NEW YORK, JUNE 29 -- A federal appeals court today overturned the convictions of former representative Robert Garcia (D-N.Y.) and his wife in the Wedtech scandal, saying their acceptance of $170,000 in payoffs from the South Bronx machine shop did not meet the legal definition of extortion.

"By paying the Garcias, Wedtech was purchasing an advocate, not buying off a thug," the three-judge panel of the 2nd U.S. Circuit Court of Appeals said in a unanimous ruling.

Garcia, who resigned his seat after conviction, will be freed immediately from Eglin Federal Prison Camp in Florida, where he surrendered in March to begin a three-year sentence. His wife, Jane Lee Garcia, received the same sentence but remained free pending appeal.

The U.S. attorney's office in Manhattan said prosecutors will study the opinion before deciding whether to retry the couple.

The Garcias were convicted in October of extortion and conspiracy but acquitted of bribery and accepting illegal gratuities. In exchange for helping the now-defunct Wedtech Corp. win federal contracts, the jury found, the couple demanded and received more than $75,000 funneled through Jane Garcia's consulting firm, a $20,000 no-interest loan routed through the congressman's sister, a $1,900 emerald necklace and other payments.

"Even in the face of Garcia's disgraceful request for money, Wedtech was not risking the loss of anything to which it was legally entitled," the ruling said.

" . . . But without Garcia's favorable attitude, the company might not be able to count on continued preferential treatment. . . . Garcia, in turn, was in effect offering to sell his congressional power but he was not using that power as a way to intimidate Wedtech."

Jane Garcia's attorney, Ronald Fischetti, said his client is "living with her mother in Florida and trying to rearrange her life with Bob in prison. Hopefully, the government will think twice about prosecuting them again. They've been financially destroyed by this."

The appeals court also upheld the Wedtech conviction of former representative Mario Biaggi (D-N.Y.), who faces an eight-year prison term on Wedtech charges.

The court upheld the conviction of former Bronx borough president Stanley Simon but partially reversed convictions against Wedtech founder John Mariotta, former Small Business Administration official Peter Neglia and Biaggi's son, Richard.