Kemp Vows End to Abuses Within HUD : Tells ‘Zero Tolerance’ for Thievery and Influence-Peddling

HUD Secretary Jack Kemp today pledged “zero tolerance” for thievery and influence-peddling at the scandal-ridden Department of Housing and Urban Development that he inherited this year.

“What I could not anticipate three months ago was the extent to which I had inherited a legacy of abuse and mismanagement, fraud and favoritism in certain HUD programs,” Kemp said in testimony before the House employment and housing subcommittee.

He denounced a system under which highly paid consultants helped developers try to win federal housing contracts and said he was taking steps to correct “fundamental flaws” and “lax accounting and management procedures” at his department.

Kemp, who took over the Department of Housing and Urban Development six months ago, said he had told agency employees in a memo that their jobs would depend on putting an end to favoritism.

And he said outsiders discovered to be abusing department programs will be barred “from doing business with HUD and all other federal agencies.”

“Some of our most serious problems have come in programs where substantial subsidies are given to developers,” Kemp said.

‘Goes for Excess Profits’

“That extra money goes for excess profits for the developer and, clearly, to cover consultant fees,” he said. “We give the developer a reason to hire a consultant, and we give the successful bidder the money to pay consultants’ fees.”

The department’s moderate-rehabilitation program was criticized in an April audit by the HUD inspector general who alleged influence-peddling and favoritism in contract awards to developers who hired former HUD and other government employees as consultants.

The audit estimated HUD could lose as much as $413 million in excess subsidies over the life of the contracts.

Several Ronald Reagan Administration insiders, including former Interior Secretary James G. Watt, have been questioned at House hearings into what they did for their consulting fees and what the fee-payers expected in return.

Cites Basis of Need, Merit

Kemp said today, “HUD programs shall operate without favoritism” and awards will be made on the basis of need and merit.

Kemp has testified several times before Congress in recent months, a sharp contrast to his predecessor Samuel R. Pierce Jr., who members of Congress say was generally unavailable during his eight-year tenure during the Reagan Administration.

Since taking office Kemp has suspended, revised or restricted three troubled programs--moderate rehabilitation, mortgage co-insurance and Title X land development mortgage insurance.