August 16, 2000
World-Wide
House Task Force Probes
Regulators' Maxxam Deal
By MICHAEL SCHROEDER
Staff Reporter of THE WALL STREET JOURNAL
WASHINGTON -- The House Resources Committee formed a task force to
investigate possible improper actions by banking regulators in pushing for a
land-for-debt deal to settle $821 million in federal claims against an owner of
a failed Texas savings and loan association.
The task force plans to investigate the circumstances surrounding a strategy
considered by the Federal Deposit Insurance Corp. and the Office of Thrift
Supervision to have the federal government take ownership of as many as
63,000 acres of redwood forests in Northern California to satisfy claims
against Maxxam Corp. of Houston and its chairman, Charles Hurwitz, related
to an S&L failure.
In particular, the panel, which was authorized Tuesday, will probe whether the
Interior Department enlisted banking regulators to use a lawsuit to pressure
Maxxam to swap its redwood forests.
In five-year-old lawsuits, regulators alleged that Maxxam and Mr. Hurwitz
controlled United Savings Association of Texas and its holding company,
United Financial Group Inc., and failed to meet capitalization rules. The
complaint also described allegedly unsafe securities trading and improper
real-estate lending that contributed to the 1988 failure of the S&L and a $1.6
billion cost to taxpayers.
"Banking regulators' lawsuits from our perspective are politically motivated,
and the regulators have engaged in a bureaucratic shell game in order to seize
the private property of one of our subsidiaries," said Maxxam spokesman
Josh Reiss.
Last year, legislation was passed that provided $450 million in federal and
California funds and property exchanges to buy more than 5,600 acres of
redwoods in the Headwaters Forest from Maxxam's Pacific Lumber Co. Any
additional purchases of Maxxam's redwood forests would require new
legislation. The task force will consider whether the banking regulators, in
cooperation with the Interior Department, are trying to circumvent the law
through the lawsuits.
The decision to form a task force grew out of an oversight review initiated in
June by Committee Chairman Don Young (R., Ark.). In a June letter to the
FDIC and OTS seeking documents for the review, Mr. Young suggested that
the regulators' suits were brought to pressure Maxxam into turning over land,
and that the government may have been influenced by environmental groups
that developed the "debt for nature" strategy.
The committee received an Interior Department memo from 1995, the year
the bank regulators' lawsuits were filed, discussing the land-for-debt strategy.
"The FDIC and OTS are amenable to this strategy if the administration
supports it," the memo said.
"The notion of a swap should be totally absent from the banking regulators'
pushing a claim against Maxxam," a committee investigator said.
Rep. Young said, "Everyone understood that the Headwaters Forest issue
was settled, period. But now we are learning of a backdoor attempt to break
the agreement."
Interior Department spokesman Mike Gauldin said, "The Resources
Committee is entitled to look at anything we do. But I'm not aware of anything
that's ongoing" with respect to a swap.
An OTS spokeswoman said the regulator hadn't been notified about the task
force and wouldn't comment at this time. An FDIC spokesman declined to
comment.
Write to Michael Schroeder at mike.schroeder@wsj.com |
