Debt for Nature Update

by Kathy Glass, Trees Foundation

The best solution to financing the public acquisition of Headwaters Forest is a Debt for Nature swap Ð a simple idea that pleases everyone but Charles Hurwitz! In this proposed trade, Headwaters Forest would be acquired by the public in exchange for writing off part or all of PL's corporate parent Maxxam's share of the $1.6 billion failure of United Savings Association of Texas (USAT) in 1988. U.S. taxpayers have already absorbed the cost of this and other failed S&Ls to the tune of $500 billion, yet pathetically few of those responsible for this financial disaster have been prosecuted or even held accountable. In fact, the statute of limitations would have expired on the USAT case in December 1994 Ð leaving Hurwitz and other members of USAT's Board of Directors forever free from the threat of an investigation into mismanagement Ð had not Earth First!er Darryl Cherney and others gone to Washington, DC, at that time to pressure members of the Senate banking committee into extending the time available for prosecution. In 1995 the Federal Deposit Insurance Corporation (FDIC) filed formal claims against Hurwitz and others in a suit that is now winding its slow way through the courts. FDIC v. Charles Hurwitz: Seeking damages in excess of $250 million, this federal case aims to discover why USAT failed and who the responsible parties were. Maxxam Corp. represented 51% of USAT's Board of Directors. This case has been assigned to federal judge Lynn Hughes in Texas, who unfortunately has one of the slowest-moving backlogs of any federal judge. At this glacial pace, few developments are expected soon in this suit.

OTS v. Hurwitz: In another, potentially more threatening lawsuit against the Maxxam moguls, the federal Office of Thrift Supervision (OTS) in December 1995 filed charges of mismanagement related to the USAT failure against Maxxam, Inc., Charles Hurwitz, and others, involving 13 separate claims for violations of federal regulations. Under Maxxam's control, USAT was transformed from a traditional home mortgage lender into a vehicle for speculative, highly leveraged, high-risk investments, including buying more than $1 billion in junk bonds underwritten by Drexel, Burnham & Lambert. (Allegations related to the USAT failure involve Hurwitz' use of these junk bonds to buy Pacific Lumber.) This "administrative proceeding" is also moving slowly, but it is moving and represents a serious problem for Maxxam. Specifying losses of at least $480 million, this lawsuit if successful, could result in an order for restitution of the entire $1.6 billion bailout amount. A hearing in this case was scheduled for January 1997 but has now been pushed back to May '97, in the Houston administrative law court.

On the heels of the OTS suit: Shortly after the OTS suit was filed, Maxxam and PL lobbyists in Washington were moved to approach US Dept. of the Interior officials for the first time regarding a land swap of surplus federal property (such as abandoned military bases) for 3000 acres of Headwaters Forest. These private negotiations apparently have been ongoing throughout 1996, with the state of California also joining in. Maintaining their line that there is no real "debt" to trade for Headwaters, Maxxam officials nonetheless appear eager to carry out some sort of trade before the "stolen asset" of Headwaters Forest is plucked from them through a lawsuit. Accordingly, current negotiations for acquisition are focused on a land swap, not Debt for Nature, while proof of alleged financial manipulation is pending in the courts. Though potentially effective as an immediate means to preserve the redwoods of Headwaters, this avenue of action rewards Maxxam when too many of its actions are questionable if not flatly illegal Ð from manipulating the public assets of an S&L, to secretive maneuvering for the hostile takeover of PL, to unsustainable "liquidation" of ancient trees to service its debt.

USA/Robert Martel v. Charles Hurwitz, Barry Munitz, Maxxam Inc., etc: Yet another lawsuit against Maxxam was filed in San Francisco federal court in January 1995 and has since been moved to the Houston jurisdiction. This case is a citizen-initiated False Claims Act suit against the corporation's activities vis-a-vis the failure of USAT, filed on behalf of US taxpayers and aiming to recover the entire bailout amount. Allegations against Hurwitz et al. include fraudulent representation of the amount of stock they controlled and a failure to maintain adequate reserves in the bank. Clandestine activity and lies enabled Hurwitz and his cohorts to defraud the federal government and rip off the taxpayers.

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Last Update: 10/6/96