Office of Thrift Supervision NEWS
February 10, 1999
FORMER TEXAS THRIFT OFFICIALS SETTLE OTS CHARGES; HURWITZ HEARING
Washington, D.C., Feb 10, 1999- Five former directors and officers of
failed United Savings Association of Texas (USAT) settled charges
brought against them by the Office of Thrift Supervision (OTS), ending
their involvement in an enforcement case in which Charles Hurwitz and
two companies he controls- MAXXAM Inc., and Federated Development Co.-
also are respondents.
The five officials- Barry A. Munitz, Jenard M. Gross, Arthur S. Berner,
Ronald Huebsch and Michael Crow- without admitting or denying the
charges, agreed to a cease-and-desist order that imposes restrictions on
any future affiliation they may have with a federally insured depository
institution. They further agreed to pay restitution totaling
The settlement leaves Hurwitz as the only individual respondent in the
case, along with his two companies. A hearing in the case resumes
February 10 in Houston before Administrative Law Judge Arthur L. Shipe.
The hearing originally began Sept. 22, 1997, and recessed twice since
then, the last time in October 1998. OTS filed the charges on Dec. 26,
1995, and is seeking the prohibition of Hurwitz and restitution from him
and his companies.
OTS said it agreed to the settlement because the cease-and-desist order
precludes the five respondents in the future from participating in the
kinds of activities that brought about the OTS charges. The agency also
said the restitution is suitable in view of their individual financial
In addition to cease and desist provisions requiring them not to engage
in any unsafe or unsound practice or breach of fiduciary duty, the five
must not participate in decisions on compensation plans of officials and
employees at an institution, the purchase or sale of mortgage backed
securities, any investment decisions, or the filing of any application
or report with a federal regulator. Further, Munitz, Gross and Crow
will not be allowed to participate in commercial real estate loan or
investment activities, Berner will not be able to provide legal advice
on thrift regulatory matters to an institution or its employees, and
Crow may not serve as a chief financial officer of an insured depository
The enforcement case involves allegations of violations of minimum
capital requirements and transactions with affiliates laws, unsafe and
unsound real estate lending and compensation practices, making false
statements concerning control and unsafe and unsound trading in
The thrift failed on Dec. 30, 1988, at a cost to the federal deposit
insurance fund of more than $1.6 billion.
MAXXAM Press Release
Contact: Robert Irelan (713) 267-3722
SETTLEMENT REINFORCES CONTENTION THAT OTS/FDIC LITIGATION IS DRIVEN BY
ENVIRONMENTAL PRESSURES, NOT BANK FUND REPLENISHMENT
HOUSTON, Texas, February 10, 1999- Attorneys for MAXXAM, Federated
Development Co., and Charles Hurwitz said that a civil suit settlement
reached by the other five respondents and the Office of Thrift
Supervision (OTS) reinforces their contention that the complaint
relating to a savings and loan association which failed in 1988 is an
attempt inspired by environmental activists and some of their political
allies to extort the assets of MAXXAM's forest products subsidiary, The
Pacific Lumber Company.
"We have said from the beginning that the suit had no merit and that its
true purpose was to create a threat of liability that might be used to
pressure Pacific Lumber into giving up the Headwaters Forest of old
growth redwoods and other parts of its land," said J.C. Nickens, an
attorney who represents MAXXAM and Mr. Hurwitz. "The fact that the
government settled its claims with the respondents who were responsible
for the management and day-to-day operations of the financial
institution for a minuscule fraction of the amount it had sought and a
small fraction of the amount it has spent speaks volumes about what was
really behind this meritless suit."
The settling respondents had served as: president and CEO of the savings
and loan, United Savings Association of Texas (USAT), and the holding
company, United Financial Group (UFG), and as chairman of the board of
USAT; chairman of the executive committee of USAT and UFG; chief
financial officer of USAT and UFG; general counsel and corporate
secretary for USAT and UFG; and executive vice president of investments
The only remaining respondents are Mr. Hurwitz, who was not involved in
the savings and loans' day-to-day operations, and the two unrelated
companies whose boards he chairs, both of which happened to be minority
shareholders in the holding company, UFG.
The OTS filed suit against the respondents in December 1995, seven years
after the thrift went into receivership. After 107 days of hearings
spread over more than a year, the OTS finally rested its case in October
1998. MAXXAM, Federated, and Mr. Hurwitz open their defense today
"The OTS has failed to prove a case and this settlement with the five
individual respondents is a monument to that failure," said Richard P.
Keen, an attorney representing Mr. Hurwitz and Federated. Despite
damage claims in excess of $1 billion and despite having spent many
millions of dollars pursuing the case, the OTS has settled with the
individuals who were primarily responsible for the operation an
management of the institution for $1,030,000. This amount is
significantly less than the legal fees necessary for the respondents to
complete the case.
"The stated purpose of the OTS suit is to replenish the Federal Savings
and Loan Insurance Corporation (FSLIC) Resolution Fund," Mr. Keeton
said. "The large amount spent by the OTS and FDIC in pursuing this
matter, coupled with the comparatively small amount of the settlement,
and the continued pursuit of Mr. Hurwitz, Federated and MAXXAM, clearly
indicate a purpose contrary to replenishing the fund. This suit is
about federal government extortion, harassment, and bullying. It also
is a huge waste of taxpayers' money."
USAT was one of many financial institutions that failed in the 1980s as
a result of the crash of Texas real estate, the oil recession, and
interest rate volatility. MAXXAM, Federated, Mr. Hurwitz and other
stockholders lost their entire investments in UFG.
During the OTS hearing, each of the settling respondents denied under
oath any wrongdoing by themselves or any other respondent, including Mr.
Hurwitz, MAXXAM, or Federated. Government documents were put into
evidence showing that banking regulators had praised USAT's management
until shortly before deciding to place the thrift into receivership and
to deliver it to new ownership.
On January 22, 1999, a suit making similar allegations and concerning
the same savings and loan was dismissed as "abusive litigation" by
Federal District Court Judge Lynn N. Hughes. Costs were awarded to the
defendants, including MAXXAM, Federated Development, and Mr. Hurwitz.
Judge Hughes characterized the plaintiff's case as "Regurgitating
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