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Court Widens Jurisdiction of Prosecutor in HUD Probe

July 17, 1990

WASHINGTON (AP) _ The independent counsel investigating former Housing Secretary Samuel R. Pierce Jr. was given a significantly broader jurisdiction Tuesday to probe developers who received federal housing grants during the Reagan administration.

The court that supervises the work of independent counsel Arlin M. Adams issued an order authorizing him to scrutinize developers, lobbyists or others who sought and obtained grants from three programs run by the Department of Housing and Urban Development from 1984 through 1988.

Adams was appointed in March to investigate allegations that Pierce and other HUD officials had showed illegal political favoritism in awarding lucrative rent subsidies under the Moderate Rehabilitation Program.

The order by the independent counsel panel of the U.S. Circuit Court of Appeals here also authorizes Adams to investigate allegations of political favoritism in the operation of the Urban Development Action Grant program and the Secretary’s Discretionary Fund for technical assistance and special projects.

It also widens the circle of people who may be investigated to include officials of other government agencies ″or other persons and entities.″

Adams’s review of the operation of the two additional programs was sought by Attorney General Dick Thornburgh in a May 25 letter to the independent counsel.

Thornburgh referred to allegations made by DuBois L. Gilliam, a deputy assistant secretary at HUD, that political considerations were an important factor in the award of UDAG and discretionary funds.

Gilliam, who is serving an 18-month sentence for corruption, told the House Government Operations employment and housing subcommittee that Pierce had ordered HUD to award grants to politically connected developers.

In one instance, Gilliam said, Pierce had ordered the approval of a $5.6 million UDAG grant because his former executive assistant, Lance H. Wilson, was a private consultant for the developer of the Florida project.

The original mandate authorized Adams, himself a former federal appellate judge, to investigate whether Pierce and other HUD officials ″may have committed the crime of conspiracy to defraud the United States or any other federal crimes″ in selecting developers to receive subsidies from the Moderate Rehabilitation Program.

The broader mandate issued Tuesday empowers Adams ″to fully investigate and prosecute all government officials, or other persons and entities for any federal crimes, including conspiracy and aiding and abetting″ in connection with the operation of all three programs.

Pierce, who ran HUD for all eight years of the Reagan administration, has denied any wrongdoing. He also told Congress that he did not participate in the day-to-day operation of specific programs and did not order his aides to award grants.

But Gilliam offered a conflicting account in his congressional testimony, telling lawmakers that Pierce had ordered him to intervene in projects in Nashville, Cleveland and Miami that were backed by influential Republicans.

Gilliam, who pleaded guilty to conspiring to manipulate the award of a grant and accepting $8,000 in illegal gratuities, is cooperating with Adams’ investigation under a grant of immunity from prosecution, according to sources who spoke on the condition of anonymity.

The investigation of the House subcommittee chaired by Rep. Tom Lantos, D- Calif., also focused on the work of Republican consultants and lobbyists who helped clients deal with HUD.

These consultants included Paul Manafort, a partner in the political consulting firm of Black, Manafort, Stone & Kelly, and James Watt, an interior secretary in the Reagan administration.

Manafort, a leading campaign strategist for President Bush, acknowledged to the panel that he engaged in ″influence peddling″ to help steer millions of dollars worth of HUD funds to a project he partly owned. Manafort said his firm was also paid $326,000 to help developers get HUD backing for a project in New Jersey.

Watt said he met with Pierce to help developers win $28 million worth of Moderate Rehabilitation Program subsidies for a suburban Baltimore project.

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