Ex-Official Pleads Guilty in HUD Corruption Probe

The long-running investigation into fraud and corruption in the Ronald Reagan Administration’s Department of Housing and Urban Development brought down its highest former official Thursday when Thomas T. Demery, once the department’s No. 3 executive, pleaded guilty to reduced charges.

Demery, 43, a former assistant secretary for housing, pleaded guilty to accepting a gratuity and obstructing justice. U.S. District Judge Thomas Penfield Jackson said that he would impose sentence at a later date.

Demery, whose trial was scheduled to start early next month, had been indicted on charges of lying to Congress and accepting a $100,000 loan from a developer whom he helped to get federal housing subsidies in the 1980s.

He was accused of steering $15 million worth of HUD loan subsidies to the Michigan developer who had given him a $100,000 second mortgage on extremely favorable terms. The second mortgage was never publicly recorded, the indictment said.

Demery, a HUD official from 1986 to 1989, also was accused of making false statements on loan applications to conceal the arrangement. He faces a maximum sentence of seven years in prison and fines of $500,000.

Independent counsel Arlin M. Adams, who has been investigating the HUD scandal for more than three years, called Demery’s plea “a major step forward.” He said that Demery’s activities at HUD “go to the heart of the matter we have been charged to investigate” and that the plea “significantly advances the HUD investigation as a whole.”

In coming weeks, Adams is expected to call Demery before a federal grand jury in Washington that is looking into allegations that former HUD Secretary Samuel R. Pierce Jr. lied to Congress about his knowledge of corruption within his department. The jury also is investigating charges that former Sen. Edward W. Brooke (R-Mass.) used his influence to win subsidies for his clients’ housing projects.

Both Pierce and Brooke have denied wrongdoing. Pierce’s attorneys, Paul Perito and Robert Plotkin, said: “There is absolutely no evidence that Sam Pierce ever profited personally from his official position.”

With Demery’s guilty plea, Adams so far has obtained 10 convictions and secured more than $2 million in criminal fines. Most of these convictions have come from plea agreements, with only three having resulted from trials.

Another former high official, Deborah Gore Dean, is scheduled to go to trial later this summer. Dean, who was Pierce’s executive assistant and alter ego, is under indictment on 13 charges of funneling millions of dollars in federal grants to favored contractors and lying to Congress about her conduct. She has denied the charges.