Redwood 'scheme' attacked; GOP-led panel wants Hurwitz case dropped
Copyright 2001 The Houston Chronicle
June 16, 2001
By GREG HASSELL
A congressional task force has issued a blistering report calling for the Federal Deposit Insurance Corp. and the Office of Thrift Supervision to drop their legal case against Houston financier Charles Hurwitz.
The 46-page document prepared by the House Resources Committee says the lawsuit was hatched as a politically motivated "scheme" to pry the Headwaters Forest with its ancient redwood trees in California from the control of Hurwitz and Maxxam Corp.
The report by the Republican-controlled committee details numerous meetings among regulators, environmental lobbyists and politicians who sought to craft a "debt-for-nature" deal that would protect the redwoods at minimal cost to the federal government.
According to the task force, one politician intimately involved in those meetings was former California Democrat Rep. Dan Hamburg, who introduced a measure in the House of Representatives to authorize purchase of the Headwaters Forest. The report also states that Leon Panetta, a White House chief of staff during the Clinton administration, wrote a letter suggesting regulators push for a debt-for-nature swap because federal budget restraints prohibited outright acquisition.
FDIC and OTS officials have repeatedly denied any linkage between the Hurwitz case and the redwoods. But the report repeatedly calls those denials into question.
According to the report, former FDIC Chairman Bill Isaac testified to the task force that the "discussions that occurred between FDIC staff and people outside the agency prior to and during the litigation were inappropriate . . . Their repeated contacts with parties with whom they had no business discussing the litigation, congressional and administrative officials and environmental groups, leave them open to whatever negative conclusions one might care to draw."
The task force rejects the claim that it was Hurwitz who first forwarded the idea of a debt-for-nature swap. Citing internal government memos and testimony given during task force hearings, the report said regulators cooked up the debt-for-nature plan first and pursued it vigorously.
"Federal banking regulators, swayed by an intense environmental lobbying campaign, willingly became integral to a 'debt-for-nature' scheme to obtain redwood trees," the report states. "In short, banking regulators provided the otherwise unavailable leverage for a federal plan to extort privately owned redwood trees."
Hurwitz is in the process of defending himself against claims brought against him by the agency that regulates savings associations, which accused him and his associates of committing reckless banking practices that sank United Savings Association of Texas. The 1988 collapse and subsequent bailout of United Savings ultimately cost taxpayers more than $ 1.6 billion.
The OTS hearing, which has been going on for more than five years, is not a formal trial but could result in Hurwitz being fined millions of dollars. Both sides are awaiting a ruling by an administrative law judge who presided over the hearing.
An OTS spokesman said Friday that agency officials had not seen the task force's report and would not be able to comment until next week. The report was quietly made public late this week when it was entered into the Congressional Record.
Several members of the congressional task force were unavailable for comment Friday.
Maxxam spokesman Josh Reiss said Friday: "We've said for years this litigation was politically motivated. Now we have a congressional report saying the same thing. . . . All these things are outrageous, and the agency should be embarrassed."
Reiss declined to speculate how the report might affect the litigation. A task force formed by the House Resources Committee has no direct oversight of the FDIC or the OTS.
The report could, however, exert some political pressure on regulators. It is so contemptuous of the legal case mounted against Hurwitz, the task force at one point summarizes, "There was no USAT case."
"In the end, the evidence is clear that, but for the environmentalists' pressure to get redwoods through debt-for-nature and, but for congressional pressure to get leverage on Mr. Hurwitz to submit and give up his redwoods to the government, the banking claims would not even have been brought," the report reads.
Legislation was passed in 1999 that pooled $ 450 million in federal and California state funds to purchase more than 5,600 acres of the Headwaters Forest from Maxxam's Pacific Lumber Co. Some environmentalists have criticized the deal, saying it does not protect enough of the forest, which totals about 63,000 acres.
That deal has left the regulators' case in a precarious state, the report claims.
"What remained at the end of the day were filed claims that would not have been brought under ordinary circumstances had Mr. Hurwitz not owned the redwoods," the report states. "The bank bureaucracy, with its reason for bringing the claims in the first place having evaporated, continued the fiction: they continued propagating the false notion that redwoods and debt-for-nature had noting to do with their bringing the USAT claims."