"Teflon CEO" Hurwitz Evades Federal Regulators Over Collapse Of Maxxam S&L
March 1, 2003
Charles Hurwitz, the notorious chairman and CEO of Maxxam Corp., proved to be a Teflon corporate raider by evading federal banking regulators investigating Maxxam’s shady business dealings. In October 2002, after seven years of litigation brought by two arms of the U.S. Treasury Dept, Hurwitz settled separate lawsuits alleging misconduct and fraudulent activities. The Office of Thrift Supervision and the Federal Deposit Insurance Corporation initially filed $820 million in claims against Hurwitz, Maxxam, and other corporate executives, over the 1988 collapse and subsequent $1.6 billion taxpayer bail out of United Savings Assoc. of Texas. Maxxam acquired the Texas S&L through junk bond financing. The agencies charged Hurwitz and Maxxam with reckless disregard for the law, self-enrichment, making false and misleading statements, and making unsafe investments. In a major travesty of justice (aka, rip off of the American taxpayers) Hurwitz was fined a mere $206,000 in restitution.
Headwaters activists had for years advocated a “Debt-for-Nature Swap” trading Maxxam’s hefty taxpayer bailout in exchange for preserving thousands of acres of Pacific Lumber’s redwood forest as public land. OTS and FDIC officials seriously considered the debt-for-nature proposal to settle their claims against Maxxam. But those prospects were dashed in September 2001 when OTS Administrative Law Judge Arthur Snipe recommended that Hurwitz and Maxxam be cleared of all charges following a 110-day trial, the longest and one of the most expensive in OTS history, costing the government more than $4 million.
Hurwitz successfully used his political muscle on Capitol Hill to undermine the FDIC and OTS lawsuits, attack the federal banking agencies, and derail the proposed debt-for-nature swap. At Hurwitz’s instigation, Maxxam filed a counter claim against the FDIC last year for “pursuing politically motivated litigation”. Maxxam seeks to recover its $30 million in legal costs incurred during the lawsuits.
Although Hurwitz managed to outmaneuver and evade federal regulators, he failed to pull Maxxam out of its shaky financial position. Maxxam subsidiary Kaiser Aluminum filed for Chapter 11 bankruptcy protection in Feb. 2002 following a bitter labor dispute the company lost to the United Steelworkers Union. Bankrupt Kaiser Aluminum announced in mid-January the “indefinite curtailment” of its aluminum smelter at Mead, WA, which has been offline since January 2001 and once employed nearly 1000 workers. Kaiser’s Trentwood (WA) mill uses other sources and in mid-January Kaiser announced that 9 more of its subsidiaries were bankrupt. And while continuing to log its redwood forest holdings at a frantic pace, Pacific Lumber shut down its sawmill at the timber company’s headquarters in Scotia. Maxxam posted a $69.4 million net loss for the first nine months of 2002, compared to net income of $52 million for the same period in 2001, even while CEO Hurwitz pocketed a $1.8 million compensation package including $786,000 in salary, $910,000 in bonus and $142,000 in "other" compensation.
There remains a $50,000 reward for information leading to the arrest and incarceration of corporate criminal Charles Hurwitz. See jailhurwitz.com.
