Chinn Held to Have Aided Meese at Others’ Expense

Atty. Gen. Edwin Meese III’s former financial adviser turned nearly an 80% profit in 18 months for Meese through extraordinary financial practices in which he assigned stock purchases to the attorney general’s account after learning how the transactions had fared, Senate investigators said Tuesday.

The assignments came from a pool of purchases made by W. Franklyn Chinn, who was handling four other accounts at the time, according to a report by the Democratic staff of the Senate Governmental Affairs subcommittee on oversight of government management.

The practice raised questions about whether Chinn assigned particularly profitable stock purchases to Meese’s account while short-changing others. “It strongly appears” that the Meese account “performed much better than the other accounts,” one subcommittee staff member said.

Chinn’s lawyer, Penny Cooper, said that the suggestion was “a false inference” and contended that the subcommittee was “totally rehashing” allegations that she said have already been proven false.

Nathan Lewin, a lawyer for the attorney general, said that “Meese knows nothing about this,” noting that his client had entered into a limited blind trust arrangement with Chinn under which he was to have no detailed knowledge of the transactions. “This is not something to lay at Meese’s doorstep,” Lewin added.

Patrick S. Korten, a Justice Department spokesman for Meese, dismissed the report as “a heavy-handed partisan effort to stir the Ed Meese pot again. It’s a lot of old stuff with new speculation and a majority report has no status on the (Capitol) Hill.”

But subcommittee Chairman Carl Levin (D-Mich.), who has spearheaded his panel’s investigation of Meese’s stock trading through Chinn, said the report raises the possibility that Chinn “may have been effectively making gifts to Mr. Meese.”

Levin asked Frank Q. Nebeker, director of the U.S. Office of Government Ethics, to determine whether Chinn’s dealings for Meese amounted to gifts or loans and whether they should have been reported as such under the federal Ethics in Government Act.

Troubled by Dealings

In a letter to Nebeker, Levin said he was troubled by the appearance of Meese’s financial dealings with Chinn, who faces trial in New York along with E. Robert Wallach, Meese’s longtime friend and former lawyer, on federal racketeering and conspiracy charges involving Wedtech Corp. Both Wallach, who introduced Meese to Chinn, and Chinn served as consultants for the scandal-torn defense firm.

Wallach wrote Meese at least 12 memos in his efforts to win government support for Wedtech. Meese, then counselor to President Reagan, intervened in 1982 on Wedtech’s behalf in the company’s eventually successful effort to land a no-bid Army engine contract.

Levin wrote Nebeker that “the partnership (with Chinn) put Mr. Meese in a position where he could be viewed as receiving benefits from an individual connected with a company which he had assisted in his official capacity.”

Independent counsel James C. McKay, who is investigating the attorney general’s involvement in this and other matters, said last December that he had not found any criminal wrongdoing by Meese but that his inquiry was continuing.

The report by the subcommittee’s majority staff constituted the most detailed information made public so far on Meese’s stock trading, handled by Chinn through a financial entity called Meese Partners.

Bought New Stock Issues

All the trades assigned by Chinn to Meese Partners were the purchase and sale of new stock issues on the same day the new issues became available, the report noted.

“By executing the buy of the stock at the initial offering price after the stock has begun trading publicly and selling it at the then-current market price on the same day (or ‘flipping’), Mr. Chinn had the ability to know profits and losses on specific trades at the time he later assigned the stock to his clients’ accounts,” the report said.

“By being able to assign profits and losses to his clients’ accounts after they had been earned or lost in the general account, it appears Mr. Chinn was able to make choices about who should get profits and who should get losses,” the subcommittee majority staff said.

On seven of 23 transactions Chinn handled for Meese Partners, the report said, Chinn appears to have allocated stock trades to the Meese account in amounts exceeding the balance available in the account. These excess amounts ranged from $5,877 to $142,853.

Amended Disclosure Form

Meese, responding to questions about his investments with Chinn, amended his financial disclosure form last September to cover the possibility that those transactions could have amounted to loans but acknowledged that he did not know the source or amount of the loans.

Chinn, noting that he is under investigation in the matter, has declined to discuss the issue with Meese or his attorneys. Subcommittee investigators said that a lawyer for Chinn has refused to permit him to be interviewed, saying he would invoke the Fifth Amendment protection against self-incrimination rather than respond.

In addition to Meese Partners, Chinn followed the unusual trading practices for the accounts he handled for Wallach; Chinn’s mother, Essie; his company, Financial Management International, and Marymount College in Palos Verdes, according to the staff report.