Kemp Puts Blame on Pierce for HUD Troubles : Calls Predecessor ‘Honest Man’ but Says Agency Was Not Managed Carefully

In his strongest comments yet on the burgeoning scandals in his department, Housing Secretary Jack Kemp on Friday blamed Samuel R. Pierce Jr., his predecessor, for the agency’s current troubles and indicated that he might halt additional programs as part of his in-house cleanup.

“I’m making a lot of changes, so that, by definition, is suggesting that Secretary Pierce unfortunately--a very decent and honest man--did not in my view manage HUD as carefully or closely as it should have been managed,” Kemp told reporters after speaking to a Republican youth group. “That reflects on Mr. Pierce and, I say this with sadness not anger, it reflects on the (Ronald) Reagan Administration.”

Kemp, who announced Thursday that he had suspended a third HUD program because of mismanagement, said “there may be” more cuts, adding: “But I’m not going to announce them today.”

Meanwhile, the Bush Administration took steps to avoid being caught off guard by similar scandals in other corners of the federal bureaucracy.

Richard G. Darman, director of the White House Office of Management and Budget, prepared a memo directing inspectors general of the other Cabinet departments to be “extra diligent” in reviewing the record of the Reagan Administration, a White House official said. He explained that the White House wants to be sure that there are no problems comparable to HUD’s that could embarrass it.

And in a related development, a White House official has been relieved of her responsibilities overseeing certain aspects of the Department of Housing and Urban Development budget because she is under congressional investigation for projects she handled while working at the beleaguered agency.

Asks for Reassignment

Janet Hale, associate director of OMB, whose duties include dealing with the entire HUD budget, asked for the reassignment and was told late Thursday by Darman that she would be removed from any OMB matters relating to the HUD investigation, although she was not relieved of all HUD-related budget matters.

“As you suggested, . . . I have decided it would be prudent to make a reassignment of responsibilities that might be perceived to relate to these matters,” Darman wrote in a memo to Hale. “For the time being, any matters specifically involving the HUD investigation or the HUD actions under investigation should be handled . . . without your involvement.”

Kemp has been harshly critical of the abuse within his department’s programs. But until Friday he had avoided any direct references to the performance of his predecessor. In fact, on June 19, he pointedly refused to comment when asked whether Pierce was responsible for the department’s problems, saying: “I’m not going to make a political judgment about any past secretary because I think it’s unseemly of me.”

Kemp is scheduled to begin testifying Tuesday before the House Government Operations subcommittee on employment and housing, which is investigating fraud and mismanagement within the department. The subcommittee is also expected to recall Pierce, possibly before the August congressional recess.

On the matter of OMB’s Hale, Darman said that her responsibilities regarding the HUD investigation would be handled by her deputy for the time being and that her staff should report directly to him for those areas.

“I recognize that there is some awkwardness in this arrangement,” Darman wrote, “but, as you suggested I might, I have concluded that this is in the best interest of OMB--and I am inclined to think that, for the period of the investigation, it is also in your own best interest.”

Hale could not be reached for comment.

Hale, former deputy assistant secretary of housing, is the subject of congressional scrutiny for her role in at least two areas while at HUD, including a controversial apartment project in Durham, N.C., that involved a former law firm colleague of Pierce.

Hale approved the Durham project, according to a report by HUD’s inspector general, despite opposition from HUD staff members. The project, an $11-million plan to convert a former hosiery mill into HUD-subsidized apartments for the elderly, was opposed 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.

Hale declined comment earlier this week when asked about signing the waiver for the Durham project, saying that she had not reviewed the records. When a reporter asked her to do so, she said, with a laugh: “Don’t call me. I’ll call you.”

But a former top HUD official, who was there when the Durham plan was approved, described Hale as having “had an emotional struggle” in approving the project.

The Durham project had been promoted by Charles B. Markham, the city’s former Republican mayor, who is a former law partner of Pierce, and by Louis Kitchin, a key GOP strategist in the South for Reagan’s presidential campaigns.

Hale was notified earlier this week that she would be called to testify before the House subcommittee. The panel began hearings in May into charges that HUD favored clients of influential Republicans in awarding grants under its moderate housing rehabilitation program.

Stuart E. Weisberg, staff director for the subcommittee, said that Hale would be the focus of an nquiry into the Durham project and into her response to a 1985 report by the HUD inspector general that described problems in the department’s co-insurance program, in which the federal government and private mortgage lenders join to underwrite mortgages on apartment projects.

“She responded that he (the inspector general) had exaggerated them and it turned out that he was right and she was wrong,” Weisberg said.

Staff writers Douglas Frantz, David Lauter and Ronald J. Ostrow also contributed to this story.

ORANGE COUNTY CUTS--Anaheim and Santa Ana have been cut from a housing program in favor of Laguna Beach and Beverly Hills. Page 23