[Congressional Record Volume 141, Number 124 (Friday, July 28, 1995)]
[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

                                 ______


                               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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