A HUD Roadshow Raises Questions of Conflict

The campaign that came to Los Angeles, among other cities, was designed to promote public awareness of fair housing laws. Critics contend that it did little more than boost the public image of the secretary of Housing and Urban Development.

U.S. Housing and Urban Development Secretary Samuel R. Pierce has periodically traveled around the country promoting the nation’s fair housing laws with parties, balloon shows, press conferences, newspaper ads and billboards carrying his picture.

About $1 million was spent on a three-year promotional roadshow that was staged in eight cities, including Los Angeles.

However, to save money, public funds were not used to pay the expenses of the public relations campaign. Instead, contributions were solicited from developers, realtors and contractors who do business with HUD and who in some cases had projects awaiting HUD approval.

There has been no public accounting of the money that was raised, but records of the event in Los Angeles show that expenses totaled about $300,000--and some of the bills still have not been paid, vendors said.

Blunt Demands

In some cases, developers received rather blunt demands to contribute a minimum of $3,000. But Tom Safran, for example, who manages hundreds of HUD subsidized rental units, sent a check for $100--only to have it returned with a letter chiding him for not contributing more.

“$100 is on the ridiculous side,” the letter stated. “It does not pay for the time and energy we have used to create an opportunity for you to be identified with this project. . . . With your involvement in housing and benefits from doing business with HUD, you should want to make a better impression. . . .”

The National Campaign of Public/Private Partnerships for Fair Housing was designed to promote public awareness of fair housing laws that prohibit discrimination in the housing market. However, critics contend that it did little more than boost Pierce’s public image while disguising his poor performance in fighting for tougher fair housing legislation.

The campaign was staged in Baltimore, Dallas, New York, Oakland, Columbus, Philadelphia, New Orleans and Los Angeles between 1983 and 1985. President Reagan endorsed it at a White House press conference, expressing his thanks “for the involvement of thousands of contractors, realtors, building managers and others who make up the housing industry.”

In keeping with Reagan’s push to involve private enterprise in government activities, HUD’s fair housing campaign was intended to be a joint effort of government officials and the private sector.

As a result, as one official summed up in a HUD newsletter: “Department staff worked hand in hand with our private sector partners.”

However, critics say that a troubling coziness was created by this arrangement, raising questions involving conflict of interest and public disclosure.

‘A Potential Conflict’

“There’s clearly a potential conflict when policy makers in an agency request private money to achieve a goal and the money comes from people who want something from these policy makers,” said Walter Zelman, executive director at Common Cause in Los Angeles, a public interest watchdog group.

“At a minimum, you ought to have public disclosure (of the money collected). . . . And it’s arguable whether there ought to be something considerably stronger, like a ban.”

The fair housing campaign was the idea of Pierce’s former executive assistant, Deborah Gore Dean, now a HUD consultant who was recently nominated to the post of assistant secretary for community planning and development with authority over about $3.7 billion in federal funds.

Dean said in a telephone interview from Washington that promoting fair housing is such an uphill battle that “you try just about every avenue.” She said she decided to enlist support from realtors and the HUD housing industry because they have “a responsibility” to help.

Dean acknowledged that she and other HUD officials helped raise money for the fair housing campaign, but she stressed that they did not personally collect the funds. In order “to protect everybody and keep it legal,” she said the money was actually collected and disbursed by private committees set up in each city.

She said that she chaired the campaign during its first year only and that she was not aware that any money was collected from individuals with projects pending HUD approval.

Furthermore, she said, “I don’t think that anybody who does HUD housing would ever think that by making a donation (to the fair housing campaign) they’d get anything in return.”

No Audit or Accounting

She said there has been no audit or accounting of the money spent by the campaign because there is no law requiring such disclosure by the “literally hundreds” of public-private partnerships that exist at the federal, state and local level of government.

She added, however, that it is “probably not a bad idea” for Congress to pass a law requiring the filing of annual disclosure statements.

The biggest expense of the fair housing campaign was advertising. The Winston Network Inc. of New York contributed more than $500,000 in space on buses and billboards across the country, Marc Winston said.

He said Dean asked the company to help out and he agreed because “it was good politics for us at the time.”

The campaign’s other significant expenses were the cost of printing posters for the billboards, taking out newspaper ads and putting on press conferences and parties. In Los Angeles, the balloons alone cost $4,500.

