Turnabout Boosts Wallach’s Hopes for Reversal of Wedtech Conviction : Scandal: Government charges own witness with perjury. Indictment seems to back Californian’s claim that he was found guilty on the basis of a lie.

When California lawyer E. Robert Wallach was convicted of fraud and racketeering in the Wedtech defense-contracting scandal last year, he cried foul: A key government witness had committed perjury, he contended. But federal prosecutors turned a deaf ear.

Now, however, even the prosecutors concede that they believe Wallach’s allegations, and--in a bizarre turn of events--the witness, Anthony Guariglia, former president of Wedtech, has been indicted, providing Wallach with new hope that his own conviction may be overturned.

Indeed, defense lawyers say that Wallach has a good chance to succeed.

To convict Guariglia of perjury, prosecutors ironically now must argue that his testimony at Wallach’s trial was “significant”--implying that Wallach may have been convicted at least partly on the basis of a lie.

Criminal lawyers say it may be the first case of its type in which the government has prosecuted one of its key witnesses for perjury and illustrates the fragile relationships--and the problems--that can arise from the prosecution’s use of witnesses who are tainted.

“It’s rare for the government to charge one of its own witnesses with perjury, especially a witness who has helped you win a conviction,” admits a government lawyer who requested anonymity.

“Sometimes, in an organized crime case, you will bring charges against a prosecution witness who has double-crossed you by changing his story on the witness stand and backing away from what he told a federal grand jury,” he said. “But this case is different.”

Moreover, if Wallach’s conviction is overturned, it would mark the third such reversal in the Wedtech scandal. The convictions of Lyn Nofziger, Ronald Reagan’s White House communications director, and former Rep. Robert Garcia (R-N.Y.) also have been thrown out.

The ironic turnabout has resulted primarily from Wallach’s own persistence in pursuing the allegations and from an unexpected telephone call to federal prosecutors from a businessman who had known Guariglia and was willing to provide a tip.

Wallach has also had help from an unlikely legal pair--Dennis Riordan, a liberal lawyer from San Francisco, and former U.S. Judge Robert H. Bork, the brainy conservative law professor whom Reagan nominated--and then saw defeated--for a seat on the Supreme Court.

Wallach, 56, got into trouble for attempting to influence his longtime friend, then-White House aide (and later Atty. Gen.) Edwin Meese III, on Wedtech’s behalf--channeling almost 200 notes, memos and phone calls to Meese in return for more than $400,000 in fees.

In federal district court in Manhattan last year, he was convicted on fraud and racketeering charges and given a six-year prison sentence, which he has yet to serve pending his appeal. He was also assessed $675,000 in fines and forfeitures.

Guariglia, 39, an accountant by training, and Mario Moreno, 48, who had been Wedtech’s executive vice president, were the prosecution’s two key witnesses, testifying at length about Wallach’s allegedly corrupt dealings with Wedtech.

The problem is, both men had been tainted themselves. Before agreeing to cooperate with federal prosecutors, each had pleaded guilty to bribery conspiracy charges in connection with payoffs to prominent political figures.

At Wallach’s trial, Guariglia acknowledged that he once had used company money for personal gambling, but he insisted that he had reformed--on orders from a federal bankruptcy court. Guariglia swore repeatedly he had been following the court’s edict to a tee.

Wallach’s lawyers uncovered records from casino pit bosses showing that Guariglia had gambled heavily on a recent trip to Puerto Rico--implying that he had lied to the jury and therefore was not a credible witness.

But Guariglia denied the charges, and Judge Richard Owen refused to allow the defense to call the casino pit bosses to cast further doubt on Guariglia’s testimony.

In fact, the prosecutors themselves had begun to suspect that Guariglia had lied, but they argued after the trial that any perjury that he may have committed was insignificant and “tangential.” Owen agreed, ruling that the verdict would have gone against Wallach anyway.

But last February, Assistant U.S. Atty. Baruch Weiss, the lead prosecutor of Wallach, received an unexpected phone call from a businessman who said Guariglia had told him he was skimming substantial sums from a separate stationery business that he owned.

The businessman’s tip led to new evidence that Guariglia had lied to federal prosecutors about how large that firm’s profits were. That, and Guariglia’s questionable court testimony, prompted prosecutors to seek a perjury indictment against him, Weiss said in court documents.

In Wallach’s appeal, the Californian’s lawyers contend that Guariglia’s alleged perjury no longer can be considered insignificant. Under the law, a person may be charged with perjury only if his lies under oath were “substantial, relevant and material.”

Some independent legal scholars agree. “It seems to me the government cannot have it both ways,” says one legal expert not connected with the case.

“Either Guariglia’s testimony was material or not. If his perjury was not significant, as the government first claimed, then how can the government indict and prosecute him?”

Weiss refused to comment on the matter.

Bork, who says he began helping Wallach several months ago after mutual friends approached him about the case, calls Wallach’s conviction “an outrage.”

Bork and Riordan contend that traditionally, in cases where prosecutors knowingly offer perjured testimony in prosecuting a defendant, the overturning of such convictions is “virtually automatic.”

And although they concede there is no evidence here that prosecutors were aware of Guariglia’s apparent misstatements before the trial, they argue that Weiss’ rejection of Wallach’s initial allegations amounted to “reckless or negligent disregard of the truth.”

Wallach, who was suspended from legal practice after his conviction, said he is confident that he will be granted a new trial.

“Developments are certainly promising,” he wrote in a letter to friends. “I remain convinced that the system will work and that the outrage will become a victory.”

Staff writer Ronald J. Ostrow contributed to this story.