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<text id=89TT2451> <link 89TT1899> <link 89TT1673> <title> Sep. 18, 1989: Sam Pierce's "Turkey Farm" </title> <history> TIME--The Weekly Newsmagazine--1989 Sep. 18, 1989 Torching The Amazon </history> <article> <source>Time Magazine</source> <hdr> NATION, Page 20 Sam Pierce's "Turkey Farm" </hdr> <body> Under his leadership, HUD became a trough for the well connected. For the first time, the former Secretary gives his side of the story By Nancy Traver For eight years he was known as "Silent Sam," the invisible man of Ronald Reagan's Cabinet who presided over the Department of Housing and Urban Development while programs were slashed and the homeless piled up on city streets. To its critics, HUD became a do-nothing agency, a target of Reagan's attacks on wasteful government. Sam Pierce, it was said, was content to sit in his office watching television and hoping for an appointment to the Supreme Court. The public is belatedly discovering that a great deal was going on at HUD while no one was looking. Prominent Republicans were paid hundreds of thousands of dollars to win building contracts for wealthy developers. Crooked real estate agents pocketed millions owed to HUD from foreclosure sales. Well-connected mortgage companies issued shaky loans largely guaranteed by the Government; as the debtors defaulted, HUD's co-insurance losses mounted toward $1 billion. At the same time, HUD was becoming a dumping ground for Reagan contributors who knew or cared little about housing. "Where the hell do you get these people?" former HUD Inspector General Charles Dempsey once said to Pierce's former executive assistant, Lance Wilson. "You're known as the turkey farm." The HUD mess has joined the $300 billion savings-and-loan bailout and the ongoing Pentagon procurement investigation as a legacy of the freebooting Reagan years. As the scandal spread, Pierce, 67, remained reclusive. At a congressional hearing in May, he brushed off suggestions that he had acted improperly. This Friday, however, Pierce returns to Capitol Hill to answer more detailed questions about his role in HUD's many giveaways. And in his first full-length interview since news of the scandal broke, Pierce agreed to tell his side of the story to TIME. INFLUENCE PEDDLING. Pierce insists that he never intervened to award lucrative contracts to his friends and G.O.P. allies, including former Interior Secretary James Watt, jazz musician Lionel Hampton, high-powered Washington lobbyist Paul Manafort and others. He acknowledges that he dispatched memos encouraging his staff to give "careful consideration" to certain projects, and that he sent letters to friends confidently promising to "work it out." But he denies that he created an atmosphere of favoritism, and he still doesn't see that the mismanagement at HUD was his doing. The one responsible, he says, was his executive assistant, Deborah Gore Dean, 34, an able woman with plenty of ambition and connections. Said Pierce: "I trusted Deborah, and I should have checked on her more. She was ordering people around, and when they refused to go along with her, she batted them over the head to get their agreement." PRIVATEERS. Pierce is proud of his success in shrinking HUD's payroll, boasting that "We were able to do more with less." But at the same time he concedes that the agency lost too many of its auditors, allowing escrow agents to steal millions in HUD foreclosure funds and prompting the Justice Department to launch 618 fraud and theft investigations around the country. Pierce also acknowledges that he should have exercised more control over co-insurance, introduced in 1983 to bring private lenders into the business of housing mortgages. Companies shared only 20% of the risk, but some inflated their appraisals; when the loans went bad, the Government had to absorb the loss. Mortgage lenders allowed into co-insurance should have been able to back up loans they issued, Pierce says, or else HUD should have forced the lenders to assume a greater share of the loss. "It needs to be watched very closely," Pierce said. "We've learned that." POLITICAL APPOINTEES. Most of the people referred to HUD "did excellent work," Pierce says. Yet he struggled to fill the top posts with people he considered competent. As his Under Secretary he proposed John Knapp, who had served as HUD general counsel for more than four years, but the White House wanted a Reagan loyalist. Pierce lost the battle, and the post went unfilled for 2 1/2 years during his tenure. The spot of Assistant Secretary for Housing, charged with running the controversial Section 8 Moderate Rehabilitation program, changed hands eight times in eight years. This proved to be disastrous for Pierce, who like Reagan was a hands-off manager. He failed to oversee his subordinates and never got deeply involved in the daily operation. The most flagrant abuses came in the $225 million mod-rehab program, in which rent subsidies and tax credits are given to developers who buy and renovate low-income housing. The program became ripe for blatant patronage in 1984, when Congress waived the requirement