[Extensions of Remarks]
[Pages E1552-E1553]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT, AND
INDEPENDENT AGENCIES APPROPRIATIONS ACT, 1996

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speech of

HON. BARNEY FRANK

of massachusetts

in the house of representatives

Thursday, July 27, 1995

The House in Committee of the Whole House on the State of
the Union had under consideration the bill (H.R. 2099) making
appropriations for the Departments of Veterans Affairs and
Housing and Urban Development, and for sundry independent
agencies, boards, commissions, corporations, and offices for
the fiscal year ending September 30, 1996, and for other
purposes:

Mr. FRANK of Massachusetts. Mr. Chairman, these two documents are
very relevant to our discussions on the HUD budget.
The article by Keith Regan from the New Bedford Standard Times
documents the need for housing, and demonstrate how ill-advised the
cuts in this budget are for HUD.
The statements from Judge Adams and former Secretary Pierce remind us
that HUD is not inherently flawed, but rather harmed from the corrupt,
incompetent administration it received during the Reagan years, and is
in fact improving greatly under Secretary Cisneros.
Office of Independent Counsel, January 11, 1995

Independent Counsel Arlin M. Adams announced today that
former HUD Secretary Samuel R. Pierce, Jr., has admitted that
his ``own conduct contributed to an environment'' at the
Department of Housing and Urban Development in the 1980s in
which his subordinates could engage in ``improper and even
criminal conduct.'' In a statement provided to Independent
Counsel Adams, which is attached to this release, Secretary
Pierce ``fully accept[s] responsibility for [his] role'' in
the mismanagement and abuse at HUD in the 1980s, and
acknowledges that his meetings with former Secretary of the
Interior James G. Watt and other personal friends who were
seeking HUD funds were inconsistent with ``the HUD Standards
of Conduct prohibiting actual or apparent undue or improper
favoritism.'' Secretary Pierce also accepts responsibility
``for the necessity for the Independent Counsel's
investigation,'' and states that he ``deeply regret[s] the
loss of public confidence in HUD that these events may have
entailed.''
Adams also announced today the completion of the major
investigative phase of his probe of HUD in the 1980s, which
to date has resulted in sixteen criminal convictions of
former high-ranking officials and others, and has obtained
more than $2 million in criminal fines. Adams stated that
``Secretary Pierce's admissions comport with the proof that
the government would have introduced at trial, and inform the
public of these events without the uncertainty and great
expenditure of time and money inherent in such a trial.''
``In light of these admissions,'' Adams further stated, ``and
in consideration of other factors--including Secretary
Pierce's age and multiple health problems, the conflicting
evidence regarding the intent with which he acted, and the
absence of any evidence that he or his family profited from
his actions at HUD--this Office has declined to seek a
criminal indictment of Secretary Pierce.'' ``These factors,''
Adams noted, ``distinguish this case from those previously
prosecuted by this Office.''
Adams stated that while further details of Secretary
Pierce's actions at HUD would be addressed in the Office of
Independent Counsel's final report, ``Secretary Pierce's
statement acknowledges what was demonstrated by both the
Lantos Committee's hearings and this Office's prosecutions:
that by his abdication of responsibility, and by his own
conduct, Secretary Pierce made it possible for his
subordinates to commit crimes and to profit from their
betrayal of the public trust.''
The Independent Counsel's investigation and prosecutions
have revealed, and Secretary Pierce's statement acknowledges,
that HUD was an agency corrupted by the activities of many of
its own officials. These high-ranking political appointees
took control of HUD's increasingly scarce federal housing
funds and then awarded those funds to benefit their friends,
their families, and themselves, without regard to the actual
housing needs of this nation or its low-income families.
``The HUD scandal,'' Adams stated, ``is the story of high-
ranking political appointees who put their own interests
ahead of the underprivileged persons whose interests they
were charged to protect. The consequences of that scandal
continue to be felt today, both in increased cynicism about
our government in general and HUD in particular, and in the
everyday lives of the poor.''
Secretary Pierce permitted the conditions to exist that
allowed the corruption of HUD. He did so in two ways. First,
he failed adequately to supervise the appointees who served
under him. As Secretary Pierce admits, during the 1980s, a
group of high-ranking political appointees at HUD whom he
``trusted with authority clearly were not deserving of either
the powers of office or [his] trust.'' In particular, he
``failed to monitor and control the Moderate Rehabilitation
Program, commonly referred to as the `mod rehab' program,
when it was being operated, at least in part, to benefit
certain consultants, developers, and ex-HUD officials.'' As a
result, many HUD political appointees, ``including Deborah
Dean and certain other members of [Pierce's] staff, used the
program to see that their friends or political allies
received mod rehab projects.'' Secretary Pierce admits that
he has ``no doubt that the manner in which the mod rehab
program was administered was flawed, and was not consistent
with how the program was portrayed to Congress and the
public.
Second, Secretary Pierce acknowledges that his ``own
conduct failed to set the proper standard.'' On a number of
occasions, he ``met or spoke privately with personal friends
who were paid to obtain funding for mod rehab projects,''
including former Secretary of the Interior James G. Watt,
former Ambassador Gerald Carmen, and others. These meetings
and conversations, and Secretary Pierce's follow-up
discussions with his staff members, ``created the appearance
that [he] endorsed [his] friends' efforts and sent signals to
[his] staff that such persons should receive assistance.''
Secretary Pierce acknowledges that these contacts with his
friends were not only inconsistent with ``the HUD Standards
of Conduct prohibiting actual or apparent undue or improper
favoritism,'' but also with Pierce's own instructions to his
staff. Secretary Pierce also acknowledges that his answers
during the congressional hearings before the Lantos Committee
``did not always accurately reflect the events occurring at
HUD several years earlier.
Adams stated that while this concludes the major
investigative phase of the probe, ``Secretary Pierce's
statement, coupled with other evidence recently made
available to this Office, raises the issue whether certain
individuals may have committed perjury or obstructed justice
during the course of this investigation.'' Noting that the
Office already has secured numerous perjury and obstruction
convictions, Adams stated that ``[t]he length of this
investigation is attributable to the efforts of those who
attempted to obstruct it. But, as previously pledged, such
obstruction, when uncovered, shall be dealt with
appropriately.''
To date, the Office of Independent Counsel's investigation
has resulted in sixteen convictions following trials or
guilty pleas, and has secured more than $2 million in
criminal fines.
Statement by the Honorable Samuel R. Pierce, Jr., December 15, 1994

