WASHINGTON -- Former PaineWebber Inc. vice president Lance Wilson is expected to be indicted soon by a federal grand jury on charges that he falsified a letter committing the company to provide taxable bond financing for a Florida development in order to obtain a federal grant for the project, a source close to the investigation said.
The deal, the Wedgewood Plaza shopping mall in Riviera Beach, was a project of Mr. Wilson's business partner, Leonard Briscoe, a Florida developer who in July was the first to be indicted as a result of the one-and-a-half-year investigation by special prosecutor Arlin Adams into the so-called HUD scandal.
The investigative source said Mr. Wilson's indictment "is coming down the line" and could be the second indictment coming out of the independent counsel's inquiry. Mr. Wilson was Housing and Urban Development Secretary Samuel Pierce's chief of staff from 1981 to 1984. He joined PaineWebber's municipal division in March 1986, and left the firm on June 14 of this year, company officials said.
Mr. Wilson could not be reached for comment. he is listed as having an unpublished phone number in Manhattan.
His lawyer, Martha Rogers of Cadwalader, Wickersham, & Taft, noted that the prosecutor in the Briscoe case has promised to come forward with an indictment of a second individual for the same crimes charged against Mr. Briscoe, and "we suppose it could be an indictment against Mr. Wilson."
"It is our hope that the government sees the light and doesn't try to indict Mr. Wilson," she added. The charge that Mr. Wilson falsified a financial commitment letter in July 1986 on PaineWebber stationery is not valid, she said, and his actions "weren't fraudulent at all."
The government charged in its July 11 indictment of Mr. Briscoe that the fabrication of a "firm financial commitment letter" to underwrite $6.7 million of taxable bonds for the shopping mall project was part of a scheme to defraud the government and violated six different federal laws, including HUD bylaws and the mail fraud and wire fraud statutes.
The Briscoe indictment charges that the letter was devised by Mr. Briscoe and an "unindicted co-conspirator ... who was employed by a financial institution in New York." The two conspirators submitted the letter to HUD Deputy Assistant Secretary Dubois Gilliam as part of an application for a $2.4 million Urban Development Action Grant for the project, the indictment says.
The "unindicated co-conspirator," who Ms. Rogers acknowledged was Mr. Wilson, allegedly submitted the letter without the intention of committing the company to finance the project, but rather only to "qualify the project for review vor a UDAG grant of money while defendant Leonard E. Briscoe searched for financing past the date that the firm financial commitment had to be submitted to HUD," the indictment alleges.
Mr. Gilliam -- who also appears as an "unindicted co-conspirator" in the Briscoe indictment -- gave preliminary approval to the grant largely based on the false commitment letter, the indictment alleges.
HUD officials withdrew the grant in early 1989, however, after Mr. Gilliam left the department. A department source in Jacksonville, Fla., said the grant was terminated because Mr. Briscoe "missed some deadlines in putting the private financing together."
David Brandt of Florida Municipal Advisors Inc., the financial adviser for a related apartment project at Riviera Beach that was financed with tax-exempt bonds, said Mr. Briscoe was not able to obtain private financing for the shopping mall, despite the commitment letter, because he was unable to find an anchor store.
Ms. Rogers said Mr. Wilson did not engage in a crime by writing the bond financing commitment letter. It is common for brokerage houses to submit such letters and then not follow through with the financing, she said, because one of the many conditions they attach to the financing commitment may not have been met.
Among the various conditions that dealers typically attach to such financial commitments are requiring the developer to obtain the federal grant as well as credit enhancement or special tax treatment, she said.
"Every firm financial commitment that I've seen is very conditional. You can't expect a Wall Street company to obligate itself when it could be two years before the financing comes to fruition," she said.
Also, the broker originally involved in developing a project in the end may be passed over for another financier, if the developer can "get a better deal," she said.
She estimated that only about half of the dealers that originally commit to finance urban development grant projects end up underwriting the bonds. "Sometimes they do, but just as often they do not," she said.
Mr. Brandt agreed that the submission of financial commitment letters that are never honored appears to be a widespread practice. He noted that Mr. Briscoe originally obtained the commitment of Donaldson, Lufkin & Jenrette, for example, to underwrite the bonds for the Wedgewood Plaza apartment complex in Riviera Beach.
But in the end, PaineWebber and two other firms -- Smith, Barney, Harris, Upsham & Co., and William R. Hough & Co. -- ended up co-managing the project's $15.8 million bond issue, he said.
The practice of switching firms was particularly characteristic of Mr. Briscoe, Mr. Brandt added. "Leonard was well known for changing horses, whether financiers or attorneys or whatever. One firm would commit to do the project, but when the deal was actually consummated, there'd be a whole other group of players," he said.
The Briscoe case is scheduled to go to trial on Sept. 23, but special prosecutor Judge Adams has asked the U.S. District Court Judge presiding over the case, Stanley Harris, to postpone the trial and give him additional time to develop a superceding indictment including a second defendant. The judge has not yet responded.
