HC - 'IT SHOULDN'T HAPPEN'

Aug. 25, 2005
'IT SHOULDN'T HAPPEN' A low-key victor after a huge win
Maxxam chief Hurwitz matter-of-fact after prevailing in court over government
By TOM FOWLER Copyright 2005 Houston Chronicle
Steve Ueckert/Chronicle

Charles Hurwitz says his company was hampered by the government's legal case against it, which U.S. District Judge Lynn Hughes called "arbitrary, dishonest, exploitative."

For a man who just won $72 million from the government, Charles Hurwitz hardly seemed to be in the throes of celebration Wednesday.

Rather, the Houston financier was low-key and matter-of-fact in discussing the decision by U.S. District Judge Lynn Hughes to penalize the Federal Deposit Insurance Corp. for what the judge called an "arbitrary, dishonest, exploitative" lawsuit against Hurwitz.

"We never want the government to have another one of these lawsuits like this that lets them, just on a punitive basis, go after people without having a good background to do so," Hurwitz said. "It shouldn't happen."

Hurwitz and the companies he controls, Maxxam Corp. and Federated Development Corp., were accused by the FDIC in 1995 of furthering the $1.6 billion collapse of a Texas savings and loan in 1988. The suit, and another by a sister agency, the Office of Thrift Supervision, were filed despite warnings by internal and external counsel that the cases would not hold up in court.

Both suits were later dismissed, with Hurwitz paying just $206,000 in one case.

He filed a countersuit against the FDIC claiming the legal battles were really an effort to force the company to give up thousands of acres of old-growth redwood forests in Northern California.

Hughes ruled in his favor last year and issued a lengthy and spirited opinion against the FDIC on Tuesday, ordering a $72 million payment to Hurwitz for legal costs and interest.

FDIC officials described Hughes' decision as "one of the most imaginative and colorful opinions in banking law that has ever been written," and said the agency plans to appeal.

Spokesman David Barr noted that the U.S. 5th Circuit Court of Appeals has overturned two decisions of Hughes' related to the case, namely his allowing the unsealing of two documents.

"We're confident that history will repeat itself," Barr said.

Hurwitz seemed to doubt if the FDIC would do so, however.

"I know that's what they're saying, but we'll see," Hurwitz said.

Maxxam is a holding company for a variety of businesses, ranging from lumber to high-end residential construction to horse and dog racing parks.

The company is a majority owner of bankrupt Kaiser Aluminum, and has been in other industries, including energy, sugar and one that made women's dress patterns.

Hurwitz is a majority owner of Maxxam.

Shares of Maxxam closed up $2.56 on Wednesday to $29.01.

Hurwitz said the decade-long case took its toll on him personally, saying it was " ... pretty heavy duty to be sued by the government for $1 billion."

Maxxam was also hampered by the legal actions.

"I think it's changed the way I thought about running a company for a while because we had this big $1 billion potential liability from the government," he said. "And that limits certain things one can do. We've been a lot quieter in the last few years than we were before."

Despite efforts to remain low-key, controversy seems to find Hurwitz companies.

Kaiser Aluminum has had labor strife as it struggled under the burdens of asbestos litigation.

And his Ritz-Carlton Rancho Mirage Hotel California was built in 1988 only after a fight with environmentalists and wealthy neighbors.

When Maxxam purchased Pacific Lumber in a leveraged buyout, Maxxam increased its tree harvest rate when it realized the company's holdings were much larger than original estimates.

Environmental groups accused the company of irresponsible practices and waged a bitter and personal war against Hurwitz. The Web site www.jailhurwitz.com was just one example of the intensity.

Hurwitz defended the company's operations, saying that after it sold a huge stand of old-growth forest to the state of California for preservation, it agreed to follow very tough environmental practices.

"We certainly would like for them to appreciate more of what we're doing," Hurwitz said of his opponents in Northern California. "We feel pretty good about the way we run our businesses. We're a long-term investor, and we've invested a lot of money in these companies. I think we've done well over the years."