Probe of HUD Suggests Abuse by Consultants

An investigation into a $225-million federal housing program shows it was used during Ronald Reagan’s presidency “to feather the financial nest” of former Administration officials and other prominent Republicans, the House Banking Committee chairman says.

Rep. Henry B. Gonzalez (D-Tex.) said he will hold hearings on the report by the inspector general of the Department of Housing and Urban Development, which suggested favoritism and cronyism in awarding federal housing renovation contracts.

HUD Secretary Jack Kemp said Friday the program “was being abused by consultants and some folks who were making a phone call and getting a federal grant.” Kemp, who addressed a gathering of state legislators, has halted further spending on the program pending a review of projects.

Handsome Profits

The report, released this week, documented how former Reagan Administration figures and other Republicans raked in handsome profits on consulting contracts to rehabilitate subsidized apartments for the poor.

The consultants included Reagan’s first Interior secretary, James G. Watt; the late John N. Mitchell, attorney general under President Richard M. Nixon; former Republican Sen. Edward W. Brooke of Massachusetts, and former Kentucky Gov. Louis Nunn, also a Republican.

Other consultants included former top HUD officials under Reagan-era Secretary Samuel R. Pierce Jr., with one charging fees of $1.3 million. Still other former officials under Pierce participated as developers in projects to renovate subsidized housing for the poor and benefited by the HUD contracts.

HUD Inspector General Paul Adams drew a comparison with the Pentagon procurement scandal, with former government officials drawing big fees as consultants to developers seeking government contracts.

Adams said that while he had found no illegality in HUD’s Moderate Rehabilitation Program, contracts were distributed in ways that suggested favoritism and use of insider information. Money for over half the units audited went to just 10 states, which by HUD formulas were entitled to just 16% of the funds.

Adams said he had turned over the 700-page investigative report to the FBI and Justice Department.