WASHINGTON -- U.S. prosecutors have widened their case against HUD scandal figure Leonard Briscoe, charging that he defrauded the government to obtain a grant for a Texas housing project by fabricating letters committing PaineWebber Inc. to underwrite $80 million of taxable municipal bonds for the project.
The new charges, contained in a superceding indictments against Mr. Briscoe filed on Nov. 21 by Independent Counsel Arlin Adams, center on Mr. Briscoe's Overton Ridge Park apartment development in Fort Worth.
This second indictment against Mr. Briscoe is the latest action coming out of Mr. Adams' two-year investigation into alleged wrongdoings at the Reagan-era Department of Housing and Urban Development.
The new indictment takes the same tack as an earlier indictment involving two of Mr. Briscoe's Florida housing deals in that it alleges that the developer and his business partner, former PaineWebber Vice President Lance Wilson, fabricated PaineWebber financial commitment letters in a ruse to get Urban Development Action Grants for the projects.
HUD bylaws require developers to submit such "firm financial commitment" letters to obtain the grants.
Mr. Wilson, whom Mr. Briscoe has identified as his partner in papers before the U.S. District Court here, is described in the indictments as an unnamed, unindicted co-conspirator.
Prosecutors have been promising to name a second defendant in the case, who Mr. Wilson's lawyers have acknowledged could be Mr. Wilson.
PaineWebber executives testified before Congress last year that a letter Mr. Wilson wrote on Nov. 25, 1986, on PaineWebber stationery pledging to underwrite $79.8 million of 30-year bonds for the Overton Ridge development was written without the authorization or knowledge of company executives.
"That is the first time I have seen this document," said James Tread-way, executive vice president and general counsel of the firm, at a hearing of the House Government Operations Committee.
He added that Mr. Wilson did not have the authority to write the letter on behalf of the firm. Mr. Wilson was a first vice president there until he left in June of this year.
David Sowell, a deputy director at the department in charge of the grant program, also questioned whether Mr. Wilson had the authority to commit PaineWebber to such a large financing, according to an investigation report by the committee.
But Mr. Sowell's inquiry into the matter was cut short by the intervention of former HUD deputy assistant secretary Dubois Gilliam, who told the committee he was working with Mr. Wilson and Mr. Briscoe at the time to obtain a grant for the project.
Mr. Gilliam is described as an unindicted co-conspirator in the Briscoe indictments.
Mr. Gilliam told the committee that he, Mr. Wilson, and Mr. Briscoe decided to fabricate the PaineWebber commitment letters because they believed no other firms were interested in underwriting the project because of the "softness of the real estate market" in Fort Worth at the time, the report said.
"Once the project was funded, at a later date, hopefully the economy would recover some, or we would allow the developer to obtain permanent financing to replace the PaineWebber firm financial commitment notice," he said.
Despite the purported commitment from PaineWebber, the project never received the $34.2 million grant sought by Mr. Briscoe, apparently because it did not meet the department's requirement that it be located next to "a pocket of poverty" in an area of economic distress, according to the report.
The project was initially found ineligible for a grant by a department regional office in Fort Worth because it did not meet the poverty test. Efforts by Mr. Gilliam to revive the application when it went to the Washington headquarters failed.
The financing for a related apartment project by Mr. Briscoe at Overton Ridge Square in Fort Worth was also the subject of an enforcement action by the Internal Revenue Service earlier this year.
A Fort Worth authority, Trinity Housing Finance Corp., had issued $27 million of tax-exempt bonds in December 1985 to finance that project, but it was never built and the bonds were called in December 1988.
Charging that the deal was arbitrage-driven, the IRS last August threatened to declare the bonds taxable unless Trinity rebated the arbitrage profits to the U.S. government.