In Baltimore, these expenses were picked up mainly by realtors, whose powerful national association has been criticized by fair housing advocates for opposing legislation that would toughen enforcement of fair housing laws.

In Columbus, Ohio, expenses were paid by apartment owners, who manage housing units that are subsidized with millions of dollars in HUD rental subsidies.

In New Orleans, the bills were paid by home builders, who receive millions in HUD-insured mortgage money to build projects that meet HUD specifications.

In Los Angeles, records of the campaign show that the money was raised from developers, financiers, community organizations and other professionals who share a common interest in winning awards of federal housing funds from HUD.

HUD officials orchestrated the solicitation of funds from these people, either appealing to them directly or working through intermediaries.

When the fund drive came up short, HUD officials arranged to pay most of the outstanding claims by staging yet another fund-raiser.

However, two bills--one for Pierce’s hotel room at the Beverly Wilshire and the other for a $1,000 luncheon at the New Otani Hotel downtown--still have not been paid, company officials said, despite requests for payment made directly to Benjamin Bobo, area director of HUD in Los Angeles. In a memo to Pierce’s office, Bobo stated that he was “under the impression” that the Beverly Wilshire bill had been paid.

Dean said that the unpaid bills come as a “complete surprise” and that she would have paid them herself if she had known about them.

She added that the HUD inspector general’s office is investigating “allegations about how he (Bobo) raised money or paid the bills” for the Los Angeles fair housing campaign.

Bobo declined to be interviewed about the fair housing campaign and the propriety of the fund raising here. His spokesman, Scott Reed, said HUD officials here coordinated the event, but “we were not involved in any fund raising.”

However, one contributor told The Times that he got a letter “on HUD local office stationery” from Bobo’s aide, Frederick Stillions, that was written “to acknowledge receipt and thank you for your generous contribution of $1,000.” The contributor was Michael Clancy, a senior vice president at First Interstate Mortgage Co. who said he is responsible for the numerous multifamily projects financed by the bank with HUD mortgage guarantees.

Stillions, who did not recall writing the letter, said he was one of several HUD officials assigned to work the Los Angeles fair housing campaign. Several top aides to Pierce in Washington were also involved, he said.

Harold Washington, a developer who estimates he has built about 1,700 apartment units in Los Angeles with millions of dollars in HUD-insured loans, said he was contacted by one of Pierce’s top aides and asked for a contribution.

Washington said that he was “most pleased” to give and that he has “a splendid relationship with HUD.” He gave $2,000 “and then I raised (money) too, going to other people” in the housing industry, he said.

Dean flew to Los Angeles from Washington to personally solicit major HUD contractors like Sherman Gardner of G & K Management Co., which owns about 20,000 HUD-subsidized apartment units.

After a meeting, Dean thanked him in a letter for “your personal support and your willingness to spread the word to your colleagues.”

Elaborate Preparations

Her efforts were part of elaborate preparations for the fair housing campaign kickoff ceremonies in Los Angeles on May 29, 1985. The press conference held on the south steps of City Hall featured several speakers and an appearance by Secretary Pierce.

Pierce’s press secretary, Bob Nipp, declined to make Pierce available for an interview, requesting instead a written list of questions. He said, further, that Pierce knew nothing about the logistics of the fair housing campaign or fund raising for it.

Pierce is the only remaining original member of the Reagan Cabinet. During his seven-year tenure, he has been criticized for docilely accepting housing program cutbacks and labeled the “Dud at HUD” and “Silent Sam.”

In recent years, deep budget cuts have brought HUD construction programs to a near standstill, providing few opportunities for Pierce to appear at upbeat public ceremonies. But the fair housing campaign was a media event that gave the secretary a chance to score a few points promoting a worthy cause.

To ensure a big turnout in Los Angeles, Bobo ordered all local HUD employes to attend the press conference and chartered buses to provide them with transportation. Sports celebrities and politicians were invited. And a marching band and singer were lined up at a cost of about $1,000.

For a little pizazz, HUD officials ordered 12,000 colorful helium balloons, costing $4,500. They booked a ballroom at the New Otani Hotel for a $1,000 luncheon served after the press conference.

And they took out newspaper advertisements, including a quarter-page ad in USA Today costing $8,722. The ad featured a large picture of Pierce at his desk, flanked by President Reagan and Vice President George Bush, and headlined by the message that they all support laws prohibiting housing discrimination.

