Pierce Aided Friend, Two Ex-Officials Say

Former Housing and Urban Development Secretary Samuel R. Pierce Jr. ordered subordinates to override staff objections and approve a North Carolina apartment project being promoted by a former law firm colleague, two former federal officials said Monday.

Pierce had testified to Congress on May 25 that he took no such actions.

Former Federal Housing Commissioner Shirley McVay Wiseman and a confidant of Deborah Gore Dean, Pierce’s executive assistant, made the statements, depicting Pierce as playing a major role in a rent subsidy program that kicked off the current charges of scandal at HUD. The Dean confidant spoke on condition of anonymity.

Records in Durham, site of the $11-million project for converting a former hosiery mill into HUD-subsidized apartments for the elderly, show that Louis Kitchin, a key Republican operative in the South for former President Ronald Reagan, got $40,000 in fees as a consultant on the project.

One of the chief backers of the project was Charles B. Markham, the Republican mayor of Durham in 1985 and a high-ranking HUD official in the Richard M. Nixon Administration. He had been a law partner of Pierce in New York during the 1960s, according to associates.

After Pierce’s alleged intervention, the long-stalled project was given new life by a multimillion-dollar series of HUD grants and subsidies. Durham city officials say that the project is helping revitalize a poor area.

Pierce ‘Not Hands On’

Pierce, in congressional testimony on May 25, acknowledged instructing HUD officials to give “careful consideration” to housing rehabilitation proposals by such GOP figures as former Interior Secretary James G. Watt. But Pierce, asserting that “I was not hands on,” insisted that he left final decisions on HUD grants to Dean and two other top officials.

However, Wiseman said in an interview that she left HUD shortly after refusing to obey orders from both Dean and Pierce to approve funding of the project.

“I was directed to sign it twice, by Deborah Dean and by the secretary,” said Wiseman, a Lexington, Ky., developer and president of the National Assn. of Home Builders. “The secretary called and ordered me to sign it, and I said that I couldn’t do that.”

Dean, who refused to answer questions at a House hearing on the emerging HUD scandal, invoking the Fifth Amendment protection against self-incrimination, refused through her lawyer, Joseph E. diGenova, to discuss the Durham project.

Cites Orders by Pierce

But the confidant said that Dean acknowledged that she had instructed Wiseman to sign the necessary waivers for the project but insisted that she had been ordered to do so by Pierce.

Pierce did not respond to requests for comment Monday but denied in May 25 testimony before the House Government Operations subcommittee on employment and housing that he had instructed Dean to obtain approval from HUD officials for favored projects.

The Durham project drew opposition from HUD officials on environmental grounds--toxic waste had been buried at the site and a railroad runs nearby--and because it lacked adequate private backing and would cost the housing agency too much.

In September, 1985, an anonymous caller told the office of HUD Inspector General Paul A. Adams that the project was being “jammed through” because of political pressure.

In HUD’s investigation, more than half of the 17 department officials interviewed said they had heard rumors that a former law partner of Pierce and a Reagan political strategist were pushing the project. But Adams, who stopped short of interviewing Pierce, found no substantiation for the charges in 1985.

Staff Blocked Project

The extensive renovation was first proposed in 1979 by Myerson, Allen & Co., a Boston development firm. HUD staff objections repeatedly blocked the project until Pierce’s alleged intervention.

John L. Allen, a principal in the firm, did not return telephone calls Monday.

After Wiseman refused to sign the waivers of HUD rules, her successor, Janet Hale, okayed the project, according to the inspector general’s report. Hale, now associate director of the White House budget office, refused Monday to discuss the case.

In July, 1985, a critical policy change was made by Alfred C. Moran, another high-ranking political appointee at HUD, which, for the first time, allowed private developers to count the HUD subsidy as a private investment.

If the Durham developers were to obtain a $2.2-million grant for the renovation under HUD rules, they had to contribute at least 2 1/2 times as much of their own money. Moran’s ruling allowed them to count the HUD rent subsidy as part of that money.

“The policy change, which was nationwide, made sense at the time,” Moran, a lawyer, said Monday.

‘Biggest Hot Potato’

A former HUD official, who described the project as “the biggest hot potato I remember,” said that Moran’s policy change has not been used on any other deals.

Moran said that he did not recall being contacted personally by Pierce about changing the subsidy policy for the project. However, he said that Dean pushed the Durham deal in two meetings. Within HUD, Dean was widely regarded as speaking for Pierce.

After leaving HUD in 1986, Moran went to work at a Washington law firm that had earned at least $50,000 in fees from the Boston developer on the Durham project, according to records in Durham.

The lawyer who served as bond counsel for the developer was identified in the records as Lynda M. Murphy, a former HUD official described by associates as Dean’s closest friend at the time. Murphy has earned substantial fees in HUD-related cases.

Denies Pressuring Pierce

Attempts to reach Markham, the former Durham mayor, were unsuccessful over several days, and a woman who answered the telephone at his home Monday said that he was away on a trip. However, Markham told the Wall Street Journal, which reported details of the Durham project Monday: “I had no conversation that could be remotely seen as pressuring Sam Pierce.”

City records in Durham show that the developers paid $40,000 to Kitchin, of Atlanta. In interviews last week and Monday, Kitchin said that he had no previous experience with HUD but agreed to help the developers “put their application back together.” He said that he spoke with HUD officials many times but had no dealings with Pierce.

State Rep. Harold J. Brubaker was paid $12,500 by the developers as a consultant on the project. Brubaker, co-chairman of the Reagan-Bush campaign in North Carolina in 1980, put the developers in touch with Kitchin, according to several people associated with the project. He did not return a call to his office.

Douglas Frantz reported from Durham and Ronald J. Ostrow from Washington.