Mr. SMITH. I think you have indicated to us that that decision was made because the put option arrangement or the put-call arrangement was not able to be concluded; is that correct? Mr. HURWITZ. Yes. Mr. SMITH. When the decision was made to make the purchase of whatever stock Jefferies might be holding, how did MCO come to be the party that would make that purchase? How was that decision made? Mr. HURWITZ. As I mentioned earlier, MCO owns 37 percent of MAXXAM, so they were well aware of it and several people on the board from MCO are on the board of MAXXAM, so they were completely aware of what was going on in the transaction. When it became clear that MAXXAM could not enter into that agreement, then I asked for alternatives and one was that MCO could just purchase the shares. Mr. SMITH. Who did you ask for alternatives? Mr. HURWITZ. My lawyers. Mr. SMITH. And your lawyers basically said MCO can do this? Mr. HURWITZ. Yes, sir. Mr. SMITH. And I guess the other half of that equation is if MCO does so, a Hart-Scott-Rodino filing will not be required? Mr. HURWITZ. Yes, sir. Mr. SMITH. When they so advised you that MCO could make the purchase, did you then unilaterally say all right, we will have MCO buy that stock? Mr. HURWITZ. I did check with the executive committee as I mentioned before and we talked about it. Mr. SMITH. You contacted the members of MCO's executive committee? Mr. HURWITZ. Yes. Mr. SMITH. Who might that be? Mr. HURWITZ. Bill Leone and George Kosmetsky. Mr. SMITH. Both of whom are employees of MCO? Mr. HURWITZ. Bill Leone is, George Kosmetsky is not. Mr. SMITH. What does he do? Mr. HURWITZ. He is retired now. He was a former Dean of the Business School of the University of Texas. Mr. SMITH. So any board meeting of MCO would have taken place after the sale was actually executed? Mr. HURWITZ. I think that is right. There could have been some telephone board meetings. I don't recall. Mr. SMITH. Did you essentially inform them that it was your intention to have this purchased or did you request their advice as to whether this purchase should take place or not? Mr. HURWITZ. I don¹t recall. We certainly discussed‹these people were aware of the merits of the company. Mr. DINGELL. Would the gentleman yield? Are any minutes kept of activities of the executive committee? Mr. HURWITZ. Yes, sir, they are. Mr. DINGELL. Would you submit those minutes of the executive committee, please? Mr. HURWITZ. Yes, sir. Mr. SMITH. Would this have been a meeting or a series of telephone conversations? Mr. HURWITZ. It could have been a telephone meeting. I think there was one. Mr. SMITH. There would be minutes of those as well? Mr. HURWITZ. Yes, sir. Mr. SMITH. I would like to go back to the subject of Michael Milken. In the chronology that your counsel supplied to the subcommittee staff, there is an indication that in July 1985, the discussions of a Lloyds of London arrangement were basically abandoned, after representatives of Drexel Burnham, including Michael Milken and Peter Ackerman indicated that Drexel Burnham believed it could raise the necessary financing. Can you expand on that item? Can you tell us when there was a meeting? Mr. HURWITZ. There was a meeting in Los Angeles. I will have to supply you the date. What happened, it was to talk about the possible financing of Pacific Lumber and the question came up do we actually need one of the timber puts from Lloyd and both Milken and Ackerman thought that would not be necessary. Mr. SMITH. Were you present at that meeting? Mr. HURWITZ. Yes. Mr. SMITH. Can you describe to us in detail how that meeting progressed? Mr. HURWITZ. Well, it was I think a fairly large meeting and Peter Ackerman was‹sat in a long period of time and I think he briefed Michael Milken who came in for a shorter period. Mr. SMITH. At any point in the meeting, were most of the participants asked to leave and only a small group remained? Mr. HURWITZ. I don't recall. It is possible. Mr. SMITH. And what was the nature of Mr. Milken's and Mr. Ackerman's conversation, discussion, et cetera? Mr. HURWITZ. They thought that this was a financeable transaction. Mr. SMITH. Can you relate to us any more of what they