Kemp Seeks Lobbyist Registration, Finance Chief in HUD Reform Plan

Housing Secretary Jack Kemp on Tuesday proposed a comprehensive package of reforms designed to clean up his beleaguered department, including naming a top financial officer and requiring public registration of all HUD lobbyists and consultants.

“We are clearing the decks,” Kemp said at a press conference where he outlined more than 50 proposed changes at the Department of Housing and Urban Development. He said the changes can help the agency “move forward on an agenda to create opportunities for homeownership, jobs and hope in our nation’s inner cities and distressed rural communities.”

Kemp, whose sweeping overhaul will require some congressional action, said he was “heartened by the bipartisan spirit” with which many members of Congress have approached the unfolding HUD scandal and its accompanying investigations. He said many of his reform proposals “have drawn on their suggestions.”

Fraud, Mismanagement

HUD has been torn by a burgeoning scandal in recent months, with revelations of fraud, mismanagement, influence peddling and the awarding of lucrative HUD grants and fees to developers, consultants and lobbyists on the basis of political favoritism.

The department’s total losses are estimated to be in excess of $6 billion, Kemp said Tuesday.

Kemp, who called HUD “a swamp” after he took office and the scandal began to break, said his reforms “represent a fundamental redirection--back to the people in need.”

Kemp said he will make two key appointments: a chief financial officer who will report directly to him and a comptroller for the Federal Housing Administration.

“Unified financial management and accountability” will prevent embezzlement schemes such as the one engineered by escrow agent Marilyn Louise Harrell in Maryland, Kemp said. Harrell became known as “Robin HUD” after she diverted as much as $5.5 million in HUD funds and said she gave most of it to charity.

In the future, Kemp said, all funding decisions will be announced and published quarterly in the Federal Register, the publication that reports all regulatory activities of federal agencies.

“In the past, many of HUD’s funding decisions were shrouded in secrecy,” he said. “This reform will ensure that the taxpayer will be able to hold HUD accountable for every dollar spent.”

Further, he said, he will require that all consultants, lobbyists and lawyers doing business with the department register with HUD and that their clients disclose the fees they paid.

“This will subject would-be influence peddlers to full public scrutiny,” he said. He added that he will ask Congress for the authority to impose civil penalties amounting to as much as $10,000 against those who violate the rules.

Kemp also proposed eliminating the awarding of HUD grants at the discretion of the secretary, meaning that awards for all housing programs will be based on competition. Congressional investigators have charged that under Samuel R. Pierce Jr., HUD secretary during the Ronald Reagan Administration, the discretionary fund served as a political slush fund.

Past abuses of the discretionary fund, Kemp said, have “resulted in the funding of projects of dubious value, including swimming pools in beachfront communities.”

Subpoena Power Sought

Further, Kemp asked that the powers of the department’s inspector general be increased to give him subpoena power. His current authority “does not allow him to subpoena testimony from witnesses who are crucial to his investigations,” Kemp said. “This lack of authority has hindered his ability to pursue past investigations.”

Among other things, Kemp also proposed:

--Requiring that all waivers from regulatory requirements be documented in writing, to prevent developers and others doing business with HUD from reaping “enormous financial benefits.” Kemp said HUD officials allowed a developer in Chicago, for example, to undertake various actions that led to FHA’s financing a high-rise luxury building. The building ultimately failed economically, he said, and FHA paid a $50-million claim.

--Increasing HUD resources to monitor for fraud and waste.

--Increasing assistance to the needy by changing the Community Development Block Grant (CDBG) program to direct more resources to low-income people. Now, the law requires that a “portion” of the CDBG funds be spent on low- and middle-income people. Kemp said he will ask Congress to require wealthy communities to use all the CDBG funds for low- and middle-income projects, and will require distressed communities to use 75% of their funds for low- and middle-income projects.

“Counties with desperate needs for jobs and housing have instead, all too often, directed block grant funds to wealthy suburbs for amenities like planting trees and building bike racks and swimming pools,” he said.

--Eliminating the FHA’s Title X land development program, vacation home loans and loans for private investors.

“FHA’s single-family insurance programs should be designed to provide homeownership opportunities for low- and moderate-income families, especially those just starting out,” he said. “Instead, FHA has compiled large losses from programs that have little relationship to this goal.” For example, he said, one defaulted Title X land development loan “was for luxury housing on a golf course in a resort community.”

Requires Annual Audits

--Completing a comprehensive actuarial study on FHA to “help FHA managers assess the impact of changing economic conditions and other factors on the integrity of the fund,” and requiring annual audits and reports.

Sen. Alan Cranston (D-Calif.), chairman of the Senate Democratic Housing Task Force and a housing subcommittee, called the Kemp plan “right on target.” Rep. Tom Lantos (D-San Mateo), chairman of the House Government Operations subcommittee on housing and employment, which is investigating HUD abuses, praised Kemp’s proposals Tuesday as “good medicine for swamp fever.”

However, Lantos said Kemp’s proposals to eliminate programs “should be considered very carefully . . . . My basic approach is to abolish abuses, not programs.”