20 HUD Consultants Paid $5.7 Million : Funneling of Funds to States Without Strong Needs Reported

Twenty consultants earned more than $5.7 million by helping funnel much of the money in a federal housing program to developers in a handful of states that did not need it, a Senate committee was told today.

Most of the 20 consultants were former employees of the Department of Housing and Urban Development or well-connected Republicans, HUD Inspector General Paul Adams said in a report to the Senate Banking Committee.

The consultants were paid by developers to help them get about one-fifth of the money from a HUD program to repair housing for the poor.

“It’s so lucrative now that you’re going to get some people doing some pretty unsavory things to feed at that trough,” Donald Terner, president of the nonprofit Bridge Housing Corp. in San Francisco, told the Senate committee.

But Adams said the well is starting to run dry for the outside consultants and some billings have not been paid in full because of the recent media attention.

Elsewhere on Capitol Hill today, the House Government Operations subcommittee on housing voted 6 to 0 to subpoena Lance Wilson, a former aide to former HUD Secretary Samuel Pierce Jr. Wilson had been scheduled to voluntarily testify last week, but did not appear, saying that he was not prepared with legal counsel.

Party Leaders Spar

And on the Senate floor, the two party leaders sparred over the HUD scandal, with Majority Leader George J. Mitchell (D-Me.) saying the department was “used as a political slush fund where political appointees gave favors . . . to politically well-connected individuals.”

Mitchell also criticized the leadership of HUD in the Ronald Reagan Administration for not heeding the warnings of the inspector general.

Minority Leader Bob Dole (R-Kan.) then complained that appointments to several HUD posts have been bottled up awaiting confirmation by the Senate.

“Let’s make certain we understand that Congress hasn’t been very cooperative,” Dole said. “Now we’ve got a situation where Secretary (Jack) Kemp is trying to do the right thing, and he doesn’t have anybody on board.”

The Senate Banking Committee voted 17 to 0 today to approve one of those appointees, C. Austin Fitts, as an assistant HUD secretary. The nomination of Fitts, who would replace Thomas Demery, one of the central figures in the HUD scandal, now goes to the full Senate.

“During our survey, five developers informed us that because of all the recent media attention, some billings were not paid in full” to them, Adams wrote in his report.

One of those consultants was Fred Bush, ambassador-designate to Luxembourg, who has had $45,000 in payments withheld since April, the report said. Bush is no relation to the President but was the chief fund-raiser for his 1988 campaign.