The same picture was displayed across the city on about 4,000 bus posters and some billboards that were put up on $250,000 worth of space donated by Winston Network Inc. The cost of producing these posters--about $22,000--was billed to HUD, invoices show.

HUD Instructions

The arrangements in Los Angeles were made in accordance with a thick loose-leaf binder that Pierce’s office sent to HUD officials in Los Angeles several months before the event. It contained detailed instructions how to lay the “groundwork” and “coordinate and orchestrate press” for the event.

The binder also included a section that explained how HUD officials should create a committee whose sole function would be to act as the sponsor of the event. Following this model, HUD officials here created the Los Angeles Fair Housing Committee.

About 60 individuals and companies were listed as members of the committee in a program of the Los Angeles event. But the committee had no staff, no bookkeeping capability and was never incorporated, said its chairman, Charles Z. Wilson, who was recruited for the job by his old friend Bobo at HUD. Wilson is publisher of the Wave newspapers, which are distributed to 250,000 homes in largely minority neighborhoods of Los Angeles.

Wilson, whose company contributed $2,000 to the fair housing campaign, described the committee as a group of volunteers that was formed for “an express and noble purpose” of sponsoring a one-day event designed to show support for fair housing laws.

Wilson said that the committee held no meetings and that he does not know the whereabouts of any records relating to its activities.

Contributors to the fair housing event were asked to make out their checks to the committee. The checks were then passed to the Los Angeles Brotherhood Crusade, which acted as the “repository and monitor” of the money, Wilson said.

Crusade official Lawrence Carter, who kept the books, said the organization’s files on the matter are not public.

As committee chairman, Wilson raised funds for the fair housing campaign by soliciting groups that have received millions of federal housing dollars to develop or manage public housing projects, records show.

As to the propriety of the solicitation, Wilson said it is “nonsense to talk about conflict of interest unless someone has used this program to feather his pockets.” He added that his fund-raising job was not easy and that in some cases “I had to pull . . . the money out of them.”

He characterized as “insulting” a $100 contribution made by developer Tom Safran. In returning the check, Wilson informed Safran that the amount was “not worthy of further conversation with the HUD office.”

Other groups solicited by Wilson included The East Los Angeles Community Union (TELACU), which contributed $1,000 to the fair housing campaign.

Rocky Relationship

This nonprofit community corporation came under fire from government agencies in 1982 when federal auditors questioned its use of millions of dollars in government anti-poverty funds. That year, the Los Angeles City Council stripped the agency of its contracts, and the then-board chairman pleaded guilty to illegally receiving federal job training dollars.

Wilson said he asked for money from TELACU’s president, David Lizarraga, because they are old friends. TELACU contributed $1,000 in June, 1985, at the same time that it had an application pending with HUD for a $3.8-million loan to build a senior citizens housing project. A few months later, HUD officials approved TELACU’s application.

TELACU’s proposal was one of seven accepted that year--out of a field of 69 competitors, said HUD spokesman Reed. In the two years since then, Reed added, TELACU has won approval from HUD for three more HUD projects, with a combined commitment of about $11 million in HUD money.

Lizarraga was unavailable for comment, but TELACU’s chief financial officer, Anthony Souza, said TELACU made a contribution to the fair housing campaign not because of any grant applications but “because we believe in fair housing.”

Gary Horn, a Riverside businessman who owns and operates hundreds of HUD-subsidized housing units, said he too contributed because of his interest in promoting fair housing. He said he believes his donation had “no influence” on his business dealings with HUD officials.

Records show that at the same time that Horn and his brother contributed a total of $2,500, their company was receiving draws from the Riverside County Housing Authority on a $600,000 HUD loan to rehabilitate an apartment house in Riverside County.

About this time, records show that Horn also was trying to enroll another one of his apartment complexes in a HUD rent subsidy program.

Horn said he does not recall how he came to contribute money to the HUD fair housing campaign. But records show that he was contacted by Dave Turner, a special assistant to Pierce, and asked to send his check to a Los Angeles attorney, Jonathan Swerdlow, who had been recruited by HUD officials in Washington to help raise money.

At the time, Swerdlow said, he was working for a law firm that handled “a lot a real estate clients . . . with HUD dealings.”

