Silent No More?

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Samuel Pierce, former secretary of housing and urban development, could be in big trouble. Attorney General Dick Thornburgh has asked for an independent counsel to investigate allegations of wrongdoing during Pierce's eight-year tenure at HUD. "Silent Sam" is charged with using his influence as a member of the cabinet to funnel housing contracts to influential Republican friends. While it is too early to say whether Pierce and his top associates "conspired to defraud the United States government" (as the charges read), his accusers' tenacity speaks volumes about hypocrisy inside the Beltway.

As Ronald Reagan left the White House, Sam Pierce drew raves from free-market conservatives. The Heritage Foundation's Mandate for Leadership III said that Pierce was "the Reagan Cabinet member who probably most effectively transformed the Reagan mandate into reality." He accomplished much of what free marketeers desired: cutting wasteful programs, implementing market-oriented reforms in housing management, and delivering assistance to needy recipients instead of property developers and bureaucrats. During Pierce's term the number of families receiving housing assistance went up by 40 percent while the number of HUD employees dropped by by one-fourth.

Unfortunately, Pierce may have done his job too well. During previous administrations, HUD was a well-known source of easy money in exchange for congressional campaign contributions, but Reagan and Pierce cut some of its slushiest funds. The Section 8 Moderate Rehabilitation program—which ostensibly paid to refurbish existing housing units but actually lined the pockets of builders who contributed to campaigns—had its budget authorization cut by nearly 80 percent. (The independent counsel's investigation focuses on Section 8.) Pierce also shifted subsidies from new housing construction, which costs taxpayers $700 a month per family served, to vouchers, which deliver the same amount of housing for $300. In the process he cut off funding to builders who, the New York Times says, "profited from HUD programs started in Democratic administrations."

When the first stories about irregularities at HUD surfaced last summer, congressional oversight committees feigned shock and dismay. But smoking guns were everywhere. As Pierce entered office, a 1981 HUD audit reported over 10,000 instances in which HUD contractors were paid for work not performed. The HUD inspector general's reports, internal audits sent to Congress every six months, openly recorded fraud and abuse throughout the department. The first page of each I.G. report recommended remedies that Congress never administered. Rep. Barney Frank (D.–Mass.), who chaired the Government Operations Housing subcommittee from 1983 through 1987, admits that he never read the I.G. reports.

Why did a lethargic Congress suddenly pay attention to HUD? Stuart Butler, director of domestic policy studies at Heritage, has noted that Pierce's budget cuts changed the rules for property developers who made campaign contributions. During the Carter administration, simply placing a phone call to the mayor and the local HUD office would land a federal contract; after Pierce cut funding for housing construction, developers had to pay James Watt and other heavyweight consultants six-figure sums to stay on the gravy train. Both Democrats and Republicans in Congress who have benefited from HUD payoffs are angry that Watt got "their" money.

Sam Pierce is no dummy. He refused to testify before Congress last fall to avoid the lynch-mob atmosphere of the hearings. Any questions about his actions at HUD will be answered in court, where he will receive the same protection any alleged wrongdoer deserves. The independent counsel, who can investigate whatever he chooses, might even look into the influence peddling that went on in past administrations.

Current HUD Secretary Jack Kemp hasn't escaped the watchful eye of Congress: The Times reports that Kemp catches flak both for dealing directly with tenant groups instead of local government officials and for "insisting that at least 75 percent of the agency's money be spent on the poor."

If Samuel Pierce broke the law, he should be punished appropriately. But the congressional inquisition is little more than a show trial. Instead of pursuing red herrings, Congress should implement the type of systemic reforms that make further corruption less likely and less profitable.

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