Report Says Lyon’s Ties Clinched Deal : O.C. Developers Who Outbid Him Saw Favoritism by HUD

Two Southern California developers who tried to buy Orange County’s Robinson Ranch from HUD in 1985 told federal investigators that they believe that the property was sold to the William Lyon Co. because of Lyon’s political influence and friendship with a key HUD official, according to an internal HUD report.

The Department of Housing and Urban Development report, triggered by an investigation of the developers’ complaints, noted: “Our analysis . . . indicated improper award practices, conclusions and possible favoritism to the William Lyon Co.,” the report said.

Position With Builders Group

The Oct. 4, 1985, report--a copy of which was obtained by The Times on Monday--quoted the two developers as saying they believe that Shirley M. Wiseman, then an acting assistant HUD secretary, wanted Lyon’s help in gaining a position with the National Assn. of Home Builders when she left HUD.

Wiseman was elected president of the association the following year, 1986.

Lyon, originally the lowest of four bidders, paid $16 million for the scenic rural property near Mission Viejo and Coto de Caza. The land, according to HUD documents obtained by The Times, was valued at about $35 million at the time of the sale.

‘Not the Best Offer’

Wiseman, accepting a recommendation from her handpicked internal committee, approved the sale to Lyon despite a warning from HUD’s general counsel “that the William Lyon Co.’s all-cash bid was not the best offer.”

Although the losing developers complained of favoritism to HUD, two officials of the home builders group--one of whom was defeated by Wiseman for the presidency--said Monday that they do not believe that Lyon influenced her election.

In addition, one of the developers quoted in the HUD report denied through a spokesman Monday that he told HUD that Lyon was sold the property through favoritism.

An associate of Wiseman in Washington said she was traveling and would not be available for comment.

Lyon and officials from his Newport Beach development company also did not return repeated telephone calls Monday.

The Robinson Ranch sale was investigated by HUD’s inspector general in San Francisco when the two higher bidders--Kaufman & Broad of Los Angeles and Simpson/Marlboro of Tustin/Los Angeles--complained. The report, signed by Miguel P. Barrios Jr., HUD’s regional inspector general for audits, criticized Wiseman for awarding the 827-acre property to Lyon.

Key Figure in HUD Scandal

Wiseman has been a key figure in the developing HUD scandal, which has focused on political influence peddling and on up to $1 billion in losses from flawed or questionable projects initiated by HUD.

Wiseman recently testified before a House committee investigating the scandal. She was praised during the hearing for refusing to obey orders to approve a project proposed by an influential Republican developer.

Lyon was host at his Coto de Caza home for a fund-raiser for former President Reagan’s library last year. Lyon has contributed about $200,000 to Republican committees and candidates since 1980, records show.

The 21-page HUD report summarizes interviews with executives from two of the three companies that bid unsuccessfully on the Robinson Ranch. Both developers are quoted in the report as saying Wiseman and Lyon were friends or “close friends . . . based on general ‘word-of-mouth’ comments.”

The report says Robert L. Simpson, a principal in the Simpson/Marlboro development group, “volunteered that it is common knowledge that Ms. Wiseman had two ambitions when at HUD--the first was to become assistant secretary of the Federal Housing Administration, and the second was to become an officer of the National Assn. of Home Builders.”

Support for Her Goals

Simpson “stated that it ‘won’t hurt’ her chances to have William Lyon’s support in these goals,” it adds.

The report also summarizes interviews with Clyde W. Lane, president of Kaufman & Broad’s Urban Division in Los Angeles.

Lane “stated that it was generally believed in the development community that Ms. Wiseman was leaving HUD and was trying to secure a position with the National Assn. of Home Builders and needed the support of William Lyon, who is active in this association,” the report says.

Lane “implied that William Lyon had lunch with Ms. Wiseman when he visited Washington, D.C.,” the report adds. “Mr. Lane also implied that Mr. Lyon was given preference because of his political contributions to the Republicans and connections.

“He emphasized that he had no proof of these allegations,” the report says.

Requests to speak to Lane were referred to Mike Sittrick, spokesman for Kaufman & Broad, who said Monday that Lane denies that he said Lyon received the property because of his friendship or politics.

“He said the characterization as to why Lyon got the land is not accurate,” Sittrick said.

Simpson was not available for comment Monday.

Dale Stuard, head of Stuard Industries in El Toro and former president of the home builders association, said: “It is absolutely impossible to make a case that Bill Lyon helped (Wiseman) get where she was in the organization.”

Stuard said Lyon is “not a power player in the organization.”

F. David Young, a Laguna Beach developer who ran for president of the home builders association against Wiseman in 1986, also said he does not believe that Lyon played a role in Wiseman’s election.

“He never threw his weight around,” Young said. He added that Wiseman beat him because “she did her homework” and raised more money for her campaign than he did.

The Robinson Ranch was seized by HUDiin 1984 when the Ridgewood Development Co. defaulted on a $35-million loan that was guaranteed under HUD’s Title X program. The Title X program is designed to provide incentives for developers to build on otherwise-difficult properties.

Ridgewood tried to retain the property and renegotiate its loan with HUD, President Harriet Harris said. But she became frustrated at HUD’s lack of cooperation and eventually wrote a letter to then-HUD Secretary Samuel Pierce that also hinted of politics influencing the process.

“We have heard of deals being made by people whose political connections with the department enable them to achieve an inside track,” she wrote.

The HUD report says Lyon’s original bid on the project of $8.5 million was the lowest of four that were considered by HUD officials.

The report was critical of the sales process because Lyon was then allowed to submit a second bid based on a higher rate of development than the others had considered.

The other companies were never given a chance to prepare a bid based on a higher rate of development, the report says, and if they had, their bids would have been better than Lyon’s.

The report notes that Wiseman refused to reveal Lyon’s bid to Kaufman & Broad and that the information had to be obtained with the Freedom of Information Act.

HUD Lost at Least $10 Million

Lyon eventually bought the property for about $16 million, causing HUD to lose at least $10 million when it was forced to pay the defaulted loan, said Jack Flynn, a HUD spokesman in Washington.

The sale to Lyon was given final approval by Wiseman after it was screened by a five-member committee she appointed. The report says two of the five members backed Lyon’s bid, one supported Simpson/Marlboro, one voted for Kaufman & Broad and the fifth did not vote.

The report says “a significant factor” in the decision of the two committee members supporting Lyon was that his firm has a proven track record of development in Southern California and is financially sound.

But the report also notes: “Kaufman & Broad is the largest home builder in California, with 1984 sales of $361.5 million.”

Times staff writer Eric Lichtblau contributed to this report.