A Symbol of the Eighties
by Jack Beatty
FEEDING FRENZY: The Inside Story of Wedtech by William Sternberg and Henry Holt, $19.95.
THE SCANDALS ENGULFING the Department of Housing and Urban Development involve considerably more money; the Pentagon procurement scandals pose more of a danger to national security; the S&L scandals will cost us a lot more in taxes; the scandals surrounding nuclear-weapons production facilities are a greater threat to the environment; and the Iran-contra scandal was a greater national embarrassment. But for all that, the Wedtech scandal still has a claim on what little indignation you may have left over from this decade of public disgrace. It was a real mess. Before it had run its course, Wedtech would criminally tarnish two Democratic congressmen, put a third under a cloud, and stain the already mottled reputation of a Republican senator; it would taint the Attorney General of the United States; it would implicate high officials of the Navy Department and the Small Business Administration; it would catch up in its coils union leaders, a prominent New York politician, and a Big Eight accounting firm; it would even drape one improbable tentacle over the celebrated form of Jessica Hahn.
In Feeding Frenzy, William Sternberg, a reporter who covered Wedtech for Crain’s New York Business, and Matthew Harrison, Jr., who worked briefly as a vice-president of Wedtech, have combined to tell the story of a company devoted to plunder. Written with understated irony, lucid about the sharper accounting practices of American business, Feeding Frenzy is full of plot twists, narrow escapes, and deeply satisfying reversals of fortune. It’s a tale of crime and—for once! — punishment: at this writing fourteen of the prime scoundrels are either in prison, some for as long as eight years, or on their way to prison.
Wedtech was in a peculiar sense an environmental crime; the sundry larcenies bundled up in its name cannot be understood apart from their locale— the South Bronx, perhaps the most emblematic tableau of ruin since ancient Rome. Both Jimmy Carter and Ronald Reagan made highly publicized pilgrimages to these grim acres, and both their administrations pledged to do something about them. Worse luck for the South Bronx. Wedtech was the something.
The company began life in 1965, as the Welbilt Electronic Die Corporation, on 148th Street, just off the Grand Concourse. One of its founders was a bad-tempered, barely literate son of Puerto Rican immigrants, named John Mariotta; in 1970, his business stalling, he took on a new partner, Fred Neuberger. (If they make a movie about Wedtech, Anthony Quinn should get the role of Mariotta, while Lee J. Cobb must do his plain duty and rise from the grave to play Neuberger.)
Born in Rumania before the Second World War, Neuberger escaped death at the hands of the fascist Iron Guard by the desperate expedient of hiking across Asia Minor to Palestine.
There, he would later boast, he became a teenage member of the Stern gang and delivered “care packages”—that is to say, bombs—to the British forces occupying Palestine. Neuberger brought a surpassing ruthlessness to the enterprise. Marietta’s contribution, however, was more important. He brought his ethnic affiliation. Hispanics, along with AfroAmericans, Asian Americans, and Native Americans, are presumed, by federal flat, to be “socially disadvantaged,” and so are eligible for a setaside program run by the Small Business Administration, which grants federal contracts to economically disadvantaged firms with 51 percent or more minority ownership. In their first crime Neuberger and Mariotta agreed to deceive the SBA by hiding the nature of their partnership, Rumanian immigrants not being deemed socially disadvantaged.
Small metalworking contracts came Welbilt’s way for a few years and then Mariotta and Neuberger got wind of an army contract for 13,000 small engines to be put out for a bid by an “8a” company. That Welbilt had never built an engine did not deter them; nor was their audacity tempered when the army turned down their bid, which was a whopping 500 percent of what it considered a fair price. From a new employee, a Harvard-educated PR man, the partners learned of a man who knew a man who knew Ed Meese. The link to Meese, then a high White House aide and soon to be Attorney General, was E. Robert Wallach, a San Francisco lawyer of liberal views and tony personal tastes who had been a law-school chum of Meese’s. For a “retainer" that eventually totaled $425,000, Wallach (who has been sentenced to six years in prison for racketeering) agreed to help Welbilt get around the army procurement officer who had rejected their bid. A few “Dear Ed" letters wrought a surprising change in Meese. Though he never seemed to be without his Adam Smith tie, this hardest of the hard Reagan men fell for the pitch of his liberal friend to extend the visible hand of government to this minority-owned company. Prodded by Meese, the army reluctantly raised its idea of a fair price, and the SBA came up with additional funding. Welbilt, in turn, held its bid within the spectrum of sanity and got the contract.
That was the method of Welbilt’s persuasion: the well-connected lobbyist putting in a word with the betterconnected Reagan Administration official. Of Meese in his dealings with Wallach, who had a financial stake in the company he was pleading for, the Justice Department’s Office of Professional Responsibility said, “(his conduct] should not be tolerated of any government employee, especially not the Attorney General of the United States. Were he still serving as Attorney General, we would recommend . . . that the President take disciplinary action.”
