Hurwitz's S&L bailout could save more trees
Jane Kay
EXAMINER ENVIRONMENTAL WRITER
March 2, 1999
1999 San Francisco Examiner

If he loses trial verdict, he may owe $750 million

As owner Charles Hurwitz negotiated the sale of the biggest stands of
privately held virgin redwood trees in the world, he and his company, Maxxam
Inc., faced $750 million in federal claims stemming from a failed S&L in Texas.

With the Headwaters deal completed, the redwoods that Pacific Lumber
continues to own could be the prize that Hurwitz trades to settle a U.S.
government enforcement action designed to win taxpayer restitution for the
$1.6 billion bailout.

The Federal Deposit Insurance Corp. and the Treasury Office of Thrift
Supervision, or OTS, allege in two separate cases that Maxxam, Hurwitz and
five other parties caused the failure of the saving and loan United Savings
Association of Texas in 1988.

The OTS's trial against Maxxam and Hurwitz, Maxxam's major stockholder,
ended in Houston on Monday. Administrative Judge Arthur Shipe is expected to
rule by the end of the year. The FDIC case is on hold, pending the outcome
of the OTS case.

Maxxam spokesman Robert Irelan called the claims Monday "totally without
merit" and "an abuse of government power stimulated by environmental
activists" who came up with a plan to have the company pay off any
settlement in trees.

The so-called debt-for-nature swap was a plot "to get more of our trees
and not have to pay for them," Irelan said.

If Maxxam loses and the agencies succeed in winning up to $750million in
a settlement agreement, environmentalists say Maxxam should pay off in trees.

Tim Little, executive director of the Rose Foundation, an Oakland
nonprofit that works on environmental and economic issues, called a payoff
in trees "a good business deal for Maxxam."

Environmental restrictions

" . . . We don't think they're going to be able to cut a lot of the
remaining old-growth stands anyway because of environmental regulations,"
said Little. "Getting rid of the environmental liabilities and at the same
time getting rid of $750million in the federal banking liabilities in
exchange for property that won't generate commercial income anyway is a good
business deal for the company."

The OTS and FDIC cases, filed in 1995, proceeded over 17 months against
Maxxam and Hurwitz and five other parties in Houston. The five others
settled lastmonth, without admitting guilt, for more than $1 million and a
promise to refrain from banking activity.

Among them was Barry Munitz from California, a director of several
Hurwitz corporations in the 1980s. He was charged with misconduct related to
the S&L demise, including making false statements to regulators. Last fall,
Gov. Davis appointed Munitz, then president and CEO of the Getty Trust and
former California State University chancellor, chief of his transition team.
His name has been mentioned as a new UC regent.

In both cases, the OTS and the FDIC allege that either Maxxam or Hurwitz
or both deliberately misled the bank regulators, engaged in sham
transactions, failed to keep sufficient capital in the institution and
masked its deteriorating financial condition.

Junk bonds, speculation

The federal agencies charged that they changed a conventional savings
and loan into an institution that bought and sold high-risk junk bonds and
speculative real estate investments.

Regulators say Maxxam and Hurwitz engaged in quid pro quo transactions.
The bank owners used the institution's cash to buy a portfolio of Drexel
Burnham Lambert, once the leading trader in junk bonds and defunct since the
late '80s. Drexel returned the favor by helping Maxxam finance the takeover
of Pacific Lumber and Kaiser Aluminum, they allege.

Maxxam's representatives have denied the charges, and said Monday, "The
OTS has failed to prove a case."

Maxxam disclosed its dealings to the regulators. The company said it did
not direct the managers to favor Drexel.

Additionally, the company said, Maxxam had only a 24.9 percent ownership
in United Savings and not the 25 percent needed to trigger a certain amount
of capital to back investments.

In response, the government has argued that Hurwitz had de facto control
of 25 percent because of its influence through contractual agreements over
other owners, primarily Drexel Burnham Lambert.

Regarding any debt-for-nature swap, Maxxam's Irelan said, "The basic
flaw in this concept is there is no debt to swap. Maxxam will be vindicated."

1999 San Francisco Examiner Page A 12




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