TIME: Almanac 1990/1990 Time Magazine Compact Almanac, The (1991)(Time).iso/time/062689/06268900.053

Text File | 1990-09-22 | 8KB | 142 lines

NATION, Page 18

The Housing Hustle

Under Reagan and "Silent Sam," HUD took care of the greedy

instead of the needy

By Nancy Traver


    The cornerstone of Ronald Reagan's campaign for the White House
was an attack on Government waste, fraud and abuse. Singled out for
special scorn were "giveaway" programs for the poor. Now, as
Congress delves into a spreading scandal at the Department of
Housing and Urban Development, the hypocrisy of Reagan's rhetoric
has been brought into sharp relief. During his Administration, a
massive giveaway did take place, but to the greedy, not the needy.
HUD, whose prime mission is to provide shelter for low-income
citizens, instead became a gold mine for Republican insiders,
ambitious developers and powerful Washington consultants.

    At the heart of the scandal is Samuel Pierce, Reagan's HUD
Secretary. Though Pierce was the only black to serve in Reagan's
Cabinet -- and its only member to remain in office throughout both
Reagan terms -- the former President once greeted him as "Mr.
Mayor" at a conference of mayors. Under Pierce's feckless
leadership, HUD's budget was pared 70% (it stands at $14.9 billion
for 1989). Little was done to halt a decline in the nation's
inventory of low-income housing, from which 4.5 million units have
disappeared since 1973. Critics charge that programs were
dismantled, talented staffers were fired and unqualified managers
were promoted. Pierce went along with all of it, earning the
nickname "Silent Sam."

    As he prepared to leave the Government in January, Pierce
pointed proudly to his three Government decorations and declared,
"President Reagan asked me to reduce the size and cost of
Government and at the same time try to take care of the most needy.
I think I did that very well." The cynicism of that boast has
become glaringly evident. Since the release of a HUD inspector
general's report in April, the agency has become the target of
inquiry by two congressional committees into charges of influence
peddling. The Justice Department has launched a nationwide probe
into the possible theft of as much as $100 million in HUD funds.
Says Democratic Congressman Tom Lantos of California, chairman of
a House panel that has held hearings on the agency's problems: "The
scandal at HUD seems to have no end. It is the most mismanaged
department in memory."

    Three broad areas of misconduct are under investigation:

    RENT SUBSIDIES. A program to provide subsidized housing was
turned into a treasure trove from which millions of dollars in rent
subsidies, tax credits and consulting fees were doled out to
prominent Republicans and a handful of rich developers. Pierce
stood idly by as his executive assistant, Deborah Gore Dean, 35,
turned over contracts to firms that enlisted Washington insiders
as consultants. They included Dean's close friend former Attorney
General John Mitchell and former Interior Secretary James Watt.

    THEFT OF FUNDS. The Justice Department last week launched a
nationwide inquiry into a pattern of abuse by escrow agents who
pocketed money they received from the sale of foreclosed homes over
a four-year period. Among the targets is a Maryland woman,
nicknamed "Robin Hud," who brags that she stole $5.5 million in HUD
money and gave it to the poor.

    SUBSIDIZED HOUSING. A 1984 audit turned up evidence that Island
Park, N.Y., officials rigged a program that was supposed to award
HUD houses to the poor so as to favor the politically connected and
exclude blacks. Among those allegedly receiving preferential
treatment: a cousin of Republican Senator Alfonse D'Amato of New
York and the son of a HUD regional administrator.

    Pierce's mismanagement of rent subsidies, known as the Section
8 Moderate Rehabilitation program, has drawn the most intense
scrutiny. If the decade-old $225 million-a-year effort had worked
as designed, local housing authorities would have applied to HUD
for federal grants to buy and renovate rental housing for the poor,
and HUD would have awarded the money to the neediest areas. The
developers who were to carry out the remodeling work were supposed
to be selected by competitive bids.

    Instead, developers who wanted to cash in on the lucrative
15-year contracts enlisted high-priced consultants, including
former HUD officials and influential Republicans with no prior
experience in housing. The consultants contacted local housing
authorities, promised help in cutting through bureaucratic red
tape, and encouraged them to apply for the funds. After a few phone
calls to their old friends at HUD or a 30-minute meeting with
Pierce, the consultants got contracts awarded to the developers,
who paid hefty consulting fees.

    Among those who lined up at the trough were eleven former HUD
officials and well-known Republicans, including Watt, former
Senator Edward Brooke of Massachusetts and former Governor Louie
Nunn of Kentucky. Watt told Congress he received $300,000 in
consulting fees for making eight phone calls and meeting with
Pierce for half an hour concerning a project in Essex, Md., that
HUD had previously rejected. Brooke is said to have received
$183,000 from two developers connected with projects in
Massachusetts. Nunn was awarded $375,000 for similar work on
projects administered by the Jacksonville office of HUD. Officers
of the powerful Washington G.O.P. consulting firm Black, Manafort,
Stone & Kelly (which worked for the campaigns of both Reagan and
his successor George Bush, as well as new HUD head Jack Kemp) got
$326,000 after winning $3.1 million in HUD rent subsidies for a
326-unit project in Seabrook, N.J.

    Some of those involved in the scandal claim lofty motives. HUD
Assistant Secretary for Housing Thomas Demery, a central figure in
the Moderate Rehabilitation award process, has been criticized
because several HUD developers contributed nearly $300,000 to
Demery's favorite charity, Food for Africa. The now notorious Robin
Hud, a Maryland escrow agent whose real name is Marilyn Harrell,
claims she used $5.5 million in HUD fees to establish a charity
called Friends of the Father and to set up four businesses that
employed poor people. In testimony last week before a House
subcommittee, Harrell said her diversion of millions of dollars was
a "sin," and added that she planned to repay the money.

    Dean, who presided over the award of Section 8 grants, had
little background in housing but plenty of ambition and family
connections. A cousin of Tennessee Senator Albert Gore, Dean
variously referred to Mitchell as her father or stepfather after
he began living with her widowed mother Mary Gore Dean. At HUD,
Deborah Dean served as a sort of gatekeeper, controlling access to
Pierce and enjoying wide powers to block projects. She told the
Wall Street Journal that the rent-subsidies program was "set up and
designed to be a political program (and) we ran it in a political
manner." At a congressional hearing last week, she invoked her
constitutional right against self-incrimination.

    How could such a scandal remain uncovered for so long? The
answer lies partly in the fact that no one was looking. During the
Reagan years, Congress was more interested in blocking budget
cutbacks than in examining how Pierce ran his department. Since
housing was an unglamorous beat, few journalists paused to
investigate what was going on under Silent Sam.

    The new HUD Secretary, Jack Kemp, promises to clean up the mess
that Pierce and his cohort left behind. Kemp has canceled all 1989
Moderate Rehabilitation programs, called for an audit of 300
housing projects that have already received rent subsidies and
demanded that 53 HUD field officers explain what happened to the
funds that appear to be missing. "There's much work to do here, and
I enjoy it," says Kemp. "President Bush has charged me with the
responsibility to reform the agency from stem to stern, and that's
what I intend to do." He has his task cut out for him.