In one of her last acts as secretary of housing and urban development, Patricia Roberts Harris approved last month a stack of urban action grants, including one in which former New Orleans mayor Moon Landrieu has a financial interest.
The action was taken July 26, the same day that Landrieu was meeting at the White House with President Carter and agreeing to become the new HUD secretary. His appointment was announced the next day. HUD officials say it was all coincidence. "At the time the decision was made," the department states, neither Harris nor her ranking adviser on the project, Assistant Secretary Robert C. Embry Jr., "was aware of Mr. Landrieu's limited partnership interest in the project, nor had Mr. Landrieu been named the secretary-designate of HUD."
The federal grant, for $1.1 million, involves the renovation and refurbishing of the Pier House, one of the classiest hotels in Key West, Fla. A group of New Orleans investors, headed by F. Clancy Dupepe, bought the hotel for $4.6 million in April 1978, a few days before Landrieu's second term as mayor of New Orleans expired. Landrieu holds a 5 percent interest in the partnership, HUD officials said yesterday.
Landrieu could not be reached for comment, but, according to HUD, he has "requested that a contract awarding this grant not be signed until a potential conflict of interest issue is resolved."
"He's thick in the middle of trying to plan for divestiture of anything that represents a conflict of interest," said acting HUD spokesman Warren Dunn.
Three hotel groups in Key West had been seeking the HUD grant, according to Pier House executives, but the Pier House partners were the first to nail down permanent financing for their project.
This will come from Stephens Inc., a Little Rock, Ark., brokerage house headed by Jackson T. Stephens, a friend and backer of Carter and of former budget director Bert Lance. Its commitment for a $9.5 million first mortgage revenue bond issue was signaled in a July 24 letter to Dupepe that was forwarded to HUD officials and set the stage for approval by Harris two days later.
According to Dunn, "the minute he [Landrieu] was nominated, he had a meeting with Secretary Harris at which he alerted her to his interest [in the Key West project]. He came over and told her immediately. I don't know whether that was on July 26th or 27th, but I think it was on the 27th."
Formal announcement of the grant, along with 23 others for "small, distressed cities," was made by HUD in Harris' name last Tuesday, although she already had been sworn in as the new secretary of health, education and welfare. HUD officials said the announcement had been prepared earlier, but was held up until interested members of Congress had been notified.
HUD records in connection with the $11-million-plus Pier House project, in which the New Orleans partners have invested $253,000 thus far, leave the impression of a hotel badly in need of improvement.
"My group purchased the existing Pier House facilities with the goal of extensively renovating the deteriorating hotel facilities, expanding the hotel accommodations by 130 rooms and doubling the size of the restaurant and kitchen facilities," Dupepe wrote July 20 to the mayor of Key West. "Even more critical," he added, are improvements to the streets, "which flood and become impassable during high tides and even only moderate rain storms....
"Without the UDAG [Urban Development Action Grant] funds," Dupepe added, "it will not be possible to go ahead with the proposed expansion. This will effect employment in two ways. Not only will there be no new employees, but it will be necessary to cut the present work force, which has been expanded in anticipation of the expansion."
Guidebooks and magazine artciles about Key West paint a more comfortable picture of the accommodations. According to "Key West, the Last Resort," local visionary David Wolkowsky bought the waterfront property in 1964 and "then in stages he built what was to become the island's most fashionable motel, the Pier House complex, a rambling struck-block structure with tin roofs."
Room rates for double occupancy range from $63 a day to $70 in an addition to the beach bulding put up three years ago. The Pier House has five bars and, according to a guidebook, "one of the city's few fine restaurants, offering a water view and a spectacular view of the sunset."
Asked how all this squared with the letters and application in the HUD file, Pier House general manager John Weiss replied: "I don't know what's in the applications."
According to HUD spokesman Jack Flynn, the July 24 letter from Stephens Inc. "was what made the project."
"They guaranteed to buy the first mortgage bonds," he said. "That was the difference."
In a July 31 memo "to the file," Embry indicated that HUD officials were not aware of Landrieu's interest until Dupepe listed him as a partner in a July 20 letter to HUD project officer Joseph T. Burke.
Landrieu's name meant nothing to Burke until more than a week later, Embry said. Meanwhile, Embry said he and his staff met with Harris July 26, and she approved the Pier House project, among others, on their recommendation.
"As the above information indicates, all decisions with respect to the Key West project were made prior to our knowledge that Mr. Landrieu would be designated secretary of the Department of Housing and Urban Development," Embry said. "All decisions were made by me without knowledge that Mr. Landrieu was a limited partner in the proposed development." CAPTION: Picture, MOON LANDRIEU owns 5 percent of Florida project