WASHINGTON — Two former top officials of the Department of Housing and Urban Development exploited inside connections at the agency to win approval of $133 million in lucrative rent subsidy grants in "the best fix around," House investigators said Thursday.
But Philip Abrams, former HUD undersecretary, and Philip Winn, former HUD assistant secretary in the Ronald Reagan Administration, insisted in congressional testimony that their expertise and the merit of their proposals accounted for their success.
Rep. Tom Lantos (D-San Mateo), chairman of the Government Operations subcommittee on employment and housing, countered that it was their political ties to Deborah Gore Dean, a powerful chief of staff to former HUD Secretary Samuel R. Pierce Jr., that made the difference.
"Favoritism was used in allocation of extremely valuable and extremely scarce housing units," Lantos said.
'Everybody Knew It'
Rep. Christopher Shays (R-Conn.) agreed, telling Abrams: "The whole key is Deborah Gore Dean. You knew it. Everybody knew it. It was the best fix around--it was a no-lose situation."
Dean has invoked the Fifth Amendment privilege against self-incrimination but has indicated that she might testify later on her role in allocating grants under the HUD Section 8 Moderate Rehabilitation program if she is given access to HUD documents that she has requested.
Abrams confirmed that he wrote three "Dear Debbie" notes to Dean in 1986 seeking her help in getting the department to approve proposals for rehabilitation and rent subsidies for projects in Nevada, Oklahoma and Colorado. Two of the three requests were granted.
In one note on behalf of the Housing Authority of Clark County, Nev., which later approved his rehabilitation program for 160 units, Abrams wrote Dean: "The bottom line is they need 160 units . . . . I would appreciate it if you could accommodate their request."
$19.8 Million in Subsidies
Abrams said that he bought an option to buy the Sierra Point apartments for $10,000 and that--when the HUD award was announced--he paid $3.4 million for the property. Under terms of the grant, he would receive $19.8 million in rent subsidies and $6 million in tax credits in return for rehabilitating the units for occupancy by low-income residents.
In all, a group led by Abrams and Winn received HUD approval for seven projects with a total of 1,347 units that qualified for rent subsidies of $133.6 million and tax credits worth an additional $29 million, according to the subcommittee.
Winn, now U.S. ambassador to Switzerland, defended his firm's actions.
"This was not our doing," he said of the HUD selection process, adding that the firm thought it was competing for the hard-to-get HUD allocations of rehabilitation units.
"There was no competition," Shays told him. "You worked directly with Deborah Gore Dean and she signed off on it."
"If Debbie says it was done on a political basis, maybe it was," Winn replied. "We are not the ones that chose the projects."
Lantos said: "You used your influence and your influence got you the units."
"It may very well be the case," Winn said, but he insisted that his associates did not break any rules in the process.
Earlier, former HUD official Joseph Strauss said he had to hire James G. Watt, former secretary of the Interior, because he needed a "heavy hitter political consultant" to get contracts under the rehabilitation program.
He also said he hired Jerris Leonard, a prominent Republican attorney who headed the Justice Department's civil rights division in the Richard M. Nixon Administration, and other well-known Republicans to advance his clients' grant proposals.
Fees for Watt
Strauss said he personally earned nearly $1 million in six years as a consultant who did 80% of his business with HUD. Watt received a fee of $169,000 for interceding with Pierce on behalf of a rehabilitation project in Essex, Md., Strauss said, and was paid $120,000 for similar help on behalf of two other clients.
Asked if the rehabilitation program was riddled with mismanagement and influence-peddling in the past, Strauss replied: "Absolutely right."
Despite his financial success, the former special assistant to Pierce said he is disillusioned with the Washington world of consulting and has moved to West Virginia.