Wallach Found Guilty of Racketeering, Fraud : Meese’s Friend, Two Others Convicted in Wedtech Scandal

E. Robert Wallach, a friend and former lawyer of ex-U.S. Atty. Gen. Edwin Meese III, was convicted Tuesday of racketeering and fraud charges in the Wedtech scandal.

In a split verdict that acquitted him of a racketeering conspiracy charge, a federal jury found that Wallach had illegally received $425,000 of the $525,000 he was accused of taking from the now-defunct South Bronx defense contractor to influence Meese and other government officials as part of Wedtech’s efforts to gain government business.

Chinn Also Convicted

Two co-defendants, R. Kent London and W. Franklyn Chinn, were convicted of racketeering, racketeering conspiracy and fraud charges stemming from payments they received from Wedtech.

The announcement of the verdict by the jury foreman was interrupted for about 20 minutes when London’s mother was overcome by emotion and experienced trouble breathing.

Many of the defendants’ other family members, who had been at the courthouse during the seven days of deliberations, began crying.

Oxygen was brought into the courtroom for the stricken woman, who lawyers said had previously had two heart attacks. U.S. District Judge Richard Owen asked whether she wanted an ambulance, but the woman said she wanted to stay in the courtroom, and the reading of the verdict was resumed.

The defendants were variously charged in a 21-count indictment with six separate schemes, allegedly to defraud Wedtech or the government, through false documents and bribery.

The three-month trial in Manhattan federal court was the sixth to result from the scandal at Wedtech, which went out of business after allegations about illegal activity were made public.

Wedtech, once a small machine shop, grew into a $100-million government contractor through a special Small Business Administration program that set aside contracts without competitive bidding for minority-controlled companies.

Evidence at earlier trials has shown that Wedtech continued to receive the no-bid contracts through a series of bribe schemes even after it ceased to be a minority-owned company.

During the trial, in which Wallach and Meese both testified, prosecutors alleged that Wallach had received more than $1.1 million in cash and stock to lobby his longtime friend on behalf of the defense firm when Meese was a top White House aide and, later, attorney general.

The two men have been close since their days as law school classmates at the University of California at Berkeley.

Last August, Meese resigned from former President Ronald Reagan’s Cabinet after an independent counsel criticized his conduct but decided against prosecuting him for steps he took on behalf of Wedtech, as well as other allegations growing out of his ties to Wallach.

15 Others Convicted

At least 15 people, including former Rep. Mario Biaggi (D-N.Y.) and several company officers and New York state officials, previously have been convicted in the Wedtech scandal on bribery, conspiracy, stock fraud and other charges.

Former White House aide Lyn Nofziger was convicted of lobbying violations on behalf of Wedtech last year, but his conviction was reversed this summer on grounds that a key section of the Ethics in Government Act is ambiguous.

Prosecutors contended that Wallach, Chinn and London, all of whom were consultants to Wedtech, defrauded the small firm of nearly $2 million between 1982 and 1985. Chinn and London helped Wallach conceal the true purpose of his lobbying payments and assisted him in hiding the money in secret bank accounts, some of which were overseas, the government claimed.

Securities Fraud

Chinn and London, in addition, were accused of securities fraud in connection with the sale of company stock as well as fraud on the Small Business Administration in falsely claiming that Wedtech remained a minority-owned firm after it sold stock to the public in 1983.

Wallach, Chinn and London were accused of taking part in a scheme to make false entries in Wedtech’s books and records and to file false statements with the federal government to help obtain defense contracts for the company.

Although Wallach’s lobbying of Meese was not itself illegal, prosecutors sought to convince jurors that he had defrauded company stockholders by concealing his high-priced lobbying with phony bills for legal services submitted to the firm.

Four former officers of Wedtech took part in this fraud and pleaded guilty to related charges in 1987. Two of them, Mario Moreno and Anthony Guariglia, testified against Wallach on behalf of the government. They were branded “professional liars” by Wallach’s defense lawyer.

During six days on the witness stand, Wallach said he first had tried to help the firm obtain federal contracts in 1981, without being paid for his services. He said he thought it deserved the opportunity to succeed because it provided needed jobs in the primarily minority community and underscored the Reagan Administration’s effort to build support among Latino voters.

Wallach said he began receiving consulting and legal fees the next year from Wedtech for a variety of services. He said his contacts with Meese were minimal.

“I asked him (Meese) if there was anything that could be done, appropriately, to help them out,” Wallach testified, referring to Wedtech.

The firm obtained a $32-million Army engine contract, without competitive bidding, after an aide to Meese convened a White House meeting to put pressure on Army officials, according to evidence at the trial.

Later, the company got a Navy pontoon contract that ultimately was worth more than $400 million, but its performance was rated by the government as “poor.”

Meese, in his testimony, said he never showed Wallach any favoritism despite their frequent contacts about Wedtech and other matters.