Says Fees From Wedtech for Lobbying Meese Were Concealed : Prosecutor Details Case Against Wallach

A federal prosecutor charged Friday that San Francisco attorney E. Robert Wallach defrauded the stockholders of now-bankrupt Wedtech Corp. by using false invoices to cover up his high-priced lobbying of former Atty. Gen. Edwin Meese III, his longtime friend.

In the fullest explanation to date of the government’s racketeering and conspiracy case against Wallach, prosecutor Baruch Weiss said that Wallach concealed hundreds of thousands of dollars in payments for lobbying Meese by disguising them as legal fees for consultation on stock matters and acquisition of a Michigan shipyard.

Conspiracy Charged

Although some Wedtech executives knew the true purpose of Wallach’s fees, the acts amounted to “fraud on the corporation and its shareholders . . . in the furtherance of a conspiracy” with Wedtech officers, Weiss told U.S. District Judge Richard Owen at a pretrial hearing called to discuss defense motions.

He said that understanding the racketeering case is important because Wallach’s lobbying of Meese was not itself illegal.

Weiss said Wallach had extracted a large payment from Wedtech by telling executives that he expected a top government appointment after Meese left the White House and became attorney general and that, in this high post, which never materialized, Wallach could give “secret help” to the fledgling defense contractor.

Trial May Be Delayed

The prosecutor’s statements at the hearing amounted to a preview of what the government will try to prove at Wallach’s trial early next year. The trial is set for Jan. 3, but Judge Owen said it may be postponed for a month or more at the request of defense attorneys.

Scheduled to be tried with Wallach are two former Wedtech consultants, W. Franklyn Chinn, Meese’s one-time investment adviser, and R. Kent London, who has a financial consulting business in Honolulu. All have pleaded not guilty.

Meese, who has denied that any improprieties arose from his long friendship with Wallach, resigned from office last August after contending that he had been cleared in a separate investigation in Washington by independent counsel James C. McKay. However, in his report, McKay criticized Meese for exchanging too many favors with Wallach and said that the former attorney general may have technically violated some tax and conflict-of-interest laws.

Owen rejected arguments by attorneys for Wallach and Chinn that their indictments in New York last year were invalid because McKay and not the Justice Department should have had jurisdiction in their cases.

Giuliani-Meese Feud Alleged

Wallach, in an interview with The Times last July, blamed his indictment by U.S. Atty. Rudolph W. Giuliani on an alleged Giuliani feud with Meese.

However, Owen said he believes the Wallach and Chinn indictments were properly undertaken because Giuliani’s investigation “was about the milking of Wedtech” while McKay’s inquiry dealt with “whether Meese violated federal criminal law.”

George W. Walker, Wallach’s lawyer, gave a preview of his defense strategy in telling the court that Wallach began his association with Wedtech in 1981 and soon became involved in many aspects of its work. Over the next five years, Wallach wrote more than 250 memos to company officers “on subjects as diverse as product development, internal management, sales and even the health and diet of key corporate executives,” Walker said.

“In addition,” he said, “Mr. Wallach corresponded widely with persons outside the company on topics such as financing, product development and legal affairs.”

The grand jury that indicted Wallach was under the false impression that he performed “one service for Wedtech and one service only--lobbying Ed Meese,” Walker told the court.

Both Weiss and Walker said that Meese, now a senior fellow with a conservative think tank in Washington, had rejected requests to be interviewed by them.

Weiss on Friday obtained a subpoena signed by Owen for any records that Meese has relating to Wallach’s and Chinn’s activities. Meese is expected to be a key witness at the trial.