Subject of FBI probe tells of Weldon ties

Posted on Mon, Nov. 27, 2006

Lawyer John J. Gallagher says their dealings go back 30 years, with a mutual interest in Russia.

By John Shiffman and Mark Fazlollah
Inquirer Staff Writers


When Center City lawyer and Russian trade expert John J. Gallagher lost a $2.5 million investment in a cognac distillery in a former Soviet republic, a family friend stepped up to help - in a big way.

The friend, U.S. Rep. Curt Weldon, first called the president of Moldova. When that didn't work, Weldon went to the House and proposed cutting all U.S. aid to Moldova until Gallagher got his money back.

That deal, now part of an FBI corruption investigation, wasn't the only time that Weldon used his office to help Gallagher, a lawyer who specializes in putting together business deals - from Philadelphia City Hall to the U.S. Capitol to the Kremlin.

Weldon also backed an effort that funneled federal money to former Soviet scientists working for a partnership between Gallagher and a Russian firm.

Gallagher's software firm apparently had no workers and did little in the partnership, The Inquirer found.

Weldon lost his congressional seat to Democrat Joe Sestak three weeks ago. But there was no letup in the FBI corruption investigation involving Weldon, his daughter Karen's consulting firm, and Gallagher.

In the first interview given by one of the subjects of the FBI probe, Gallagher said his relationship with Weldon went back 30 years. Their careers, he said, dovetailed in Russia.

"I was very lucky to have my representative also have an interest in Russia," Gallagher, a resident of Weldon's district, said in his spacious office at 18th and Market Streets in Center City.

Gallagher said Weldon, in trying to help him in Moldova, was simply providing good constituent service. "It's my congressman's job," Gallagher said. "He represents me, and a foreign country wronged me."

Agents who searched his law office were investigating possible violations of a federal bribery law, Gallagher said. "Of course I didn't pay Curt Weldon," he said.

Gallagher declined to give details of the FBI raid last month, other than to acknowledge that agents took his Moldova file, among others. He said he was cooperating with the investigation.

For years, Gallagher and the Weldon family have constantly crossed paths in the network of U.S.-Russian trade groups.

Gallagher, who says he has made more than 100 business trips to Russia, helped Karen Weldon's firm there. He said he introduced her firm, Solutions Worldwide, to officials from a Russian company that makes drone spy planes.

The aviation firm gave Solutions a $12,000-a-month contract. Curt Weldon pushed the Navy to buy the drone, and officials got as far signing a contract with the Russian company.

But Gallagher said the deal ended because of news coverage of Karen Weldon's contract.

The first client of Solutions Worldwide was the Russian natural-gas giant Itera International Energy. The FBI also raided its Florida office last month.

Weldon set up a Library of Congress dinner for Itera in 2002 and, on the floor of Congress, pushed for a federal grant to the firm. A month later, Itera hired Solutions for $500,000 a year.

Weldon and his daughter, as well as Itera officials, have denied wrongdoing.

Gallagher said he met Itera officials but declined to elaborate, saying only that he did no business with them. "If it's part of the grand jury investigation, unfortunately I can't speak."

Until recently, Gallagher may have been better known in Russian trade circles than in his own hometown. A graduate of La Salle University and the University of Pennsylvania law school, Gallagher, 54, started his own law firm in 1980.

Gallagher also knew his way around City Hall.

During the City Hall corruption investigation, the FBI recorded him talking to the late power broker Ronald A. White about raising money for Mayor Street and trying to win city deals, sources said.

On one such 2003 call, Gallagher phoned White from Russia to complain that he wasn't getting his share of city legal work. White said he'd take care of it. "Relax," White told him. "Everyone knows who you are."

Gallagher said in the interview that he and White had been friends since they attended law school together three decades ago.

He said he never paid White to help him with the Street administration. For "all good friends," he said, White "would lend a hand."

Gallagher said in the interview that he held two Street fund-raisers with White - one raised about $25,000 - because he was "a lifelong Democrat."

Gallagher also is close to top Republicans in Delaware County, where he lives.

He has given $48,000 to the Springfield Republican Party over the last six years - three times more than any other donor, campaign records show. The Springfield party is run by Charles Sexton, Karen Weldon's partner in Solutions Worldwide.

Gallagher said he contributed because he had known Sexton for 25 years. He said he never got work from Delaware County.

