Two Federal Agencies Trying to Take Lumber Company Land as Repayment for S&L Failure
Copyright 2000 San Jose Mercury News
December 14, 2000
BY SUZANNE GAMBOA
WASHINGTON -- One Republican congressman called it ``government corruption at its worst.'' But his Democratic counterpart said it looked more like aggressive and creative pursuit of taxpayers' money. They were referring to the effort by two federal banking agencies to get Northern California logging executive Charles Hurwitz and his holding company, Maxxam, to ante up more than $1 billion for the $1.6 billion 1988 failure of a Texas savings and loan association. The agencies' work was questioned in a hearing Tuesday by members of a congressional task force. The Republican-led task force is investigating whether the Federal Deposit Insurance Corp. and the Office of Thrift Savings are pressing the claims in a scheme to snare thousands of acres of old redwoods owned by Pacific Lumber Co., of Humboldt County, a Hurwitz company.
Rep. George Miller, D-Concord, was the sole Democrat at the hearing. He said Democrats had refused to participate in the task force investigation.
The FDIC is seeking $300 million from Hurwitz in a federal lawsuit, and OTS has an $800 million claim against Maxxam pending before an administrative law judge.
Hurwitz was a leading official in one of the largest savings and loan association failures in U.S. history: United Savings Association of Texas' failure on Dec. 30, 1988. The failure cost taxpayers $1.6 billion in bailouts by the federal government.
To date, the FDIC has recovered just $18 million. For years, environmentalists have pushed the two agencies to impose a ``debt-for-nature'' swap in which Hurwitz would give the federal government thousands of acres of redwood forest in Humboldt County to help repay the savings and loan loss.
Hurwitz's company, Pacific Lumber, has rejected the idea, saying that it is a publicly traded company that had no relationship to the savings and loan and cannot be penalized for its failure. Rep. John Doolittle, R-Roseville, the task force chairman, described the agencies' tactics as loaded with scheming, extortion and abuse of power. ``This case is government corruption at its worst,'' said Doolittle, a frequent critic of Clinton administration environmental policies. ``The heavy hand of government should not be used to extort private property from anyone.''
But Miller congratulated the agencies. He said they were aggressive and creative in trying to recoup taxpayers' money. ``If the agency gets creative and is able to get around the statute of limitations that would bar the public's right to recover this, we're supposed to lament that and feel sorry and ashamed for the agency. No, no. That's called justice. That's pursuit of justice,'' Miller said. The FDIC suit has been answered with a counter suit by Hurwitz and Maxxam.
The FDIC said it believes Hurwitz used the savings and loan to ``engage in speculative, high-risk investment strategy'' by using it to purchase junk bonds, said FDIC attorney William Kroener III. In addition, Kroener said, Hurwitz failed to live up to obligations to maintain the level of capital at United Savings Association of Texas. ``Because of his grossly negligent conduct, the FDIC filed suit against Mr. Hurwitz,'' Kroener said.
The FDIC has been pursuing those claims in court since 1995 and is awaiting a decision from a Houston federal district judge. Hurwitz and Maxxam say the crash of the Texas economy is to blame for the S&L's failure and point to an FDIC investigation that concluded no evidence of insider trading, stock manipulation or theft of corporate opportunity existed.
They allege they are the victims of a government conspiracy driven by environmentalists to force them to cede thousands of acres of redwoods in the Headwaters Forest to the government rather than log it. Hurwitz and Maxxam officials were not called to testify.