The FBI has evidence that controversial landlord Shao Ti Hsu and former Sen. Vance Hartke (D-Ind.) offered a Prince George's County housing official $7,000 per month to keep the county from interfering in their efforts to buy and operate several run-down housing projects.
The housing official, Charles C. Deegan, cooperated with federal investigators by secretly tape-recording dozens of meetings he had with Hsu and Hartke at which the offers were made, according to sources.
Hsu and Hartke, the sources said, offered Deegan a one-third interest in each of several housing projects they planned to buy and told the county official that his share would yield $7,000 per month. In return, Deegan, an assistant to the county's director of licenses and permits, was asked to make sure the county approved the sales and did not cite the projects for housing code violations after they were purchased.
Hartke, 60, served in the Senate from 1958 to 1976, said yesterday that he met with Deegan and Hsu several times to discuss housing projects in Prince George's County. He denied, however, that he planned to hold any interests in the apartments or that Deegan had ever been offered financial interests in them. The former senator also said he was not aware the FBI was investigating Hsu or that the conversations with Deegan had been taped.
As a lawyer, Hartke said, he represented "a number of investors" who he said were interested in joining with Hsu in the purchase of several housing projects in the suburban Maryland county. Hartke would not identify the investors he represented.
"As far as we're concerned," said Hartke, "we were simply interested in what could be done with some of those decaying properties out there."
Hsu, 63, a millionaire engineering professor at the University of Maryland whose low-rent apartment buildings in Prince George's and the District of Columbia frequently have been cited for code violations, did not return a reporter's telephone calls yesterday.
The FBI's secret taping of Deegan's meeting with Hsu and Hartke, according to sources, was part of a wide-ranging investigation of Hsu which also concerns his possible ties to other members of Congress and officials within the Department of Housing and Urban Development.
FBI officials in Prince George's County and Baltimore said yesterday that they would have no comment on reports of the investigation.
Hsu, who owns several hundred apartments which were worth more than $3 million in 1976, according to court documents, has been charged with housing violations numerous times over the past four years.
In 1976, he was convincted of perjury in connection with his testimony at a civil trial in which he denied receiving a court order requiring him to make repairs at an apartment building he owned in Southwest Washington.
That conviction was overturned last year by the D.C. Court of Appeals, but the U.S. Attorney's Office has decided to entry Hsu on the perjury charge, and a trial is scheduled for Dec. 17.
Hartke, who began his political career as the mayor of Evansville, Ind., served three terms in the Senate and rose to the chairmanship of the Senate Veteran Affairs Committee and to high-ranking positions on the Commerce and Finance Committees before being defeated in his 1976 bid for reelection by Richard G. Lugar.
Hartke now works as a lawyer with his son, Wayne, in a suite in the Watergate office complex.
Sources said the FBI recruited Deegan for its investigation after Hsu allegedly approached Deegan with his plan three months ago.
Deegan, sources said, reported Hsu's first contact with him to Prince George's County Executive Lawrence Hogan, who suggested he work with the FBI and pretend he was interested in the offer.
For the last three months, Deegan, who was the acting director of the Department of Licenses and Permits until late last spring, worked diligently to persuade Hartke and Hsu that he made all housing decisions for Prince George's County, while secretly taping their conversations with him, sources said.
Although in reality Deegan is an investigator for the County Landlord-Tenant Commission who had been detailed to the Licenses and Permits Department, he reportedly convinced Hsu and Hartke that he could control the county's actions on the projects they wanted to buy.
Last month, county housing officials revoked the rental licenses of Hsu's Emerson Gardens complex in Hyattsville, for code violations, then restored it. Although both actions were done in accordance with normal procedures, Deegan implied to Hsu that he had been responsible for having the license restored.
Meanwhile, Deegan was meeting alone with Hsu and sometimes with both Hsu and Hartke several times a week, often at Hartke's office in the Watergate. Deegan attended the meetings wearing hidden microphones provided by FBI investigators. He also taped calls the two men made to him.
At those meetings, sources said, Hsuand Hartke offered to give Deegan a one-third interest in each property they bought. It was made clear during the discussions sources said, that Hartke would also own an interest in the properties, although he would not put up any cash for their purchase.
Deegan's job was to prevent county officials from interfering with the deals. Among other tasks, he was to ensure that the county drop its court suit seeking the demolition of Baber Village, a vacant, federally subsidized complex in Seat Pleasant, allowing the two men to buy the boarded-up apartments.
Sources said that in the tapes Deegan made, Hartke assured Deegan that HUD secretary Moon Landrieu would support the sale of the projects.
"I simply said that Landrieu would be interested in having those properties rehabilitated," Hartke said yesterday. "I've known Landrieu for a long time."
A HUD spokesman said yesterday that department officials were not aware of any offers to buy Baber Village.
Sources said that a sales contract had already been signed for Hsu and Hartke to buy the Dodge View apartments in Landover, a 500-unit complex whose original owners had defaulted on a conventional mortgage loan.
Hsu and Hartke were to take over the complex next month with a downpayment of $500,000, and assume its $4.8 million mortgage, Deegan was to prevent the dilapidated complex from being cited for housing code violations, sources said. d