UNITED STATES OF AMERICA Before the OFFICE OF THRIFT SUPERVISION DEPARTMENT OF THE TREASURY OTS Order No. AP 95-40 Date: December 26, 1995 NOTICE OF CHARGES AND OF HEARING FOR CEASE-AND- DESIST ORDER, ORDER OF PROHIBITION, RESTITUTION, CIVIL MONEY PENALTIES, AND OTHER APPROPRIATE RELIEF In the Matter of UNITED SAVINGS ASSOCIATION OF TEXAS, Houston, Texas, and UNITED FINANCIAL GROUP, INC., Houston, Texas, a Savings and Loan Holding Company. ________________________________________________ MAXXAM, INC., Houston, Texas, a Diversified Savings and Loan Holding Company; FEDERATED DEVELOPMENT CO., a New York Business Trust; CHARLES E. HURWITZ, Institution-Affiliated Party and Present and Former Director of United Savings Association of Texas, United Financial Group, and/or MAXXAM, Inc.; and BARRY A. MUNITZ, JENARD M. GROSS, ARTHUR S. BERNER, RONALD HUEBSCH, and MICHAEL CROW, Present and Former Directors and/or Officers of United Savings Association of Texas, United Financial Group, and/or MAXXAM, Inc., Respondents. I. JURISDICTION 1. Until August 9, 1989, the Federal Savings and Loan Insurance Corporation ("FSLIC") was the regulatory agency with jurisdiction over federally chartered savings associations, federally insured, state-chartered savings associations, and certain federal savings banks, pursuant to Section 407 of the National Housing Act (the "NHA"), former 12 U.S.C. Є 1730 (repealed by FIRREA), and holding companies thereof, pursuant to section 408 of the NHA, former 12 U.S.C. Є 1730a (repealed by FIRREA). The Federal Home Loan Bank Board (the вFHLBBг) was the operating head of FSLIC. FSLIC and the FHLBB are hereinafter referred to collectively as the FHLBB. The Federal Home Loan Bank of Dallas ("FHLB-Dallas") was at all times relevant hereto the agent and representative of the FHLBB in supervising and examining United Savings Association of Texas ("USAT") and United Financial Group, Inc. ("UFG"). 2. As of August 9, 1989, pursuant to the provisions of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA") , Pub. L. No. 101-73, 103 Stat. 183, the Office of Thrift Supervision ("OTS") succeeded the FHLBB as the regulatory agency charged with the supervision and regulation of both savings associations and savings and loan holding companies pursuant to Sections 3(q)(4), 8(b), 8(e), and 8(i) of the Federal Deposit Insurance Act (the вFDIA"), 12 U.S.C. ЄЄ 1813(q)(4), 1818(b), (e), (i), as amended by FIRREA. OTS, as successor to the FHLBB, is the appropriate federal banking agency to maintain a proceeding to determine whether a cease-and-desist order requiring restitution and other affirmative relief should issue against persons participating in the conduct of the affairs of an insured savings institution, whether such persons should be prohibited from further participation in the conduct of the affairs of any insured depository institution and whether civil money penalties should be assessed against such persons. 12 U.S.C. Є 1818. 3. At all relevant times, USAT: (a) was a savings association as defined by Sections 2(4) and 10(a)(1)(A) of the Home Owners' Loan Act (the "HOLA"), 12 U.S.C. ЄЄ 1462(4), 1467a(a)(1)(A), and Section 3(b) of the FDIA, 12 U.S.C. Є 1813(b), as amended by FIRREA; (b) was an insured depository institution as defined by Section 3 (c) (1) of the FDIA, 12 U. S. C. Є 1813 (c) (1), as amended by FIRREA; and (c) was an insured institution as defined by NHA Section 408 (a), former 12 U.S.C. Є 1730a(a) (repealed by FIRREA), whose accounts were insured by FSLIC. At all relevant times, USAT was a savings and loan association chartered by the State of Texas. The eligible deposits of USAT were insured by FSLIC from 1937 through December 30, 1988. 4. At all relevant times, from at least 1970 through December 30, 1988, USAT was a subsidiary of non-respondent UFG. UFG was a savings and loan holding company as defined by section 408 (a) (1) (D) of the NHA, former 12 U.S.C. Є 173Oa (a) (1) (D) (repealed by FIRREA) and was a savings and loan holding company, as defined by section 10(a)(1)(D) of the HOLA, 12 U.S.C. 1467a(a)(1)(D), and section 3(w)(3) of the FDIA, 12 U.S.C. Є 1813(w)(3), both as amended by FIRREA, related to the foregoing savings association. At all relevant times, UFG owned 100 percent of the voting stock of USAT.