Wedtech scandal
Encyclopedia
The Wedtech Scandal was the name of an American
political scandal
that came to light in the late 1980s involving the Wedtech Corporation.
The company had been founded in Bronx County, New York
by a Puerto Rican immigrant named John Mariotta, and originally manufactured baby carriages. But after a number of years, Mariotta brought in a partner, Fred Neuberger, and began focusing on contracts for the Department of Defense
.
As a major employer in a depressed part of New York City
Wedtech enjoyed a strong local reputation, and was even praised by then U.S. President Ronald Reagan
for the jobs it provided for those who might otherwise be forced onto welfare rolls.
But Wedtech had won many of its defense contracts under a Small Business Administration
program which allowed minority-owned businesses to be awarded no-bid contract
s, despite the fact that Fred Neuberger, not a member of any minority, owned a majority of the company's stock, thus disqualifying Wedtech as a minority-owned business. To keep Neuberger's controlling ownership secret, the company committed fraud
, forging papers that claimed Mariotta was still the primary owner of the company.
When Wedtech went public, it gave shares of stock
to law firms (as payment for legal services), including Squadron, Ellenoff, Plesent & Sheinfeld
. But many of the law firms employed members of the U.S. House of Representatives, including Bronx Congressmen Mario Biaggi
and Robert Garcia, who would later be forced to resign their seats due to their roles in the scandal.
Another key figure in the scandal was Paul Castellano
's first cousin, Maj. General Vito Castellano who occupied key capitol positions in Albany
, such as the former commander of the New York National Guard and Governor Cuomo's
former chief of staff. Vito Castellano pleaded guilty to state charges of tax evasion in connection with payments from the Wedtech Corporation. Indicted on charges of bribing Mr. Castellano was Bernard C. Ehrlich, whom Castellano had promoted to commanding officer of the 42d Infantry Division of the National Guard.
Wedtech then began extending its reach to the White House
, utilizing President Reagan's press secretary, Lyn Nofziger
, to contact public liaison officer (and future Senator) Elizabeth Dole
. Through Dole, Wedtech won a $32 million contract to produce small engines for the United States Army
. This was only the first of many no-bid deals that eventually totaled $250 million.
By the final years of Reagan's second term, Wedtech's crimes had become too numerous to hide. An independent counsel was appointed by Congress, which later charged Attorney General
Edwin Meese
with complicity in the scandal (he had worked as a lobbyist for the company prior to his appointment to Justice). While Meese was acquitted of any wrongdoing, he resigned in 1988 when the independent counsel delivered the report on Wedtech.
In all, about 20 state, local, and federal government officials were convicted of crimes in connection to the scandal. Some of these convictions, however, were reversed on appeal in 1991 when it was found that Anthony Guariglia, former Wedtech president and a star government witness, had committed perjury
, and that the prosecutors had reason to know he was committing perjury. Guariglia had been convicted of lying about stopping his compulsive gambling, and an appeals court found that the jury would have likely discredited his testimony if it had known about the perjury.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
political scandal
Political scandal
A political scandal is a kind of political corruption that is exposed and becomes a scandal, in which politicians or government officials are accused of engaging in various illegal, corrupt, or unethical practices...
that came to light in the late 1980s involving the Wedtech Corporation.
The company had been founded in Bronx County, New York
New York
New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...
by a Puerto Rican immigrant named John Mariotta, and originally manufactured baby carriages. But after a number of years, Mariotta brought in a partner, Fred Neuberger, and began focusing on contracts for the Department of Defense
United States Department of Defense
The United States Department of Defense is the U.S...
.
As a major employer in a depressed part of New York City
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
Wedtech enjoyed a strong local reputation, and was even praised by then U.S. President Ronald Reagan
Ronald Reagan
Ronald Wilson Reagan was the 40th President of the United States , the 33rd Governor of California and, prior to that, a radio, film and television actor....
for the jobs it provided for those who might otherwise be forced onto welfare rolls.
But Wedtech had won many of its defense contracts under a Small Business Administration
Small Business Administration
The Small Business Administration is a United States government agency that provides support to entrepreneurs and small businesses. The mission of the Small Business Administration is "to maintain and strengthen the nation's economy by enabling the establishment and viability of small businesses...
program which allowed minority-owned businesses to be awarded no-bid contract
No-bid contract
The term "no-bid contract" is a popular phrase for what is officially known as a "sole source contract". A sole source contract implies that there is only one person or company that can provide the contractual services needed, and any attempt to obtain bids would only result in one person or...
s, despite the fact that Fred Neuberger, not a member of any minority, owned a majority of the company's stock, thus disqualifying Wedtech as a minority-owned business. To keep Neuberger's controlling ownership secret, the company committed fraud
Fraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
, forging papers that claimed Mariotta was still the primary owner of the company.
