Jailing of Meese’s Ex-Adviser Urged : Wedtech Figure’s Refusal to Release Bank Records Cited

James C. McKay, the independent counsel investigating the ties of Atty. Gen. Edwin Meese III to scandal-plagued Wedtech Corp., secretly urged Friday that Meese’s former financial adviser be jailed immediately for refusing to release foreign bank account records needed in the influence-peddling inquiry.

McKay’s plea to back up a contempt of court finding with an indefinite jail sentence for former Meese adviser W. Franklyn Chinn was submitted under seal to the U.S. 2nd Circuit Court of Appeals in New York. It supported a similar unannounced move Thursday by U.S. Atty. Rudolph W. Giuliani in New York, sources familiar with the case told The Times.

In the Giuliani-directed probe, a federal grand jury is investigating whether Chinn and his business partner, R. Kent London, defrauded Wedtech of $1.14 million. McKay, however, is seeking any foreign bank records that might help determine whether Meese benefited from his 1982 intervention on behalf of Wedtech in its quest for a Pentagon contract, sources said.

McKay Cites Urgency

McKay, noting that his inquiry involves “the nation’s highest law enforcement officer,” said that if he determines that Meese should be charged with any crimes, the matter is “obviously of highest urgency.” On the other hand, if the facts show that Meese did not commit any violations, he should be “cleared immediately,” McKay told the court.

In any case, McKay said, the urgency of the matter requires that Chinn and London be jailed immediately. Both men were held in contempt last month by U.S. District Judge Vincent L. Broderick for refusing to sign waivers authorizing foreign banks to turn over records of their accounts.

The federal appeals court upheld the contempt order a week ago, but the court’s mandate is automatically delayed for 21 days to give individuals the opportunity of appealing. In the cases of Chinn and London, however, McKay joined Giuliani in urging that they be jailed immediately. They could be held for as long as 14 months or until they comply with the grand jury subpoena.

Fifth Amendment Cited

Chinn and London have not acknowledged that they maintain any foreign bank accounts but have nevertheless refused to sign the waivers sought by the grand jury on grounds that doing so would violate their Fifth Amendment protection against self-incrimination.

Chinn, a former Wedtech director and financial adviser, managed a “limited blind partnership” for Meese and his wife, Ursula, beginning in 1985, in which they invested $55,000. In less than two years, Chinn produced a profit of $39,845 for them--a 72% return--by making 23 same-day trades of new issues of stocks, a highly speculative trading technique.

Meese withdrew his financial investment from the Chinn-managed partnership after learning that Chinn was a subject in a federal criminal investigation. The investment also is under scrutiny by McKay’s office, primarily to determine whether it was used as a vehicle to funnel payoffs to Meese.

London, a former professional blackjack player, business associate of Chinn and Wedtech consultant, has been accused in a civil suit of participating with Chinn in the scheme to defraud Wedtech of at least $1.14 million by submitting phony invoices.

Introduced by Friend

Meese was introduced to Chinn by the attorney general’s long-time friend and personal lawyer, E. Robert Wallach, who received more than $1 million in fees and stock from Wedtech for his work as an adviser. Wallach also put Chinn in contact with Wedtech. Wallach is a subject of Giuliani’s probe and figures in McKay’s inquiry as well.

Chinn’s lawyer, Christina Arguedas, plans to appeal the 2nd Circuit Court’s contempt decision to the Supreme Court and said she expects a ruling on the immediate jailing issue next week.

Peter Vigeland, who has been identified by other legal sources as London’s lawyer in the matter, said all options are being considered by his client in the contempt matter: appealing to the Supreme Court, complying with the subpoena and going to jail.

Carol Bruce, the prosecutor in McKay’s office who is directing the Meese portion of the inquiry, said she hopes to wrap up the investigation by mid-September. But other sources familiar with the matter said they doubt the deadline can be met.

The investigation will be completed by seeking a grand jury indictment or presenting a report on the findings to the special court that appointed McKay.