T««NATION, Page 20Sam Pierce's "Turkey Farm"Under his leadership, HUD became a trough for the well connected.For the first time, the former Secretary gives his side of thestoryBy 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.
