W. Franklyn Chinn, Attorney General Edwin Meese III's former financial adviser, has defrauded clients of at least $1.3 million since he began managing Meese's investments in May 1985, according to an affidavit by an Internal Revenue Service investigator.

The affidavit, filed in U.S. District Court in New York last Friday, said that at least $380,000 of the fraudulently obtained funds remains under Chinn's control in accounts in Hong Kong and London.

Chinn was indicted last month in New York on racketeering charges, along with E. Bob Wallach, Meese's longtime friend and lawyer, and West Coast businessman R. Kent London, in connection with millions of dollars the three men are alleged to have siphoned from the scandal-torn Wedtech Corp. in return for promises to influence Meese and other federal officials.

The affidavit was filed by Robert L. Charboneau, an IRS agent assigned to Independent Counsel James C. McKay's investigation of Meese's involvement in the Wedtech affair. It was filed in connection with a hearing in which bail was sat at $1 million each for Chinn and London and $500,000 for Wallach.

Chinn has said through lawyers that he does not believe his activities were fraudulent. He has not been charged with securities violations in connection with his activities because McKay is interested in Chinn only to the extent that he crosses into the investigation of Meese.

Charboneau does not say in the affidavit whether Meese's investment account was affected by Chinn's financial manipulations. In an amendment to his 1985 and 1986 government financial disclosures filed last fall, Meese acknowledged that occasional trades made by Chinn on his behalf may have involved more money than was in the account.

Wallach also had an investment account with Chinn.

Chinn was introduced to Meese by Wallach in early 1985. Around that time, Wallach also introduced Chinn and London to Wedtech officials, and both became consultants to the Bronx-based defense contractor. Later that year, Chinn became a Wedtech director.

Meese invested about $50,000 with Chinn on May 23, 1985, and that grew to more than $90,000 by the time Meese terminated the partnership, effective last June 30, after Wallach, Chinn and Meese were all targets in the Wedtech investigation. Meese has denied any wrongdoing in connection with Chinn or Wedtech.

In the 16-page affidavit, backed by dozens of exhibits, Charboneau charged that, according to witnesses, Chinn may have defrauded Marymount College in Palos Verdes, Calif., one of his clients, of $281,200 by faking losses in nonexistent gold trading transactions between Feb. 24 and March 17 last year and transferring the money to his personal accounts in Hong Kong.

Steve Krause, the school's controller, said yesterday the college is cooperating in the federal investigation and has put its investment trading "on suspension" pending outcome of the investigation.

Besides the Marymount transaction, Charboneau said he believes "Chinn may have fraudulently obtained securities transaction commission rebates and transferred the resultant monies amounting to over $1 million to accounts in Hong Kong and London, England."

Much of his information comes from James Schlichtmann, who worked in Chinn's San Francisco office from 1985 until last April, according to the affidavit. It said Schlichtmann is cooperating with McKay under an immunity agreement. Charboneau said Schlichtmann's information "has been consistently corroborated by other reliable individuals and documentary evidence."

He said that Chinn appears to have brought most of the money back into his accounts in the United States, where he could use it for his purposes, accounting for the funds through phony profits on falsified gold transactions.

But Charboneau said he believes at least $384,197.85 is still in foreign accounts in Chinn's name.

Late last month, a number of assets belonging to Chinn, Wallach and London were frozen by a restraining order issued by the federal court in New York. The racketeering laws under which the three were charged provide that the assets could be forfeited to the government if the men are convicted.