The Housing Hustle

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SUBSIDIZED HOUSING. A 1984 audit turned up evidence that Island Park, N.Y., officials rigged a program that was supposed to award HUD houses to the poor so as to favor the politically connected and exclude blacks. Among those allegedly receiving preferential treatment: a cousin of Republican Senator Alfonse D'Amato of New York and the son of a HUD regional administrator.

Pierce's mismanagement of rent subsidies, known as the Section 8 Moderate Rehabilitation program, has drawn the most intense scrutiny. If the decade-old $225 million-a-year effort had worked as designed, local housing authorities would have applied to HUD for federal grants to buy and renovate rental housing for the poor, and HUD would have awarded the money to the neediest areas. The developers who were to carry out the remodeling work were supposed to be selected by competitive bids.

Instead, developers who wanted to cash in on the lucrative 15-year contracts enlisted high-priced consultants, including former HUD officials and influential Republicans with no prior experience in housing. The consultants contacted local housing authorities, promised help in cutting through bureaucratic red tape, and encouraged them to apply for the funds. After a few phone calls to their old friends at HUD or a 30-minute meeting with Pierce, the consultants got contracts awarded to the developers, who paid hefty consulting fees.

Among those who lined up at the trough were eleven former HUD officials and well-known Republicans, including Watt, former Senator Edward Brooke of Massachusetts and former Governor Louie Nunn of Kentucky. Watt told Congress he received $300,000 in consulting fees for making eight phone calls and meeting with Pierce for half an hour concerning a project in Essex, Md., that HUD had previously rejected. Brooke is said to have received $183,000 from two developers connected with projects in Massachusetts. Nunn was awarded $375,000 for similar work on projects administered by the Jacksonville office of HUD. Officers of the powerful Washington G.O.P. consulting firm Black, Manafort, Stone & Kelly (which worked for the campaigns of both Reagan and his successor George Bush, as well as new HUD head Jack Kemp) got $326,000 after winning $3.1 million in HUD rent subsidies for a 326-unit project in Seabrook, N.J.

Some of those involved in the scandal claim lofty motives. HUD Assistant Secretary for Housing Thomas Demery, a central figure in the Moderate Rehabilitation award process, has been criticized because several HUD developers contributed nearly $300,000 to Demery's favorite charity, Food for Africa. The now notorious Robin Hud, a Maryland escrow agent whose real name is Marilyn Harrell, claims she used $5.5 million in HUD fees to establish a charity called Friends of the Father and to set up four businesses that employed poor people. In testimony last week before a House subcommittee, Harrell said her diversion of millions of dollars was a "sin," and added that she planned to repay the money.