Ex-Aide Disputes Pierce Testimony : Account of Grant to HUD Secretary’s Former Associate Called ‘Devastating’

A former official at the scandal-ridden Department of Housing and Urban Development on Friday challenged sworn testimony of former HUD Secretary Samuel R. Pierce Jr., saying Pierce once ordered her to approve a $16-million grant for an apartment project of dubious merit.

Shirley M. Wiseman, who was acting assistant secretary of housing at the time, said she refused to obey Pierce’s direct order to fund the controversial Durham, N.C., project because it had “too many problems.”

Wiseman testified that Pierce himself later approved the project, which was being pushed by a GOP strategist for former President Ronald Reagan and a former associate of Pierce’s law firm.

“Your testimony is devastating,” Rep. Christopher Shays (R-Conn.) told Wiseman, recalling Pierce’s repeated assertions that he had never tried to influence allocation of funds that were disbursed on a discretionary basis.

To Summon Pierce

Rep. Tom Lantos (D-San Mateo), chairman of the House subcommittee conducting hearings on the HUD scandal, said that he would summon Pierce for additional testimony to clarify this “very serious conflict.”

Janet Hale, who succeeded Wiseman in the key housing post, testified Friday that, on her first day on the job, she was asked by a top Pierce aide to issue follow-up instructions to the field on the Durham project.

Later, despite reservations, Hale said, she signed three waivers to advance the project when she was told by Pierce’s executive assistant, Deborah Gore Dean, that he wanted it done.

Pierce, whose eight-year leadership of HUD has come under increasing criticism, testified repeatedly last May 25 that he had delegated responsibility for funding decisions on this type of program to other top officials in the department who formed an ad hoc committee for that purpose.

Both Wiseman and Hale--named by Pierce as members of the committee--said that they had never heard of such a panel and never attended any meetings to discuss funding for low-income rent subsidy projects under the moderate rehabilitation program.

Charles B. Markham, former Republican mayor of Durham and once an associate of Pierce in a New York law firm, was a major proponent of the Durham project for converting an old hosiery mill into apartments for low-income people. Louis Kitchin, a GOP strategist in the South for Reagan’s two presidential campaigns, also was pushing for the grant.

However, HUD career officials opposed funds for the Durham project on grounds that the building was close to a busy railroad track and was so run-down that it would be too costly to convert it into apartments.

Pierce’s role in the Durham project was described by Wiseman, who is now president of the National Assn. of Home Builders and has 25 years of experience in real estate development.

Refused to Obey Orders

Wiseman said she twice refused to obey instructions from Dean, the powerful assistant to the secretary, to approve funds for the project. She said she then received a telephone call from Pierce--the first time he had ever called on a specific grant.

“The secretary said: ‘I want the project funded,’ ” Wiseman recalled.

“I said: ‘I can’t fund it, Mr. Secretary.’

“He said: ‘I want it funded.’

“I said: ‘I’m sorry, I can’t fund it, but I’ll send it up to you.’ ”

Wiseman said that, from her perspective, the project was not a good business deal because it would require several different government subsidies.

Shortly after this episode, Wiseman left HUD, but she said she did so solely because she wanted to seek office in the home builders’ organization.

Hale said that, on her first day as Wiseman’s successor, she was asked to sign documents in connection with the Durham grant.

“I received a piece of paper--a rapid reply--it had Secretary Pierce’s signature,” she recalled. “I had to formally sign the funding documents after the secretary approved the funding. I was implementing his instructions.”

Dean, she said, told her that Pierce wanted the project to proceed.

Rep. Matthew G. Martinez (D-Monterey Park) asked her if anyone at HUD besides Pierce and Dean supported the Durham grant.

“To my knowledge, there was no one else who supported the project (in the department),” Hale replied.

When asked why she had signed waivers relating to occupancy rates, maximum rentals and safety at the Durham project if she was concerned about whether it was the right thing to do, Hale said that Dean “forcefully made the point” that Pierce wanted her to cooperate.

“I was told to sign them, and I did, sir,” Hale told Shays.

On another matter, Wiseman said Pierce in early 1985 overruled her refusal to lift a lending restriction on DRG Funding Corp., a mortgage broker in HUD’s co-insurance program.

The firm, represented by former HUD Secretary Carla Anderson Hills, had protested to Pierce against a requirement that HUD approve its loans in advance, and he agreed to ease the disciplinary measure.

DRG later defaulted on more than 100 loans on multifamily projects at a loss to the government of $500 million or more. Its right to make co-insurance loans was suspended last March by HUD and its operations are being investigated by a federal grand jury.

Hills, who is now the U.S. trade representative, has been summoned to testify before the committee next week. She will be questioned about the DRG case and her representation of a Florida real estate firm that received at least one grant for renovating buildings for the poor.

Meanwhile, current HUD Secretary Jack Kemp announced Friday that the federal government has filed a $2.5-million civil action against a former HUD closing agent in Texas, charging that she diverted HUD money into her personal bank account for the purchase of real estate, cars and guns.

Fund Diversion Charged

The suit charges that Reba Louise Lovell, 36, and her Arlington, Tex., company, KenLo Inc., “wrongfully diverted” more than $2.5 million in proceeds that they had received on behalf of HUD for the sale of 55 houses. Last month, Lovell was indicted by a federal grand jury on similar charges.

The Justice Department has been investigating the behavior of dozens of outside escrow agents who handled paper work and fund transfers in the sale of property the government had seized in foreclosures of federally guaranteed mortgages.

The most notorious case involves Marilyn Louise Harrell, an escrow agent dubbed “Robin HUD,” who said she diverted as much as $5.5 million in HUD funds and contended that she gave the money to the poor.