MAXXAM FACTOIDS

By Darryl Cherney

Written 1992

After having worked on the MAXXAM issue for the last six years, I thought it might be helpful to the community if I shared some of the information I have researched so that we all can get a better idea of who MAXXAM is. This is not intended to be an article, but rather an outline for those who wish know where to begin if they wish to research MAXXAM further or if they wish to take MAXXAM on as an issue. MAXXAM in some ways is huge, ranking in the Fortune 200. In other ways it is miniscule, being a holding company primarily run by a single individual, Charles E. Hurwitz of Houston, Texas.

Here are the cards as they've been dealt to all of us. Read 'em and weep.

1982-1984. Maxxam takes over Simplicity Patterns and restructures pension resulting in huge loss for retirees: from $10,000 (approx.) down to $6,000 approx. per year. Maxxam eventually sold off Simplicity's patterns division but kept the corporate infrastructure and renamed it MAXXAM. (Source: Philadelphia Enquirer: America What Went Wrong)

1983-present. MAXXAM through its wholly affiliated Federated Development Corp (who at the time owned MAXXAM, though now its reversed, I believe), announced plans to be a large development called MIRADA, which included a Ritz Carlton Hotel and estate housing for the wealthy, in Rancho Mirage, California. MAXXAM faced resistance because there were three lambing grounds for the at-the-time endangered (listed) bighorn sheep. There was also a voter referendum passed 55%-45% by the citizens of Rancho Mirage, in which zoning variances would be prohibited to allow the construction to take place. The Bighorn sheep is the official symbol of Rancho Mirage, even being embossed in their business cards.

MAXXAM filed a $240 million lawsuit against the city council members of Rancho Mirage in a successful effort into intimidating them not to follow the voter's dictum. The Council backed down and in a "compromise," the luxurious hotel got built, permits to construct approximately 160 estate homes were granted, and in return, MAXXAM ceded 3000 acres to the city to be a Bighorn preserve.

In the news today, we are learning that a new suit has been filed by MAXXAM against the town of Rancho Mirage. Recently, the city council donated the 3000-acre preserve to the Bighorn Institute of Palm Desert, a non-profit organization dedicated to maintaining Bighorn habitat. MAXXAM contends that it gave the land to the town and not to the preserve and has filed suit to reverse the deal. In the meantime, the city council voted to offer MAXXAM extended permits to build without even asking MAXXAM to drop the litigation in exchange for permits being issued.

1984-88. MAXXAM acquires United Savings Association of Texas with the assistance of Drexel Burnham and Lambert, who I'm pretty sure, owned between 10-20% of the bank at one time. After inflating it to become the largest S & L in Texas, USAT failed in 1988, become the 5th largest failed S & L in the country, according to Fortune. The FDIC and other regulators are in the final stages of deciding whether to file charges against USAT and its board, who included Charles Hurwitz, CEO and Dr. Barry Munitz, Chairman of the Executive Committee (at the time of the failure) and later CEO, President and Chairman of the Board. (after the failure). USAT's collapse cost taxpayers $1.6 billion. (Source: Wall Street Journal, Fortune, Houston Business, etc.)

1985-present. Maxxam takes of Pacific Lumber Co., providing golden parachutes to some of the old board members after threatening to sue them for doing things like voting to protect the pension fund, a vote which was reversed. MAXXAM's acquisition of Pacific Lumber was engineered and financed by two men who went on to become convicted felons for stock market manipulation, Michael Milken of Drexel and Boyd Jeffries of Jeffries and Associates. Ivan Boesky profited from inside information obtained prior to the Pacific Lumber takeover and made $3 million. He, too, wound up in a federal penitentiary.

By early 1986, MAXXAM had liquidated the old pension to the tune of $55 million in cash, leaving it with approximately $35 million with which to acquire a new one. Against all outside advice given by hired consultants, MAXXAM awarded the new pension to Executive Life Insurance, which had invested heavily in junk bonds. Executive failed in one of the largest insurance company failures in the country and is currently being held in escrow by the California State Insurance Commissioner until a buyer/consolidator can be found. It was revealed after the failure that Executive Life held $350,000,000 of Pacific Lumber Junk bonds. Employees and U.S. Dept. of Labor have filed separate lawsuits over this issue.

MAXXAM is currently making up the difference to the retirees on a month by month basis.