may have said in the meeting? Mr. HURWITZ. Just basically that, that they thought that they could, in fact, have a commitment, a financing commitment based on what they heard and what they read and what they saw on Pacific Lumber. Mr. SMITH. Was there any indication as to who might purchase Pacific Lumber bonds in an offering? Mr. HURWITZ. No. Mr. SMITH. Thank you, Mr. Chairman. Mr. WYDEN. Would counsel yield? Mr. SMITH. Yes, sir. Mr. WYDEN. What did Mr. Ackerman talk about? Did he talk about the annuity? Mr. HURWITZ. No. Mr. WYDEN. Did he talk about the termination of the pension plan? Mr. HURWITZ. No. Mr. WYDEN. Did he talk about Executive Life? Mr. HURWITZ. No. Mr. WYDEN. What did he talk about? Mr. HURWITZ. He talked about the financing of Pacific Lumber. Mr. WYDEN. I thank counsel for yielding to me. Mr. SMITH. Mr. Hurwitz, were the firms that were competing for the annuities evaluated by MAXXAM, Pacific Lumber or Wyatt? Mr. HURWITZ. It is my understanding that they retained Wyatt and they also retained a company called Conning & Co. I am happy to answer any questions you have on this matter, but I want you to know I was very removed from this whole thing. Mr. SMITH. When you say they, do you mean Pacific Lumber or other officers of MAXXAM? Mr. HURWITZ. Pacific Lumber and other officers of MAXXAM. Mr. SMITH. Are you aware of any differences in the position between Pacific Lumber and MAXXAM as to who should get the annuity contract? Mr. HURWITZ. There was some conversation from time to time about Executive Life and there was a newspaper article that some of the people sent out saying maybe Executive Life should not be considered because it supposedly had close ties with Mike Milken. It was Executive Life that is AAA rated by Standard & Poors. We had a series of bids and they were the low bid by I think some $2.5 million. There is a note in the files of some people that I understand are going to testify next week that will state to you that there was a message from Bill Leone stating Metropolitan was the second bidder and they ask if Metropolitan could get within $800,000 of Executive Life, we would pay $800,000 more to go with them. Mr. SMITH. And that was a statement by Mr. Leon? Mr. HURWITZ. Yes. Mr. SMITH. He would be willing to pick Metropolitan? Mr. HURWITZ. Over Executive Life if they would get within $800,000; right. Mr. SMITH. I think that is all I have, Mr. Chairman. Mr. WYDEN. Why would he be willing to pay more? Mr. HURWITZ. Because some of the people at Pacific Lumber questioned Executive Life and had read something about their tie-in with Michael Milken and there was some bad publicity. Mr. DINGELL What was the tie-in, though? Mr. HURWITZ. It was a newspaper article. Mr. WYDEN. Junk bonds? Mr. HURWITZ. I don't know. I don't recall the article. Mr. WYDEN. I thank counsel for yielding. Mr. HURWITZ. It is important to know Executive Life is a AAA rated company. Mr. DINGELL. Mr. Hurwitz, we have discussed several companies, MCO, MAXXAM, MCOP. Do any of these run a joint arbitrage account from Houston? Mr. HURWITZ. No, sir. Mr. DINGELL. None? Mr. HURWITZ. No, sir. Well, MCO‹ Mr. DINGELL. Do they participate in any arbitrage accounts? Mr. HURWITZ. MCOP and MCO, I don't think has a joint account, but I am not sure. Mr. DINGELL. So MCO participates in an arbitrage account which is run out of Houston? Mr. HURWITZ. Yes, sir. Mr. DINGELL. Does MCOP participate in such an arbitrage account? Mr. HURWITZ. I don't know. Mr. DINGELL Do you have an arbitrage account in Houston? Mr. HURWITZ. I don't recall. Mr. DINGELL. Does MAXXAM? Mr. HURWITZ. Yes, sir. Mr. DINGELL. Who runs the arbitrage accounts that MAXXAM and MCOP participated in? Mr. HURWITZ. A fellow named Ronald Heubsch. H-e-u-b-s-c-h. Mr. DINGELL. H-e-u-b-s-c-h? Mr. HURWITZ. Yes, sir. Mr. DINGELL. First name is Ron. Are there any other companies that parti cipate in this, rather, in arbitrage accounts run by Mr. Heubsch? Mr. HURWITZ. Yes, sir. United Financial has an arbitrage account. Mr. DINGELL. That is a savings and loan? Mr. HURWITZ. Yes, sir. Mr. DINGELL. Who is the chief operating officer of that? Mr. HURWITZ. Jerrod Gross. Mr. DINGELL. Do you have an