NEW YORK, JULY 20 -- The new management of the embattled Wedtech Corp. today accused San Francisco lawyer E. Bob Wallach, a close friend of Attorney General Edwin Meese III, of conspiring to defraud the company of more than $300,000 and sharing in payments given to other Wedtech personnel.
Those funds are in addition to the $1 million in stock and cash that Wallach has already acknowledged receiving from Wedtech, which is now being reorganized under federal bankruptcy laws.
Wallach is considered central to the ongoing Wedtech probe because he was responsible for involving Meese and at least three other key individuals in assisting the Bronx-based defense contractor. Martin Pollner, attorney for the new Wedtech management, repeated today that he has found no indication Meese shared in any of Wallach's profits.
The charges were contained in a lawsuit filed in federal bankruptcy court in Manhattan. Wallach, responding to the charges through his lawyer John Kotelly, said in a statement: "All fees that I received from Wedtech Corp. were earned by me and were appropriate. Any charges of civil conspiracy that include my services or activities on behalf of the company are unfounded and without basis."
Last week former White House political director Lyn Nofziger was indicted on six charges of violating federal ethics laws in lobbying the administration on behalf of Wedtech and other businesses. Independent counsel James C. McKay is continuing to look into the role Wallach and others played in the case.
McKay's mandate was expanded May 11 to include the role Meese may have played in assisting Wedtech. Meese has acknowledged that in 1982, while he was at the White House as counselor to the president, he intervened on Wedtech's behalf after receiving several memos from Wallach. Wedtech at that time was seeking to obtain a no-bid, $32 million Army engine contract, which it was awarded in August 1982.
Pollner and Richard Mezan, Wedtech's new corporate attorneys, charged that besides the improper consulting fee, Wallach also recruited the New York law firm of Squadron, Ellenoff, Plesent and Lehrer for Wedtech in 1983 with the understanding that he would receive 10 percent of all legal fees paid to the firm.
The lawsuit said Wallach received $157,000 from Squadron Ellenoff from September 1983 through April 1986. Ira Sorkin, a member of the firm, said, "Bob Wallach was cocounsel to Wedtech. In that capacity, he received 10 percent of our fees paid by Wedtech. He did work for that."
Sources familiar with the investigation said whether the payments to Wallach were proper depends on Wallach having done 10 percent of the work and the law firm not having inflated its normal charges to cover Wallach's share.
The lawsuit also charged that Wallach "directly or indirectly" received a portion of payments Wedtech made to two San Francisco businessmen he recruited as Wedtech consultants: R. Kent London, and W. Franklyn Chinn, a former Wedtech director and former business partner of Meese.
Meese, who ended a limited blind partnership with Chinn last month, invested more than $50,000 with Chinn in 1985 at Wallach's recommendation, and received profits of $40,000 over a 19-month period.
Pollner and Mezan filed a lawsuit last May against Chinn and London, charging that they fraudulently collected a $1.14 million consulting fee from Wedtech and asking for the return of that fee, as well as $10 million in punitive damages.
Sources familiar with the Wedtech probes being conducted by Pollner's law firm, McKay and New York U.S. Attorney Rudolph W. Giuliani said investigators are looking into allegations that Wallach received percentages of the compensation paid to other Wedtech employes, including James Jenkins, a deputy to Meese at the White House, who went to work as a Wedtech consultant in 1985 and became the firm's Washington representative last year.
The Wedtech lawsuit said Wallach received the improper $300,000 consulting fee in October 1984, after he "conspired" and "schemed" with four former Wedtech executives who have pleaded guilty to federal bribery charges and a fifth executive who was indicted last month on similar charges.
Documentation collected by Pollner and Mezan indicated that the consulting fee was related to Wedtech's acquisition that year of a shipyard facility in Ontonagon, Mich. But they charge Wallach performed "no services . . . with respect to the finding, negotiation or acquisition of the shipyard."