NCJ - Schectman sounds off on Dikeman, Hurwitz

Schectman sounds off on Dikeman, Hurwitz

by KEITH EASTHOUSE

Steve Schectman sat down with the Journal the day after last week's televised debate on the Gallegos recall. Speaking at his Arcata office, the environmental attorney expressed outrage at Pacific Lumber's financing of the recall effort. He also raised strong objections to the manner in which one of his competitors, replacement candidate Worth Dikeman, a deputy district attorney, is conducting his campaign.

Additionally, he displayed a detailed knowledge of the inner workings of the Maxxam corporation, which owns Pacific Lumber and is headed by notorious Texas financier Charles Hurwitz.

Schectman gained that knowledge in the late 1990s while litigating with Eureka attorney Bill Bertain a settlement on behalf of the residents of the town of Stafford, whose homes were buried in a debris torrent that roared off PL timberlands on New Year's Day 1997.

Among other things, Schectman talked about another Hurwitz company, Kaiser Aluminum & Chemical Corp. The company, which was driven into bankruptcy in 2002, recently canceled medical and pension benefits for all its employees, union and nonunion, and retirees. The pension benefits are federally insured, but the medical benefits are not.

The Seattle Times, in an editorial, called the move "shameful."

"Under cover of bankruptcy law, a company is taking away benefits from its retired workers who already have earned them and who have no chance to earn them again."

Schectman did not say whether anything similar would happen at PL. But he did use it as an illustration of Hurwitz' ruthlessness.



NCJ: What do you mean when you say that it's clear Worth Dikeman's working with Pacific Lumber?

SS: It's clear that Dikeman is in a position, probably by choice, where he's come to the defense of Pacific Lumber. He believes Pacific Lumber needs protection. He's adopting their strategies. For instance, he has constantly hinted that I have an agenda, and that somehow if I was DA -- which I don't want to be because that would mean Paul [Gallegos] had been recalled -- I would be biased against PL. As if Dikeman's not biased against every criminal defendant he tries. The only bias I would have would be that of someone who's particularly equipped to unravel the web of deceit Maxxam has created to protect itself. Rather than worrying about Pacific Lumber attacking our democracy, having a negative impact on our job base here, he's concerned I would go after them. Here's a guy who's been a deputy district attorney here for 18 years -- you'd think he'd be affronted that a defendant in a case brought by the DA's office is funding a recall, paying for polls. It's unbelievably thuggish behavior, yet Dikeman's not offended by that. He's taken advantage of that. He and PL are at least in a symbiotic relationship, if not in a conspiratorial one.

NCJ: What about the "soft on crime" rap against Gallegos?

SS: [Dikeman made clear in last night's debate that] he believes, as does everyone that works in the office, that there's been no change in the prosecutorial zest or desire to put people away. It's not about crime, it's not about a crime wave, it's about Mr. Dikeman, along with Pacific Lumber, making a power grab.

NCJ: What is the larger significance of this recall election?

If the recall is successful, it will send what we call in law a chill on everyone's free speech. Politicians will be less likely to stand up and do courageous acts -- or the right act. You'll see less free market competition among some of the ancillary businesses related to the natural resources industry. And you'll see a general decline in decorum here. Whenever a bully wins there are consequences to be paid to those who would be bullied. Just like in a schoolyard, if the bully goes uncontained, the other kids will be afraid to go to school. They won't enjoy their experience as much. They will be deprived. And that's not that different from what we're facing here. And it's really sad to see that a guy like Mr. Dikeman, who's supposed to protect us from bullies, is backing bullies.

NCJ: Gallegos is getting second-guessed on everything he handles. Dikeman has been at the DA's office for a long time, has a long track record of handling cases. Anything controversial in his past?

SS: Well, it's no more controversial than Paul's record except it's magnified by the number of years he's been there. Paul has done nothing different than any competent DA would have done. Mr. Dikeman -- and the record bears this out -- has blown lots of cases. You can't try that many cases and be involved in litigation that long and not make some less-than-perfect decisions.

NCJ: Can you cite a couple of examples?

SS: I know he had three trials last year and lost two of them. I also know that [attorney] Ed Denson just won a preliminary hearing because Dikeman apparently called the defense witness in his case without realizing it, and that caused whoever was charged with the crime to be let free. I'm not saying Mr. Dikeman is incompetent. I'm just saying that the allegations that are being made against Paul can be made against anyone, maybe a lot more successfully. And that just goes to show the lie that the recall is based in any part on his being soft on crime.

NCJ: I've had the impression Dikeman is a particularly fierce prosecutor when it comes to medical marijuana cases.