In 2003, Gallagher and Delaware County Republican chief Thomas J. Judge Sr. traveled to Serbia to see Sexton get an honorary doctorate. Gallagher said the degree was arranged by the wealthy Karics, who were banned from the United States because of their ties to the late dictator Slobodan Milosevic.

The Karics also hired Karen Weldon to try to improve their image. Gallagher said he did no business with the Karics.

In his forays to Russia and Eastern Europe, Gallagher wears many hats: sometimes private lawyer, other times an agent of U.S. antinuclear policy. Sometimes, the roles blur.

One example: Gallagher now serves as chairman of the United States Industry Coalition, a Weldon-backed, government-financed group that lines up private business ventures in Russia.

Shortly before Gallagher became a board member, the agency in 2001 helped set up a deal for him with one of Russia's leading software companies.

Gallagher's firm, CTG Software Inc., had no address, other than his law office, and apparently no employees. It was founded two days before the Energy Department announced it would fund the venture, which aimed to find software jobs for former weapons scientists.

About 12 months later, Gallagher dropped out without getting any of the federal money. The endeavor fell short of expectations, hiring far fewer scientists than planned.

Gallagher gets strong support from the industry coalition's former CEO, Victor Alessi.

"I am convinced that his involvement in this project was altruistic," Alessi said.

Some coalition board members said Gallagher had helped the organization as chairman.

"One of the very strongest suits was his relationship with Curt Weldon," said former coalition chairman David C. Bell, president of Phygen Inc., a high-tech Minneapolis firm doing business in Russia. "Curt has been a friend of [the coalition]. It's nice to have friends in positions of power."

The former director of the Energy Department's nonproliferation programs said he "would not have chosen someone with a known close relationship with Weldon to be chairman of the board with [the coalition]."

"My goodness, it raises the appearance of a conflict of interest," said John Hnatio, who called Weldon a "major funder" of the program.

Weldon also was at Gallagher's side in a fight to help a young Russian crippled in an accident with a U.S. diplomat.

In 1998, U.S. Consul General Douglas Kent was uninsured when his SUV hit a Toyota in the Russian city of Vladivostok. Passenger Alexander Kashin, then 23, was left paralyzed.

Gallagher filed a federal suit in Philadelphia and gained wide attention in Russia. Protesters picketed the U.S. consulate in Vladivostok. "I thought... if we initiated suit, it could be settled very quickly," Gallagher said.

But the case lingered.

In May 2004, Weldon pushed Congress for a settlement, describing the case as a human-rights issue. He said the suit was filed by a "very prominent Russian lawyer in Philadelphia by the name of John Gallagher."

Congress took no action, and a federal court dismissed the case against Kent last month.

Kashin will never walk again, Gallagher said, but he hasn't given up trying for help from the U.S. or Russian governments.

Kent said he was confused by Weldon's role. "I could never tell whether Gallagher was working for Weldon or Weldon was working for Gallagher," Kent said.

The FBI is clearly interested in Weldon's actions in the Moldova affair, Gallagher said.

In that venture, Gallagher said he put up $500,000 of his own money and gathered the rest from a group of investors, several from Delaware County.

At first, he said, he received assurances from top Moldovan officials that the sale had the government's blessing.

He met with Moldova's prime minister and the man who later allegedly scammed him. The prime minister said, "deal with him," Gallagher said. He cited that incident in a 2004 deposition in a suit investors filed against him.

After Gallagher deposited the money in an Eastern European bank, he said, it disappeared. When Gallagher returned to Moldova, he said officials acted as though they didn't know him.

In 2003, Gallagher went to Weldon, who offered the amendment to cut off foreign aid.

"A longtime constituent of mine invested $2.5 million in Moldova," Weldon told Congress. "I have taken this matter to the president of Moldova on several occasions."

Weldon demanded that Moldovan officials recover the lost money. But he later withdrew the amendment to cut off aid.

Gallagher vowed to continue fighting to get the money back from Moldova because some investors are "dear friends."

"This isn't something I'm forgetting about because the FBI took the file," he said.

To view the U.S. Industry Coalition Web site for John J. Gallagher's firm, go to http://go.philly.com/usic

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Contact staff writer John Shiffman at 215-854-2658 or at jshiffman@phillynews.com. Special correspondent Bagila Bukharbayeva contributed to this article.

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