Sen. William Proxmire (D-Wis.) has asked the inspector general at the Department of Housing and Urban Development to investigate HUD's plans to sell seven housing projects without competitive bidding to a company that includes two prominent Republicans.
Proxmire said at a Senate Appropriations subcommittee hearing yesterday that he sees "a clear and conspicuous political element" in the proposed sale to a company that includes Sheila Rabb Weidenfeld, a former press secretary for Betty Ford, and her husband Edward L. Weidenfeld, who is handling leftover legal matters for the Reagan-Bush Committee.
"These aren't just people who walked in off the street," Proxmire told HUD officials. "This is a press secretary to a former first lady and a man who is the lawyer for President Reagan's campaign committee. You obviously had some big and important political people involved here."
HUD has tentatively agreed to sell the seven New York-area projects for $11 million and to provide a first mortgage at 11 1/2 percent and a second mortgage at 2 1/2 percent, an arrangement that is expected to yield a profit of more than $1 million.
In the process, HUD bypassed the standard procedure of selling such foreclosed properties at a public auction.
Acting assistant housing secretary Philip Abrams said he was not sure whether HUD was violating its regulations by selling the buildings to a corporation, but that "we would have to waive the regulations" for part of the sale. He contended that two of the worst properties "are absolutely unsaleable."
Proxmire, however, said that "the only way you could determine the best value to the government would be to solicit bids."
HUD Secretary Samuel R. Pierce Jr. testified that the sale "seemed to make sense. It would make the government more money than it could possibly make if we sold the buildings individually."
Sheila Weidenfeld, who served on Reagan's transition team for historic preservation, owns 20 percent of First American Housing Preservation Corp., which she recently formed with two New York developers, and her husband is a director of the firm.
The Weidenfelds, who helped negotiate the sale with HUD, have said it is a straightforward deal that anyone could have arranged.
Proxmire, quoting from a May 11 Washington Post article that described the transaction, said the developers seemed primarily attracted by the tax benefits on the buildings. Abrams estimated the developers could sell the tax benefits for about $4 million, but he said HUD does not include tax breaks in figuring a developer's profit.
Abrams said that HUD preferred to give the developers a low-interest loan to repair the poorest properties. Proxmire replied: "I can't understand how a 2 1/2 percent mortgage puts the government ahead."