interest in that? Mr. HURWITZ. Yes, sir. Mr. DINGELL. You do. What is your interest in that savings and loan? Mr. HURWITZ. Equity in interest, common stock interest. Is that what you mean? Mr. DINGELL. Are you a stockholder? Mr. HURWITZ. Yes. Mr. DINGELL. Are you an officer? Mr. HURWITZ. I am chairman of the board of the holding company. Mr. DINGELL. Chairman of the board of the holding company. The holding company then controls the savings and loan? Mr. HURWITZ. Yes, sir. Mr. DINGELL. Are there any other companies that participate in this arbitrage account run by Mr. Heubsch? Mr. HURWITZ. No, sir. Mr. DINGELL. Were the good offices‹are these accounts separate and simply administered jointly by Mr. Heubsch, or are they commingled? Mr. HURWITZ. They are separate. Mr. DINGELL. They are separate? Mr. HURWITZ. Yes, sir. Mr. DINGELL. But they function as a unit? Mr. HURWITZ. No, sir. Mr. DINGELL. They function totally separately? Mr. HURWITZ. Yes, sir. Mr. DINGELL. Do they ever invest in the same takeovers? Mr. HURWITZ. Yes, sir. Mr. DINGELL. Did they invest in the takeover of Pacific Lumber? Mr. HURWITZ. No, sir. Mr. DINGELL. None of these funds were used in the takeover of Pacific Lumber, none? Mr. HURWITZ. None. Mr. DINGELL. None. Not funds belonging to MCOP, not funds belonging to MCO, not funds belonging to MAXXAM? Mr. HURWITZ. None. Mr. DINGELL. None. What is the average size of the cash balance of these investments in this joint arbitrage account? Mr. HURWITZ. They vary in size. I don't know what United Financial is, but I think that MAXXAM is probably in the neighborhood of $70 million. MCO, maybe in the neighborhood of $35 million. Mr. DINGELL. Does Pacific Lumber now invest in a joint arbitrage account? Mr. HURWITZ. They have an account, yes. Mr. DINGELL. They have an account there? Mr. HURWITZ. Yes, sir. Mr. DINGELL. Is it different than the accounts of the other firms that you mentioned? Mr. HURWITZ. Well, it is run separately. Mr. DINGELL. It is run separately but it is now a part of the arbitrage operation that is run by Mr. Heubsch? Mr. HURWITZ. Yes, sir. They have funds. Mr. DINGELL. Are there any differences in the way that it invests or the way it is treated than any of the other companies? Mr. HURWITZ. I think they are treated about the same. Mr. DINGELL. Who are the officers of this arbitrage account or network of arbitrage accounts run by Mr. Heubsch? Mr. HURWITZ. Who are the officers of the companies? Mr. DINGELL. First of all, what is the name of Mr. Heubsch's company and who are the officers of it? Mr. HURWITZ. He is with a company called‹I think he is with Federated Development Co. Mr. DINGELL. Federated Development Co.? Mr. HURWITZ. Yes, sir. Mr. DINGELL. Who are the officers of that? Mr. HURWITZ. I am chairman of the board, and Barry Munitz, the vice president. A fellow named Jim Pollen is the secretary-treasurer. Mr. DINGELL. It has a board of directors? Mr. HURWITZ. Yes, sir. Mr. DINGELL. It is incorporated in what State? Mr. HURWITZ. It is a New York business trust. Mr. DINGELL. A New York business trust. Mr. HURWITZ. Yes, sir. Mr. DINGELL. What is its address? Mr. HURWITZ. It is in Houston, TX, 5718 West Himer. Mr. DINGELL. What kind of investments does the fund invest in? Mr. HURWITZ. It is in arbitrage activity. Mr. DINGELL. Is that its only activity? Mr. HURWITZ. In the case of MAXXAM, from time to time it will take a position in a company that is a nonarbitrage position. Mr. DINGELL. Does this invest in companies before or after the announcement of the proposed takeover. Mr. HURWITZ. It can do either. Mr. DINGELL. Usually before, however? Mr. HURWITZ. Usually after. Mr. DINGELL Usually after? Mr. HURWITZ. Yes. Mr. DINGELL. Does Mr. Heubsch manage funds for any other interests other than the companies that you mentioned to me earlier? Mr. HURWITZ. No, sir. Mr. DINGELL. No. Have you ever had the moneys of‹under the control of Federated Development Co. in Mr. Ron Heubsch invested in any companies that you intended to take over? Mr. HURWITZ. We have invested in MCO holdings and MAXXAM companies that we have had an interest in. Mr. DINGELL. Are savings and loan accounts of your savings and