Three Plead Not Guilty to Defrauding Wedtech : Wallach, a Friend of Meese, and Two Others Deny Scheme to Influence Attorney General

NEW YORK — E. Robert Wallach, Atty. Gen. Edwin Meese III’s longtime friend and former lawyer, and two other defendants pleaded not guilty Thursday to charges of racketeering in a scheme to influence Meese and other government officials to benefit the scandal-tainted Wedtech Corp.

Wallach said after his arraignment that his activities on behalf of Wedtech, a Bronx defense firm that sought no-bid government contracts as a minority-run business, “were both dedicated and lawful,” consistent with what he described as 30 years of work on behalf of minorities.

He predicted that “the true motivation (of the prosecution) will become apparent,” but his lawyer cut off questions on what that meant. Wallach had sought unsuccessfully to have his case handled by an independent counsel conducting a related probe of Meese, contending that the Justice Department would not treat him fairly because of his ties to the attorney general.

‘Pawn in Political Game’

Dr. R. Kent London, a former Wedtech consultant charged with defrauding the now-bankrupt company of more than $1 million, said he is “a pawn in a political game” and that his “rights are being sacrificed to an overzealous prosecution motivated by political considerations.”

Asked what politics had to do with his indictment, London told a reporter to read the New York Times, apparently a reference to reports here that U.S. Atty. Rudolph W. Giuliani may resign to seek the Republican nomination for the Senate.

Cristina Arguedas, the lawyer for W. Franklyn Chinn, Meese’s former investment adviser and the third defendant, contended that the charges “are a fabrication of the crooks who ran Wedtech,” apparently a reference to four former executives who have been cooperating with the continuing government investigation since they were convicted a year ago.

‘Insufficient Evidence’

When the indictments were issued last month, James C. McKay, the independent counsel who is investigating Meese, said: “There is insufficient evidence as of this date” to indicate that the attorney general “knowingly participated in criminal activity in connection with the Wedtech scheme.”

Whatever the outcome of the case, it is clear it already represents an enormous setback for Wallach, who Justice Department and former White House officials say boasted about his close association with Meese when lobbying for various causes. Wallach received two appointments from President Reagan, as U.S. representative to the United Nations for human rights and as deputy chairman of the Advisory Commission on Public Diplomacy.

At the arraignment before U.S. Magistrate James C. Francis IV, at which Wallach pleaded in a strong voice “innocent to all three counts,” the high-profile attorney was forced to correct a court clerk who mispronounced his name.

Meese Won’t Comment

Meese, asked for comment on the arraignment after he took part in a Justice Department press conference on debt collection Thursday, said: “What arraignment in New York?” When informed of the development in the Wedtech case, he smiled and said: “Oh, I hadn’t even heard about that. You know I can’t comment on any cases that are ongoing in the department.”

The attorney general, who is mentioned seven times in the 48-page Wedtech indictment, has not spoken publicly about the case since the charges were returned. But William Bradford Reynolds, assistant attorney general for civil rights and Meese’s closest adviser at the department, has told reporters that the indictment has produced “no embarrassment.”

Reynolds said recently that the charges do “not at any place suggest that the matters which are the subject of the indictment are ones that are directed toward any activity of the attorney general or, indeed, that the attorney general would have had any basis for knowledge or understanding that they were going on.”

Sought ‘Fair Hearing’

Although the indictment did not cite the incident, Meese has acknowledged playing a role in setting up a White House meeting for Wedtech officials that led to the company’s receiving a $32-million Army engine contract. He has said he wanted only to ensure “a fair hearing” for Wedtech.

The 18-count indictment alleged that Wallach, who served as a Wedtech consultant, defrauded the company and its shareholders of more than $500,000. In once instance, in September, 1983, he obtained a $125,000 payment for efforts to influence Meese, who was then counselor to the President, and other federal officials, the indictment said.

To conceal the purpose of the payment, Wallach falsely attributed the payment to consultation services he purportedly rendered for the company’s initial public stock offering in August, 1983, the government charged.

In 1984, he obtained a Wedtech payment of $300,000, which the indictment alleged was for services he would render the firm in 1985 and 1986 in an expected appointment to a Justice Department post, according to the indictment.

Designated as Target

Wallach was never appointed to the position but as recently as last March, Justice Department officials have said, Meese was expected to name him counselor to the attorney general. Around that time, however, Justice Department officials learned that Wallach had been designated a target in the Wedtech investigation and that appointment was killed.

He allegedly covered up the $300,000 payment by falsely attributing it, in a letter to the company, to services he claimed to have rendered in connection with Wedtech’s acquisition of shipyards and a tug barge system from a Michigan company.

In a courthouse corridor interview Thursday, Wallach characterized the indictment as “contrived and a contortion of the facts which overwhelmingly rebut them.”

London and Chinn, a member of Wedtech’s board who also served as a consultant, are charged in the indictment with defrauding Wedtech of $1,140,000 and of kicking back $100,000 in cash to Anthony Guariglia, the firm’s president at that time, for his support in ensuring the payment to the two men.

Wallach, 53, and Chinn, 45, are San Francisco residents. London, 44, lives in Honolulu.

Staff writer Eric Lichtblau in Washington contributed to this story.