Former Housing and Urban Development Department official Deborah Gore Dean's relationship to former Maryland Republican gubernatorial candidate Louise Gore was misstated in yesterday's editions. Deborah Dean is Louise Gore's niece. (Published 6/19/89)
Soon after President Ronald Reagan took office, thousands of Republican loyalists descended on the White House, looking for jobs. Many, like Bill J. Sloan, former director of the California Republican Party, were installed at the Department of Housing and Urban Development. As head of HUD's San Francisco office, Sloan charged the government for dozens of questionable trips, including one to a Republican fund-raiser at Disneyland. He repaid $6,800 in improper charges in 1983 and was reprimanded by then-Deputy Undersecretary Gordon Walker, a former Utah developer who was in charge of all field offices. Sloan resigned, followed by his deputy, who also had to repay misspent travel funds. Three years later, Walker himself resigned after disclosures that he had earned $145,000 while moonlighting for a group that sells books and tapes on how to make money in real estate. While these and several other top aides to then-HUD Secretary Samuel R. Pierce Jr. became mired in ethical problems, the sluggish bureaucracy beneath them, depleted by budget cuts, often ground to a halt. Only those contractors who knew how to grease the wheels of government seemed able to get quick answers. "The White House used HUD as a dumping ground for the dregs," said a department official. "We just had a lot of slimy people . . . . Pierce absolutely refused to take action when there was smoke out there. He'd say, 'Give me an indictment and I'll do something.' I'd say, 'Mr. Secretary, by that time it's too late.' " Since its creation as a Great Society program in 1965, the housing agency has been plagued by what might be termed institutional corruption: fraud, embezzlement and theft by middle-level HUD employees and by the developers, builders and landlords who chase after its grants and subsidies. Yet, as Congress and the Bush administration try to sort through the growing evidence of theft, favoritism and influence peddling at HUD, people both within and outside the housing agency say that two factors combined to produce a particularly fertile climate for wrongdoing during the Reagan administration. First, the White House refused to allow Pierce even to name his own deputy as it filled the department with political castoffs and ideologues. While these assistants pursued their conservative agendas, Pierce was often on the road. He made more than 700 speeches during his eight years in office, always flying first class, and visited the Soviet Union five times. A former New York labor lawyer, Pierce was an exceedingly passive secretary who delegated key decisions to inexperienced young aides, such as Deborah Gore Dean. Second, Reagan administration budget-cutters wielded their sharpest ax at HUD, cutting the staff from 16,000 to 11,000 and slashing subsidized housing outlays from $26 billion to less than $8 billion. This produced intense competition for the remaining dollars, forcing developers to hire highly paid Republican consultants, like former interior secretary James G. Watt, to pull the right strings. "Historically, people had to bribe someone to do bad things," said Rep. Barney Frank (D-Mass.), who chaired a House Government Operations panel that oversaw HUD during the Reagan years. "At HUD, you had to bribe people or their friends to let you do good things. They so shut down the supply of housing funds that the price went up." Charles L. Dempsey, a former HUD inspector general, said the recent discovery that some agency employees have diverted millions of dollars from property sales was utterly predictable. He said he warned Pierce about the lack of internal controls at a 1981 senior staff meeting. "We told them, 'You've got a lousy accounting system; you have to strengthen it,' " said Dempsey, now a management consultant. "They didn't do anything. How can you correct poor accounting systems, poor cash flow, when you're cutting the staff? "There was a hell of a brain drain at HUD. The technical experts left and were never replaced. You had people making decisions who didn't know what the hell they were doing," Dempsey said. Things deteriorated further in Reagan's second term. In September 1987, a report by Dempsey's successor, Paul A. Adams, criticized HUD's handling of property sales for "lack of adequate staffing . . . . Significant delays exist in transferring funds to HUD . . . . HUD exercises little control over the activities of closing agents. The number of closing agents varies from field office to field office, and no one knows or keeps track of the number of closing agents it has nationwide." Gerald McMurray, staff member and longtime housing expert with the House Banking, Finance and Urban Affairs Committee, said