Second Ex-HUD Official Takes Fifth as Hills Denies Influence Peddling

A second former Housing and Urban Development Department official invoked his Fifth Amendment right against self-incrimination Monday as a congressional investigating committee pressed to obtain further evidence of political favoritism in the awarding of housing grants during the Ronald Reagan Administration.

Former HUD official R. Hunter Cushing’s refusal to testify immediately brought Democratic demands that he be suspended from his current post in the Commerce Department.

Earlier, Carla Anderson Hills, HUD secretary in the Gerald R. Ford Administration, acknowledged to the panel that she had personally lobbied Reagan’s HUD secretary, Samuel R. Pierce Jr., on behalf of a company that had been penalized by the agency for its handling of government-backed loans.

However, Hills, now President Bush’s U.S. trade representative, insisted that she did not use political influence to obtain a favorable ruling for the mortgage lending firm, which later had defaults of more than $530 million under the HUD co-insurance program.

Hills said she presented the case for the DRG Funding Corp. to Pierce “strictly on the merits.” Pierce responded by lifting a requirement that the firm receive HUD approval before issuing loans under the co-insurance program.

“Regrettably, you had an impact on a decision that had serious consequences for the government and the taxpayer,” said Rep. Christopher Shays (R-Conn.), a member of the House Government Operations Committee’s subcommittee on employment and housing. “I just wish you had failed.”

Hills, who was at the time a Washington lawyer, also denied any impropriety when she interceded with HUD for a Florida real estate developer seeking participation in the scandal-tainted Section 8 moderate rehabilitation program. The firm subsequently obtained a hard-to-get allocation of 233 units in the program.

Unlike other high-paid Republican consultants, Hills said that she rejected the development company’s offer to pay her $1,000 per unit and, instead, billed it at her law firm’s usual rate--roughly half that amount.

In seeking testimony from Hills and Cushing, the committee was attempting to lay the groundwork for a second interrogation of Pierce. In sworn statements, Pierce has insisted that he took no part in funding decisions on housing grants but delegated such authority to a special committee of aides.

Cushing’s refusal to testify paralleled the course taken by Deborah Gore Dean, once-powerful executive assistant to Pierce. She also invoked her Fifth Amendment privilege when summoned last month to answer questions about political favoritism in making grants under a rent subsidy program to benefit low-income tenants.

Cushing, who under Pierce was deputy assistant secretary of HUD for multifamily housing, said he might agree to answer the panel’s questions if he had access to HUD documents and knew what areas the members wanted to explore.

But his stand triggered a letter by three Democrats to Commerce Secretary Robert A. Mosbacher asking that Cushing be suspended immediately from his $76,400-a-year position unless he agrees to testify. Cushing is now assistant secretary for loan programs at the Commerce Department.

“The Fifth Amendment is your right to stay out of jail, not to run a government program,” declared Rep. Barney Frank (D-Mass.), one of the signers of the letter to Mosbacher. Rep. Charles E. Schumer (D-N.Y.) and Rep. Bruce A. Morrison (D-Conn.) also joined in the request.

Cushing said he has taken 30 days of administrative leave without pay, effective July 10. “I hope to be able to testify, at an appropriate time,” he said.

A senior Commerce Department official, who asked not to be identified, said the agency had no legal authority to suspend an employee under such circumstances.

Rep. Tom Lantos (D-San Mateo), chairman of the subcommittee, told Cushing that he will be the first witness called after Congress returns in September from its August recess. Lantos said that he will ask HUD Secretary Jack Kemp to help Cushing get the documents he seeks so he can prepare for his appearance.

Hills spent almost five hours defending her role as a lawyer for DRG Funding Corp., a Washington, D.C., firm in the HUD co-insurance program that ultimately had a default rate of 44%. Officials have estimated that loans issued by the company with government backing could eventually produce losses of $360 million or more for the government.

“I could not tell in 1984 or 1985 that this was a rotten situation,” Hills said. “I think society would agree, even if DRG were a bad actor, they deserved representation . . . . I did not have all the facts.”

She said she had not been aware at the time of a scathing report on DRG by the HUD inspector general and said she would not apologize now for helping the firm obtain removal of the prior-approval requirement imposed because of problems with its loans.

Despite opposition by HUD staff officials, Secretary Pierce lifted the restriction in May, 1985, but coupled it with a warning that DRG’s right to co-insure loans would be terminated if it continued to violate HUD regulations.