Panel Charges Pierce Steered Funds to Friends

Former Housing and Urban Development Secretary Samuel R. Pierce Jr. helped steer federal funds to friends, his former law firm and politically connected consultants, a House committee concluded Thursday in its report on the biggest domestic scandal of the Ronald Reagan Administration.

“During much of the 1980s, HUD was enveloped by influence peddling, favoritism, abuse, greed, fraud, embezzlement and theft,” the House Government Operations Committee said in its unanimous report. “In many housing programs, objective criteria gave way to political preference and cronyism, and favoritism supplanted fairness.”

The alleged waste, abuse and mismanagement at the Department of Housing and Urban Development during the eight years that Pierce headed the agency cost taxpayers more than $2 billion, the committee estimated.

Pierce, who also is under investigation by an independent counsel, misled the committee’s employment and housing subcommittee and may have knowingly lied and committed perjury in testifying before the panel, which conducted a 16-month investigation, the report found.

“The saddest part of the HUD scandal is that programs to help the poor and needy were diverted by Secretary Pierce and his political associates to help the rich and greedy,” Rep. John Conyers Jr. (D-Mich.) said in a statement accompanying the report.

Appearing before the subcommittee in May, 1989, Pierce “tried to distance himself from the abuses and political favoritism at HUD during his tenure,” said Rep. Tom Lantos (D-San Mateo), the panel’s chairman.

In his testimony, Pierce said he “never told these people to fund anything,” a reference to reports that he had instructed his subordinates to award discretionary housing funds to applicants and consultants favored by the secretary.

But Lantos said Pierce’s statement to the panel contrasted with sworn testimony from other witnesses and “a paper trail of documents (that) suggest that he was directly and intimately involved in the abuses and favoritism in HUD funding decisions.”

Pierce’s lawyer, Paul L. Perito, called Thursday’s report “a rehash of stale and unfounded allegations, rank speculation and creative surmise,” and questioned its release only five days before congressional elections.

The timing “is consistent with the political impetus which has always driven this committee’s so-called investigation,” Perito said. “The report, like the clock that strikes 13, casts doubt on everything that went before it.”

None of the 15 Republicans on the committee opposed adoption of the report in a voice vote two weeks ago. Five members, however, expressed “additional views” disputing a recommendation that political appointees be barred from serving as HUD deputy assistant secretaries, with the posts to be filled only from the ranks of career agency employees.

Rep. Christopher Shays (R-Conn.), a subcommittee member who took a leading role in questioning witnesses during the panel’s 27 hearings, hailed the report and proposed reforms as “an example of government working at its best.”

“This campaign to clean up HUD succeeded because Republicans and Democrats, Congress and the White House, worked together,” Shays said.

The report cited examples of alleged favoritism toward clients of Pierce’s former law firm, Battle, Fowler, Jaffin & Kheel. The incidents are considered important because they began before Deborah Gore Dean became Pierce’s executive assistant. Until he invoked his 5th Amendment privilege to cut off further testimony, Pierce appeared to be blaming Dean for any improprieties that took place during his tenure.

The committee said Pierce “was planning to rejoin Battle, Fowler in May, 1989, when the HUD scandal erupted.”

Perito declined to discuss the committee’s findings point by point, citing the current investigation of Pierce and other former HUD officials by independent counsel Arlin Adams.

But a source close to Pierce said there had been no formal or informal offer for him to rejoin the firm as a partner. The source said that suggestion grew from an unsworn interview of Pierce by the subcommittee early in the investigation in which the housing secretary made a casual reference to the possibility.

The report said HUD’s moderate rehabilitation program, which was intended to benefit the poor by financing improvements of low-income rental units, became “a cash cow which was milked by former HUD officials and the politically well-connected.”

An investigation of the “mod rehab” program by HUD’s inspector general, Paul A. Adams, prompted the congressional probe and the special prosecutor’s examination of Pierce and other former HUD officials.

“Well-connected political consultants, such as former Interior Secretary James Watt, received hundreds of thousands of dollars for talking to the ‘right people’ at HUD, including Secretary Pierce, to obtain mod rehab funds,” the report said.

“Not only was Secretary Pierce aware that HUD was run politically,” the report said, “it was Secretary Pierce who wanted to know who was behind each mod rehab project. Applications for HUD funding supported or proposed by friends of the secretary, his former law firm, former HUD employees, and the politically well-connected often were given more than just ‘careful consideration.’ In numerous instances, Secretary Pierce directed that specific projects or grant applications be funded.”

The report said it was clear that Dean, Pierce’s executive assistant from 1984 to 1987, played a key role in “the mod rehab giveaway game,” citing documentary evidence that she was the focal point of the funding process.

“However, one of the unsolved mysteries is whether, for the most part, Ms. Dean acted on her own or at the direction or with the approval of Secretary Pierce,” the report said.

The report repeatedly praised current HUD Secretary Jack Kemp for “reacting swiftly and decisively to the time bombs left at the agency by his predecessor” and for working closely with Congress on reforms.

The committee report recommended a number of reforms, some of which already have been adopted. It said funding decisions on HUD projects should be based on merit and competition, removing politics and discretion from housing programs. It also called for making annual reports by the agency’s inspector general to Congress more direct.

In addition, the committee said top HUD officials should no longer take part as honorees, chairmen or special guests at dinners and other events where tickets are sold or contributions solicited “to avoid a perception of conflict or favoritism.”