Ex-HUD Chief Is Cleared of Wrongdoing : Probe: Independent counsel decides not to bring charges against Samuel R. Pierce Jr. He says former Reagan aide allowed corruption to exist.

An independent counsel cleared former Housing and Urban Development Secretary Samuel R. Pierce Jr. of criminal wrongdoing Wednesday in a scandal that uncovered payoffs and widespread political favoritism in his Cabinet agency during the Ronald Reagan Administration.

But the counsel, Arlin M. Adams, was sharply critical of Pierce, saying that he “permitted the conditions to exist that allowed the corruption” in the Department of Housing and Urban Development.

Sources close to the case also disclosed that Adams, a former federal judge, has turned his attention to the conduct of James G. Watt, who was Interior secretary in the Reagan Administration before becoming a political consultant for developers seeking HUD contracts.

Adams is said to be focusing on the question of whether Watt may have committed perjury when he testified before a House subcommittee in 1989 about a meeting with Pierce to help business executives obtain rent subsidies from the housing agency. For his efforts, Watt has acknowledged receiving a $300,000 consulting fee. It was not clear which of Watt’s statements Adams is focusing on.

In an apparent reference to Watt, Adams said a recent statement from Pierce “coupled with other evidence recently made available . . . raises the issue whether certain individuals may have committed perjury or obstructed justice.”

Neither Watt nor his attorney, Martha Rogers, responded to requests for comment. But Watt insisted to Congress in 1989: “My participation was legal, moral, ethical and effective.”

The HUD scandal first came to light in 1989, after the Reagan Administration left office, when the agency’s inspector general released a scathing internal audit of a program intended to provide rent-subsidy grants to developers in order to improve substandard housing for poor families.

The program was promptly suspended by Jack Kemp, Pierce’s successor, and other housing-grant programs were modified. But the abuses spawned a series of congressional hearings and, ultimately, the appointment of Adams in 1990 as an independent counsel.

Pierce, 72, who has been in ill health, was the only black member of Reagan’s Cabinet and the only Cabinet officer to serve all eight years of the Reagan presidency. Earlier in his career, he had been both a state and federal prosecutor and then a municipal judge. During the Richard Nixon Administration, he served as general counsel at the Treasury Department.

Elaborating on his decision not to bring criminal charges against Pierce, Adams said he took into consideration a written statement from Pierce that acknowledged responsibility for the scandal.

Adams said he also considered “other factors, including Secretary Pierce’s age and multiple health problems, the conflicting evidence regarding the intent with which he acted and the absence of any evidence that he or his family profited from his actions at HUD.”

Pierce, in his statement, which was made public by Adams, acknowledged that “my own conduct failed to set the proper standard” at HUD.

“On a number of occasions,” he continued, “I met or spoke privately with personal friends who were paid to obtain funding for mod rehab (moderate-rehabilitation) projects, including among others James Watt and (former General Services Administrator) Gerald Carmen.

“These meetings and conversations, and my following discussions with staff members, created the appearance that I endorsed my friends’ efforts and sent signals to my staff that such persons should receive assistance.

“I . . . deeply regret the loss of public confidence in HUD that these events may have entailed.”

The highest former officials to be convicted, all in 1993, were Deborah Gore Dean, Pierce’s former executive assistant, and Thomas T. Demery and Philip D. Winn, former HUD assistant secretaries.