SS: I did a [medical marijuana] case against Dikeman. [It had to do] with medical marijuana pioneer Bobby Gofort. What was particularly underhanded in that case was that in order to get Mr. Gofort to enter a plea bargain, Dikeman charged [Gofort's] wife, knowing full well that his wife had nothing to do with any of the charges that were pending against him. Throughout the proceedings it was always a squeeze maneuver [Dikeman] was doing, trying to make the husband fall on the sword to protect his wife. After we knocked out several charges at [a] preliminary hearing, we entered into a deal where Bobby did no jail time as he should not have done, and his wife, Denise Gofort [whom I represented], had all the charges against her dismissed. She was made to suffer for no reason other than that an overzealous prosecutor was looking to get a plea bargain. It wasn't like he wanted to charge her because he wanted to go to trial. He knew he would have lost.

NCJ: Do you believe Dikeman when he says that if he becomes DA he won't withdraw the PL suit?

SS: I don't think he'll file a dismissal. But there are all sorts of ways to let it die a slow, silent death.

NCJ: Like how?

SS: Like by not vigorously prosecuting it. Like by allowing various litigation maneuvers by Pacific Lumber to be successful. The thing he said last night that disturbed me the most was that it would be good for PL to have its day in court. Why would he say that? When I analyze that, the only thing I can think is that if he's DA, PL will win the case. That's the only thing good that can come of it for PL -- a loss cannot be good. [Usually a prosecutor] would say, "It's good a defendant is going to trial because I'm going to put them away." [Instead] he's saying I think it's good that they get exonerated. What kind of advocate is that? It's scary.

NCJ: Why are you running?

SS: I'm running because I feel offended that this recall is happening. It's really being funded and motivated by Pacific Lumber. And I know what kind of ruthless businessperson Charles Hurwitz is. And I know probably better than most people the corporate structure set up by Maxxam to take over Pacific Lumber, to take over Kaiser [Aluminum]. I know what he's done to the workers at Kaiser, how he's ruined over 3,000 families [in Washington, New Jersey and Louisiana] at Kaiser.

NCJ: What has he done at Kaiser?

SS: Hurwitz has made his living in large part by taking over entities that have some wealth, transferring that wealth through a series of corporations up to his Maxxam, which then transfers it to the Hurwitz family trust, leaving ruin in his wake. When he took over PL, the company was cash-rich, resources-rich and had no debt. There's more debt on PL today than the day he took over. But he used the value of PL to leverage a buyout of Kaiser Aluminum.

NCJ: Talk about the Stafford lawsuit.

SS: I saw that all the cases being brought here [regarding logging on PL land] were against [the California Department of Forestry]. I refused to get involved in that. I'm a bottom-line guy. I said, "Well, who's making money in all this? Follow the money." PL caused this landslide, no doubt about it. And they did it in conscious disregard for the probable dangerous consequences, which is another way of saying they should be held for punitive damages. Why were they [logging so recklessly]? Because of Hurwitz's plan to transfer all the wealth out of Humboldt County and into his pocket. And I wanted him to be liable. So I had to spend years unraveling his corporate structure, piercing the corporate veil, to find out who's really in charge and who's really benefiting. And in the process we learned all about Kaiser and the intermediate corporations, the entities in between, and we unraveled what his economic plan was. For instance, we clearly established that the reason why he lost his timber operating licenses in 1998 and 1999 [for repeated violations of logging regulations] was that he was trying to convince Wall Street to float these timber bonds, which had never been done before. Those were sold in August `98, just before the Headwaters deal became a public issue.

NCJ: I don't get the connection between the bonds and the logging.

SS: He needed to prove to Wall Street that he could get a harvest rate sufficient for them to underwrite the bonds for 30 years out. He sold approximately $1 billion worth of bonds. Actually, $980 million.

NCJ: Why did he want to do that?

SS: To get the cash. Here's his theory, generally speaking: "Give me the cash, you [bondholders] hold the leftovers, and maybe you get paid, maybe you don't. I don't care. I've got the money."

Anyway, he ratchets up the harvest rate in the run up to the [bond] offerings. Stafford was one of the first victims of that. They didn't even care what happened as a result of their irresponsible harvesting. All they cared about was that they got the bonds. Anything else in between was merely the cost of doing business. Hurwitz knew he had a venerable institution here [in Pacific Lumber] that could give him cover to do virtually whatever he wanted to transfer the wealth. So all of a sudden he has 200, 300 violations [of forest practice rules] in a year. We took a deposition of one of the [state forestry regulators]. He said it was like the Cold War, that they, the state, were like the U.S. and Hurwitz's people were like Russia. "They didn't do a thing we said," [the regulator told us]. That's what was going on.