From January 1981 through January 1989, I served as the
Secretary of the Department of Housing and Urban Development.
I was responsible for the overall administration of the
Department, which employed thousands of people in numerous
divisions. During the time I served as Secretary, a number of
HUD staff members engaged in improper and even criminal
conduct. I realize that my own conduct contributed to an
environment in which these events could occur.
Many people I trusted with authority clearly were not
deserving of either the powers of office or my trust. My
management style, developed after years of working in a law
firm and other legal environments, was to delegate details.
This style exacerbated the problems at HUD because I did not
exert sufficient control over the individuals who

[[Page E 1553]]
reported to me. In particular, I failed to monitor and control the
Moderate Rehabilitation Program, commonly referred to as the
``mod rehab'' program, when it was being operated, at least
in part, to benefit certain consultants, developers, and ex-
HUD officials. As a result, a number of political appointees,
including Deborah Dean and certain other members of my staff,
used the program to see that their friends or political
allies received mod rehab projects.
In addition, my own conduct failed to set the proper
standard. On a number of occasions, I met or spoke privately
with personal friends who were paid to obtain funding for mod
rehab projects, including, among others, James Watt, Gerald
Carmen, and Robert Rhone. These meetings and conversations,
and my following discussions with staff members, created the
appearance that I endorsed my friends' efforts and sent
signals to my staff that such persons should receive
assistance. While I never financially benefited in any way
from these projects, these meetings and contacts were
inconsistent with the HUD Standards of Conduct prohibiting
actual or apparent undue or improper favoritism, and my
related instructions to my staff.
I was the person entrusted with the duties of Secretary and
I was the person responsible for the
Department. If I am to take credit for its successes, I must
also take the blame for its problems. I have no doubt that
the manner in which the mod rehab program was administered
was flawed, and was not consistent with how the program
was portrayed to Congress and the public. Despite certain
warning signs, and my own meetings and conduct, as
described above, I failed to ensure that the mod rehab
program operated properly.
I have come to some of these conclusions as a result of
facts revealed by the investigation and the prosecutions
conducted by the Office of Independent Counsel. Prior to that
investigation, I had testified before Congress. I was ill-
prepared for the congressional hearing and appeared without
counsel. Reviewing my exchanges with Members of the Lantos
Subcommittee, I see that I answered certain questions with
broad responses that did not always accurately reflect the
events occurring at HUD several years earlier. Similarly, one
of my answers to inquiries made by the Public Integrity
Section of the Department of Justice was not completely
responsive.
These last five years have been difficult ones for me, but
my parents taught me that I must not shrink from my duties. I
was the guardian of the HUD gates, and I rested on my post
when vigilance was most needed. In light of my conduct and
that of others at HUD, I fully understand and accept
responsibility for the necessity for the Independent
Counsel's investigation. However, in my forth years of public
service I never received a single improper benefit for my
actions--no money, no tickets, no trips, nothing.
Nonetheless, I fully accept responsibility for my role in
what occurred at HUD, and deeply regret the loss of public
confidence in HUD that these events may have entailed.
[From the Standard Times, July 25, 1995]

