, was not satisfied with Cunningham’s retirement announcement and wants him to resign immediately instead. CREW plans to circulate a draft ethics complaint against Cunningham on Capitol Hill on Friday, although the House ethics committee is highly unlikely to wade into issue with a federal criminal probe under way.

National Republican Congressional Committee Chairman Tom Reynolds (N.Y.) praised Cunningham for his decision to step down at the end of this Congress. “Today, Duke Cunningham did for his party what he has always done for his country: He put the interests of others above his own ambitions. Our conference will miss him,” said Reynolds in a statement released by the NRCC.

Cunningham’s retirement announcement is expected to set off a scramble among Republicans who would like to succeed him.

Former state Assemblyman Howard Kaloogian (R), a leader in the successful 2003 effort to recall California Gov. Gray Davis (D), has already said he would run whenever Cunningham retired.

Other potential GOP candidates include San Diego County Supervisor Bill Horn, state Sen. Bill Morrow, state Assemblyman George Plescia, San Diego County Supervisor Pam Slater-Price, state Assemblyman Mark Wyland, and California Consumer Affairs Department Director Charlene Zettel, who is a former Assemblywoman.

Horn and Morrow both live in the adjoining 49th district, which is held by Rep. Darrell Issa (R-Calif.). But both have enough overlapping territory in their districts to run for the Cunningham seat.

Morrow was the runner-up to Issa in the 2000 Republican primary in the 49th, and both he and Horn took steps to run for Congress in 2003, when it appeared that Issa would run in the gubernatorial recall election.

Earlier this month, businessman George Schwartzman announced that he would challenge Cunningham in the Republican primary. He complained that Cunningham was too conservative in the district, and did not focus on the Congressman’s ethical troubles.

Meanwhile, Cunningham’s departure greatly impacts the Democrat in the race, college lecturer Francine Busby, who took just 37 percent of the vote against Cunningham in 2004. Busby’s fundraising picked up steadily as Cunningham’s troubles mounted, but in a district that gave President Bush 55 percent of the vote last year, Busby’s potential clearly diminishes with a damaged Cunningham out of the race.