Ex-HUD Aide Says Pierce Funded Project

A former Housing and Urban Development official Friday contradicted one-time HUD Secretary Samuel Pierce’s sworn statement that he played no direct role in deciding which housing projects received HUD financing.

Shirley McKay Wiseman, former general deputy assistant secretary for housing, said Pierce called her and instructed her to approve millions of dollars for a Durham, N.C., project sought by Pierce’s former law partner.

Wiseman said Pierce’s exact words to her were, ‘I want the project funded.’ ”

“I can’t fund it but I will send it upstairs to you,” Wiseman said she told Pierce.

Developers Got Millions

As a result of HUD’s approval, the developers received more than $11.3 million in rent subsidies, a $2.3-million urban development action grant and more than $3 million in tax credits, said Rep. Tom Lantos (D-San Mateo), chairman of the House government operations subcommittee on unemployment and housing.

Janet Hale, who succeeded Wiseman at HUD, testified that on her first day on the job, she was directed by Deborah Gore Dean, Pierce’s executive assistant, to “forward” the funding documents on the North Carolina project.

However, Hale said that Pierce’s signature was already on the documents approving funding for the project.

Pierce testified before the House panel in May that he had no direct role in HUD funding decisions. Since then, however, there have been reports that Pierce intervened on behalf of associates, including the one-time law partner, former Durham Mayor Charles Markham, who was seeking HUD financing for the North Carolina project.

Pierce to Be Recalled

Both former HUD aides testified under oath, as had Pierce earlier.

Pierce, who has returned to the practice of law and business pursuits in Manhattan, has been recalled by the panel for further questioning. But no date has been set for his appearance.

Sources told the Associated Press on Thursday that Dean, who for three years was Pierce’s top aide, sought immunity from prosecution in exchange for her testimony implicating Pierce. However, congressional sources said Lantos hoped to gain that information independent of Dean.

“The granting of immunity is not under active consideration by the subcommittee,” Lantos said Friday.

Dean last month refused to answer questions from the subcommittee, invoking her Fifth Amendment right against self-incrimination. One of the sources said that, if granted immunity, Dean is prepared to testify that Pierce ordered funding for numerous projects under the Section 8 Moderate Rehabilitation program.

Program Suspended

The program was suspended briefly earlier this year and its selection guidelines rewritten after HUD auditors criticized project selections. Auditors said influential Republicans had successfully lobbied HUD officials in favor of projects involving their clients.

Wiseman has said she quit her job as HUD’s assistant secretary for housing because Pierce ordered her to fund the North Carolina project over the objections of other agency officials.

Pierce replaced Wiseman with Hale, now a specialist in the Office of Management and Budget, who in 1985 approved funding for the project.

Wiseman also testified that she was lobbied by Carla Hills, President Ford’s HUD secretary, on behalf of DRG Funding Corp., the largest private lender that underwrote mortgages in a $5-billion HUD co-insurance program. DRG at the time was on probation ordered by the agency. Wiseman said Hills went over her head to Pierce after failing to persuade Wiseman that the restrictions should be lifted.

“It was later brought to my attention that Hills had . . . taken the case to Secretary Pierce. I was informed by staff that there was a meeting,” and DRG’s probation was lifted, she said.

Under Investigation

DRG now is the subject of an FBI criminal investigation, and HUD officials believe the government may lose as much as $500 million because of DRG’s handling of government-backed loans.

New HUD Secretary Jack Kemp said earlier last week that abuses at the agency during the Reagan Administration--the period of Pierce’s tenure--cost HUD in the “ballpark” of $2 billion.

A Kemp aide said Thursday that more than half of that amount, $1.1 billion, was believed to have been lost by a single program, a co-insurance venture administered by HUD’s Federal Housing Administration.

Meanwhile, the Washington Post reported Friday that HUD hired attorney Peter E. Novick to head a program that had losses three years earlier estimated at $240,000. The paper said the losses occurred because Novick made false statements while working as a settlement attorney in real estate transactions from 1982 to 1984.

Novick, 47, pleaded guilty May 25 in U.S. District Court to one count of making a false statement and has been ordered to report in mid-August to a halfway house to serve a one-year sentence, the paper said.

Rehired by HUD

Novick had worked for HUD as an attorney before going into private practice. He was rehired by HUD in February, 1987, after talking with Thomas Demery, then the assistant secretary for housing.

In other developments:

* The Senate Banking Committee voted to launch its own investigation of HUD.

* That committee also approved the nomination of Francis A. Keating II as HUD’s general counsel, a post that will have a key role in agency dealings with investigations by law enforcement agencies.

* An aide to the Lantos subcommittee said Hills, now U.S. trade representative, will appear before the panel this week to face questions about her alleged lobbying of HUD officials after she left the agency.

* A Houston-area lawyer acknowledged that he has been barred from doing business with the federal government because he was slow in turning over about $1.5 million from sales of HUD property. Attorney Larry E. Thomas said he had not kept any money, and a HUD official confirmed that almost all the money had been recovered.