‘Zero Tolerance’ for Corruption Pledged by Kemp; Major HUD Changes Planned

Secretary Jack Kemp Tuesday pledged “zero tolerance” for corruption at his scandal-racked Department of Housing and Urban Development and vowed to bar HUD influence peddlers from doing any business with the federal government.

“Let ‘em read my lips,” Kemp said at his first appearance before Congress since disclosures that influential Republicans and former HUD officials had pocketed six-figure payments for obtaining approval of federal grants intended to benefit low-income people.

“Those who abuse the programs will find zero tolerance for abusing the poor or profiting from poverty,” he said in toughly worded testimony to the House Government Operations subcommittee on employment and housing.

Kemp, a former GOP congressman from New York, drew bipartisan praise from subcommittee members, who have been investigating waste and fraud in a variety of HUD programs under his predecessor, Samuel R. Pierce Jr.

Although he tried to avoid criticism of Pierce’s eight-year tenure and termed him “a decent and honorable man,” Kemp said that he planned “wholesale changes” in the federal agency.

“I think (the department) was run in a slipshod fashion,” Kemp acknowledged. “It was managed very poorly.”

Rep. Tom Lantos (D-San Mateo), chairman of the subcommittee, estimated that poor management at the department and improper grants during the last eight years might cost the taxpayers billions of dollars, while Pierce was “apparently oblivious to it all.”

Kemp indicated that his cleanup task is far from over, saying: “We have made progress . . . but we still have a long way to go.”

Lantos disclosed that Kemp’s staff has identified HUD offices in Los Angeles, Houston, Denver and New Orleans as primary targets for further investigation. HUD operations in Atlanta, Birmingham, Ft. Worth, Buffalo and Washington, D.C., are on a secondary priority list.

The list “probably goes further than you suggest,” Kemp replied. But he stressed that he believes the department is on the road to reform and better management.

For one thing, he told the subcommittee, he now has a “hot line” telephone connection to HUD Inspector General Paul A. Adams, in contrast to Pierce’s reported rebuffs of Adams’ recommendations designed to stop waste or fraud in HUD programs.

Kemp took the occasion to reassure some prominent Democrats that he would not take advantage of the scandals at HUD to scuttle housing programs designed to benefit low- and moderate-income Americans.

House Speaker Thomas S. Foley (D-Wash.) told reporters Tuesday that he does not think HUD programs should be eliminated just because high-paid consultants profited from them during the Ronald Reagan Administration.

“That is a condemn-the-victim approach,” Foley said. “I can’t see anything more cynical than that.”

Kemp said that he had suspended some flawed programs only to make sure that they would operate the way Congress intended, without political favoritism, to benefit low-income people.

Won’t ‘Slaughter’ Programs

“I am not interested in slaughtering programs,” he said. “President Bush didn’t choose me to lead a scorched-earth housing policy.”

For example, Kemp noted that, although he had halted the letting of new contracts under the much-criticized Section 8 moderate rehabilitation program, he permitted the program to be resumed with new rules only two months later. The program provides subsidies for renovation of apartments for low-income tenants.

“We have stopped the hemorrhaging, and we’re going to put it on the right track,” Kemp said.

In a major HUD co-insurance program, he said, three mortgage lenders were suspended from doing business with the agency, three others were put on probation and three more firms are being closely watched.

Aside from “inexcusable” management shortcomings, he said, there were fundamental flaws in the structure of some of HUD’s 50 programs.

“Some of our most serious problems have come in programs where substantial subsidies are given to developers,” Kemp explained. “In the case of (moderate rehabilitation), for example, HUD paid from 20% to 44% more than the rental value of the apartments. That extra money goes for excess profits for the developer and, clearly, to cover consultant fees.

“We give the developer a reason to hire a consultant, and we give the successful bidder the money to pay consultant’s fees,” Kemp added.

“I am determined that all HUD programs shall operate without favoritism and without Republican or Democratic consultants and for the fullest possible benefit of those in need and not those who are motivated by greed,” he said.

“We will remove the perception and the reality of influence peddling and political favoritism in HUD programs,” Kemp concluded. “I want to pledge today that all decisions involving funding for our programs will be based on need and merit.”