that each state get a fair share of housing money. Unlike other programs, mod-rehab awards were no longer governed by a complex formula of points and merits. Pierce appointed a three-member committee to oversee it: Dean, along with the Assistant Secretary of Housing and the Under Secretary--two posts that often went vacant. The vacuum was apparently filled by Dean. Some former HUD officials who were supposed to have served on the committee said formal meetings were not held. Others said Dean decided who would get the grants and ordered that they be funded. Dean has yet to tell her full story; she refused to testify before Congress, invoking her Fifth Amendment right against self-incrimination. Her lawyer said last week, "Miss Dean's mod-rehab funding activities were directed and authorized by Samuel Pierce." Whoever was in charge, contractors asking HUD for money quickly learned that it was better to know the judge than to know the law, as was once said of the Tweed Ring. Developers who hired politically potent insiders won attention. Watt was paid $300,000 in 1986 for his help in getting grants for a 312-unit project in Essex, Md. Manafort's consulting firm earned $326,000 in 1986 after garnering subsidies for a 326-unit development in Upper Deerfield Township, N.J. Former HUD officials were particularly successful at raking in Section 8 money. Philip Winn, once Assistant Secretary for Housing, Philip Abrams, former Under Secretary, and Lance Wilson, who preceded Dean in the job of executive assistant, formed a partnership that sponged up $162 million in contracts and tax credits in just eleven months. In all, 20 consultants made more than $5.7 million over a five-year period by lobbying for Section 8 money. Some states received a disproportionate amount of the funds: Florida got nearly 30% of the Section 8 budget, tiny Puerto Rico won 15%. Pierce told TIME that he only briefly scanned the Section 8 recommendations that were brought to him by Dean. But Shirley McVay Wiseman, a former Assistant Secretary of Housing, told Congress that Pierce ordered her to approve an $11 million 151-unit low-income housing project for the elderly in Durham, N.C., that sat on a former hazardous-waste storage site. HUD staff recommended against approval, but Pierce, aware that a former law associate was pushing the project, told Wiseman, "I want it funded." Pierce still defends his actions. "Occasionally, you have to step in and overrule your staff," he told TIME. "That Durham project was a great success." Thomas Demery, the last Assistant Secretary of Housing to serve under Pierce, says he tried to clean up mod rehab by instituting a point system that would rank projects on their merits. Pierce said he thought the problems with the program were resolved; then HUD Inspector General Paul Adams came to him in 1988 and suggested that certain developers and former HUD employees had established a "special relationship" with the agency. Adams' red flag came too late; contracts for the next year had already been awarded. Reacting like any good bureaucrat, Pierce called for a special task force to oversee Section 8. Although Pierce pronounces himself shocked by revelations about Dean, he gave her plenty of opportunity to do his job for him. In 1986 Pierce traveled to Des Moines and was embarrassed and angered by questions about a $225,000 HUD grant that the city was to receive--without his knowledge. Dean had used the Secretary's autopen to approve the contract. But Dean's back-channel sources warned her of Pierce's fury. When he returned to Washington, says the aide, Dean "turned on the charm, told some jokes and managed to calm him down." Despite his general disengagement, Pierce took direct action to save DRG Funding Corp., one of the largest co-insurers, after the company hired former HUD Secretary Carla Hills to plead its case. In 1984 mid-level HUD officials placed DRG on probation because they suspected it of ignoring loan guidelines and inflating property values. Hills, now U.S. Trade Representative, approached Pierce in April 1985. (She insists her lobbying actions were appropriate.) Although HUD staffers strongly urged that DRG be dropped, Pierce merely asked the company to change its procedures. DRG went on to tally $538 million in bad loans--a debt that HUD (that is, the U.S. taxpayer) must largely repay. Pierce excuses his inattention to Section 8 by saying that his time was consumed by policy issues like fair housing, or more expensive programs like the $96 billion Federal Housing Administration, and the $144 billion Government National Mortgage Association. One of his priorities was the Fair Housing Amendments Act, approved by Congress in 1988. The law provides additional protection to families with children and gives the Federal Government broad powers to investigate landlords suspected of discrimination. To win Reagan's support for the bill, Pierce had to overcome opposition from conservative stalwarts such as former Attorney General Ed Meese. After George Bush and other moderates came to his aid, Pierce was quick to show his gratitude. One former senior White House official said that when Bush