Once the bonds were sold, Hurwitz has all the money from the trees in his pocket. He doesn't care if it operates at a loss. He just needs it to operate for a while, so that when [PL] does go bankrupt, they won't be able to pierce the bankruptcy and look to him for satisfaction.

NCJ: Who's "they?"

SS: The people who are holding the debt. He did the same thing to Kaiser only with different vehicles, but the same overall concept. Transfer the wealth out and into his pocket. Run the company dry, sell it.

By 1998 he sells the bonds. He's got a billion dollars, the money's upstream to him. He knows that. But he's entering into the negotiations for the Headwaters deal. And he can't enter a deal where the government limits the annual harvest to a rate less than Wall Street has already relied on.

NCJ: Say that again.

SS: When he negotiates the Headwaters deal, not only does he want to negotiate a great price [which he succeeds at -- $480 million]. But he has to negotiate an annual yield [of timber] based on [the state's] sustained yield plan and [the federal government's] habitat conservation plan. They are saying that, "We're only going to give you 136 million board feet." He says no deal, because if he does it, he will no longer have any protection from bankruptcy or anything else.

NCJ: Why?

SS: Because he's entered into a deal, which on its face doesn't meet the deal he made with Wall Street to sell the bonds. He has to have at least 180 million board feet for Wall Street. And he knows there's this science going on during the Headwaters negotiations that's saying the sustainable rate is only 136 million board feet. So all of a sudden this bogus plan comes out, this bogus study, the Jordan Creek study, which says, "Oh, guess what, we were wrong all these years -- it slides more on unharvested land than harvested land." It was bullshit, but the government said, "OK, you can get up to 176 million board feet." That's why he needed the false Jordan Creek study -- to give him the opportunity to ensure that he could get government approval to harvest at a rate consistent with his bonding. That's what the DA's case is really a spin-off of.

NCJ: So you've explained the financial reason for the deception that is at the heart of Gallegos' and [Assistant District Attorney] Tim Stoen's case. And what you're saying, basically, is that the only reason that matters under Hurwitz is a financial reason.

SS: Absolutely. He who has the gold rules, as Hurwitz told us right at the beginning.

NCJ: What does Kaiser tell us about what may happen with PL?

SS: The handwriting is on the wall that the resource base will be depleted before all the bonds can be serviced. He'll blame the environmentalists, he'll blame Paul Gallegos, he'll blame you and he'll blame me and he'll be laughing all the way to the Grand Cayman Islands.

NCJ: If he got his money in 1998 from the bonds and in 1999 from the Headwaters deal, why is he still around?

SS: Because he doesn't want a bankruptcy right now. [The operation is] running itself. Why go through the bankruptcy at this point unless he has to? He won't declare bankruptcy. He'll be forced into bankruptcy, like Kaiser was, by creditors.

NCJ: At what point will that happen?

SS: I'd have to look at the offerings again. But I would say within 10 years.

NCJ: And what would be the triggering mechanism?

SS: Failure to meet obligations to various debtors, primarily bondholders, which are primarily now various institutions, large investors.

NCJ: So they're holding the bag.

SS: Yeah, that's what he does. What happens is that if you have three creditors that aren't getting paid, they can petition, they can force you into bankruptcy and have the current ownership removed from the operation of the business. Then a receiver is put in place who will run the business to liquidate the debt for pennies on the dollar.

NCJ: So everyone gets some amount of money, but not nearly what

SS: Right. The only one who gets the full pay is Hurwitz.

NCJ: How has your knowledge about Maxxam, Hurwitz, Kaiser, PL, factored into your participation in the recall race?

SS: I find it reprehensible that someone who has already done so much harm to this county and the workers here, and to workers around the country, would take this bold move to try to bully the DA here simply because he thinks he can. Everyone has to admit, whether they like PL or not, that it's an incredibly in-your-face move to fund the recall.

NCJ: If Hurwitz has been bad for the county, why does PL seem to have so many supporters?

SS: Money. As the man said, he who has the gold rules. The workers are honest, hard-working people. They don't really understand the Wall Street kind of machinations that have occurred here. They just want to do their job, get paid, go home and enjoy life.

NCJ: If it's really Hurwitz who's been dividing the community, then PL's done a pretty good job of scapegoating the environmentalists.

SS: As I often said during the Stafford stuff, if Julia Butterfly Hill wasn't up in that tree, Hurwitz would have put her up there. It was perfect for him. He was able to start talking about how the environmentalists were messing with his ability to conduct business. Basically, he was able to misdirect the microscope from him to a target people in this community could understand, and one they felt threatened by. They're threatened by the counterculture young people coming up here and protesting. So they circled the wagons and said, "Protect your way of life."

NCJ: If you're elected, would you hire Paul Gallegos as your assistant district attorney?

SS: Sure.