Wedtech Executives, Nofziger ‘Unloaded’ Stock, Counsel Says : Senate Oversight Panel Referring Matter to SEC
WASHINGTON — Wedtech Corp. executives and lobbyists, including former White House political director Lyn Nofziger, “unloaded” $10 million worth of stock weeks before the company was disqualified from a lucrative Small Business Administration program, the firm’s recently hired legal counsel testified today.
Martin Pollner told a Senate subcommittee that company executives were aware that the SBA was about to announce that the firm was no longer eligible to participate in the set-aside program in which minority contractors are awarded no-bid government work.
“They (Wedtech executives and their consultants) unloaded the stock” at a time when the public was unaware that the SBA was in the process of disqualifying Wedtech from the program, Pollner said.
Under the program, the firm received $250 million in military contracts.
Sen. Carl Levin (D-Mich.), chairman of the Senate subcommittee on oversight of government management, announced during Pollner’s testimony that the stock sales may constitute insider trading and that the congressional panel has referred the matter to the Securities and Exchange Commission.
Pollner issued documents showing that in March, 1986, Nofziger sold 33,000 shares of Wedtech stock worth $326,000 shortly before the public became aware in mid-April that Wedtech was being disqualified by the SBA for participation in the federal program. The stock’s price plummeted thereafter.
Pollner’s records show that Nofziger’s lobbying partner, Mark Bragg, sold the same amount of Wedtech stock as Nofziger in the same month. Nofziger and Bragg are under indictment in connection with alleged illegal lobbying activities on behalf of Wedtech.
Wedtech’s founder, John Mariotta, sold 342,000 shares of Wedtech stock worth $3.6 million in April, 1986, days before the public announcement that the company was no longer eligible for the SBA program, Pollner said.
Pollner earlier told the subcommittee that Wedtech, which filed for reorganization under the federal bankruptcy laws last December, has “probably been insolvent for years.”
He said former Wedtech executives “had been misappropriating millions of dollars from the company for their personal benefit for years as well as creating a slush fund . . . for the admitted bribery of city, state and federal officials.”
Wedtech raised $162 million through public stock offerings and more than half of it was raised in 1986, “long after the time the company became insolvent,” Pollner told the subcommittee.
“As soon as we began to investigate the company’s finances we learned that its financial condition was dramatically different than the company’s public disclosures,” Pollner testified.
“It appeared that the company had probably been insolvent for years; most of its prior government contracts were not profitable; and it was subsisting on money improperly obtained from public offerings of Wedtech securities and progress payments received from the Department of Defense.”
Pollner said that during the period that Wedtech was raising money from the public and the Bronx defense contractor was being paid by the Pentagon, the company’s management “was cashing in to an astonishing extent.”
