In December 1987, E. Robert Wallach and two other men were indicted by a federal grand jury on charges of defrauding stockholders of Wedtech Corp. Wedtech was a metal parts manufacturer in the South Bronx, New York, that Wallach came to champion in its status as a minority-owned vendor as it bid for government contracts. The indictment alleged that the defendants submitted false invoices to the federal government to hide their lobbying of former Atty. Gen. Edwin Meese III.
Wallach, an attorney and long-time friend of Meese, was charged with racketeering, conspiracy and fraud for allegedly receiving more than $500,000 for his lobbying. Also indicted were two former consultants to the by-then bankrupt Wedtech, W. Franklyn Chinn, who had at one time been an investment advisor to Meese, and R. Kent London. Meese was not charged with any wrongdoing.
In 1980, Wedtech had sought a Department of the Army contract to build small engines, but when the Army and Wedtech could not agree on financial terms, Wedtech officers decided political lobbying was the answer to their problem. In 1981, they turned to Wallach, who agreed to help the company obtain the sought-after defense contracts by contacting his friend Meese, who was then counselor to President Ronald Reagan.
According to the prosecution, Wallach sent memoranda to Meese or his subordinates regarding the award of the small engine contract and other Wedtech matters. Ultimately, in September 1982, the Army awarded the small engine contract to Wedtech for approximately $27 million.
Wallach reported to the Wedtech officers that his efforts were primarily responsible for the contract award. During this lobbying effort, Wallach received no compensation from Wedtech, although he was reimbursed for his expenses.
Ultimately, Wedtech grew to be a $100 million government contractor and even though it stopped being a minority-owned company, it continued to receive lucrative no-bid contracts.
Throughout his relationship with Wedtech, Wallach often dealt with Mario Moreno, who was a Wedtech officer in 1981 and eventually became vice-chairman of the firm’s board of directors, and Anthony Guariglia, a certified public accountant who joined Wedtech in May 1983 as vice-president and controller and went on become Wedtech's president.
In the summer of 1986, Wedtech's operations became the subject of numerous federal investigations and on December 26, 1986, the company filed for bankruptcy.
On January 26, 1987, Moreno and Guariglia entered into cooperation agreements with the government, and on January 30, 1987, each pled guilty to working to disguise the payments made to Wallach.
Wallach, Chinn and London went on trial in U.S. District Court for the Southern District of New York in the summer of 1989. By that time, more than a dozen people, including former U.S. Representative Mario Biaggi, had been convicted of bribery, stock fraud, conspiracy and other charges in the Wedtech scandal.
Prosecutors contended that Wallach had received more than $1.1 million in cash and Wedtech stock to lobby Meese, whom he had befriended while they were in law school. The prosecution’s case was undercut by perjury of some of its witnesses.
Moreno and Guariglia were the government's primary witnesses. Moreno testified that a $300,000 payment to Wallach in 1984 was intended for future services, but that Wallach agreed to present a bill relating to work on a previous shipyard purchase instead, although Wallach did not do any work of substance on the purchase. Moreno said the false invoice was created to enhance the value of Wedtech stock. His credibility was suspect, however, because, as he admitted to the jury, he previously had committed perjury in an unrelated federal case.
Guariglia testified to numerous billings that he said were false and designed to boost Wedtech’s stock value. He also told the jury that he had formerly been a compulsive gambler, but had stopped in the summer of 1988 and had not gambled since. He testified that he stopped on the orders of the prosecution and because he recognized that he was “hooked” on gambling.
On cross-examination, Guariglia admitted that he had signed gambling markers totaling $65,000 at the Tropicana, an Atlantic City casino, in September and October of 1988. But he asserted that he had not gambled on those occasions. He said he signed $15,000 in markers on September 18, 1988, to pay off some previous markers which he believed he owed and when he discovered there were no markers outstanding, he pocketed the cash. Guariglia also testified that on October 26, 1988, he had signed $50,000 in markers, but said he did not gamble with the money. He said he gave the chips to a personal friend.
In response, the defense sought to introduce testimony from an official at the casino who was prepared to testify that records showed Guariglia placed bets on October 26, 1988. The prosecution objected and the judge refused to allow the testimony.
Meese testified for Wallach and told the jury that Wallach had never asked him to do anything improper.
Wallach testified for six days and denied doing anything improper or illegal or trying to hide what he did for Wedtech. He said he worked for a long time without pay because he believed the company was minority-owned and it provided jobs to minorities.
On August 8, 1989, after 16 weeks of trial, Wallach, Chinn and London were convicted. Wallach was convicted of racketeering conspiracy and interstate transportation of fraudulently obtained checks. He was sentenced to six years in prison, fined $250,000 and ordered to forfeit $425,000.
London was sentenced to five years in prison and fined $250,000. Chinn was sentenced to three years in prison and fined $100,000. London and Chinn were ordered jointly to forfeit $1.14 million.
During a subsequent hearing on a motion for a new trial, defense lawyers argued that Guariglia had committed perjury. The prosecution conceded that Guariglia had committed perjury during the trial, but maintained that it learned of the perjury in December 1989, well after the completion of the trial. The prosecution also acknowledged that information had established that Guariglia had gambled in Puerto Rico in November 1988 and that he had operated a stationery supply business illegally. Guariglia had been arrested for violating the terms of his bail.
The motion for new trial, however, was denied.
In May 1991, the U.S. Court of Appeals for the 2nd Circuit reversed the convictions of Wallach, Chinn and London because of Guariglia’s perjury.
By then Guariglia had been charged with perjury by federal prosecutors and had been convicted at trial.
The Court of Appeals said that Guariglia and Moreno “provided the foundation upon which the prosecution built its entire case. They offered the only testimony that directly linked the defendants with the admittedly illegal conduct of Wedtech,” the Appeals Court said.
“Had it been brought to the attention of the jury that Guariglia was lying . . . his entire testimony may have been rejected by the jury,” the Court said, adding, “Because we are convinced that the government should have known that Guariglia was committing perjury, all the convictions must be reversed.”
Chinn and London both pled guilty rather than go to trial again.
But Wallach went on trial a second time in the summer of 1993. On July 28, 1993, the jury deadlocked and a mistrial was declared. U.S. District Judge Richard Owen then dismissed the charges against Wallach.
– Maurice Possley