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At a hearing of a House Government Operations subcommittee, Mr. Kemp said he wouldn't dispute an estimate by Rep. Charles Schumer (D., N.Y.) that corruption in HUD could cost a "ballpark figure" of $2 billion. The secretary said $6 billion was too high and $1 billion too low. Mr. Schumer arrived at his figure by going through the 50-odd HUD programs and adding up estimated losses in each one.

Mr. Kemp said he had initiated a review of virtually every HUD program and "would wage war on abuse." Though Mr. Kemp wore his enthusiasm on his sleeve, he admitted he had a daunting task ahead. Implicitly criticizing the Reagan administration, he said, "What I could not anticipate three months ago was the extent to which I had inherited a legacy of abuse and mismanagement, fraud and favoritism."

Copyright Dow Jones & Company Inc Jul 12, 1989

WASHINGTON -- Jack Kemp, secretary of housing and urban development, acknowledged that fraud and waste at his department may cost the government $2 billion, but pledged to get the agency "back on track."

At a hearing of a House Government Operations subcommittee, Mr. Kemp said he wouldn't dispute an estimate by Rep. Charles Schumer (D., N.Y.) that corruption in HUD could cost a "ballpark figure" of $2 billion. The secretary said $6 billion was too high and $1 billion too low. Mr. Schumer arrived at his figure by going through the 50-odd HUD programs and adding up estimated losses in each one.

Mr. Kemp said he had initiated a review of virtually every HUD program and "would wage war on abuse." Though Mr. Kemp wore his enthusiasm on his sleeve, he admitted he had a daunting task ahead. Implicitly criticizing the Reagan administration, he said, "What I could not anticipate three months ago was the extent to which I had inherited a legacy of abuse and mismanagement, fraud and favoritism."

Arguing that cleaning up the agency was possible, Mr. Kemp touted his closure and revamping of the Section 8 moderate-rehabilitation program as an example where "we have stopped the hemorrhaging."

The secretary also said much of the abuse was due to "influence peddling" by prominent Republicans hired by developers as consultants during the term of his precedessor, Samuel Pierce.

"Some of our most serious problems have come in programs where substantial subsidies are given to developers," said Mr. Kemp. "That extra money goes for excess profits for the developer and, clearly, to cover consultant fees."

Several prominent Republicans, including former Interior Secretary James Watt, have testified that they helped developers win HUD contracts and grants.

In pledging changes, the secretary said, "I'm determined that all the HUD programs will operate without favoritism, without Republican or Democratic consultants, and for the benefit of the people in need." He also promised to bar anyone found abusing HUD programs from doing business with HUD or any other government agency.

Mr. Kemp said he intends to take "aggressive, corrective steps" to eliminate mismanagement at HUD to instill a high level of ethics at the agency.

"We will maintain a policy of zero tolerance for violations of our standards of conduct," he said.

Mr. Kemp sought to assuage fears that the Bush administration would use the HUD scandal to cut housing programs for the needy. Since taking office, Mr. Kemp has suspended, restricted or overhauled several corruption-plagued programs, including the programs involving housing for the elderly and mortgage assistance for land development.

"We will not seek the termination of good and necessary programs for the sole reason that they have been abused in the past," Mr. Kemp said.

Credit: Staff Reporter of The Wall Street Journal