loan invested in this account? Mr. HURWITZ. In arbitrage or the one you make the takeover in? Mr. DINGELL. In arbitrage. Mr. HURWITZ. Yes, sir. Mr. DINGELL. They are? Mr. HURWITZ. Yes, sir. Mr. DINGELL So they have been indirectly invested in takeovers? Mr. HURWITZ. They only invest in, I believe, announced takeovers, and they are in a pure sense of the word, arbitrage. Mr. DINGELL. Now, has Federal Home Loan Bank Board examiner inquired into the way this account in the name of the savings and loan that you own were being conducted? Mr. HURWITZ. Yes, they have, but I don't own the savings and loan. Mr. DINGELL. Well, in which you have an interest. Mr. HURWITZ. Yes, sir. Mr. WYDEN. He is chairman of the board. Mr. DINGELL. Of which you are the chairman of the board? Mr. HURWITZ. Yes, sir. Right. Of the holding company, not of the savings and loan. Mr. DINGELL. Of the holding company; that is correct. Now, what were the findings of the bank board examiner? He found, first of all, you had about $500 million of the depositors' money invested in this arbitrage account, did he not? Mr. HURWITZ. I don't know exactly the size of it, but it was a large account. Mr. DINGELL. It was a large sum? Mr. HURWITZ. Right. Mr. DINGELL. Is this the largest single investment this savings and loan has? Mr. HURWITZ. First, I don't think it is $500 million. That sounds way too high. Mr. DINGELL. What are the total assets of the savings and loan? Mr. HURWITZ. About $6 billion. Mr. DINGELL. About $2 billion? Mr. HURWITZ. $6 billion. Mr. DINGELL. $6 billion. And they have $500 million invested in this? Mr. HURWITZ. I don't think so. That sounded way too high to me. Mr. DINGELL. Would you tell us how much the figure is? Mr. HURWITZ. I recall maybe $150 to $200 million, but I will be happy to supply that. Mr. DINGELL. When the examiner looked at the books and records, did he find that they were in good order? Mr. HURWITZ. The books and records? Mr. DINGELL. Of the savings and loan. Mr. HURWITZ. I think there was some question about the record keeping. Mr. DINGELL. As a matter of fact, he found them to be in disarray, did he not? Mr. HURWITZ. I don't think as it relates to the investment area, but there was some talk about the bookkeeping. Mr. DINGELL. In any event, he did not find them to be in good order. Mr. HURWITZ. I think that is right, yes. Mr. DINGELL. The Chair thanks you. The Chair recognizes Mr. Wyden. Mr. WYDEN. Thank you, Mr. Chairman. Mr. Hurwitz, I want to ask some questions about the savings and loan in particular because of course these are federally insured institutions. Here we are talking about taxpayers' money, we are not just talking about private sector funding. Now, you are chairman of the board of United Financial Group, the holding company that operates the United Savings Association of Texas in Houston. In 1986, 10(k) report shows the assets of United Savings have grown from $1.8 billion to $6.5 billion but the association lost money during the last 2 years and four of the past 5 years, most of the associations net worth is good will Rod its tangible net worth is only 1 percent of assets or roughly $60 million. Thus, significant loss on just a few investments could have very significant meaning. Mr. Hurwitz, the 10(k) report states much of United Savings growth since 1984 has been due to arbitrage program, access to capital and securities markets and an emphasis on wholesale funds. Mind, while your base lending business seems to be in decline. It sounds like United Savings is more like a money management operation these days. Would that be incorrect? Mr. HURWITZ. I think that is incorrect, yes. Mr. WYDEN. I am sorry. Mr. HURWITZ. I say I think that is incorrect, yes, sir. Mr. WYDEN. Let us then examine exactly‹now, page 12 of the 10(k) states the company engages in merger arbitrage which is an investment technique involving investing in securities that are the subject of an anticipated exchange or tender offer, corporate reorganization such as a merger, liquidation or proxy context. In merger arbitrage, the arbitrage seeks to derive profits by realigning the price differential between the purchase price of securities and