Bruce Rappaport, the wealthy Swiss businessman who promoted a proposed Iraqi oil pipeline, sent $150,000 in the summer of 1985 to W. Franklyn Chinn, the investment adviser for Attorney General Edwin Meese III and Meese's close friend, E. Bob Wallach, according to informed sources.
Rappaport had retained Wallach several months earlier to secure United States backing for the $1 billion project, which was never built. Sources familiar with the payment said Wallach said it represents his legal fee for his work on the pipeline proposal. Among other things, Wallach obtained Meese's help in setting up a meeting in June 1985 with then-national security adviser Robert C. McFarlane.
However, the sources said, the payment is not included on Wallach's 1985 income tax return and was not reported by Wallach until May 1987, the month that independent counsel James C. McKay expanded his investigation of the Wedtech Corp. to include Meese's dealings with Wallach and Chinn.
James Rocap, Meese's lawyer, said yesterday that he was aware of the $150,000 payment but that "it has absolutely nothing to do with Mr. Meese."
Lawyers for Chinn and Wallach could not be reached for comment, nor could Rappaport, a Geneva-based financier.
Meese, acting on Wallach's recommendation, hired Chinn in May 1985 to set up a "limited blind partnership" with about $60,000 in stocks held by Meese and his wife, Ursula. Chinn took about $55,000 of that and in two years turned it into about $100,000, largely through a series of unusual transactions in which stocks were bought and sold on the same day.
On some of those one-day trades, Chinn invested significantly more money on the Meeses' behalf than was in their account. In at least one instance, Chinn invested $100,000 to $250,000 more than was in the Meese Partners account that Chinn controlled.
Rocap said yesterday that the $150,000 payment from Rappaport had no relation to Chinn's trading on the Meeses' behalf. "No money was ever given by Bruce Rappaport or Frank Chinn for trading in Ed Meese's account, period," he said. "None of it ever went to Mr. Meese. None of it was ever used for the benefit of Mr. Meese."
Sources said Wallach has described the $150,000 payment as a legal fee from Rappaport for his work on the proposed pipeline. The money was "sent to Chinn for the benefit of Wallach," one source said.
Other sources said that financial records turned up by the investigation show a $150,000 deposit on Aug. 15, 1985, in a brokerage account held by Chinn's Financial Management International Inc. Chinn also maintained accounts for Meese and Wallach at the brokerage firm Bear, Stearns & Co.
Wallach and Chinn were accused with a third man in a federal indictment in New York last December of taking under-the-table payments from the scandal-torn Wedtech Corp. in order to influence Meese. McKay has been conducting a separate investigation of Meese's dealings with the two men.
Wallach had his own limited partnership with Chinn known as E.R.W. Partners Ltd. A friend of Meese's for more than 30 years, Wallach recommended in early 1985 that the attorney general set up a similar arrangement with the San Francisco investor. That was done May 23, 1985.
Wallach was hired by Rappaport around the same time to work on the proposed pipeline whose 540-mile route through Jordan was to take it close to Israeli territory.
Rappaport had been enlisted by the Bechtel Group, the giant San Francisco engineering firm that was seeking to build the pipeline, because of his close ties to Israeli political figures, including then-Prime Minister Shimon Peres. Wallach, in turn, was hired by Rappaport because of his close relationship to Meese.
According to informed sources, Meese called McFarlane around June 1985 and asked him to see Wallach about the project, which Meese described as having "some promise." When Wallach turned up for the session with McFarlane, sources said, he brought Rappaport with him. According to the sources, McFarlane deemed the project "in the interests of U.S. national security" and assigned an aide to work on it.
Rappaport, Wallach and Julius Kaplan, another Washington lawyer for Rappaport, sought through the summer of 1985 to get the Overseas Private Investment Corp., a small government agency that insures foreign investments by U.S. firms, to insure the pipeline against Israeli attack. Wallach met with OPIC officials here in Washington and in early September 1985 traveled to Jordan with Bechtel representatives to promote the project.
Later that month, sources said, Wallach wrote Meese a memo outlining the plans for the project and citing a plan to make payments out of pipeline profits to the government of Israel and to Peres' Labor Party to cement guarantees against Israeli attack. Meese, sources said, subsequently sent a handwritten note to Peres advising him to deal with McFarlane and inviting him to Washington to meet with McFarlane about the matter.
Peres visited the United States in October 1985 and, sources said, spoke briefly with Wallach and Meese about the pipeline as well as with McFarlane.