Were Misled on Wedtech, Officials Testify
Present and former officials of the Small Business Administration told a Senate panel Thursday that they had been misled into helping a corrupt New York sheet-metal firm obtain millions of dollars in U.S. defense work under the SBA’s minority business program.
Former SBA Administrator James C. Sanders and others, testifying before the Senate Governmental Affairs subcommittee on oversight, said that they had made unwise decisions to assist the Wedtech Corp. through a special program for minority-owned firms. But they said they believed White House representations that the contracts would help provide needed jobs in the economically distressed South Bronx, as President Reagan had pledged to do during the 1980 campaign.
Ex-Official ‘Damn Mad’
Sanders said he was “damn mad” that his agency had been drawn into the massive scandal surrounding Wedtech, which is the subject of bribery and fraud investigations by federal grand juries in Washington, New York and Baltimore.
In retrospect, he said, “I suspect payoffs were made” by Wedtech to influence decision-making at the SBA or to try to enlist White House support.
The officials’ testimony shed further light on how Wedtech received preferential treatment in obtaining government contracts that totaled $250 million before the company slid into bankruptcy in December, 1986. The subcommittee is evaluating whether the SBA’s program guidelines should be tightened to prevent future abuses.
Sen. Carl Levin (D-Mich.), the subcommittee chairman, said that the SBA was guilty of “questionable actions and inactions” while Wedtech insiders were “lining their pockets” at the expense of the firm’s investors and low-skilled employees.
Defends Role at SBA
Sanders defended his supervision of the SBA from 1982 to 1984, a period in which Wedtech was actively seeking influence in Washington, insisting that “the word was out from me that nobody had to knuckle under to political pressure.”
But the former agency chief acknowledged that he had been influenced himself about Wedtech by then-presidential aide James Jenkins. He said Jenkins had told him that the President wanted the SBA to help the South Bronx firm obtain noncompetitive government contracts reserved for minority-owned businesses to improve employment in its area.
Sanders acknowledged under questioning by Levin that he had met over lunch with former White House aide Lyn Nofziger and Nofziger associate Mark A. Bragg, partners in a public relations firm that was then lobbying for Wedtech.
“There was no particular purpose for the lunch,” which occurred before a crucial May, 1982, White House meeting on a Wedtech contract request, Sanders said. But he added that he knew Nofziger and Bragg represented Wedtech and “were hoping the firm would get a contract.”
Sanders testified that he may also have had a brief conversation about Wedtech with San Francisco lawyer E. Robert Wallach, a close friend of Atty. Gen. Edwin Meese III. Meese then was White House counselor and Jenkins’ immediate superior.
Army Had Qualms
After the White House meeting, the SBA agreed to advance Wedtech $5 million for tooling, equipment and start-up costs to produce small engines for a $32-million contract with the Army. It did so even though the Army had qualms about Wedtech because of its high price for the job and its lack of experience in this type of work.
“You have to rely on information given you by the people underneath (in the SBA). But I was given misinformation and some bad advice,” Sanders said of the Army engine decision and a later one that helped Wedtech get a $134-million Navy contract for pontoon bridges.
Another witness, David Elbaum, SBA district counsel for New York, testified that he had approved keeping Wedtech in the noncompetitive minority-business program even after Wedtech’s Puerto Rican-born founder, John Mariotta, no longer had a controlling interest in the firm.
Cites Pressure
Elbaum said he wrote his opinion under pressure from then SBA regional administrator Peter P. Neglia, who has since been indicted for allegedly demanding payments from Wedtech.
After leaving the White House, Jenkins went to work for Wedtech, earning $169,056 over a 2 1/2-year period. Other Wedtech officers and consultants, including Nofziger and Bragg, received sums ranging from $800,000 to $12 million.
Twelve former Wedtech executives and present or former government officials have been indicted or pleaded guilty in the Wedtech scandal.
