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

Times Staff Writers

E. Robert Wallach, a close associate of former Atty. Gen. Edwin Meese III, was convicted Tuesday of racketeering and fraud charges in the Wedtech scandal.

Wallach was acquitted of a separate racketeering conspiracy charge by a New York federal court jury. Two associates--W. Franklyn Chinn of San Francisco and R. Kent London of Honolulu--were convicted on racketeering, racketeering conspiracy and fraud charges in connection with payments they received from Wedtech Corp., a now defunct South Bronx defense contracting firm.

Facing Up to 20 Years

Each of the defendants faces a maximum sentence of at least 20 years in prison. U.S. District Judge Richard Owen set sentencing for Oct. 16.


Announcement of the verdicts at the end of the three-month trial was delayed for about 20 minutes when London’s mother experienced breathing difficulties. Oxygen was brought into the courtroom, and lawyers told the judge she had a history of two heart attacks.

As family members of other defendants wept, the judge asked London’s mother whether she wanted an ambulance. She said she wanted to stay, and the tense reading of the verdict continued.

Wallach, 55, told reporters after the verdict: “I am guilty of nothing but being in the wrong place at the wrong time.”

Wallach said he was a victim of “prosecutorial contortions of the facts.” And he defended Meese, saying: “Nothing that happened here casts a single aspersion on that man.”

He said he would appeal.

“The jury essentially agreed with the government,” said the prosecutor, Assistant U.S. Atty. Baruch Weiss. “ . . . They believed the government’s evidence.”

The jury deliberated for six days on the charges in the 21-count indictment. It decided that Wallach had illegally received $425,000 from Wedtech to lobby Meese and other officials to help the firm get government contracts.


During the three-month 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 Wedtech. During that period, 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, Berkeley. Wallach is a prominent attorney from San Francisco.

Resigned From Cabinet

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 had taken on behalf of Wedtech, as well as other allegations growing out of his ties to Wallach.

At least 15 persons--including former Rep. Mario Biaggi (D-N.Y.) and several company officers and New York state officials--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 purpose of his lobbying payments and assisted him in hiding the money in secret bank accounts, some of which were overseas, the government contended.

Accused of Stock Fraud

Chinn, 47, and London, 46, were also accused of securities fraud in connection with the sale of company stock, as well as defrauding the federal Small Business Administration by falsely claiming that Wedtech remained a minority-owned firm after it had sold stock to the public in 1983.

As part of the racketeering count, jurors found that Wallach had defrauded Wedtech stockholders of $300,000 by promising to help the company if he received a high appointment from Meese in the Justice Department.

He received a second illegal payment of $125,000 for attempting to use his influence with Meese on behalf of Wedtech, the jury determined. Wallach had contended that that payment was a legal fee for helping the company acquire a Michigan shipyard, but the jury rejected his argument.

Jurors cleared Wallach of having received a third illicit payment of nearly $100,000.

Lobbying Wasn’t Illegal

Although Wallach’s lobbying of Meese was not 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 lawyer.

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

Wallach said that the next year he began receiving consulting and legal fees 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.

Got Navy Contract

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 on the job was rated by the government as “poor.”

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

But, under persistent cross-examination by prosecutors, Meese acknowledged that his dealings with Wallach were far more extensive than he previously had admitted. He said that, at the time his friend was lobbying for Wedtech, he had seriously considered giving Wallach a top position at the Justice Department.

The former attorney general was at West Point, N.Y., on Tuesday night to give a speech at the U.S. Military Academy and was not available for comment on the verdict, said a spokesman, Pat Korten.

Robert L. Jackson reported from Washington and John J. Goldman from New York.