WASHINGTON — Housing and Urban Development Secretary Jack Kemp on Thursday announced his intention to cancel a loan-guarantee program whose benefits have gone in substantial measure to clients of politically well-connected consultants.
Among the consultants listed by HUD are two former high-ranking officials of the department and the wife of a former staff member of Ronald Reagan's White House.
The program, designed to insure private loans obtained by small companies that sought to develop unused land for housing and commercial activities, had become "riddled with abuse," the department said.
Of the 58 developers who had obtained loan insurance under the program since 1977, 25 have since defaulted, HUD said. It estimated the cost to the government at $90 million.
In a prepared statement, the department said that Kemp was canceling the program because of "the enormity of the losses incurred, high patterns of abuse and the failure of the program to benefit the needy." It is known as the Title X Land Development Mortgage Insurance Program.
Other HUD programs, notably the low-income housing rehabilitation program, already had become embroiled in charges of political influence-peddling during the Ronald Reagan Administration. A HUD inspector general's audit charged earlier this year that consultants with the right political connections earned enormous fees for obtaining HUD housing rehabilitation funds.
Former Interior Secretary James G. Watt, for example, testified to a congressional subcommittee that he and a partner received $300,000 to meet with Samuel R. Pierce Jr., Reagan's HUD secretary, on behalf of a Maryland housing developer. Paul J. Manafort, a campaign adviser to President Bush, said that his firm was paid $326,000 in connection with a New Jersey project.
Pierce testified that his executive assistant, Deborah Gore Dean, was the key department official in approving such grants. Dean refused to testify earlier this month, citing her Fifth Amendment protection against self-incrimination.
Kemp suspended grants under the rehabilitation program several months ago. But HUD spokesman Mary Brunette said that the department has published strict new regulations to govern the program and has begun accepting applications again.
The program that Kemp moved to cancel Thursday is substantially smaller than the rehabilitation program. HUD has insured about $500 million worth of development loans since 1977, the department said.
"I promised to root out every occurrence of inefficiency, misuse of government monies and fraud in the Department of Housing and Urban Development," Kemp said in announcing his intention to terminate the program.
Not only will no more loan guarantees be issued, HUD said, but "all projects that have received firm commitments and initial endorsements will be examined to determine whether fraud or misrepresentation warrant the denial of government insurance."
HUD officials said that consultants who helped obtain funds under the program for their clients included Tricia Canzeri, a former New York investment banker whose husband, Joseph W. Canzeri, served as assistant to the President in the Reagan White House. HUD also listed two former deputy assistant HUD secretaries, Maurice Barksdale and Shirley Wiseman.
None of the three could be reached for comment Thursday night.
Canzeri, according to HUD officials, represented the developers of McNair Farms, a combination of single-family homes, apartment buildings, office space and retail stores in Washington's Virginia suburbs. The HUD loan guarantee was approved in March by James C. Nistler on his last day at HUD as a deputy assistant secretary.
HUD officials said that the legislation authorizing the loan guarantee program gave the secretary the authority to cancel it.