Justice Dept. to Check HUD Grants for Impropriety; Kemp Sets Review

Times Staff Writers

Faced with growing reports of scandal in the Department of Housing and Urban Development during the Ronald Reagan Administration, the White House disclosed Monday that the Justice Department will check on possible influence-peddling in the awarding of federal housing grants.

In an unusual White House announcement, Deputy Press Secretary Roman Popadiuk disclosed that the department's public integrity section is reviewing the HUD rehabilitation grants issued during the Reagan Administration "to determine whether any contacts between housing consultants and senior HUD officials were improper."

Popadiuk said that Secretary Jack Kemp has canceled all 1989 grants under this program that had not yet been put in writing and directed the HUD inspector general to review the contracts already approved to make sure that the funds are allocated "in a fair and competitive way."

The White House spokesman added that President Bush is confident that Kemp "is going to turn the management around and get control of the situation at HUD."

Bush expressed his confidence in Kemp's wide-ranging cleanup campaign as House investigators prepared to question more prominent Republicans who received large fees as consultants for developers who benefited from a rent-subsidy program.

An aide to a House Government Operations subcommittee said that Frederick Bush, the chief campaign fund-raiser for President Bush last year, would be summoned to testify again in the inquiry into alleged political favoritism by top HUD officials.

Frederick Bush--no relation to the President--will be asked about a $286,000 technical assistance grant that he obtained from senior HUD officials in 1986 despite staff objections to the award. He testified earlier about a $215,000 payment to his consulting firm by developers who received a grant from a HUD program to rehabilitate housing for the poor.

The President has nominated Frederick Bush to be ambassador to Luxembourg, but the controversy over the HUD grant could hurt his chances of Senate confirmation.

Rep. Tom Lantos (D-San Mateo), the subcommittee chairman, said that he wants to explore how grants were made to well-connected Republican consultants from a discretionary fund controlled by former HUD Secretary Samuel R. Pierce Jr. and his top aides.

Pierce's former executive assistant, Deborah Gore Dean, invoked the Fifth Amendment privilege against self-incrimination when called to testify about the matter by the House panel but indicated that she would testify if she were able to obtain access to HUD documents and Pierce's personal logs of visitors and telephone callers.

Kemp, who was in Charleston, S.C., Monday to address the U.S. Conference of Mayors, declared that HUD grants would not be made on a partisan basis any longer, adding: "Democrats and Republicans need to read my lips--it's open to everybody on the basis of need, as opposed to greed, as it existed in the past."

But Kemp refused to comment when asked if Pierce was responsible for the problems in the past.

"I'm not going to make a political judgment about any past secretary because I think it's unseemly of me," the new HUD chief said.

Meanwhile, the subcommittee plans to question Paul Manafort today about a $326,000 consulting fee that his political consulting firm received for obtaining rent subsidy funds for a housing project in Seabrook, N.J. Manafort is a partner of Charles Black, who was campaign manager for Kemp's presidential bid. Their firm also worked for the Reagan and Bush political campaigns.

Another hearing is scheduled Thursday to hear testimony by Phillip Winn, U.S. ambassador to Switzerland, about his success in obtaining HUD rehabilitation funds. Joseph Strauss, a former special assistant to Pierce and business partner of former Secretary of the Interior James G. Watt, also will be questioned on how he earned more than $1 million in HUD-related consulting fees.

"Abuse and favoritism were pervasive at HUD in awarding these scarce and desirable moderate rehabilitation funds," Lantos said. "We are eager to hear from these witnesses how projects they pushed came to be selected by HUD for federal subsidies over many competing projects."

In addition to the controversy over consultants' fees, the House subcommittee also has focused on an estimated $20 million allegedly stolen from HUD by private contractors who were agents for the government in the sale of foreclosed property.

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