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Congressman, 6 Others Indicted in Wedtech Scandal

June 4, 1987

NEW YORK (AP) _ Wedtech Corp. transformed itself from a machine shop into an acclaimed, multimillion-dollar defense contractor through fraud and bribery, according to a racketeering indictment naming a congressman and six others.

Wednesday’s 58-count federal indictment accused Rep. Mario Biaggi, D-N.Y., his eldest son and five other people of turning Wedtech into ″a vehicle for making illegal payments to public officials″ to win government contracts.

Wedtech has been the focus of five federal, state and local criminal investigations into how it grew practically overnight into a $100 million-a- year defense contractor, largely through no-bid government contracts.

″Wedtech was presented to the public as the proverbial American success story,″ said U.S. Attorney Rudolph Giuliani. ″This indictment now alleges that much of Wedtech’s success was based on its being run as a racketeering enterprise.″

In Washington, special prosecutor James C. McKay is investigating links between Wedtech and Attorney General Edwin Meese III and Lyn Nofziger, a former top political aide to President Reagan.

Giuliani said he has forwarded to McKay all evidence pertaining to Meese and Nofziger.

Federal investigators, meanwhile, are exploring whether Wedtech money bought the silence of Jessica Hahn about her 1980 sexual encounter with Jim Bakker that led to the PTL founder’s downfal, the Daily News reported today.

Law enforcement sources the newspaper did not identify said part of a $265,000 fund set up for Ms. Hahn may have come from Wedtech money donated by founder John Mariotta, a born-again Christian, to the Rev. Aimee Cortese, a PTL board member and sister of Rep. Robert Garcia, a target in the Wedtech case.

The News reported Wednesday that prosecutors had temporarliy shelved plans to seek charges against Garcia, D-N.Y., and his wife, Jane Lee Garcia, in order to pursue additional evidence.

Ms. Cortese may have passed the money to Ms. Hahn without Mariotta’s knowledge, it said. The investigators reportedly said they have been unable to account for $60,000 Ms. Cortese allegedly received from Mariotta and Wedtech.

Wednesday’s indictment accused Biaggi, an 18-year congressman from the Bronx, of tax evasion, making false statements on financial-disclosure forms and extorting $3.6 million worth of stock by threatening to withdraw support for Wedtech efforts to win government contracts.

The 69-year-old former highly decorated police officer also was accused of demanding a $50,000 bribe disguised as legal fees.

″I am innocent and want to prove it,″ Biaggi said Wednesday. He has said the stock payments were legal fees paid to his son Richard’s law firm, which the elder Biaggi founded and now serves as consultant.

Biaggi said authorities had refused his offer to submit to a lie-detector test.

Also indicted were the younger Biaggi’s law partner, Bernard Ehrlich; Peter Neglia, a former federal Small Business Administration official; Ronald Betso, a friend of Neglia’s; Mariotta, and former Bronx Borough President Stanley Simon, who previously was indicted in the scandal.

All were charged with racketeering and racketeering conspiracy.

Biaggi could receive 181 years in prison and $8.9 million in fines if convicted on all 21 counts. The others could receive prison terms ranging from 60 to 170 years and fines up to $7 million.

Ehrlich has been under a suicide watch since he was implicated in the scandal, the Daily News reported, quoting law enforcement sources.

Four former Wedtech officials pleaded guilty in January to conspiring to bribe city, state and federal officials. Some also pleaded guilty to bribing the former head of the state National Guard and stealing millions from shareholders.

In December, Wedtech closed its Bronx operations and laid off about 1,000 workers. A few days later, it sought protection from creditors under Chapter 11 of federal bankruptcy law.

Wedtech, was a small, struggling company until 1975, when it entered a Small Business Administration program that allowed certified minority-owned concerns to obtain no-bid government contracts. In the next 11 years Wedtech, a manufacturer of bridge pontoons, small engines and spare parts for the military, received $250 million in defense contracts.

The company drew attention for hiring minorities and former drug addicts in the impoverished South Bronx. In 1984, Reagan hailed Mariotta, the firm’s Hispanic founder, as a ″hero for the ’80s.″

Giuliani said, ″In retrospect, it was an unfortunate characterization.″

″If Wedtech was the proverbial American success story,″ Giuliani, ″these charges raise serious questions about the way we practice politics and conduct business in the city, state and nation.″

According to the indictment:

-The Biaggis, Ehrlich, Mariotta and Neglia conducted a sham stock transaction to deceive the SBA into believing Wedtech was a minority- controlled company. That opened the way to a slew of no-bid contracts that ultimately accounted for more than 90 percent of the company’s gross revenues.

-Mariotta joined four former Wedtech officials in looting the company of some $5 million.

-Neglia, a former New York regional director of the SBA who played a key role in maintaining Wedtech’s no-bid status, demanded that Wedtech pay $3,000 to Republican organizations and bribe him with an option to buy 20,000 shares of stock. The stock option was placed in Betso’s name.

Biaggi was indicted in March on federal bribery and conspiracy charges in an alleged influence-peddling scheme unrelated to Wedtech. He pleaded innocent.

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