EF! Renews Call for "Debt for Nature Swap" for Headwaters Forest
Redwood forest activists are popping champagne corks over a victory in what has otherwise been a dismal summer for the giant trees. The Federal Deposit Insurance Corporation (FDIC) filed suit Tuesday, August 3, for over $250 million against redwood raider Charles Hurwitz (FDIC v. Hurwitz), the man who crashed United Savings Association of Texas (USAT). The thrift failed in late 1988, costing the taxpayers over $1.5 billion. The celebration's tone is tempered, however, by the sound of giant redwoods that continue to fall in the Headwaters Forest Complex in Humboldt County on California's north coast.
According to a related 1991 suit, FDIC v Milken, the funds Hurwitz liquidated from USAT were essentially laundered through the Drexel firm and used to finance the1985 takeover of Pacific Lumber, the world's largest private holder of ancient redwoods. Logging subsequently tripled, assets were sold off, and the pension fund was pilfered in order to service the $750 million junk bond debt incurred by Hurwitz in the takeover. Pacific Lumber's debt was refinanced in 1993, bringing it back up to $700 million and accompanied by a restructure that severed the Headwaters Forest from the company and put it debt-free in the pocket of Charles Hurwitz.
Amidst a continuing nine-year battle against Hurwitz's MAXXAM conglomerate, Earth First! first identified the Headwaters Forest Wilderness Complex as critical endangered species habitat in 1987. In 1993, with the introduction of the Headwaters Forest Act (which ultimately failed to pass) in the US Congress, EF! launched a Debt for Nature campaign. EF! claims that since the taxpayers bailed out the S & L and since the S & L funds were ultimately laundered and used to finance the takeover of PL, then essentially the taxpayers own Pacific Lumber. "The American taxpayer should not pay a dime to acquire Headwaters Forest because we already bought it," said EF! organizer Darryl Cherney. "We've been demanding debt for nature and jail for Hurwitz. The suit filed by the FDIC brings us closer to achieving both those goals." He went on to say that "The FDIC should request a restraining order to prevent the logging of ancient redwoods for the duration of the lawsuit. The taxpayers don't want to find an empty shell of a lumber company when we are ultimately awarded its assets."
The 22-page claim, filed in Federal District Court in Houston, Texas, charges . . .
11. Charles Hurwitz was the controlling force of USAT, UFG, MCO and Federated ... He directed and controlled USAT's investment activity, he regularly attended Board and Committee meetings, he selected USAT officers and directors, he controlled and dominated virtually all of USAT's activities. No significant decision concerning USAT's affairs was undertaken without his approval.
14. In 1984, Hurwitz began to engage in substantial reciprocal business arrangements with Drexel Burnham Lambert, Inc. ("Drexel"). Drexel assisted Hurwitz's takeover activities and USAT invested heavily in Drexel undewritten junk bonds. From 1984 through 1988, Hurwitz purchased a substantial volume of Drexel underwritten junk bonds and other brokered securities. Drexel, in turn, provided substantial financing for Hurwitz takeover activities.
It is worth noting that Drexel was a 9% shareholder in the S & L's holding company, United Financial Group (UFG). According to the current suit, "USAT eventually became the eighth largest purchaser of Drexel-underwritten junk bonds among all savings and loans nationwide." The suit goes on to say,
16. To "keep the doors," to forestall regulatory intervention and to insulate UFG, MCO, and Federated from the need to make capital contributions to USAT, Hurwitz and his colleagues covered up the true state of the Association by a pattern of deceptive financial reporting and balance check manipulation. Gains were taken on certain securities transactions, while losses were left imbedded in the portfolio, subsidiaries were used to skirt liability restrictions, losses on real estate investments were repeatedly understated; maturity matching credits were improperly constructed. The offset was to keep USAT operating despite its desperate condition, incurring ever-increasing losses for which the insurance fund ultimately paid more than $1.0 billion. Moreover, by failing to honor UFG, MCO and Federated's net worth maintenance obligations, significant wealth was preserved by Hurwitz and his colleagues for distribution to themselves or for other investment opportunities.
According to the suit "MCO" is "now known as MAXXAM." (p.2)
Many Congressional Banking committee members and leaders from environmental organizations have written to both the FDIC as well as the Office of Thrift Supervision (OTS), encouraging follow up on these claims. OTS still retains the right to file claims against MAXXAM, its affiliates, Hurwitz, and his cronies. California State University Chancellor Barry Munitz, a potential defendant, served as Hurwitz's number two man for nine years and was Chairman of USAT's executive committee. Those who have written to the FDIC and/or OTS include Senator Barbara Boxer, Senator John Kerry, Senator Patty Murray, Representative Henry Gonzales, Brock Evans of the National Audubon Society and Carl Pope of the Sierra Club. Representatives Ron Dellums and Pete Stark also vigorously pursued this matter.
Earth First! continues to press for criminal charges to be filed against Hurwitz and his partners in crime. The criminal statute of limitations reamins open and both FDIC and OTS reserve the right to recommend to the US justice Department that criminal charges be filed. "Surely, the claims in FDIC v Hurwitz warrant that felony charges be filed," said Cherney. "Charles Hurwitz has swindled a savings and loan, pilfered a pension fund and ripped off the redwoods. We say three strikes and you're out for corporate criminals. America's redwood heritage will not be safe until Charles Hurwitz is behind bars."
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