announced his candidacy, Pierce turned up at the next Cabinet meeting with a shopping bag of neckties he had had made to order. Each one said PUSH FOR BUSH. Yet Pierce always operated on the periphery of the Administration. He rarely spoke at Cabinet meetings unless the subject was housing. "You had the sense that he was there for a specific job and that he was insecure speaking on other subjects," said a top Reagan aide. If Pierce was reticent, it was not because he was out of place among the well-heeled Reaganites. The eldest son in a wealthy family, Pierce was given the education and polish to prepare him for a career in law and politics. His father was a successful small businessman who moved his family to the comfortable New York City suburb of Glen Cove. Pierce said his father emphasized that making money was not enough; he urged his sons into public service. One of Pierce's brothers is a Harvard professor in psychiatry and education, the other is a businessman. Pierce attended college and law school at Cornell, where he was the first black to play football against Navy at Annapolis, at a time when blacks from northern schools sat on the sidelines. Even though most blacks gravitated toward the Democrats, Pierce felt more comfortable with Republicans--and during the Eisenhower years the party quickly drew him up the ladder. After a four-year stint in the Manhattan District Attorney's office, he moved to Washington, where he served as a special assistant to Arthur Larson, Under Secretary of Labor for Dwight Eisenhower. "He'd achieved all the distinctions a person could, and let me tell you, that was before people made an effort to get Brownie points by being nice to blacks," recalls Larson. Back in New York, Pierce was appointed to an interim judgeship by Governor Nelson Rockefeller. But he lost the election that followed, showing an ineptitude for politics that would plague him 20 years later at HUD. Says Chuck Stone, then the editor of a black newspaper that covered the race: "Pierce was bright as hell, but arrogant and stiff-necked. He just couldn't relate to people." Yet Pierce went on to tally a string of firsts: the first black to join a major New York law firm (Battle, Fowler), the first to be appointed to the board of a major American manufacturing corporation (U.S. Industries). In 1964 Pierce and William Rogers (later Secretary of State under Richard Nixon) helped make legal history with the argument they contributed to New York Times v. Sullivan, a landmark case that led the Supreme Court to put narrow limits on libel. Pierce's reputation was so strong that a top FBI official once proposed to promote him as a national black leader who might replace Martin Luther King Jr. Pierce broke another race barrier in 1970, when he became the first black to hold a sub-Cabinet post in the Treasury Department. As general counsel, he oversaw the complex federal bailout of Lockheed Aircraft. The job would seem to have been an ideal training ground for Pierce, but managing a department of 1,000 lawyers at Treasury was nothing like handling the 16,000 workers and vast diversity of programs at HUD. Pierce made no secret of his reluctance to leave his $280,000 annual partnership at his New York law firm to return to public service. But when Reagan called him out to Los Angeles, Pierce signed on. As the only Cabinet officer to last the full eight years under Reagan, Pierce is bewildered and hurt by the scandal that has washed over him and soiled his reputation. Reagan himself has been less vigorous in speaking out on Pierce's behalf than he has been for other subordinates. "I hope the examination of the HUD matter is careful and fair," the former President told TIME recently. "Sam Pierce deserves no less." A better defense for Pierce would be to argue that since HUD was created in 1965 under Lyndon Johnson, abuse of the agency has been bipartisan. During the Carter years, Section 8 spending reached $24 billion, and much of that went to developers with Democratic ties. A Carter contributor from Chicago won 35 HUD projects; in Massachusetts 70% of Carter's re-election campaign donations came from local Section 8 developers, who in turn got 90% of the state's Section 8 grants for the following year. Pork-barrel politics is built into HUD. The department's ostensible constituency, people who need low-income housing, is powerless and nearly invisible. The real constituency is wealthy, well-connected developers--and the politicians who can use HUD grants to deliver goodies to their supporters. Reagan and Pierce tried to attack the problem by cutting HUD's money. Result: the competition for the remaining funds grew fiercer. While that unseemly scramble took place, the truly needy were nearly shut out. The pillage took place on Pierce's watch, and even Republican analysts agree that the magnitude of the looting was unprecedented. Investigators must still determine whether Pierce was betrayed by his staff, as he contends, or whether he gave his consent to turning HUD into a hog trough. Either way, Silent Sam should be held responsible for standing aside and saying nothing. </body> </article> </text>