Meese was not the only intercessor for Welbilt. Lyn Nofziger, the former Reagan coat-holder, was found guilty of illegally lobbying the White House for Welbilt and two other companies. (His conviction was later overturned.) Mario Biaggi, the Democratic congressman from the Bronx, was convicted on fifteen counts of various crimes, from extortion to racketeering, in the Wedtech case. One of the Wedtech executives has alleged that Alphonse D’Amato, the New York Republican senator, got an illegal campaign contribution for his efforts on the company’s behalf, a charge the senator has denied. Robert Garcia, the Democratic congressman from the South Bronx, and his wife were recently convicted of extortion and conspiracy in connection with money they received from Wedtech. Stanley Simon, the Bronx borough president, was given five years for racketeering. And there were lesser officials. Their motive was greed. Officers of Welbilt used the money it got from the government contracts to steal and to bribe, not to build engines. They bribed the partner of the Big Eight firm Main Hurdman who was responsible for overseeing the audit of Welbilt’s books before it went public— selling stock in itself as Wedtech, that singular anomaly at once a publicly owned and a minority-owned company. They bribed the regional SBA man who helped to smooth that contradiction out. They bribed a Navy Department official, when the company was courting even more lucrative business from the Navy. When Parren Mitchell, the Democratic chairman of the committee charged with monitoring the SBA, started to investigate Wedtech’s malefactions, they bribed Mitchell’s two nephews, who, for $50,000, agreed to talk to their uncle. Whether they did or not remains unknown; in any case, the investigation stalled.
One man Wedtech could not bribe was Carlos Campbell, the assistant secretary of commerce in charge of the Economic Development Administration. A former naval aviator who had been born and raised in Harlem, Campbell was immune to guff about the presumptive beneficence of “minority-owned" firms. He was, moreover, a shrewd financial analyst. He tried to protect the government’s interest, arguing against lending the people’s money to a sieve like Wedtech, and for his considerable pains, three days before Christmas of 1984 he was dismissed from the Reagan Administration.
THE AUTHORS skillfully evoke a certain amount of sympathy for the devil. Thus, while they tell us that Wedtech’s nonunion employees were forced to accept a 10 percent wage cut in the same month in which the Wedtech executives stole more than $400,000 from their own company, they also allow us to enjoy the spectacle of the boodlers spending their swag. Mariotta lived by the motto “If you travel like you are well off, people will accept you.” And of course Mariotta was right. In contemporary America the appearance of prosperity is all too often taken as a sign of propriety. Neuberger bought so many houses that “he couldn’t keep track of the keys to all of them.” Another Wedtech executive, Mario Moreno, lost $100,000 in a single sitting at the gaming tables of Atlantic City. The same fellow spent $1 million on renovations for his $85,000 Bronx house. “At the rear,” the authors write,
he built a $200,000 greenhouse, furnished it like a lanai and, to complete the effect, added a miniature tropical rain forest along the edges. One level down, Moreno had a team of workers (most of whom would have probably scattered to the winds at the mention of the words green card) chisel an indoor swimming pool out of the bedrock. This cost another $500,000. When it was done, Moreno possessed what was undoubtedly the only indoor grotto in the Bronx.
Wedtech had waxed with the Reagan defense buildup, but by 1986 the boom was over, and the government was growing curious about how the company had spent so much money so fast with so little (just over a third of the engines it had contracted to build, and dismal results on the navy contract as well) to show for it. Acting on a tip, an investigator for the Labor Department found that Wedtech had spent $7,418,000 on improvements to one of its plants that were supposed to cost in the neighborhood of $2,800,000. Kickbacks from pliant contractors to the Wedtech owners accounted for the difference. Investigations were launched.
The press, which had fawned over Wedtech (“Mariotta and Neuberger had discovered that journalists were easy marks for rheir heartwarming tales”), now began to grow skeptical. In the summer of 1985 Wedtech’s high-priced lawyer, who coincidentally had also represented the Village Voice, called the editor of the Voice to “express his concern” about the way a negative story on Wedtech was being pursued. The story never ran, but that marked the end of the honeymoon for Wedtech. As the lawenforcement agencies prepared their indictments, headlines about how the Wedtech executives were making killings by selling off their stock began to appear.
The authors sum up what the company had wrought:
Wedtech had received federal contracts with a total value of $494 million and had sold $160 million in worthless securities to the public. In just a few vears, Mariotta and the Gang of Four (the other Wedtech senior officers] had stolen more than $5 million from Wedtech, had made at least another $15 million selling their stock, and had lived like royalty at the company’s expense.
If this had been honest graft that brought good jobs at good wages, to coin a phrase, to the hard-pressed people of the South Bronx, it might mitigate the crimes of the Wedtech thieves. But the jobs were not good: toxic pollution in the plant was so bad that the Defense Contract Administration Service urged that its employees be removed from the premises. And the wages were good only fitfully: the corrupt local chapter of the Teamsters used friendly persuasion to keep them low. In any case, these bad jobs did not last. Wedtech is out of business. One of its buildings houses a wholesale grocery distributor, the other a self-storage warehouse. “The Wedtech sign that overlooked the Major Deegan Expressway,” the authors write, “blew down in a windstorm.” It will be years before an honest minority contractor in the South Bronx will be able to get the government’s help to put up a new sign in its place.
ON MARCH 6, 1984, Ronald Reagan came to New York for a fund-raiser at the Waldorf-Astoria. With money stolen from Reagan’s government, two of the Wedtech executives bought $20,000 worth of tickets to the event. Imagine the surprise of these equal-opportunity racketeers when, in his banquet speech, Reagan singled out Wedtech for special praise. “Real progress in this country can be traced to the work of conscientious and hardworking individuals,” the President said.
“One such person is John Mariotta, who’s providing jobs and training for the hardcore unemployed of the South Bronx. . . . And what gave Mr. Mariotta the courage to keep going when others quit? He tells us it was his faith in God. Now, his faith has moved mountains, helping hundreds of people who’d almost given up hope. People like John Mariotta are heroes for the eighties.”
Jesus, one is tempted to conclude, wept. But let the authors of this firstrate piece of investigative journalism have the last word: “Perhaps the whole scandal is eloquent testimony to the ‘greed is good’ ethic that pervaded Wall Street and Washington during the Reagan presidency. In an ironic sense, John Mariotta was a symbol of the eighties.”