that "the whole system just collapsed. They couldn't even pay the bills." While Dempsey and Adams did a good job of uncovering fraud among landlords, tenants, brokers, lenders and contractors, relatively few cases were developed against senior HUD employees. Except in cases of outright bribery, the Justice Department routinely declined to prosecute such cases, which often fell in a kind of gray zone between influence peddling and criminality. The recent audit of the housing rehabilitation program is a case in point: Widespread impropriety was charged, but no one was accused of breaking any laws. Criminal cases tended to revolve around the local field offices, which were charged with overseeing HUD's new philosophy of privatization and self-reliance in programs for the poor. The local offices seemed paralyzed as housing authorities in such cities as Newark and Chicago sunk deeper into debt. "We shifted more and more to local autonomy and gave them less and less oversight," one investigator said. Pierce, who was saddled with the nickname "Silent Sam," saw little alternative. "We do not have a responsibility to check every nickel and dime that goes out . . . . We would have to have a staff bigger than the FBI to do that kind of check," he said in 1984. In city after city, crooks and speculators feasted on HUD-financed projects. In Washington, three men pleaded guilty to tax charges in connection with the uncompleted Bates Street town house development. In Memphis, housing officials used HUD money to speculate in the risky short-term bond market. In Boston, federal housing funds financed a small army of patronage workers who took polls and distributed absentee ballots. In Camden, N.J., a "bulk sales" program led to kickback convictions after speculators falsified mortgage applications to sell HUD houses to welfare recipients and, in one case, a 4-year-old girl. As Reagan's second term wound down, the White House tried to dislodge Pierce by offering him an appeals court judgeship. An administration that pledged to crack down on "waste, fraud and abuse" seemed to lose interest in the troubled agency. The undersecretary's job remained vacant for 16 months, and half the top posts went unfilled. "There was nobody running the department, so Pierce turned to his executive assistant, and that was Debbie Dean," one HUD official said. "Pierce was a nonexistent secretary," Frank said. "You had to look for the vital signs. The biggest scandal at HUD was that he cashed a paycheck." In congressional testimony last month, Pierce, 66, blamed political abuses on Dean and other former aides, saying that they had betrayed and misled him. Dean, 34, who has denied any wrongdoing, invoked the constitutional protection against self-incrimination at a House hearing last week. The daughter of former Maryland GOP gubernatorial candidate Louise Gore, Dean was twice nominated as assistant HUD secretary to oversee $3.7 billion in community development funds. A Senate committee blocked the nomination, with members saying that Dean's background -- she had run a small Georgetown magazine and managed several Georgetown restaurants -- was lacking. "Debbie Dean was wheeling and dealing and manipulating," Frank said. "She couldn't get confirmed, yet she was running the department." Another young special assistant to Pierce, Joseph Strauss, received $1.3 million in consulting fees from developers after leaving HUD, investigators said. Dempsey said such young aides were "delightful and charming, but most of them couldn't manage to find their bottoms in a phone booth." From the earliest days of the Reagan administration, it was evident that Republican connections counted at HUD. In 1982, top agency officials agreed to sell seven New York-area housing projects, without competitive bidding, to a company that included Edward L. Weidenfeld, the lawyer for Reagan's 1980 campaign committee, and Sheila Rabb Weidenfeld, who was press secretary to Betty Ford when she was First Lady. The sale was dropped after an investigation. Some say the ethical tone was set at the top in the early 1980s. Senior officials took dozens of trips to vacation resorts, and the bills were paid by groups of real estate agents and builders who did business with HUD. Then-Undersecretary Donald I. Hovde, who visited Italy, Puerto Rico, the Virgin Islands and Las Vegas at industry expense, defended the practice. Several top appointees resigned under fire. In one episode that seemed to symbolize the modus operandi, Assistant Secretary Emanuel S. Savas quit in 1983 after disclosures that he had HUD employees type and proofread his book, "Privatizing the Public Sector," on government time. Last month, James E. Baugh, who was HUD's deputy assistant secretary for public housing, was charged with steering a $399,000 award to a D.C. contractor who allegedly paid thousands of dollars to Baugh's wife. Baugh has pleaded not guilty.