Builder Won Improper HUD Sale, Report Says

A key Washington official in the developing HUD scandal gave preferential treatment to a company headed by Newport Beach developer William Lyon, a major Republican contributor, by selling him 827 acres in south Orange County even though his bid was the lowest of four reviewed, according to a HUD internal report.

The report by the U.S. Department of Housing and Urban Development, obtained by the Long Island newspaper Newsday and published Sunday, says Shirley M. Wiseman, a former acting assistant secretary with the agency in 1985, appointed an internal committee that recommended the sale to Lyon, despite a warning from HUD’s general counsel “that the William Lyon Company’s all-cash bid was not the best offer.”

The disclosure of Wiseman’s selection of Lyon adds to the recent spate of reports documenting widespread political favoritism in HUD’s decision-making during the Reagan Administration.

The HUD report, issued several months after the 1985 transaction, concluded, “the bidding, negotiations and award practices appear to have been improperly adjusted to secure an award to the William Lyon Company.”

Lyon ended up buying Robinson Ranch, a scenic rural property near Mission Viejo, from HUD in 1985 for about $16 million, although HUD documents obtained by The Times estimate that the value of the property at the time was as high as $35 million.

Lyon could not be reached for comment Sunday. Dale Catalde, director of operations for the firm, declined to comment saying that he was not involved in the project.

Wiseman, now president of the National Assn. of Home Builders, testified recently before a House committee investigating the HUD scandal and was praised for her refusal to obey orders from former HUD Secretary Samuel Pierce and his top assistant, Deborah Gore Dean, when they allegedly sought approval for a housing project in North Carolina proposed by an influential Republican developer.

Wiseman, who now lobbies for developers seeking HUD projects, could not be reached Sunday.

Overruled Opposition

In his final days in office, Pierce personally approved consulting contracts worth hundreds of thousands of dollars, according to HUD officials who say that in one case Pierce overruled lopsided opposition from department experts.

The two contracts involved were earmarked for companies with ties to a former Pierce deputy and a prominent black Republican couple, said the officials, who asked anonymity.

Despite Pierce’s endorsement, the contracts were put on hold by the new HUD administration. HUD spokesman Jack Flynn said both projects are under review and other officials said HUD experts contend the contracts are unnecessary and poorly designed.

HUD became involved in the Robinson Ranch property in 1981 when it gave the Ridgewood Development Co. of Costa Mesa a Title X loan guarantee for $35 million to develop the site. In 1984, the property was seized by HUD when the project went into default.

The Title X program was designed to encourage development of difficult projects, such as remote properties that require expensive preparation for construction. The present HUD secretary, Jack Kemp, recently stopped the program, partly because of the high number of defaults.

Bitter and Confused

Ridgewood President Harriet Harris has said she is bitter and confused about HUD’s decision to sell the property before it considered a settlement in which her firm could renegotiate the loan.

The HUD report published Sunday said Wiseman initially wanted to sell the property to Lyon based on his bid of $8.5 million, which was less than three other bids being considered. After the warning from HUD’s general counsel, the report said Lyon submitted a second bid and was awarded the property by Wiseman’s committee.

The HUD report was critical of the process, because Lyon was allowed to submit a second bid based on a higher rate of development. It said the other firms were not given the opportunity to prepare a bid based on a higher rate of development and, if they had, their bids would have been better.

Edwin Baker, a HUD official who worked on the sale in Washington, told The Times that one of the other bidders--Kaufman & Broad Co. of Los Angeles--protested the Lyon sale in a letter. The HUD report said the Kaufman bid would have been the highest if it had been modified the same way as Lyon’s. The other bidders were Simpson/Marlboro Co. and San-Jack Enterprises.

After the sale, the report said Wiseman told one of the losing bidders that Lyon was selected “because it would rezone (from the original 525 units approved by Orange County supervisors) to 2,500 units to 3,000 and therefore HUD would receive more money.”

A representative from Kaufman & Broad warned the Wiseman committee, however, that the issue of rezoning was “subjective,” since it would need approval from the supervisors.

Lyon applied for an increase in the zoning on the property. But under pressure from development opponents, the supervisors only approved 530 additional homes.

Staff writers Lanie Jones and Michael Flagg contributed to this story.