the value ultimately realigned from their‹realized from their disposition. Again, the question that occurs to me is: does this mean that United Savings is essentially, primarily involved in trying to promote speculative activity? Mr. HURWITZ. This is in compliance with the ratios of the Federal Home Loan Back Board, number one. Number two, I think United Savings, like all the savings and loans in Texas, their biggest problem is real estate portfolio, and $800 million of nonearning assets. Mr. WYDEN. How big is the United Savings merger arbitrage position? Mr. HURWITZ. My recollection is $150 to $200 million. Mr. WYDEN. Now, Morgan Stanley, a professional risk investors told the subcommittee it demands a return 1.5 times the normally expected return because of the high risk involved. Now, you are not in line with that kind of standard, are you, at the savings and loan? Mr. HURWITZ. You mean for our return? Mr. WYDEN. Yes. Mr. HURWITZ. I can get you the actual returns. They have been moderate but good. Steady. Mr. WYDEN. But is it in line with the return that Morgan Stanley thinks is acceptable? Mr. HURWITZ. I don't know‹1.5 times what? Mr. WYDEN. The normally expected return. Mr. HURWITZ. I don't know what that is. Mr. WYDEN. The reason this is so important is because what we are talking about here is stock market speculation using federally insured deposits, and I think the rate of return here is an extremely important factor. Mr. HURWITZ. The rate of return has been good and the Home Loan Bank Board has looked into these activities. Mr. WYDEN. Does United Savings purchase stock in a potential‹before a tender offer is publicly announced? Mr. HURWITZ. No. Mr. WYDEN. Do you see anything wrong with the Federal Government and depositors backing this type of operation by a savings and loan? Mr. HURWITZ. No. Mr. WYDEN. United Savings lists assets of $6.5 billion. Its corporate debt securities portfolio is $563.9 million but only $14.4 million is investment grade, a full 97 percent of the corporate bond portfolio is below investment grade or junk bonds, and, of course, this strategy is high risk and could produce serious problems if the market turns down. Now, the subcommittee has obtained confidential examination documents from the Federal Home Loan Bank Board. These show the Federal Home Loan Bank Board is concerned about United Savings excessive exposure in junk bonds and has warned the board of directors to curtail its high risk investments because of the associations weak financial position, history of losses, dependence on nonoperating income and poor records. How do you respond to this? Mr. HURWITZ. I am not aware they have asked them to curtail the investment in high yield bonds. Mr. WYDEN. Are you aware the Home Loan Bank Board has awarded an independent review of United's investment procedures? Mr. HURWITZ. Yes. Mr. WYDEN. What has been your response to that? Mr. HURWITZ. I think it is either happened or‹it has happened Mr. WYDEN. Drexel owns 6 percent of the United Financial Group. Of course, been involved in financing the Pacific Lumber takeover by MAXXAM and yourself. I think what I am concerned about is there seems to be a circular kind of pattern where you are in a position to receive a high risk financing and then buy junk bonds from Drexel. How much of the $550 million of junk bonds held by United Savings was purchased from Drexel? Mr. HURWITZ. I will have to get you that. I don't know the answer. Mr. WYDEN. Approximately. Mr. HURWITZ. I don't have any idea. Mr. WYDEN. Do you have any agreements with Drexel to buy junk bonds in connection for help in various other deals? Mr. HURWITZ. No. Mr. WYDEN. Is United Savings essentially a vehicle to work deals for your other companies? Mr. HURWITZ. No. Mr. DINGELL. Will the gentleman yield? Does MAXXAM have any deals with Drexel to indemnify Drexel against violations of the securities laws ? Mr. HURWITZ. I was just informed in the normal course of business with brokerage accounts that it does, but I am not personally aware of‹‹ Mr. DINGELL. So MAXXAM does have an agreement to indemnify Drexel against violations of the securities law; is that correct? Mr. HURWITZ. That