CASE CLOSED

	July 1, 1999
	Kwame Holman reports on the longest independent counsel investigation in history, a nine year investigation of the Housing and Urban Development agency.

JIM LEHRER: The Independent Counsel Law was not renewed by Congress, and at midnight last night, it went out of existence. As a form of P. S. to its expiring, Kwame Holman now tells the story of the longest independent counsel investigation of them all. KWAME HOLMAN: Through most of his 78 years, Judge Arlen Adams manage to live and work in the shadow of his home town, Philadelphia. That includes college, graduate and law schools, 22 years as a senior partner at a law firm and 19 years of service on the third circuit of the United States Court of Appeals. What finally succeeded in luring Adams away from Philadelphia was a phone call he received nine years ago. JUDGE ARLIN ADAMS, Circuit Appeals Court (Ret.): I got a call one day from a special court, the District of Columbia. They asked me if I would be willing to come down and talk to them about a special assignment. I was naive enough to accept the invitation. I got on the metro liner. And there I was confronted with three of my former colleagues, all distinguished judges, and they mentioned the HUD problem. KWAME HOLMAN: The HUD problem was evidence of profiteering and influence peddling inside the Department of Housing and Urban Development during the Reagan administration. And it appeared the abuses emanated from the Office of Housing Secretary Samuel Pierce. Then Attorney General Richard Thornburg decided an independent counsel, not the Justice Department should handle the investigation. JUDGE ARLIN ADAMS: The crimes allegedly committed by a cabinet officer, the Honorable Samuel Pierce appointed by the president, and there was a fear that the public would not have confidence unless an outsider made the investigation. KWAME HOLMAN: And that outsider was Judge Arlin Adams. Adams said his former appeals court colleagues persuaded him to take the job. JUDGE ARLIN ADAMS: I think I asked them what was your estimate as to how long I'll be away, and I think one of them said, "oh, we guess about six months." KWAME HOLMAN: The panel suggested about six months? What have you come to think of that prediction? JUDGE ARLIN ADAMS: Well, it was way off the mark. I was there for five years. KWAME HOLMAN: And the investigation continued long after Adams handed it off to his assistant in 1995. In fact, it ended only after the court issued this order of termination dated June 3, 1999. REP. TOM LANTOS: It blows one's mind. REP. CHRISTOPHER SHAYS, (R) Connecticut: We can say good things about Judge Adams. He did a wonderful job, but even then, both Tom and I have a problem with the amount of time and the amount of money spent. But the last I looked, it cost them $28 million to do where we really did the bulk of the job at no cost to the government. KWAME HOLMAN: Due largely to the efforts of representatives Tom Lantos and Christopher Shays, Congress already had established a factual base for the independent counsel's work. The House Subcommittee on Employment and Housing began its investigation in the spring of 1989 and continued for more than a year. Shays was the committee's ranking Republican; Lantos, it's Democratic chairman. REP. TOM LANTOS: The decision makers at HUD appeared to have carried paper work reduction to the extreme. There are practically no records for how decisions were made involving hundreds of millions of dollars of taxpayers' money. KWAME HOLMAN: The primary focus of the committee's investigation was a program to improve housing for low-income residents who received federal rent subsidies. By design, HUD would ask local public housing authorities to apply for federal housing funds based on need. The PHA's then would invite local developers to rehabilitate housing units; in return for a long-term guarantee rents would be subsidized. But in practice, well-heeled developers or their politically connected consultants often went directly to high-ranking officials at HUD and got renovation money quickly approved for their own projects. Dealings with the local PHA's became just a formality. WILLIAM CONNOLLY, New Jersey Director of Housing: Let's not make any mistake about it. We were honoring the letter of the HUD rules because we felt we needed to do that. There's absolutely no question that the process had already been stood on its ear by HUD. KWAME HOLMAN: The hearings exposed several former HUD officials turned developers who profited handsomely from the scheme, including then U.S. Ambassador to Switzerland, Phillip Winn. AMB. PHILIP WINN: I did not deal with the housing agencies per se -- and again this is not my expertise -- but I understand in one of the projects there were six bidders, so there was competition. SPOKESMAN: We can't let you get away with that, sir. AMB. PHILIP WINN: You don't think that's true? SPOKESMAN: No, that's not true. There was not competition. There were - you had a number of units here that were locked in. There was no competition. If there was advertising, it wasn't competitive because your project had basically been selected by the central office. KWAME HOLMAN: The hearings also revealed that several prominent Republicans collected hundreds of thousands of dollars in consulting fees by using their influence to get projects approved by HUD with little review. Fred Bush, a top Republican fund-raiser and the ambassador-nominee to Luxembourg, received $500,000 for his efforts on behalf of a developer in Puerto Rico. FRED BUSH: We were hired by the developer to advocate this project. REP. BARNEY FRANK: What was it you were going to do, specifically? What did you do? FRED BUSH: Well, I called Ms. Dean. REP. BARNEY FRANK: But what were you trying to do for her, for the developer in that conversation? FRED BUSH: To find out what the procedures were. REP. BARNEY FRANK: You went to the executive assistant of the secretary to find out the