2 Ex-HUD Officials Played Role in Beverly Hills Case

Deborah Gore Dean and Thomas T. Demery, former officials who now occupy center stage in the scandals unfolding at the Department of Housing and Urban Development, were involved in a controversial ruling that allowed a Beverly Hills senior citizens’ apartment to restrict most of its units to city residents, thus excluding many minorities.

Dean, a once-powerful assistant to former Secretary of Housing and Urban Development Samuel R. Pierce, has been accused of handing out lucrative political favors to well-connected Republicans. Demery, former assistant secretary, is a central figure in a congressional inquiry for backing a charity that accepted gifts from unusually large numbers of developers who got HUD funds.

Their involvement in the 1987 Beverly Hills decision--which has not been linked to the HUD scandal--was revealed in internal memos and correspondence from HUD recently reviewed by The Times. The documents show that Demery and Dean were instrumental in obtaining decisions in 1987 from Pierce and a HUD attorney that allowed Beverly Hills to turn away outsiders.

Rep. Tom Lantos (D-San Mateo), whose subcommittee is conducting the congressional investigation into HUD, said Wednesday that the Beverly Hills decision “raises some troubling new issues involving HUD and apparently some of the former key HUD officials. I am asking the subcommittee to look into this problem as soon as we’re able to do so.”

Lantos was referring to questions of whether the Pierce decision violated the spirit of HUD’s civil rights regulations.

According to documents, Demery took an unusual step in 1987, ignoring HUD officials at the Los Angeles field office, San Francisco regional office and Washington headquarters who had ordered the 150-unit building open to all applicants to avoid racial discrimination. (Under HUD rules, tenant selection cannot intend discrimination or have a discriminatory effect.)

Went Directly to Pierce

Demery went directly to Pierce, asking him to restrict at least half of the units to Beverly Hills residents because the city had donated the land and extra money for apartment balconies and amenities.

In a memo signed by Dean, Pierce in May overturned the previous rulings, setting the number of units reserved for Beverly Hills residents at 70%.

In justifying the restriction, city officials had claimed that 1,500 local residents were in need of affordable housing. But when 3,100 applications poured in, only 225 were from Beverly Hills.

A HUD official in Washington, speaking on guarantee of anonymity, said it was “not at all typical” for Pierce to become involved in details of such a small project.

As local officials had predicted, the subsidized apartments, for which tenants paid less than $400 a month, went overwhelmingly to Anglos. According to HUD documents, Anglos got 88% of the 150 units. Only 19 minorities were accepted, including nine Asians, seven blacks and three Latinos.

Former Beverly Hills Mayor Benjamin Stansbury said Wednesday that Pierce himself had promised the city it could ban outsiders “long before construction even began,” but other HUD officials “changed the rules on us later.”

Defends Restriction

Stansbury defended the restriction, saying the city had many needy residents despite its image as a wealthy enclave. But in the end, he said, local residents “were kind of shy and uncomfortable about applying, and didn’t come forward like we expected.”

Pierce, Demery and Dean could not be reached for comment. But a letter from California HUD officials in May, 1987, to the Menorah Housing Foundation--the project’s nonprofit developer--stated that their criteria banning outsiders “was not approved by HUD.”

Shirley Srery, executive director of Menorah Housing Foundation, which specializes in HUD housing for seniors, said that while HUD made no formal commitment, “We had been told it was certainly possible, given the financial help from the city, to restrict the building to Beverly Hills. . . . It was pretty much told to us in ’83 or ‘84: ‘You come up with a lot of the costs’ ” and restrictions would be allowed.

The dispute simmered long after Pierce’s May ruling. In September, Tom Honore, HUD’s fair housing director in Los Angeles, wrote to Benjamin F. Bobo, manager of the local HUD office, stating: “The demand for multifamily rental housing in Los Angeles County is so intense that to restrict tenancy, even partially, to the residents of Beverly Hills . . . would nullify the efforts and objectives” of HUD civil rights requirements.

The documents show that Dean entered the picture amid lobbying by Carla Hills, a former secretary of HUD and now U.S. trade representative. Hills, who in 1987 was practicing law in Washington, was hired by the city of Beverly Hills, Stansbury said.

In congressional testimony this week, Hills said she was paid by developers on projects around the country to lobby for funds from HUD programs now under investigation. She said she approached Dean on behalf of Beverly Hills, and was told by Dean that a decision had already been made in Beverly Hills’ favor.

Sought Legal Opinion

Several weeks later, at Hills’ request, Dean sought a legal opinion from HUD lawyers, documents show. The city wanted assurances that the 70% restriction on the project could be applied to a huge waiting list of mostly non-residents, which included hundreds of minorities.

On July 12, 1987, HUD attorney J. Michael Dorsey wrote an opinion that the 70% restriction was legal, and that future selections from the waiting list could be restricted.

“The feeling among fair-housing people--experts in this field--was that Dorsey’s ruling was weak,” a HUD official in Los Angeles said Wednesday.

The rulings in Beverly Hills’ favor were particularly controversial because they were announced just before and just after a number of other Southern California cities were ordered not to restrict outside residents from living in HUD-financed projects in their communities.