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Office of Thrift Supervision NEWS February 10, 1999 FORMER TEXAS THRIFT OFFICIALS SETTLE OTS CHARGES; HURWITZ HEARING RESUMES Washington, D.C., Feb 10, 1999- Five former directors and officers of failed United Savings Association of Texas (USAT) settled charges brought against them by the Office of Thrift Supervision (OTS), ending their involvement in an enforcement case in which Charles Hurwitz and two companies he controls- MAXXAM Inc., and Federated Development Co.- also are respondents. The five officials- Barry A. Munitz, Jenard M. Gross, Arthur S. Berner, Ronald Huebsch and Michael Crow- without admitting or denying the charges, agreed to a cease-and-desist order that imposes restrictions on any future affiliation they may have with a federally insured depository institution. They further agreed to pay restitution totaling $1,030,000. The settlement leaves Hurwitz as the only individual respondent in the case, along with his two companies. A hearing in the case resumes February 10 in Houston before Administrative Law Judge Arthur L. Shipe. The hearing originally began Sept. 22, 1997, and recessed twice since then, the last time in October 1998. OTS filed the charges on Dec. 26, 1995, and is seeking the prohibition of Hurwitz and restitution from him and his companies. OTS said it agreed to the settlement because the cease-and-desist order precludes the five respondents in the future from participating in the kinds of activities that brought about the OTS charges. The agency also said the restitution is suitable in view of their individual financial condition. In addition to cease and desist provisions requiring them not to engage in any unsafe or unsound practice or breach of fiduciary duty, the five must not participate in decisions on compensation plans of officials and employees at an institution, the purchase or sale of mortgage backed securities, any investment decisions, or the filing of any application or report with a federal regulator. Further, Munitz, Gross and Crow will not be allowed to participate in commercial real estate loan or investment activities, Berner will not be able to provide legal advice on thrift regulatory matters to an institution or its employees, and Crow may not serve as a chief financial officer of an insured depository institution. The enforcement case involves allegations of violations of minimum capital requirements and transactions with affiliates laws, unsafe and unsound real estate lending and compensation practices, making false statements concerning control and unsafe and unsound trading in securities. The thrift failed on Dec. 30, 1988, at a cost to the federal deposit insurance fund of more than $1.6 billion. ### MAXXAM Press Release 2/10/99 Contact: Robert Irelan (713) 267-3722 SETTLEMENT REINFORCES CONTENTION THAT OTS/FDIC LITIGATION IS DRIVEN BY ENVIRONMENTAL PRESSURES, NOT BANK FUND REPLENISHMENT HOUSTON, Texas, February 10, 1999- Attorneys for MAXXAM, Federated Development Co., and Charles Hurwitz said that a civil suit settlement reached by the other five respondents and the Office of Thrift Supervision (OTS) reinforces their contention that the complaint relating to a savings and loan association which failed in 1988 is an attempt inspired by environmental activists and some of their political allies to extort the assets of MAXXAM's forest products subsidiary, The Pacific Lumber Company. "We have said from the beginning that the suit had no merit and that its true purpose was to create a threat of liability that might be used to pressure Pacific Lumber into giving up the Headwaters Forest of old growth redwoods and other parts of its land," said J.C. Nickens, an attorney who represents MAXXAM and Mr. Hurwitz. "The fact that the government settled its claims with the respondents who were responsible for the management and day-to-day operations of the financial institution for a minuscule fraction of the amount it had sought and a small fraction of the amount it has spent speaks volumes about what was really behind this meritless suit." The settling respondents had served as: president and CEO of the savings and loan, United Savings Association of Texas (USAT), and the holding company, United Financial Group (UFG), and as chairman of the board of USAT; chairman of the executive committee of USAT and UFG; chief financial officer of USAT and UFG; general counsel and corporate secretary for USAT and UFG; and executive vice president of investments at USAT. The only remaining respondents are Mr. Hurwitz, who was not involved in the savings and loans' day-to-day operations, and the two unrelated companies whose boards he chairs, both of which happened to be minority shareholders in the holding company, UFG. The OTS filed suit against the respondents in December 1995, seven years after the thrift went into receivership. After 107 days of hearings spread over more than a year, the OTS finally rested its case in October 1998. MAXXAM, Federated, and Mr. Hurwitz open their defense today (February 10). "The OTS has failed to prove a case and this settlement with the five individual respondents is a monument to that failure," said Richard P. Keen, an attorney representing Mr. Hurwitz and Federated. Despite damage claims in excess of $1 billion and despite having spent many millions of dollars pursuing the case, the OTS has settled with the individuals who were primarily responsible for the operation an management of the institution for $1,030,000. This amount is significantly less than the legal fees necessary for the respondents to complete the case. "The stated purpose of the OTS suit is to replenish the Federal Savings and Loan Insurance Corporation (FSLIC) Resolution Fund," Mr. Keeton said. "The large amount spent by the OTS and FDIC in pursuing this matter, coupled with the comparatively small amount of the settlement, and the continued pursuit of Mr. Hurwitz, Federated and MAXXAM, clearly indicate a purpose contrary to replenishing the fund. This suit is about federal government extortion, harassment, and bullying. It also is a huge waste of taxpayers' money." USAT was one of many financial institutions that failed in the 1980s as a result of the crash of Texas real estate, the oil recession, and interest rate volatility. MAXXAM, Federated, Mr. Hurwitz and other stockholders lost their entire investments in UFG. During the OTS hearing, each of the settling respondents denied under oath any wrongdoing by themselves or any other respondent, including Mr. Hurwitz, MAXXAM, or Federated. Government documents were put into evidence showing that banking regulators had praised USAT's management until shortly before deciding to place the thrift into receivership and to deliver it to new ownership. On January 22, 1999, a suit making similar allegations and concerning the same savings and loan was dismissed as "abusive litigation" by Federal District Court Judge Lynn N. Hughes. Costs were awarded to the defendants, including MAXXAM, Federated Development, and Mr. Hurwitz. Judge Hughes characterized the plaintiff's case as "Regurgitating political half-truths."
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