procedures. That is the most preposterous answer I have ever gotten. You did not. I just don't believe you. FRED BUSH: I was very used to going to the person at the top, if I could get to that per son. REP. BARNEY FRANK: To talk to them about the procedures? FRED BUSH: To talk about anything . REP. BARNEY FRANK: If you were going to mail a letter, do you go to the postmaster? That is extraordinary. And as a matter of fact, Mr. Bush, it demonstrates precisely the point, that you were using your political influence. KWAME HOLMAN: Ronald Reagan's former Interior Secretary -- James Watt -- was paid $300,000 by a Maryland developer. JAMES WATT: My credibility was used to get a result. SPOKESMAN: Right, therefore you were engaged in influence peddling. JAMES WATT: If I were a Democrat, I would say that Jim Watt engaged in influence peddling. REP. TED WEISS: And if you were an objective Republican, would you also believe that that was- JAMES WATT: No, I would say there's a skilled, talented man who used his credibility to accomplish an objective. REP. TED WEISS: Morally? Morally and ethically? JAMES WATT: That, by definition, is also there. KWAME HOLMAN: The person at the center of the controversy, Housing Secretary Samuel Pierce, was remorseful under a barrage of sharply-worded questions from both Democrats and Republicans. SAMUEL PIERCE: We should have gotten rid of this program too. REP. TOM LANTOS: Well, should you have gotten rid of it, or should you have cleaned it up? I mean, you made the decision, or people in your office made the decision, that if you can't terminate it, then milk it? SAMUEL PIERCE: No. REP. TOM LANTOS: I mean there were many other ways to go. SAMUEL PIERCE: I didn't make that decision. REP. TOM LANTOS: Well, somebody did because it was milked. SAMUEL PIERCE: But it was too bad, and that's sorry -- I'm sorry about that. REP. CHRISTOPHER SHAYS: Some people at HUD thought they had almost this divine right to have a certain number of allocated housing projects that they could get for themselves or give to someone else and make a bundle of money in the process. JUDGE ARLIS ADAMS: Now, I had to take steps to apprehend those responsible and in some cases to punish them. KWAME HOLMAN: But first, Judge Adams had to find office space. JUDGE ARLIS ADAMS: So had do collect a whole new library. We went to various government agencies and borrowed the books. We had to order books and order pencils and order desks, and then they should have had a list of people who would be interested in serving, and I had to start from scratch. And that took a great deal of time. I would estimate that it took four or five months to cover what I've just described. KWAME HOLMAN: Judge Adams then went through files at the Department of Housing and Urban Development and subpoenaed documents. JUDGE ARLIS ADAMS: And there were several million documents, and just to go over several million documents just takes a lot of time. KWAME HOLMAN: And then there were witnesses to interview, those who already had testified before the Lantos Committee and many more. KWAME HOLMAN: I saw in your report 2,000 witnesses? JUDGE ARLIS ADAMS: Oh, yes. We interviewed so many people. REP. TOM LANTOS: Judge Adams did it without the slightest touch of partisanship. He did it in a professional fashion. If I am to criticize him and some of the others, and I do, it is their willingness to take advantage of the total lack of budgetary and time constraints. JUDGE ARLIS ADAMS: It should have been expedited. It took us too long to get organized. The courts took too long at rendering decisions. And as a result -- and also, our mandate was amended a number of times. Put all those together, it lasted longer than I expected and, frankly, longer than it should have. KWAME HOLMAN: But Judge Adams quietly got results. His final report, issued in October, contained these findings: $10 million in misappropriated housing funds recaptured, $2 million in criminal fines collected, and beginning in 1993, the first of 17 criminal convictions. Among them, Assistant Housing Secretary Thomas Demry, Former United States Treasurer Catalina Villapondo, and US Ambassador to Switzerland, Phillip Winn. Fred Bush was not indicted, but his nomination as ambassador to Luxembourg was withdrawn. As for former Interior Secretary James Watt, he was indicted on 25 felony counts, pleaded guilty in 1996 to a single misdemeanor, and received five years probation and a $5,000 fine. It was determined that Samuel Pierce's executive assistant, Deborah Gore Dean, actually made most of the project decisions in the abused housing program. She was convicted on 12 felony counts and sentenced to 21 months in prison. However, repeated appeals continue to keep her out of jail and, according to Judge Adams, are the primary reason the investigation extended through the 1990's. Housing Secretary Samuel Pierce was not indicted. JUDGE ARLIS ADAMS: Well, that may have been the most important thing I had to decide; from a criminal standpoint, I did not find that he had obtained any money improperly. I did find that he had not managed the department as efficiently as he should have. I also found that he was quite ill at the time. And when I weighed the consequences of an indictment and the fact that the case against him seemed to be "weak" in the legal sense, I thought it was my responsibility not to proceed with an indictment. SPOKESMAN: He wasn't making money off the system, and in that sense, he wasn't abusing the system. REP. TOM LANTOS: And I think Judge Adams made the right decision. I would have made the same decision. KWAME HOLMAN: Looking back on the process, Judge Arlin Adams says his long investigation of HUD was at times tedious and frustrating. But he does hold a rare distinction as a result; he's one of only two dozen or so Americans who have served as independent counsels. And with the expiration of the Independent Counsel Statute last night, membership in that club is closed.