Rep. Biaggi, Son, 6 Others Indicted in Wedtech Scheme
A federal grand jury Wednesday indicted Rep. Mario Biaggi (D-N.Y.), his lawyer, son and five other persons in a political corruption investigation of Wedtech Corp., a Bronx-based defense contractor that allegedly bought influence to obtain government contracts.
The indictments capped a months-long investigation by U.S. Atty. Rudolph W. Giuliani of Manhattan, in which five federal agencies and the Bronx district attorney took part. An independent counsel in Washington is also probing the involvement of some past and present officials of the Reagan Administration, including Atty. Gen. Edwin Meese III and Lyn Nofziger, the President’s former political affairs director.
Besides the 10-term congressman and his son, Richard, others charged in the 58-count indictment were Peter Neglia, former regional administrator of the U.S. Small Business Administration; Ronald Betso, an associate of Neglia’s; Bernard Ehrlich, a partner in Richard Biaggi’s New York law firm; Stanley Simon, former Bronx borough president, and John Mariotta, a Puerto Rican immigrant who founded Wedtech as a small machine shop 22 years ago.
Praise From Reagan
Referring to Wedtech’s growth as a minority-owned business, which President Reagan once had commended, Giuliani told a press briefing:
“If Wedtech was the proverbial American success story, these charges raise serious questions about the way we practice politics and conduct business in the city, state and nation.”
But Giuliani added: “I have no reason to believe the President had any idea what was going on. There is no suggestion that he did.”
The indictment was termed a “superseding indictment” because it added to earlier charges of bribery lodged against Simon and Ehrlich. Rep. Biaggi was also indicted in March in an unrelated case for allegedly receiving a Florida vacation for using his influence to help a floundering Brooklyn ship repair company.
‘Racketeering Enterprise’
The indictment described Wedtech as a “racketeering enterprise” in which Mariotta and his top executives made payoffs in order to obtain no-bid government work. The grand jury charged that all the recipients either willingly accepted cash or stock payoffs, which would be bribe taking, or aggressively sought these payments with threats or promises, which would be extortion.
All the defendants were charged with multiple counts of racketeering and either bribery or extortion. Additionally, Rep. Biaggi and his son were charged with filing false federal income tax returns for 1983 and 1985 as part of an alleged scheme in which Richard Biaggi concealed Wedtech payments to his father by reporting them as his own legal fees.
The indictment also included counts of mail fraud, wire fraud and obstruction of justice in connection with many of the allegedly criminal acts it described. If convicted on all counts, the defendants would be liable for maximum punishments ranging from 60 to 181 years in prison and fines as high as $8.9 million, Giuliani said.
Hitting hardest at Biaggi, the grand jury charged in 21 counts that he demanded and received a $50,000 payment, disguised as a legal fee paid to Biaggi and Ehrlich, his son’s firm, for having helped Wedtech qualify for no-bid U.S. contracts for minority-owned businesses even after Wedtech became a publicly held firm and lost its eligibility. It became ineligible because the holdings of Mariotta, a minority owner because of his Latino heritage, dropped below 50%.
The indictment said the congressman also demanded and obtained 5% of Wedtech’s outstanding stock in 1983 by threatening to withdraw his help and the law firm’s assistance. He also failed to disclose his receipt and sale of Wedtech stock in his annual financial disclosure statements for 1983 through 1985, a practice required of all congressmen and top government officials, the grand jury charged.
The elder Biaggi, 69, a former New York policeman who was much decorated and who had been wounded on duty several times in the 1950s, protested his innocence and that of his son in a statement from his Washington office. “I will fight this indictment because I am innocent and want to prove it,” his statement said in part, adding that federal prosecutors refused his offer to take a lie detector test.
Other defendants also denied wrongdoing or declined immediate comment.
Neglia, the former SBA official, was charged with fraud in an alleged scheme with Rep. Biaggi to keep Wedtech qualified as a minority bidder even after Mariotta lost controlling interest in the firm. Neglia, who demanded that Wedtech pay $3,000 to Republican organizations on his behalf, approved a sham agreement in which Mariotta was to receive sufficient stock from other company officers to give him controlling interest, although Mariotta never intended to consummate the agreement, the grand jury charged.
The indictment said Neglia also demanded and received 20,000 shares of Wedtech stock in the name of an associate, Ronald Betso, who also was charged.
Ehrlich and Simon were accused separately of extorting payments from Wedtech in return for helping the firm obtain no-bid federal contracts. Giuliani told a news briefing that some Wedtech transactions were so hidden and so complicated that the evidence had to be gathered by an investigative team including the FBI, the Labor Department’s office of labor racketeering, the Internal Revenue Service, SBA investigators and the Pentagon’s criminal investigative service.
In Washington, independent counsel James C. McKay is investigating allegations that assistance was given to Wedtech by Meese and Nofziger and their associates. Giuliani said that “we’ve turned over to counsel McKay facts relating to both Mr. Nofziger and Mr. Meese uncovered in our investigation.”
He declined to elaborate.
Before filing for bankruptcy last year, Wedtech had obtained $250-million worth of Defense Department and U.S. Postal Service contracts after winning a $32-million no-bid contract in 1982 to produce small gasoline engines for the Army.
Earlier this year, four company executives who had worked for Mariotta pleaded guilty to bribery and conspiracy and agreed to cooperate with prosecutors.