is my understanding. Mr. DINGELL. How long has that treatment been in place? Mr. HURWITZ. I am not even familiar with it. Sorry. Mr. DINGELL. Does MCO have a similar agreement? Mr. HURWITZ. I don't know. Mr. DINGELL. Does MCOP have a similar agreement? Mr. HURWITZ. Don't know. Mr. DINGELL. Does the savings and loan we have been describing, United SA of Texas, does that have an agreement with Drexel, Burns and Lambert to indemnify them against violations of securities laws? Mr. HURWITZ. I don't know. Mr. DINGELL. Would you submit to us copies of the agreement that you have with Drexel, Burns and Lambert on the part of all these companies, please, so we can see them? Mr. HURWITZ. Yes, sir. Mr. DINGELL. What percentage of the bond portfolio of United SA of Texas, Houston, TX, have invested in investment grade securities? Mr. HURWITZ. I am sorry. Could you repeat the question? Mr. DINGELL. What percentage of the investment portfolio of United SA of Texas is invested in investment grade securities? Mr. HURWITZ. I just heard the Congressman from Oregon State (sic) it was a small percentage. Mr. DINGELL. On the order of about 3 percent, is it not? Mr. HURWITZ. I have forgotten what he said, but it was a small percentage. Mr. DINGELL. Do you have any reason to differ with the statement that it would be 3 percent? Mr. HURWITZ. I just don't know. Mr. DINGELL. Do you know where they get their‹these below investment grade securities? Mr. HURWITZ Well, they have a whole staff of people that analyze securities and they buy them and they deal with every major investment banking firm. Mr. DINGELL. Have they ever been advised by the Federal Home Loan Bank Board that their portfolio does not meet the requirements of the Federal Home Loan Bank Board and that it involves an excessive reliance on below investment grade securities? Mr. HURWITZ. I don't recall. Mr. DINGELL. Does this savings and loan, United, have an account with Drexel, Burns and Lambert? Mr. HURWITZ. I think so. Mr. DINGELL. You do? Do they have accounts whereby they procure investment securities from any other investment house? Mr. HURWITZ. Yes, sir. I think they trade with‹‹ Mr. DINGELL. Beg your pardon? Mr. HURWITZ. Yes, sir. I think they trade with every investment banking firm. Mr. DINGELL. What percentage is with Drexel and what percentage is with other‹‹ Mr. HURWITZ. I am sorry. I don't know. Mr. DINGELL. Would you submit that for the record, please? Mr. HURWITZ. Yes, sir. [See appendix A, p. 141.] Mr. WYDEN. Just very briefly, one other area I wanted to ask about, Mr. Hurwitz. United Savings and another one of your companies, MCO holdings, purchased about 12 percent of the stock in Castle and Cook, a Hawaii-based food conglomerate in 1983, and then they were sued by Castle and Cook in 1984 to stop a takeover. Castle and Cook eventually paid green mail to stop them and United Savings made $7 million it its share of the deal. I think the only question I had here was: how does a federally insured savings and loan get itself involved in this kind of hostile takeover? Mr. HURWITZ. First of all, there wasn¹t a hostile takeover. Second, it was approved by the Home Loan Bank Board before it made the purchase. Mr. WYDEN. Well, there was a suit by Castle and Cook to stop the takeover. Mr. HURWITZ. Castle and Cook said they thought there would be a takeover, there was never a takeover, never one mentioned. There was no tender offer. Mr. WYDEN. They eventually paid green mail. Mr. HURWITZ. They came to us, sued us, and said they thought we were contemplating a takeover and sued us. Mr. WYDEN. Is this the right kind of thing for a federally insured savings and loan to get involved in? Mr. HURWITZ. To make investments or be involved in hostile takeovers? This was not a hostile takeover. Mr. WYDEN. This, in your view, was the right kind of thing for federally insured savings and loan to be involved in? Mr. HURWITZ. I thought it was a very cheap company and the board of directors of United thought it looked like a tremendous investment for them. No one intended to be sued, and the company, Castle and Cook, thought something different. Mr. WYDEN. Thank you, Mr. Chairman. Mr. DINGELL. In