U.S. Seeking to Freeze Chinn’s Assets, May Try to Seize Them

W. Franklyn Chinn, a financial adviser who once managed the personal holdings of Atty. Gen. Edwin Meese III and his wife, was threatened Thursday with seizure of $1.3 million of his assets on grounds that he had engaged in fraudulent activities and had made illicit profits from some customers.

Federal prosecutors asked U.S. District Judge Richard Owen to freeze Chinn’s funds until he and a former associate--E. Robert Wallach, Meese’s close friend and his former lawyer--can be tried jointly later this year on racketeering and conspiracy charges in the Wedtech Corp. scandal. Meese’s name did not figure in the hearing.

Penelope Cooper, Chinn’s attorney, told the court that the San Francisco-based consultant has less than $600,000 in assets, far less than the government charges. Cooper said that most of these assets predate his association with Wedtech, the small Bronx-based defense contractor that Chinn and Wallach have been accused of defrauding.

“The government is trying to punish Mr. Chinn because he has pleaded not guilty and is not cooperating with them,” Cooper told Judge Owen. By contrast, she said, the assets of former Wedtech Vice President Mario Moreno have not been frozen, even though Moreno “has admitted stealing millions of dollars from both the government and Wedtech.”

Moreno has been the government’s star witness in the bribery and extortion trial of Rep. Mario Biaggi (D-N. Y.) and six associates.

Prosecutors told Owen that he should freeze Chinn’s assets to guarantee that the government can obtain them through forfeiture if Chinn is convicted of racketeering charges. Such a procedure was written into federal law in 1984, mostly to deprive convicted narcotics traffickers of the proceeds of their drug sales.

Assistant U.S. Atty. Baruch Weiss said the federal law provides that “a forfeiture judgment can be exercised against any assets, regardless of when the assets were obtained.” He said that Chinn’s assets are “fungible,” meaning they could easily be commingled.

Weiss said in a court filing that there is evidence that Chinn, in connection with his international business activities, may have defrauded customers of hundreds of thousands of dollars in securities transactions and transferred funds into Hong Kong bank accounts.

An Internal Revenue Service investigator assigned to independent counsel James C. McKay in Washington found also that Chinn may have concealed funds through bogus gold transactions overseas, Weiss said.

Meese, who invested $55,000 of his assets with Chinn in 1985 in a limited blind trust formed at the suggestion of Wallach, withdrew his money last June after disclosures that Chinn, as a former director of Wedtech, was facing indictment.

At the time of the withdrawal, Meese’s investment had nearly doubled to $95,000, largely because Chinn credited more money to Meese’s stock-trading account than the attorney general had on deposit with him, federal investigators said.

Meese said that he was unable to learn where the additional funds had come from.

Cooper said that Chinn no longer has any foreign bank accounts. She said that freezing his assets would deprive him of competent legal services before his trial because he would have insufficient money to pay his lawyers.