Swerdlow said all checks he collected were forwarded to either Bobo or Wilson.

One developer solicited by Swerdlow explained his reasons for giving:

“I gave just because of the nature of our business and the people who asked for it. I have not seen diddly squat since I wrote the check out.”

He asked not to be identified because “any benefits that might have come out of it (the $1,000 contribution) would really get shot down if I were to be quoted, especially in light of what I’ve said.”

Despite aggressive fund raising, the drive ended up with a $24,047 shortfall one month after the kickoff ceremonies.

A year later, some bills still remained unpaid and local HUD officials were hard-pressed to find the money to pay them.

The invoices included a $15,000 balance on printing costs, a $232 bill for Pierce’s hotel room at the Beverly Wilshire, and a $1,072 bill for date nut finger sandwiches, salads and strawberry mousse served at the luncheon that Pierce hosted for contributors to the campaign.

To pay off the debt, HUD officials first planned to host another luncheon--this time selling tickets for $100 each.

But in a memo to Pierce’s office, Bobo pointed out several “unforeseen impediments”--including the difficulty in finding a nonprofit sponsor for the luncheon that would not have a conflict in hosting the affair.

Bobo stated that the United Cerebral Palsy/Spastic Children’s Foundation had agreed to sponsor the luncheon. But he pointed out that “this could potentially create a conflict of interest situation with HUD” because the organization owns HUD-subsidized housing units and was in the process of applying to HUD for funds to build a senior citizens housing project. The luncheon plans were scratched. Finally, in March of this year--two years after the bills were run up--HUD officials hit on another means of raising some money.

It was decided that in another public-private partnership effort, the Southwest Los Angeles Board of Realtors would join with HUD in sponsoring a one-day symposium to provide “valuable information about new HUD initiatives and how to apply them to the everyday operations of the Los Angeles housing industry.”

The conference--which attracted a large audience partly because it qualified as credit for realtors seeking to fulfill their continuing education requirements--was a repeat performance of a conference held about a year earlier. But this time, the entry fee was boosted from $7.50 to $25.

And although admission was paid by checks made out to the Southwest Los Angeles Board of Realtors, a significant percentage of the proceeds were set aside to pay HUD’s bills.

Board President Leatrice Vine said of the proceeds:

“We got part of it, and they (HUD) got part of it. . . . I could find out (how much), but I’m not sure it’s something for the newspapers. We don’t put our business in the paper. . . . But our feeling is that what we felt we did was right.”

Josea White, a member of the realty board who helped organize the conference, confirmed: “There was an amount given back through HUD to somebody.” But he said he could not remember details.

Soon after the conference, HUD finally paid off the $15,000 balance left on the bill for printing posters for the Los Angeles campaign. Dean said she recalled Bobo telling her that “this would pay all the bills.”

Los Angeles was not the only place where realtors gave HUD’s fair housing campaign a boost. Dean said that for the first event in Baltimore, she immediately turned for help to the local board of realtors, which paid practically all the expenses.

Martin Sloane, head of the National Committee Against Discrimination in Housing, criticized HUD officials for their “close, cozy sweetheart relationship” with realtors. He accused the realtors’ national lobby of using their clout with Pierce to thwart rather than advance enforcement of the nation’s fair housing laws.

Bob Malekoff, counsel to the Senate housing subcommittee, said Pierce gave in to the National Assn. of Realtors by watering down a measure that would toughen enforcement of fair housing laws by providing $3 million in funds to nonprofit organizations that test communities to determine whether real estate sales organizations and landlords are discriminating.

Malekoff charged that for all Pierce’s hoopla about fair housing, his campaign has a hollow ring.

“You could see his (Pierce’s) picture on the billboards,” Malekoff said. “But he has not pushed this (fair housing) program.”

He cited a Senate hearing last year where civil rights groups attacked Pierce for selling out to the realtors by entering into secret negotiations to add guidelines to the Fair Housing Initiatives Program that would cripple efforts by nonprofit organizations to test for housing discrimination.

Dean countered that the hearings were “rigged” with only certain people asked to testify. She said the guidelines might be called “a compromise” but certainly not a sellout.

“I would love to see this government do more” to toughen fair housing laws, Dean added. “But they didn’t do anything under Carter. And they didn’t do anything under Johnson, or Kennedy or Nixon. And they’re doing about the same under Reagan.”