United Savings, does Drexel, Burns, Lambert have any ownership interest? Mr. HURWITZ. Yes, sir. Mr. DINGELL. How much? Mr. HURWITZ. I think it is 6.3 percent. Mr. DINGEELL. You have told us that they have below market grade securities to the amount of about $500 million, $550 million, and that the total assets run about $6.5 billion; is that right. Mr. HURWITZ. Yes, sir. Mr. DINGELL. Now, as I understand the law, MCOP under Hart-Scott-Rodino, could participate in the deal that we have been discussing earlier and could avoid Hart-Scott-Rodino only if it was acting for, and I now quote, the statute. A bona fide business purpose. What was the bona fide business purpose for which MCOP participated in the transaction? Mr. HURWITZ. The business purpose was the board of directors of MCOP and MCOP holdings, thought it was an undervalued company. Mr. DINGELL. It thought it was an undervalued company. Was the question of Hart-Scott-Rodino ever discussed by you with your attorneys or by you with MCOP in connection with the MCOP purchase of stock? Mr. HURWITZ. Yes, sir. Mr. DINGELL. It was? Mr. HURWITZ. Yes. Mr. DINGELL. And what was that subject? Mr. HURWITZ. I am sorry. What was it? Mr. DINGELL. First when and then what. Mr. HURWITZ. I would guess it was in late September, the 27, 28, somewhere in there, and what? That it was, that they thought it was OK to purchase it. Mr. DINGELL. It was OK to purchase? Mr. HURWITZ. Yes, sir. Mr. DINGELL. It was OK for MCOP to purchase, but it was not OK for MAXXAM to have purchased? Mr. HURWITZ. Yes, sir. Mr. DINGELL. And it was not OK for MCO to purchase? Mr. HURWITZ. I think it was OK for MCO. Mr. DINGELL. Why did MCOP and not MCO? Mr. HURWITZ. I think it was a subsidiary where there is a fair amount of cash in it. Mr. DINGELL. This discussion occurred only 3 days before the tender was in fact made; isn't that right? Mr. HURWITZ. Yes, sir, I think so. I don't recall exactly when it was made, but that is certainly possible and I promised to get you those dates and I will. Mr. DINGELL. Preparation for this had been going on for 2 months; is that right? Mr. HURWITZ. Preparation for‹‹ Mr. DINGELL. The takeover. Mr. HURWITZ. Yes, sir, there had been work done. Mr. DINGELL. Why did this element of the financing wait until 3 days before the tender when discussions relative to the tender had been taking place for the best part of 2 months? Mr. HURWITZ. We had contemplated that we would enter into this put-call agreement with Jefferies & Co. Mr. DINGELL. You told me that the put-call agreement fell through. Mr. HURWITZ. Yes, sir. Mr. DINGELL. And that the purchase was conducted in other ways. Mr. HURWITZ. Yes, sir. Mr. WYDEN. If the chairman would yield, I have a handwritten memo here of a conversation with Glenn Kassan. The note indicates that on Sunday, September 29 at 1 p.m., Mr. Kassan told a banker from the Irving Trust Co. who was working with you preparing the tender offer, another block of 490,000 shares of stock became available. ³Could not buy since over the $15 million Hart-Scott-Rodino limit.² Mr. Kassan is then reported to have said, ³So MCO bought. Will be part of the deal with MAXXAM.² My question to you, Mr. Hurwitz is, do you see any independent business purpose here? Mr. HURWITZ. First of all, I want to state that I think we supplied those documents. Mr. WYDEN. That is correct, that is my understanding as well. Mr. HURWITZ. I think what happened there is that Irving Trust was leading a group of banks putting together some money for this financing and they had thought all along that MAXXAM was going to buy the stock and it was a notification that they weren't going to buy it and the reason why. I think that was the meaning behind it. Mr. WYDEN. Well, Mr. Chairman, I still am concerned about the implications of this and whether or not this was a part of a deal with MAXXAM to avoid Hart-Scott-Rodino and I would hope that we would continue to examine further into this. Mr. DINGELL. Gentlemen, the committee thanks you for your presence and for your patience. The committee will continue to inquire into these matters and further meetings will be held at the call of the Chair.