Unit Looks Into Meese Wedtech Ties : Justice Department Weighs Appointment of Special Counsel

The Justice Department’s anti-corruption unit is looking into Atty. Gen. Edwin Meese III’s ties with Wedtech Corp., a New York defense contractor now under federal investigation, as a first step in determining whether an independent counsel should be appointed, officials said Tuesday.

Disclosure of the “threshold inquiry” into Meese’s conduct was made by James C. McKay, the independent counsel investigating conflict-of-interest charges against Lyn Nofziger, President Reagan’s former political adviser, who lobbied for Wedtech after he left the White House.

Wedtech is under investigation for allegedly seeking to obtain government contracts and influence a congressional inquiry by giving illegal fees to several local and federal officials in New York and Maryland.

Chairmen Raise Questions

Questions about Meese’s role were raised by Sen. Joseph R. Biden Jr. (D-Del.) and Rep. Peter W. Rodino Jr. (D-N.J.), chairmen of the Senate and House Judiciary committees, in a letter to McKay.

Biden and Rodino asked about steps Meese took when he was counselor to President Reagan to help Wedtech obtain a contract let by the Defense Department without competitive bidding. They also posed questions about Meese’s investment of $60,000 in a company whose president is involved with Wedtech and his failure to remove himself until April 8 from the federal Wedtech probe.

In their letter, Biden and Rodino asked McKay whether, as the independent counsel appointed by a special three-judge federal court to look into Nofziger’s lobbying, he also had authority to investigate Meese.

McKay responded that, although he thought that his appointment did not give him latitude to investigate allegations raised about Meese’s conduct, he “would be prepared to undertake” such a probe if the Justice Department or the three-judge court asked him to do so.

Would Share Information

McKay also disclosed that the Justice Department’s public integrity section already had launched an inquiry into Meese’s role. He said that his office would share any relevant information with Justice Department officials conducting the Meese inquiry.

Meanwhile, The Times learned Tuesday that E. Robert Wallach, Meese’s long-time friend and attorney, has been designated a subject of the federal investigation of Wedtech, which is being conducted in New York.

Wallach’s designation as a subject--an individual whose conduct is within the scope of a grand jury’s investigation--led to Meese’s decision to remove himself from any role in the federal investigations, a source familiar with the matter said. The attorney general, who earlier had removed himself from the Nofziger investigation because of his long ties with Nofziger, did not give a reason when he took the action in the Wallach case.

Not Told of Probe

Wallach, who could not be reached Tuesday, said in an interview last month that he had not been told he was a subject of the accelerating Wedtech probe. “I was interviewed (by investigators) back in November, and there has been nothing since then,” he said.

But two sources with knowledge of the investigation said Tuesday that Wallach, along with W. Franklyn Chinn, the San Francisco financial consultant with whom Meese invested $60,000, has been named a subject.

Meese has acknowledged that while serving as Reagan’s counselor, he received about six memos from Wallach about Wedtech’s efforts to obtain the no-bid Pentagon contract. Wallach worked as a Wedtech attorney until last December, when the company filed for bankruptcy, receiving by his own account “$600,000 and something” in company stock and an undisclosed amount of legal fees.

Wallach said that he was first put in touch with Wedtech by a friend who knew of his long-time personal relationship with Meese. He said he was responsible for introducing Chinn, his investment adviser, both to Wedtech and to Meese.

Receives Stock Options

Chinn signed an agreement with Wedtech on April 30, 1985, under which he was given an option to buy 75,000 shares of Wedtech common stock at $9.25 a share when it was selling at $14, according to Wedtech documents at the Securities and Exchange Commission. After becoming a Wedtech director four months later, he received additional options for more than 37,500 shares of Wedtech common stock.

After Meese pledged to the Senate Judiciary Committee that he would reinvest some $60,000 in stocks of well-known companies in a limited blind trust to avoid any appearance of conflict of interest, Wallach said he put him in touch with Chinn for that purpose.

Meese has said that he did not know if Chinn had invested any of his money in Wedtech because such knowledge was withheld from him under terms of the “limited blind partnership” he entered into with Chinn’s company. But Wallach said that Chinn had told him none of Meese’s funds had been invested in Wedtech.