Word: wedtech
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With military orders flowing in, Wedtech's revenues grew to $72.3 million by 1984. The company went public with a $30 million stock offering, making millionaires of Mariotta, Neuberger and other executives. But the stock sale almost killed the goose that laid the golden egg: since Mariotta was no longer the majority stockholder, Wedtech ceased to qualify as a minority-owned company. When the local SBA office began proceedings to remove the company from the set-aside program, Wedtech's officers quickly worked out an agreement to transfer 1.8 million shares of stock to Mariotta's nominal control. Wedtech turned...
...company's downfall began when Mariotta was ousted as Wedtech's chairman and replaced by Neuberger after disputes about management policies. The stock that Mariotta supposedly controlled was returned to the company, and Wedtech yielded its status as a minority-owned business. The stock dropped from $11.44 a share in March 1986 to $6.50 in October. Soon after, New York City newspapers began linking the firm to corruption investigations. Wedtech officials admitted they had forged invoices to speed up payments from the Army. By year's end the company had laid off 1,000 workers and filed for bankruptcy. Debts...
...Wedtech scandal is a blot on the minority set-aside program, which conservatives have criticized for being ineffective and poorly administered. Many of those who support the program agree that it needs reforming. Massachusetts Congressman Nicholas Mavroules, a member of the House Small Business Committee, has introduced legislation that would increase the penalties against minority front companies and require set-aside contractors to report to the Inspector General on their use of consultants. Mavroules wants to reform the set-aside, not eliminate it. Says he: "I believe the program is still very much needed to encourage the growth of fledgling...
...Wedtech, meanwhile, is attempting to resurrect itself. A new management team has in its pocket a $500,000 loan from Chemical Bank and $38 million in Government contracts, none of which are the subject of investigation. Gone are the Cadillacs and limousines used by Wedtech's former officers. A $305,000 Manhattan condominium purchased in 1985 for "entertainment" purposes is on the market. Eventually, Wedtech's officers hope to rehire many of its former workers...
...biggest crime of all, says Wedtech's new president, Joe Felter, is that the scandal "cast a terrible aspersion on our minority work force that was grossly undeserved." For the moment, though, the sophisticated computer- controlled machines on the shop floor are mostly silent. For the South Bronx, Wedtech is one more example of hopes betrayed...