FDIC Drops Lawsuit Against MAXXAM Chairman; Extraordinary Victory Necessitates Legal Sanctions, Congressional Action and Inspector General Inquiry
HOUSTON--(BUSINESS WIRE)--Nov. 13, 2002--The Federal Deposit Insurance Corporation has dropped its seven-year old lawsuit against MAXXAM Inc. Chairman and CEO Charles E. Hurwitz regarding his activities with United Savings Association of Texas, a savings and loan that went into receivership in December 1988 during the economic crisis that bankrupted most Texas thrifts and banks.
The FDIC's action represents an extraordinary triumph for MAXXAM and Mr. Hurwitz who have for years argued that the agency's litigation was without merit and politically motivated. MAXXAM's position has been validated by a June 2001 U.S. House of Representatives Resources Committee Task Force Report.
MAXXAM's victory also marks the highest profile legal defeat in the history of the FDIC. The agency originally sought claims of $250M and spent millions to achieve today's result.
Commenting on the FDIC's action Charles Hurwitz said, "MAXXAM and its employees have been vindicated. However, our happiness is tempered by the reality that we have had to spend enormous resources to defend ourselves against two government agencies' claims that never should have seen the light of day."
According to its own documents, the FDIC chose to sue even though it concluded that its claims stood a 70 percent likelihood of failure on statute of limitation grounds, and if they survived that challenge faced less than a 50 percent likelihood of success on the merits. This violated an FDIC guideline that the agency should pursue litigation only if it is "more than likely to succeed" and "cost-effective."
As part of the millions it has spent on this matter, the FDIC paid the Office of Thrift Supervision to bring related claims for $821M against MAXXAM and Mr. Hurwitz. MAXXAM has filed a counterclaim against the FDIC for violations of federal appropriations laws concerning this litigation financing arrangement.
On Sept. 12, 2001, after six years of litigation including 119 days of trial spread over more than two years, OTS Administrative Law Judge Arthur Shipe recommended in a landmark opinion that the OTS' case should be dismissed. Judge Shipe concluded that Mr. Hurwitz's actions on behalf of United Savings and its corporate parent United Financial Group were "intended for their benefit" and that the OTS engaged in "denigrations" and "unseemly name calling for advocacy purposes" with "rhetoric . . . ill-fitted to this case."
MAXXAM intends to continue its legal efforts against the FDIC to collect all amounts expended to defend itself (which now total over $43M including in-house costs) and seek additional monies as compensation for the agency's inappropriate conduct, which the company believes to be worthy of significant sanctions.
"It is important that a message be sent to the FDIC that it should never again behave in a political, illegal and unethical manner. No company or individual should ever have to go through what we have endured," Hurwitz added.
Towards that end, MAXXAM hopes that the FDIC's decision to drop its lawsuit will spur Congress and the FDIC's Inspector General to undertake oversight and investigation in order to prevent the FDIC from ever again behaving as they have in this matter. |
