Al Wiggins was a small Santa Ana home builder who started out as a barber. Mac Binger was born to one of the wealthiest families in America: prominent Midwesterners, owners of thoroughbred racehorses and Broadway theaters.
This unlikely pair teamed up to build luxury condominiums around a golf course and country club in the resort town of Palm Desert using a federal Department of Housing and Urban Development program for the poor.
While there is no indication any laws were broken, the Desert Falls Country Club is an example of how far HUD has strayed from its original mission of housing the nation's poor. It's a tale of loose regulations that involves a former HUD official hired as a consultant and what a HUD auditor's report said was questionable use of a program meant for the poor and people of modest means.
Wiggins and Binger turned to the HUD office in Santa Ana when the banks were reluctant to lend them money for Desert Falls.
But when HUD officials in Los Angeles and Washington said luxury condos were not exactly their idea of affordable housing, the two partners hired a former HUD official and promised him $60,000 to help open doors at the agency.
HUD wound up guaranteeing a $13.6-million loan to build Desert Falls Country Club. In return, the agency made the Orange County home builder and Binger promise to sell a fifth of the condos at prices people of modest means could afford.
Two years later the project collapsed into bankruptcy.
Today, James M. (Mac) Binger, is still building there with his new partners, with one big difference: HUD no longer requires any of the units to be affordable. The condos start at $129,000. HUD, meanwhile, has little to show: exactly 20 "affordable" units out of 1,300 planned for Desert Falls.
In many respects, Desert Falls isn't much different from other projects financed by HUD's Title X loan guarantee program. Since 1977, according to HUD's own figures, 25 of 58 developers who got loans insured by HUD under Title X have defaulted, including the developers of Orange County's Robinson Ranch. That means HUD must repay the lenders, and HUD figures it will lose $90 million on those bad loans.
That's small potatoes compared to some HUD programs. HUD Secretary Jack Kemp estimates mismanagement, theft and political cronyism under his predecessor, Samuel R. Pierce Jr., may eventually cost the government $2 billion.
Title X had such a dismal record that Kemp announced in June he would end it. Among its biggest failures was Desert Falls. The country club caused such a flap that HUD tightened its Title X rules. Even under the old, looser rules--a HUD auditor would later say--Desert Falls should never have received government assistance.
Title X has yet to be scrutinized by a House subcommittee investigating HUD although a spokesman for Rep. Tom Lantos, a Democrat from San Mateo and the subcommittee's chairman, says it will investigate Title X as soon as September.
Should it investigate Desert Falls, the subcommittee will hear about a cast that includes the Binger family of Minneapolis and Montana, heirs to the 3M Scotch tape fortune.
It will hear about Oscar A. (Al) Wiggins of Tustin, who works out of a one-room office in Santa Ana. He's building a couple of small subdivisions now, but nothing the size of Desert Falls. He lost his stake in that during the bankruptcy.
Binger would not be interviewed. But Binger's lawyer and fellow Desert Falls investor said Binger was only trying to make a profit and provide affordable housing for retired people.
"This project is not at all like the things you've been reading about in the paper," said George R.A. Johnson, a Minneapolis lawyer with a prominent firm. "Everything here is totally aboveboard and by the book."
Wiggins insists that Desert Falls was eligible under Title X rules and that the two partners didn't do anything wrong.
Officials Cite Regulations
HUD officials say the agency insured the loan because it couldn't turn down Binger and Wiggins under the old Title X regulations.
Now 59, Wiggins had never applied for a Title X loan when he met Binger 10 years ago. Neither had Binger. The two met, according to HUD records, when Binger backed a Loma Linda subdivision in San Bernardino County called Springhill that Wiggins was building.
Wiggins was president of Pacific Coast Builders Inc., which he had started in 1975 after years of working for other people.
Binger, now 47, is the son of James H. Binger, the former chairman of Minneapolis defense contractor Honeywell Inc. and Virginia McKnight Binger, daughter of William L. McKnight, longtime chairman of Minnesota Mining & Manufacturing Co. of St. Paul--3M. At one time, she invested at least $500,000 in one of Mac Binger's corporations involved in Desert Falls.
Binger lives in a small Montana settlement called Big Arm at the western edge of the Rockies on picturesque Flathead Lake, where he runs a cattle ranch.