HUD Fraud
A major segment of the HUD fraud was centered in the
Denver area and committed by a group of closely related people and
companies, who had close ties to the Reagan and Bush administrations.
Numerous HUD officials left government to work for the Denver group
that defrauded the American people of billions of dollars, much of which
is hidden away in either offshore financial institutions or in secret
locations throughout the United States. Philip Winn was
one of the kingpins in the Denver group. He was a former HUD Assistant
Secretary who joined the MDC group in Denver and became a key player in
the HUD and savings and loan scandals.
Numerous
HUD officials left government service and
received high paying jobs with an interrelated group in Denver. This
group included, among others: MDC Holdings; Richmond Homes; Silverado
Bank Savings & Loan; Aurora Bank; M & L Business Machines;
Leonard Millman; Larry Mizel; David Mandarich (president of MDC
Holdings); Ken Good; Bill Walters; Neil Bush; Silverado’s President
Michael Wise; James Metz, major stockholder in Silverado; and dozens of
subsidiaries and related companies, limited partnerships, trusts.
It
was learned that Leonard Millman, Larry Mizel, and Philip Winn, all
members of the ADL, were partners in these schemes, as was Philip
Abrams, former HUD under-secretaries.
Federal regulators involved in the HUD scam included HUD Secretary
Samuel Pierce, former Assistant Secretary Thomas Demery; Deborah Gore
Dean and Lance Wilson,
former executive assistants to Pierce. All except Pierce have been
indicted. A number of former HUD officials pleaded guilty to various
federal crimes. Dean, an executive assistant to the Reagan
Administration’s Housing Secretary, was indicted on 13 criminal charges
of fraud, perjury, submitting false statements to Congress, and
conspiring to steer valuable housing grants to favored developers and
consultants.
The
network made huge financial contributions to various politicians,
including the Reagan-Bush team and the Bill Clinton group. One of the
key participants in the fraud, Philip Winn,
used part of the money looted from the HUD and savings and loan
programs to bribe politicians, especially in the Reagan-Bush
presidencies. In return, Winn was appointed U.S. Ambassador to
Switzerland and got the protection of the Justice Department through
U.S. Attorney Michael Norton, who had secret participation in several of
the Denver area real estate projects.
Justice Department officials,
with thousands of investigators throughout the United States, knew of
the corruption and did very little. What little they did was usually to
prosecute either innocent people or those who played a minor role in the
massive criminality. Lawyers, developers, banks, members of the Senate and
House were the recipients of the money defrauded from HUD. Consultants,
for instance, with political connections, reaped huge fees of as much
as $400,000 for a few phone calls or visits to HUD officials or phone
calls to powerful members of Congress.
Rampant political favoritism and influence peddling were part
of the HUD scandal, combined with payment of millions of dollars for
improvements that were never made. Former HUD personnel acted in
collusion with present HUD officials in the fraudulent activities. One
of the schemes was buying HUD properties for no-money-down, placing
second loans on them for improvements that were never made, and then
defaulting on the loans while receiving the rental income.
In 1982, the HUD inspector general made a report to
Congress, reporting that insiders, including former HUD officials, were
defrauding HUD of hundreds of millions of dollars, especially in the
Section 8, and particularly sections 224D, 223F, and 202 elderly
housing. Congress did not act until six years later when media publicity
forced it to conduct an investigation. In 1988, Arlen Adams was
appointed Special Prosecutor for HUD, and during subsequent
investigations confirmed that developers with the aid of present and
former HUD officials were receiving Section 8 rehabilitation units,
grossly overcharging the government, often billing for work that was
never accomplished.
Simultaneously,
the group bilking the government was
contributing heavily to the Reagan-Bush team. In March 1989, HUD
hearings were triggered by exposure of huge financial donations by the
Winn Group and Richmond Homes in Denver.
Turning Prosecution over to the Bad Guys
In
November 1989, Congress asked U.S. Attorney General Richard Thornburgh
to
recommend to the Court of Appeals in Washington the appointment of a
Special Prosecutor. He stalled until March 1990, when Congressional
pressure forced him to act. Thornburgh had already blocked the
appointment of a Special Prosecutor into Inslaw, October Surprise, and
eventually BCCI and BNL. U.S. Attorney Generals Edwin Meese, Richard
Thornburgh, and William Barr knew
about each of the criminal activities described within these pages, and
either aided and abetted them directly, or indirectly, by blocking
investigation and prosecution. A corollary to that would be the Mafia
controlling the highest law enforcement agency in this country.
Statute of Limitations
One of the reasons for stalling prosecution was to allow
the statute of limitations to expire, protecting the widespread
criminality in the Denver area HUD and savings and loan corruption, and
in turn protecting the part played by the Justice Department, the CIA, and many federal and White House officials.
In
another investigation, a report was issued by the Committee on
Government Operations stating, “The Winn Group did not obtain units from
HUD on merit alone, but rather from inside favoritism at HUD.”
Political Payoffs
Key
figures in the Denver-based HUD and savings and loan group, Winn and
Mizel, contributed heavily to California Congressman’s Tom Lantos’
Congressional race in 1982. (I had repeatedly reported the corruption
that I found to Congressman Lantos, and in typical fashion, he verbally
addressed the problem while simultaneously protecting it.)
