WASHINGTON - Former PaineWebber Inc. vice president Lance Wilson provided a bond financing commitment letter on the same day he was told it was needed to secure a grant for a business partner's commercial development project in Florida, a top former housing official testified Friday.

The letter, which the prosecution has presented as key evidence in Wilson's fraud and conspiracy trial before the U.S. District Court here, stated that PaineWebber had done "all necessary due diligence" in pledging to underwrite $6.7 million of taxable bonds for the Wedgewood Plaza Mall development in Riviera Beach, Fla.

Yet Wilson wrote the July 15, 1986, letter without any substantial knowledge of the project, DuBois Gilliam, a former deputy assistant secretary at the Housing and Urban Development Department, testified during his second day as a witness for the prosecution. The letter was written just hours after Wilson received a request for one from the developer, Gilliam said.

Gilliam is expected to be cross-examined by the defense today as the trial enters its fifth week.

Wilson said Friday that the defense will stress Gilliam has admitted to lying under oath and that the prosecution's other witnesses so far have failed to corroborate the conspiracy charges being leveled by Gilliam.

Gilliam testified Friday that the need for the PaineWebber commitment letter arose after a private financing commitment for the project fell through.

On the day designated as the project's "drop dead" date for obtaining a private financing commitment, the Royal Palm Savings and Loan in Palm Beach delivered an unacceptable, conditional commitment letter, thus putting the project in danger of being killed, he said.

After discussing the problem with Leonard Briscoe, the project's developer and co-defendant in the trial, Gilliam said he suggested calling Wilson to ask if he would provide an unconditional commitment on PaineWebber stationery.

According to Gilliam, Briscoe put in the call, and Gilliam got on the phone and said, "I told Wilson that PaineWebber would not be held accountable for the letter. If Briscoe found another lender, I would not expect PaineWebber to carry out the commitment. "

After that, "Lance agreed to produce the letter," Gilliam said. But because Wilson did not know what items to include in the letter, Gilliam said he put one of the department's project reviewers, David Sowell, on the phone to "give Wilson the correct points to include in the letter."

Wilson wrote the letter later that afternoon, Gilliam said, and faxed it to the department at 6:07 p. m. - seven minutes after the deadline.

"I did not sense that he knew about the project at the time," Gilliam said, because Wilson asked whether Briscoe had obtained any leases from potential mall vendors that could be relied on as revenue to back the bonds. When Gilliam told Wilson the project did not have any leases, he said Wilson "snickered" over the phone.

Later that month, a $2.3 million grant for the project was approved over the vehement objections of another project reviewer, Bob Powell, Gilliam said. Powell, who testified earlier, had raised questions about Briscoe's intent to use the grant to purchase land for the mall, which is not ordinarily allowed under the Urban Development Action Grant program, Gilliam said.

When Powell refused to sign off on the project, Gilliam said he forced Sowell to do so. Powell resigned from the department after the project was funded.

The incident over the Wedgewood mall project precipitated bad feelings and "low morale" within the grant office and resulted in "problems" for other Briscoe grant applications that came in later, Gilliam said.

In particular, when Briscoe submitted an application for a $34 million grant to fund his Overton Ridge apartments complex in Fort Worth, Tex., in November 1986, Gilliam said Sowell and other project reviewers immediately raised questions about the application's financial commitment letter, which was again supplied by Wilson. The letter pledged PaineWebber to provide $80 million of taxable bond financing for the Overton Ridge project, subject to the award of a grant.

The staff "didn't believe PaineWebber would back the deal," Gilliam said, and "they didn't think Lance had the authority to write the commitment letter. " Sowell even went so far as to call an investment banker in PaineWebber's Boston office to inquire about Wilson's credentials, he said.

Gilliam said he disciplined Sowell for raising questions about Wilson, and he instructed another reviewer who had raised questions about details in the commitment letter, Arthur Kahn, not to talk with Wilson again.

Kahn later recommended not funding the project, citing irregularities with the financing commitment as well as questions about whether the project was eligible for a grant, since it was not located close to a "pocket of poverty" as ordinarily required by the department.

But Gilliam said he overruled the staff and pushed the project forward. He testified that, under an agreement with Briscoe, he expected to get 2% of the grant proceeds when the project was finally approved.

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