With half a year, MAXXAM had sold off the Welding Operation worth $350,000,000; sold the PL office building in San Francisco worth $35 million; taken $55 million from the pension fund; and announced it would double the rate of cutting of Pacific Lumber's 190,000,000 acres of redwood and douglas fir forests. Both the policies of selection logging (e.g. no clearcutting, and defined as removal of no more than 50-70% of the trees) and sustained yield forestry which were stated as a principle company policies in the Dec. 31, 1984 10K report to the Securities Exchange Commission (SEC), were rescinded. MAXXAM announced it would liquidate 90% of Pacific Lumbers Old Growth Redwood forests (of which it is the world's largest private holder) within 20 years.

In 1987, MAXXAM was cited by California Dept. of Fish and Game for illegally dumping asbestos into the Eel River floodplain. Curiously, no fine was even asked for and MAXXAM reported removed asbestos from the river bar.

In 1988, John Connally, former governor of Texas and former Secretary of the Treasure, joins MAXXAM's Board of Directors to bring international expertise and connections to the corporation.

In 1989, Pacific Lumber opens its newly built co-generation plant that produces electricity from burning wood. The town and mills of Scotia are powered by the plant and all excess electricity must be purchased by PG & E.

In 1989, ABC's television news show 20/20 revealed that in one year Pacific Lumber had actually nearly tripled it cut, as confessed to by Company President John Campbell, who runs the operations out of Scotia, CA.)

1988-present. MAXXAM bought Kaiser Aluminum, using profits from Pacific Lumber Company to partially finance the deal. Owner of Kaiser put MAXXAM in five countries and brought it up to number 189 in the Fortune 500 of 1990. Forbes Magazine reported that the Kaiser deal was helped along by the purchased of $400 million of Kaiser's aluminum by Mark Rich, the "King" of the metal market who is currently on the lam in Switzerland due to a $500,000 reward place on his head by the U.S. government for tax evasion, making him the most wanted man in the U.S. (Wall Street Journal, Forbes)

1991 to present. Barry Munitz, Vice-president and number two man of the MAXXAM empire (according to Chairman of the Board Charles Hurwitz) resigns from MAXXAM to become the Chancellor of the California State University system, the largest university system in the nation, having 350,000 student enrolled. Humboldt State University, of the 20 schools in the system, is one of only two accredited forestry schools in the state (UC Berkeley being the other) and is home to the Redwood Science Laboratory which is the major repository for knowledge of the redwood forest ecosystem. Run in conjunction with the U.S. Forest Service, the Redwood Science Lab employs the services of Dr. C. J. Ralph, the state's foremost expert on the Marbled Murrelet, a robin-sized speedy seabird that nests only the huge branches of the coastal old growth forests of the Pacific Ocean. In 1990 MAXXAM became embroiled in litigation of logging in this bird's habit. In 1992, the bird became a federally listed "threatened" species, following in the footsteps of the spotted owl.

In November and December of 1992, MAXXAM was chastised by a number of government agencies, including U.S. Fish & Wildlife, for logging in Marbled Murrelet habitat without having completed necessary surveys.

Although litigation, direct action protests in the woods and national media coverage have congealed around this logging operation, known as the Owl Creek timber harvest plan, no criminal investigation or prosecution has been instigated at this time.

Simultaneous to the selection of Dr. Munitz' as Chancellor, the State Senator Barry Keene introduced and later passed as Senate-Assembly Joint Concurrent resolution that would make the Chancellor of the CSU system the head of a to-be-formed Center for the Resolution of Environmental Disputes. The Center has recently begun to function and has already handled a lawsuit involving Humboldt County timberlands, although it did not involve MAXXAM.

In mid-1991, Munitz admitted to the Orange County Register that he continued to own large amounts of stock in MAXXAM.

1991. MAXXAM's President, John Seidl, is selected to be a vice president of the Board of Directors of the Nature Conservancy. Seidl resigned from MAXXAM in 1992.

This outline has not even attempted to touch the dynamics of the dozens of lawsuits filed against MAXXAM for wide variety or reasons ranging from land swindles to environmental law violations. Likewise, it has not touched upon the volume of legislation, voter initiatives or public hearings that have surrounded this issue in abundance on every level of government. It has not outlined the volunteer work of dozens committed activists. It has not chronicled the trail of money. It has not chronicled the pain this takeover has put the citizens of Humboldt County through. And it has not attempted to analyze the track record or predict the future intentions of Charles E. Hurwitz and MAXXAM.

One thing is for certain. MAXXAM has designs on California as well as the rest of the world. It is far more than just a lumber company. It will certainly be making bold moves in the future. And it is something we should all take very seriously.