Part of Taxpayer Liabilities
Congressional
staff investigators discovered thousands
of apartments were obtained by the group for rehabilitation, costing the
American taxpayer over $100,000 each, when the cost for comparable
privately financed units would be approximately $20,000. Congressional
investigators discovered that U.S. Attorney Michael Norton owned five
large apartment complexes with the Winn Group being investigated.
It
was discovered that former FBI Special Agent in
charge, Bob Pence, who retired in 1992, had been receiving bribes, along
with U.S. Attorney Michael Norton and the head of the Internal Revenue
Service’s CID unit. Some of these bribes were laundered through M&L
Business Machine Company in Denver.
Standard Congressional Cover-Up
When the scandal exposed California Congressman Tony Coelho and Texas Congressman Jim Wright,
they took early retirement, defusing the pending investigations. The
media and the public did not address the huge losses inflicted upon the
American taxpayer. Instead, after key Congressmen such as Wright of
Texas and Coelho of California were forced to retire so as to
discontinue further investigation, their constituents showed little
concern about the criminality and huge financial losses to be paid by
taxpayers. Their concern was the loss of a powerful Congressman who
produced pork barrel benefits for their constituents. Little was said of
the huge multi-billion dollar debt inflicted upon the public. If it had
been left to the constituents of Congressmen Jim Wright or Coelho, the
enormous financial losses would be ignored as long as the voters
received benefits from their corrupt Congressmen.
California Representative Tom Lantos (D-Cal.) led a Congressional investigation into the HUD matter, calling it
Influence peddling of the tawdriest kind. The scandal at
HUD is one of the most complex national scandals that we have seen in
decades. There is a degree of mismanagement, fraud, abuse, waste,
influence peddling that we have just barely begun to touch.
Representative Charles Schumer, a
subcommittee member, said: “Like picking up a large stone only to
discover that bugs and slime have grown in the darkness. This
investigation has exposed the corruption which flourished unchecked
under Secretary Pierce’s HUD.”
In addition to causing Wright and Coelho to resign (with
liberal retirement benefits), Congress tried to stonewall an
investigation into HUD by blocking confirmation of HUD appointees
expressing intent to expose the HUD scandal. After Jack Kemp took
over HUD and stated his intent to prosecute those involved, Congress
blocked confirmation of Kemp’s management team. When the Department of
Justice started an investigation into HUD, members of Congress then
investigated the Justice Department, threatening to cut back its funding. The Justice Department investigation stopped.
Referring to Congressman Wright’s blocking of an investigation into HUD corruption, a
Wall Street Journal
editorial (April 17, 1989) stated:
What is most disturbing...is the obvious pattern of
so many violations extending over so many years....the brazenness is
amazing. Obviously, Mr. Wright felt assured there was no prospect that
he ever would be called to account for his actions....When Congress is
so powerful it can intimidate the Justice Department from another Abscam case, who should be surprised at corruption?
Shades of the Savings and Loan Debacle
Investigations showed that House speaker Jim Wright obstructed
investigation of the HUD corruption while accepting $145,000 in
unreported gifts. The House Committee investigating Wright’s dealings
with the HUD scandal quickly dropped the investigation after some House
members reminded them that an investigation would implicate many other
members of Congress. After pressuring Jim Wright to resign on the
relatively minor charge of ethics violations, the media attention to the
HUD scandal ended. The guilty parties went free; the missing billions
of dollars of looted money was never found; and the stage was set for
more looting of the American taxpayer.
Justice Department
Stonewalling
In typical fashion, after congressional members asked
the politically appointed U.S. Attorney General to investigate their
allegations, Thornburgh accused them of introducing partisan politics
into the HUD investigations. Representative Chuck Schumer of New York replied at a news conference:
There’s ample evidence of wrongdoing at HUD, but there’s
stonewalling at the top. And the only way to get to the bottom of the
mess at HUD is through the appointment of an independent counsel.
Instead of attacking us, the Attorney General should be focusing on
making sure that high-ranking officials at HUD don’t get away with
breaking the law.
Representative Schumer characterized the Attorney General’s
objections as a “political response.” A more correct characterization
would probably be felony cover-up, obstruction of justice, and
misprision of felony.
Another time-honored way that Congress (and the Justice Department)
stonewalls sensitive investigations is to withhold funding needed to
conduct the investigation. Congress threatens to withhold funding from
the Justice Department to dissuade Justice officials from investigating
their members. Justice Department officials stonewalled the
investigation of Chapter 11 judicial corruption, as it stonewalled every
scandal I can think of for the last 50 years. It was also done to halt
further FBI investigations of Congressional wrongdoings in Abscam. As
the FBI’s continuing investigations into the conduct of Congressmen
became too threatening, members of Congress responded by dragging
Justice Department officials in for gruelling oversight hearings. It
became clear to Justice Department officials that the budget for the
Justice Department was in danger if the probes into Congressional
wrongdoings did not cease.
Congress
Finally Conducted an “Investigation” that whitewashed the scandal
allowing the key figures to escape justice despite a House committee
concluding that the Department of Housing and
Urban Development was “enveloped by influence-peddling, favoritism,
abuse, greed, fraud, embezzlement and theft.”
