The No. 3 man at the CIA is stepping down as executive director of the agency, senior U.S. officials told FOX News on Monday.

Kyle Dustin "Dusty" Foggo is the subject of an FBI investigation related to poker parties and possible use of prostitutes to curry favor with defense and CIA contracting officials. Investigators are probing whether San Diego-based defense contractor Brent Wilkes provided prostitutes to lawmakers or Foggo in order to win federal contracts.

The CIA sent out an e-mail to agency staff Monday afternoon announcing that Foggo was stepping down, but it did not say whether he was leaving the agency, U.S. officials said. Suggestions have been made that he will retire soon.

The e-mail said Foggo was stepping down because it was likely the new agency head would want to appoint his own executive director. President Bush nominated Air Force General Michael Hayden on Monday to be the next CIA director after Porter Goss unexpectedly resigned from the post on Friday. Goss brought Foggo into the agency, giving him control over CIA contracts.

Foggo is also the subject of a CIA inspector general investigation into a contract he awarded to a company operated by Wilkes, an unnamed co-conspirator in the bribery scandal of California Republican Rep. Randy "Duke" Cunningham. Cunningham is currently serving a federal prison sentence for taking $2.4 million from government contractors.

The FBI is reviewing records of suites Wilkes rented at Washington, D.C.'s Westin Grand Hotel and the Watergate for poker parties attended by Cunningham, other lawmakers, CIA officials or agents and defense contractors.

"The third in power at the CIA was at several of these games and was an active participant, and that one individual sent contracts to one of the co-conspirators who managed the game and paid for everything," alleged Keith Ashdown, vice president for Taxpayers for Common Sense.

Last week, the CIA released a statement on Foggo's behalf denying any improprieties. "Mr. Foggo maintains that government contracts for which he was responsible were properly awarded and administered," the agency said.

It acknowledged Foggo's attendance at poker parties at the hotel rooms, but said nothing untoward happened while he was there.

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

Government watchdog groups say it appears defense contractors lost huge sums at the poker table with the expectation they would later reap millions in government contracts

"Tens of millions to hundreds of millions of dollars in defense contracts went to contractors that bribed their way to the top of the defense industry rather than earn it through producing good items for our men and women in uniform," Ashdown said.

Federal law enforcement officials have identified Wilkes as one of four unnamed co-conspirators who bribed Cunningham. Wilkes has not been charged with a crime, but the FBI is investigating if Wilkes, with the help of Shirlington Limousine and Transportation Inc. of Arlington, Va., made the prostitutes available. Both Wilkes and the limousine company deny any link to prostitutes.

Foggo approved a contract to a company owned by Wilkes to provide water, first-aid kits and other supplies to CIA agents in Afghanistan and Iraq. That contract is now the subject of the separate CIA inspector general investigation. Wilkes' attorney, Michael Lipman, has said Wilkes was not involved in any prostitution for contracts scheme. Those charges were raised by a second defense contractor who has pleaded guilty in the case.

Senior House Republicans call this new twist in the Cunningham case troubling.

"I am concerned about the reports that I have read. And I'm hopeful that the Justice Department will complete their investigation post-haste," House Majority Leader John Boehner, R-Ohio, said Thursday.

On Sunday, House Minority Leader Nancy Pelosi implied that Goss resigned under pressure because of links to the poker and prostitution investigation.

"I think that this dismissal was triggered by what has been happening on the scandal front for the Republicans with the third in command, who was hired by Mr. Goss, to be involved in these card games and whatever else it was," Pelosi said.

But Bill Gertz, a reporter at The Washington Times with close contacts at the CIA, said he believes Foggo's departure is related to Goss' resignation more than the federal probes.

"It's very likely he would have gone as are his circle of aides who have come under fire" in relation to the reforms Goss has been implementing at the CIA, Gertz said.

Meanwhile, lawmakers raised questions Monday about Department of Homeland Security contracts to Shirlington Limousine. Democrats on the House Homeland Security Committee sent a letter Monday to the department's inspector general questioning whether Shirlington Limousine was qualified to get the two contracts it was awarded by the department, one for $3.8 million in April 2004 and another for as much as $21 million over five years in October 2005.

The committee plans to discuss the contract at a previously scheduled May 18 hearing on contracts, hiring processes and security clearances.

"The information we've obtained raises a number of serious questions, from the contracting process to possible security concerns," said Rep. Mike Rogers, R-Ala., chairman of the subcommittee on management, integration and oversight. "The appearance of a lack of background checks on contractors is another troubling personnel issue at DHS that we are examining."

Homeland Security Department spokesman Larry Orluskie said the more recent contract with Shirlington Limousine, which is a $21.2 million pay-on-performance agreement of up to five years, is "performing exactly as expected."

Orluskie said the contract calls for 12 minibuses and 16 drivers to shuttle Homeland Security employees between the department's various offices in the Washington area. It also provides 10 additional drivers to chauffeur department executive staffers in Homeland Security-owned sedans.

FOX News' Major Garrett and The Associated Press contributed to this report.