UPDATE 1-U.S. judge says FDIC must pay Maxxam $72 million
Tue Aug 23, 2005 08:18 PM ET
HOUSTON, Aug 23 (Reuters) - A federal judge ruled on Tuesday the U.S. Federal Deposit Insurance Corporation must pay conglomerate Maxxam Inc. (MXM.A: Quote, Profile, Research) $72 million to cover the company's costs of defending itself against charges it caused the collapse of a Texas savings and loan in the 1980s.
In his ruling, U.S. District Court Judge Lynn Hughes said the FDIC wrongly targeted Maxxam and its chief executive Charles Hurwitz when it sought more than $1 billion in damages linked to the demise of United Savings.
"The FDIC will pay Maxxam $72,255,147.51 in sanctions," Judge Hughes wrote in his ruling.
Hughes said a court of appeals could trim that payout to $15,334,905.98 if it limits the damages to the lawsuit brought by the FDIC and not one lodged by the U.S. Office of Thrift Supervision at the behest of the FDIC.
Maxxam was cleared in both lawsuits, and sought to recover the costs from defending itself in the cases that were first lodged in 1995.
The FDIC was not immediately available for comment.
Maxxam is a Houston-based conglomerate of timber, real estate, aluminum and racetrack holdings that once was an arch villain of both California environmentalists and steel workers at bankrupt Kaiser Aluminum (KLUCQ.OB: Quote, Profile, Research) , which is majority-owned by Maxxam.
Maxxam drew the ire of green groups when it bought timber company Pacific Lumber Co, which owned land that was home to centuries-old redwoods in California. It later sold some of that land to the state and U.S. governments for $450 million.
In a blistering criticism of the federal government, Judge Hughes said the FDIC was used as a political weapon to target Hurwitz and Maxxam.
The regulator sought to hide documents and illegally transferred money to the OTS to seek damages against Maxxam, Hughes said.
"(FDIC regulators) set about using their agency's authority to compel an illegal result wholly unconnected with their legitimate responsibilities and they lied about it under oath," he wrote.
Hughes also said the FDIC wrongly prevented Hurwitz and a network of companies he controlled from taking a majority interest in United Savings before its collapse. Hurwitz's companies owned slightly less than 25 percent of United Savings.
More than 1,000 savings and loans collapsed between 1986 and 1995, and United Saving's demise cost the federal government's regulator about $1.6 billion.
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