FDIC Seeking $ 543 Million from United Financial

DATELINE: NEW YORK

	On-again, off-again negotiations between the Federal Deposit Insurance Corp. and 
United Financial Group Inc., Houston, may end soon with an FDIC suit claiming $ 
543 million in damages from the 1988 collapse of United Savings Association of 
Texas, a UFGI subsidiary.

   According to UFGI's recent SEC filing FDIC formally notified the company 
earlier this year of its intention to sue.

   In February, FDIC counsel notified UFGI that the company and its former 
directors and officers "were liable to the FDIC for breach of their fiduciary 
duty towards USAT, for aiding and abetting others in the breach of duties . . ." 
according to the company's most recent 10K filing.

   At the time UFGI owned United Savings, it was controlled by Charles Hurwitz,  
president  and chief  executive of Maxxam  Inc.

   In other court filings involving junk bond king Michael Milken, FDIC has 
accused Mr. Hurwitz of colluding with Milken to manipulate the junk bond market.

   FDIC has not accused Mr. Hurwitz of specific wrongdoing but has noted that 
Milken raised more than $ 1.8 billion in junk bond investment capital for him.

   In return, FDIC claims Mr. Hurwitz caused USAT to invest $ 1.4 billion in junk 
bonds issued by Milken's firm, Drexel Burnham Lambert.

   Mr. Hurwitz's potential liability from the USAT failure stems from his role at 
UFGI.

   His flagship company, Maxxam Inc., controlled a 24% share of UFGI stock and 
Mr. Hurwitz served for a time as UFGI chairman.

   Mr. Hurwitz has been sued before, in the 1970s by the SEC which accused him of 
making false statements and manipulating stock.

   He agreed to an out-of-court settlement in which he neither admitted nor 
denied guilt.

   Among new charges FDIC may bring against Mr. Hurwitz and UFGI are that, during 
the time the company controlled USAT, they failed to maintain the thrift's net 
worth, caused USAT to pay improper dividends to UFGI, and made improper 
investments in junk bonds.                                                                        


   Besides seeking $ 534 million in damages FDIC has said it also may seek the 
return of $ 14 million in tax refunds that UFGI kept as part of the company's 
tax-sharing agreement with USAT.

   The Resolution Trust Corp. made a similar claim in its lawsuit against the 
parent company of failed Lincoln Savings and Loan Association, Irvine, Calif.

   In that case, FDIC claimed that American Continental Corp. had improperly kept 
$ 90 million in taxes upstreamed from Lincoln.  UFGI acquired USAT in 1983 and 
the thrift failed in December 1988.

   FDIC first made a claim against UFGI in October 1989.  At that time FDIC and 
UFGI entered into negotiations and reached a tentative out-of-court settlement.

   But a month later FDIC notified UFGI that it could not approve the settlement 
and was terminating further negotiations.

   During this hiatus, Mr. Hurwitz was able to purchase a $ 180 million portfolio 
of RTC performing and nonperforming assets for $ 122.3 million in RTC's first 
"structured" bulk sale.

   RTC later admitted that it had not conducted a background check of Mr. Hurwitz 
because the deal was all-cash.

   Mr. Hurwitz had financed the deal with a loan from General Electric Capital 
Corp.

   Negotiations between FDIC and UFGI started up again briefly in August 1991 
only to be broken off a second time in November by FDIC.

   According to the UFGI filing FDIC then asked the company and its officers to 
agree to a "tolling" (or freezing) of the statute of limitations which would 
otherwise have run out in December.

   The company agreed to the request.  Under the tolling agreement, the six-month 
freeze will end July 31.

   It was two months after gaining agreement on extending the statute of 
limitations that FDIC informed UFGI that the company and several of its former 
top officers and directors were "possible targets" of an FDIC suit.

   Though UFGI claims that the drawn-out negotiations with FDIC and the 
continuing uncertainty over its legal claims against the company have taken a 
toll, a careful reading of its recent 10K reveals that UFGI has used the time 
gained by FDIC's inaction to significantly lower its financial vulnerability.

   The company has scaled back and limited its business operations to managing a 
handful of existing investments.

   "FDIC's demand for compensation has constituted a substantial contingent 
liability to the company and severely hindered the company's ability to raise 
capital . . . or engage in other profitable business transactions," according to 
the SEC filing.

   Now, after three years of FDIC vacillation there may be little of UFGI left to 
sue.

   "It's my understanding that UFGI is no longer an operating entity," according 
to Bob Ireland, a spokesman for Maxxam Inc.

   Last August UFGI's chairman and president resigned, followed in October by the 
rest of the company's employees.

   The reductions in personnel, the 10K explained, were made to "reduce 
expenses."

   The company's former general counsel, Arthur Berner, was granted a $ 150,000 a 
year legal retainer through 1993.

   Also, prior to agreeing to freeze the statute, UFGI's former officers demanded 
that the company indemnify them against any possible claims from the threatened 
FDIC action.


Resolution Trust Reporter
June  1, 1992
SECTION: Vol. 3, No. 20; Pg. 5