Businessman Suspended by HUD Attacks Agency : Housing: A. Bruze Rozet, accused of operating substandard properties, tells a congressional panel that oversight of inner-city projects has been abysmal.

A. Bruze Rozet, suspended recently by the Department of Housing and Urban Development from acquiring any further federally subsidized housing projects, charged Tuesday that oversight by HUD of troubled inner-city projects has been “abysmal and verges on the criminal.”

Rozet, board chairman of Associated Financial Corp. of Santa Monica, launched his spirited counterattack against the government in testimony before a House Banking Committee subcommittee hearing into allegations of substandard conditions in housing projects owned or managed by his companies.

The attack drew an immediate rebuttal from Frank Keating, HUD general counsel, who said Rozet’s indictment of the Cabinet agency’s conduct was “silly and inaccurate.” Owners, not HUD, are responsible for housing conditions, Keating said.

In his hard-hitting presentation, Rozet contended that HUD often denied rent increases or other federal assistance to troubled projects, triggering their rapid deterioration.

“Has HUD obtained the legal right to stab the owner in the back and then fine him for bleeding on the carpet?” Rozet asked.

AFC and its subsidiary, Housing Resources Management Inc., along with Rozet and other affiliates, were suspended by HUD Jan. 26 from entering into new business arrangements with the federal government or taking part in new HUD contracts because of allegations of mismanagement at some of the low-income housing projects controlled by AFC. Rozet, terming the accusations unjustified, plans to fight them in federal court.

Rozet charged that HUD’s actions showed it did not have the best interests of low-income tenants at heart.

“They have condemned tenants to live in squalor while pleading the poverty of the government and trying to shift the blame to the few private-sector groups in the country trying to cope with disastrous economic and social conditions,” he said. “They have raised the hopes of inner-city residents with rhetoric and promises of action and then dashed their hopes on the anvil of purported reform and miserly budgets.”

Rozet said his firm is involved in 331 projects with 44,131 subsidized housing units in 40 states and Puerto Rico. He added: “Of this inventory, we estimate that 85% are performing well, are in good condition and meeting HUD housing standards.”

He said many of the firm’s problems began after its late 1986 acquisition of a company known as NIDC, which owned six of the seven properties that spurred the suspension of AFC by HUD a month ago.

Rozet accused HUD of reneging on commitments to provide aid to some troubled projects but praised it for assistance in helping AFC to rejuvenate a 593-unit project in suburban Maryland that had been plagued by drug dealers.

He chastised HUD for refusing to allow a rent increase at Tyler House, a Washington project. He said that refusal contributed to deterioration that Housing Secretary Jack Kemp labeled “scandalous” during a visit last summer.

“Faced with a problem beyond its resources and without assistance from HUD, the owner has little choice but to forfeit ownership of the property and suffer the consequences of substantial tax liability,” Rozet argued. “It is wrong for HUD to ignore the problem.”

Rozet said HUD has no uniform policy on allocating funds for security against drug dealing. As an example, he said that some AFC projects were denied such aid while HUD spends $100,000 a month to protect the Wilmington Arms project in Compton from drug gangs.

Members of Congress at the hearing expressed skepticism about some of Rozet’s testimony. Rep. Jan Meyers (R-Kan.) said, “The gentleman before us has been enormously enriched by investment in these properties.”

Rep. Henry B. Gonzalez (D-Tex.), chairman of the subcommittee, questioned whether Rozet was coming before the panel “with clean hands” in view of the HUD suspension. But he added that Rozet “knows more than any HUD secretary I’ve ever known,” and promised to invite him back for additional testimony.