Housing Crunch Hits Poor Most--Waiting Lists for Affordable Units in
Area Keep Growing

(By Keith Regan)

New Bedford.--A drop in the number of affordable apartments
is sending record numbers of low-income families to area
housing authorities for help. But housing officials say
budget cuts are forcing them to turn people away or add them
to already lengthy waiting lists.
As many as 1,000 individuals and families are waiting for
spaces in the city's 3,900 units of public or subsidized
housing, according to Joseph Finnerty, executive director of
the New Bedford Housing Authority.
Mr. Finnerty said the fact that few new units of affordable
housing have been built by private developers in recent years
has contributed to the influx of applicants.
``The apartment buildings you see built on the edge of town
aren't aimed at low-income residents,'' he said. Meanwhile,
as those buildings went up, many older apartment buildings
that once housed affordable housing were being demolished in
New Bedford and other large cities.
``There's a decrease in the number of affordable apartments
at the same time economic conditions mean more people need
them,'' said Mr. Finnerty.
The problem is not limited to the city, however.
In Wareham, the wait for one of the town's 32 units of
public housing ranges from six to 12 months, according to
Housing Authority Executive Director Pamela Sequeira.
``We don't have the funds to offer any new housing
programs,'' Ms. Sequeira said. ``And these families can't
find affordable apartments on their own.''
A report issued Monday by the Center on Budget and Policy
Priorities finds the national shortage of public housing
reached record levels in 1993, with low-income families out-
numbering affordable housing units by a two-to-one margin.
Based on ceasus data, the report found 11.2 million low-
income renters and just 6.5 million units of low-income
housing. Affordable housing is defined as taking up less than
30 percent of a resident's income, low-income is defined as
any family or individual earning $12,000 a year or less.
The report cites a decrease in the number of low-rent homes
due to the gentrification of some urban areas and the
abandonment of run-down housing in others.
Mr. Finnerty said he has witnessed the decline of
affordable housing units over the last decade since Congress
eliminated a tax break in 1965 that encouraged private
developers to build low-income housing.
``They took away the incentive for developers to include
low-income housing in their buildings,'' he said.
Fairhaven resident Joaquin ``Jack'' Custodio said public
housing programs have long fallen short of their goal of
providing families a way out of poverty.
``It's the strong versus the weak,'' Mr. Custodio said.
Residents of housing projects ``aren't given any power'' to
improve their lives, he added.
Housing, unlike other public assistance is not an
entitlement program, meaning families who do not receive
public housing or federal subsidies must fend for themselves,
Mr. Finnerty said.
Still, he said, the need for public housing is tied to
other programs, such as Aid to Families with Dependent
Children, with cuts in those forms of asssitance making it
even more difficult for families to afford housing.
Ms. Sequeira cited the report's finding that most families
who do not receive public housing assistance spend more than
half of their income on housing. Many, especially elderly
families on fixed incomes, can ``end up in a deficit in their
first month,'' she said.
``Something else has to give,'' said Mr. Finnerty. ``An
elderly person might spend less on medicine or a family might
not eat as well as they should to make up the difference.''
Mr. Finnerty also said the study's timing is crucial.
Congress is currently considering a $7 billion reduction in
the Department of Housing and Urban Development's budget for
next year.
The New Bedford Housing Authority is already facing a 14
percent cut in this year's budget and a 28 percent cut for
the next fiscal year, which begins in October.
``It's only going to get worse,'' Mr. Finnerty said.

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