U.S. Congress Staff Report Recommends That FDIC and OTS Drop Lawsuits Against MAXXAM and Charles Hurwitz
HOUSTON--(BUSINESS WIRE)--June 15, 2001--The United States House of Representatives Committee on Resources has issued a Staff Report that calls on the Federal Deposit Insurance Corporation and Office of Thrift Supervision to drop their politically motivated litigation against MAXXAM (AMEX:MXM) and its Chairman and CEO Charles Hurwitz.
The report, Redwoods Debt-for-Nature Agenda of the Federal Deposit Insurance Corporation and the Office of Thrift Supervision to Acquire the Headwaters Forest, concludes that: "...FDIC polluted its and OTS' claim by prompting and paying for OTS to pursue them in the first place as part of the redwoods scheme. OTS also attended several meetings in which details of the redwood swap scheme were discussed well before their claims were noticed or filed ... The OTS is equally responsible for improper involvement in the redwoods scheme, and the pollution of its claims with a political agenda ...
"If anyone bears responsibility for corrupting the bank regulatory system -- it is the FDIC and OTS legal staff who caved to the redwood desires of the DOI (Department of Interior) and the (Clinton) Administration. The Directors of the FDIC and OTS should take corrective action and withdraw the authorization for the FDIC lawsuit and the OTS administrative action against Mr. Hurwitz for matters involving USAT. Integrity of the bank regulatory system demands nothing less."
Other key portions of the report include:
-- The finding that: "The bank regulators knew that their actions
would be the leverage for such a debt-for-nature transaction.
Between late 1993 and when the actions were initiated, the
bank regulators became more and more enmeshed with the
environmental groups, the Department of the Interior, and the
White House in the redwoods debt-for-nature scheme. In the
end, they ignored every prior internal analysis indicating
that they would lose the USAT suit, so they teamed up and
brought it administratively and in the courts."
-- The release of previously unreleased notes of a Feb. 3, 1995
meeting between FDIC attorneys Jack Smith and John Thomas with
Rep. Dan Hamburg to discuss potential agency claims against
Mr. Hurwitz. According to the notes, Rep. Hamburg had an
"immediate interest in the case" because of a bill he had
pending to acquire Headwaters forest owned by MAXXAM's Pacific
Lumber subsidiary. The FDIC inappropriately provided detailed
information about its investigation to Rep. Hamburg and
acknowledged that the agency had a weak case. However, the
FDIC also told the Congressman that "If we can convince the
other side (hurwitz) that we have claim(s) worth $400 million
they want to settle, could be a hook into the holding
company." According to the Staff Report this meeting reflects
"the willful manner in which FDIC volunteered to get involved
in a political issue and mix potential claims with the
redwoods issue."
-- The disclosure that on Feb. 4, 1995 -- one day following the
meeting with Rep. Hamburg -- the FDIC wrote to the OTS in an
effort to interest the OTS to pursue duplicative litigation
against MAXXAM and Mr. Hurwitz and create the "hook" into the
holding company necessary to force a debt-for-nature swap.
This effort quickly led the FDIC to hire the OTS toward that
end. The Staff Report also unearthed a 1994 FDIC memo in which
the FDIC outlines the purpose of its relationship with OTS:
"Tactically, combining FDIC and OTS' claims -- if they all
stand scrutiny -- is more likely to produce a large
recovery/the trees than is a piecemeal approach."
-- The disclosure that if "ordinary" procedures had been followed
in July 1995, the potential Hurwitz lawsuit would not have
been filed. Indeed, the FDIC legal division was preparing such
a recommendation for its board of directors. However, this
recommendation changed after FDIC attorneys met on July 21,
1995 with Mr. Allen McReynolds, Special Assistant to the
Secretary of the Interior. According to notes of that meeting,
the "Adm(inistration) want to do deal" and that "If we drop
suit, will undercut everything." The Staff Report notes that
as a result of this meeting the FDIC realized that "(1) the
Clinton Administration and the DOI had adopted and embraced
the redwoods debt-for-nature scheme and they wanted the scheme
to be successful, and (2) the FDIC's potential claims were
critical to pulling off that redwoods debt-for-nature scheme.
The potential banking claims ... were the leverage that were
critical to making the redwoods debt-for-nature scheme work."
Commenting on the Staff Report, MAXXAM General Counsel J. Kent Friedman said, "The FDIC and OTS should be embarrassed by the revelations in the report. It is imperative that banking agencies never be allowed to ignore their mandated responsibilities and pursue litigation for purely political reasons. Such abusive behavior must never occur again. MAXXAM encourages Congress to continue what it has started and pursue additional oversight of our matter as well as the very real problem of abusive litigation brought against many others by the FDIC and OTS."
Copies of the Staff Report are available in the June 14, 2001 Congressional Record or on www.bureaucraticshellgame.com, MAXXAM's Web site relating to information about the litigation of the FDIC and OTS. |
