Once a success story, Wedtech corporation mired in scandal

The Wedtech corporation scandal began like the buzz of a pesky gnat; but now it sounds like the drone of a Harley-Davidson motorcycle without a muffler. As the indictments and investigations continue, questions are being raised about how small firms do business in an atmosphere where a certain amount of lobbying and exercise of influence is necessary. Are special programs to aid minority-owned companies abused? Do politicians who fight for government contracts for their local companies too often expect payments in return for that help?

In the case of the Wedtech Corporation, its Hispanic heritage owner was hailed by President Reagan in 1984 as ``a hero for the '80s.'' Coming up from a humble beginning as a machine shop in the South Bronx in 1965, Wedtech moved into a $100 million-a-year business with large government military contracts by 1984.

The company brought jobs to an area known for its urban poverty and hopelessness, including work for persons released from jail or off of drugs. By most accounts such employees worked out well.

But since investigations of bribery, fraud, extortion, and racketeering in this success story began in 1986, seven men have been accused of crimes, four others have pleaded guilty in plea bargains, and more than a dozen others are reportedly being investigated.

Defendants include US Rep. Mario Biaggi (D) of the Bronx, former Bronx Borough president Stanley Simon, a former administrator for the Small Business Administration, and the founder of Wedtech. Under investigation in the wide-ranging scandal is US Attorney General Edwin Meese III, former White House adviser Lyn Nofziger, US Rep. Robert Garcia (D) of the Bronx and his wife, and other federal officials.

``If Wedtech was the proverbial American success story, these charges raise serious questions about the way we practice politics and conduct business in this city, state, and nation,'' US Attorney Rudolph W. Giuliani said last Wednesday when indictments were handed down against Congressman Biaggi and others in Manhattan.

According to the indictment, Wedtech was used ``as a vehicle to making illegal payments to public officials in order to receive, maintain, and/or facilitate the performance of government contracts.''

Both Biaggi and Mr. Simon are charged with extortion and receiving bribes.

Because Wedtech founder John Mariotta was of Puerto Rican heritage, the firm qualified as a minority-owned business, enabling it to win no-bid federal contracts. In the early '80s, the company, then called Welbilt, began lobbying efforts to win Army contracts. At first the firm was rebuffed because of high costs.

But after a series of meetings with high-level officials, and the use of lobbyists with White House connections, Wedtech was eventually awarded one and then another Army contract. According to the investigation, after Wedtech went public with a stock offer in 1983, various public officials and lobbyists have received stock shares from the company.

Mr. Giuliani announced the most recent indictments, along with Bronx District Attorney Mario Merola, and representatives from the Federal Bureau of Investigation, the Department of Labor, the Small Business Administration, and the Internal Revenue Service, the Department of Defense, and the New York City Police Department.

Noting that he was restricted from commenting on anything beyond the indictment because of an order from a federal judge barring further comment, Giuliani did say that the investigation is continuing.

Giuliani further said that though President Reagan singled out Wedtech in 1984, he had no reason to believe the President had any idea what was going on, and that his characterization of Mr. Mariotta was ``unfortunate.''

A special prosecutor is looking into allegations of impropriety on the part of Attorney General Meese and Mr. Nofziger.

Giuliani says he has turned over all information regarding the two to the special prosecutor.