When Wedtech went public, it gave shares of stock
Stock
The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...
to law firms (as payment for legal services), including Squadron, Ellenoff, Plesent & Sheinfeld
Squadron, Ellenoff, Plesent & Sheinfeld
Squadron, Ellenoff, Plesent & Sheinfeld was a New York City-based law firm that practiced from 1970 to 2002 when it merged with Washington, D.C.-based Hogan & Hartson. The Squadron Ellenoff name was discontinued at that time...
. But many of the law firms employed members of the U.S. House of Representatives, including Bronx Congressmen Mario Biaggi
Mario Biaggi
Mario Biaggi is a former U.S. Representative from New York and former New York City police officer. He was elected as a Democrat from The Bronx in New York City...
and Robert Garcia, who would later be forced to resign their seats due to their roles in the scandal.
Another key figure in the scandal was Paul Castellano
Paul Castellano
Constantino Paul "Big Paul" Castellano , also known as "The Howard Hughes of the Mob" and "Big Paulie" , was an American Mafia boss in New York City. He succeeded Carlo Gambino as head of the Gambino crime family, at the time, the nation's largest Mafia family...
's first cousin, Maj. General Vito Castellano who occupied key capitol positions in Albany
Albany, New York
Albany is the capital city of the U.S. state of New York, the seat of Albany County, and the central city of New York's Capital District. Roughly north of New York City, Albany sits on the west bank of the Hudson River, about south of its confluence with the Mohawk River...
, such as the former commander of the New York National Guard and Governor Cuomo's
Mario Cuomo
Mario Matthew Cuomo served as the 52nd Governor of New York from 1983 to 1994, and is the father of Andrew Cuomo, the current governor of New York.-Early life:...
former chief of staff. Vito Castellano pleaded guilty to state charges of tax evasion in connection with payments from the Wedtech Corporation. Indicted on charges of bribing Mr. Castellano was Bernard C. Ehrlich, whom Castellano had promoted to commanding officer of the 42d Infantry Division of the National Guard.
Wedtech then began extending its reach to the White House
White House
The White House is the official residence and principal workplace of the president of the United States. Located at 1600 Pennsylvania Avenue NW in Washington, D.C., the house was designed by Irish-born James Hoban, and built between 1792 and 1800 of white-painted Aquia sandstone in the Neoclassical...
, utilizing President Reagan's press secretary, Lyn Nofziger
Lyn Nofziger
Franklyn Curran "Lyn" Nofziger was an American journalist, political consultant and author. He served as press secretary in Ronald Reagan's administration as Governor of California, and as a White House advisor during the Richard Nixon administration and again during the Reagan...
, to contact public liaison officer (and future Senator) Elizabeth Dole
Elizabeth Dole
Mary Elizabeth Alexander Hanford "Liddy" Dole is an American politician who served in both the Ronald Reagan and George H. W. Bush presidential administrations, as well as a United States Senator....
. Through Dole, Wedtech won a $32 million contract to produce small engines for the United States Army
United States Army
The United States Army is the main branch of the United States Armed Forces responsible for land-based military operations. It is the largest and oldest established branch of the U.S. military, and is one of seven U.S. uniformed services...
. This was only the first of many no-bid deals that eventually totaled $250 million.
By the final years of Reagan's second term, Wedtech's crimes had become too numerous to hide. An independent counsel was appointed by Congress, which later charged Attorney General
Attorney General
In most common law jurisdictions, the attorney general, or attorney-general, is the main legal advisor to the government, and in some jurisdictions he or she may also have executive responsibility for law enforcement or responsibility for public prosecutions.The term is used to refer to any person...
Edwin Meese
Edwin Meese
Edwin "Ed" Meese, III is an attorney, law professor, and author who served in official capacities within the Ronald Reagan Gubernatorial Administration , the Reagan Presidential Transition Team , and the Reagan White House , eventually rising to hold the position of the 75th Attorney General of...
with complicity in the scandal (he had worked as a lobbyist for the company prior to his appointment to Justice). While Meese was acquitted of any wrongdoing, he resigned in 1988 when the independent counsel delivered the report on Wedtech.
In all, about 20 state, local, and federal government officials were convicted of crimes in connection to the scandal. Some of these convictions, however, were reversed on appeal in 1991 when it was found that Anthony Guariglia, former Wedtech president and a star government witness, had committed perjury
Perjury
Perjury, also known as forswearing, is the willful act of swearing a false oath or affirmation to tell the truth, whether spoken or in writing, concerning matters material to a judicial proceeding. That is, the witness falsely promises to tell the truth about matters which affect the outcome of the...
, and that the prosecutors had reason to know he was committing perjury. Guariglia had been convicted of lying about stopping his compulsive gambling, and an appeals court found that the jury would have likely discredited his testimony if it had known about the perjury.