The Six-Degree Suit
Just as all actors seem to have a link to Kevin Bacon, it appears that all of the past decade's notorious news events can be tied to a bizarre court case between the Federal Deposit Insurance Corp. and the millionaire developer Charles Hurwitz.
These events include the savings and loan crisis, an alleged government conspiracy to steal endangered redwood trees, President Clinton's controversial pardon last year of the fugitive Marc Rich, and the attempted breakup of Microsoft Corp.
The legal scuffle also threatens to become a precedent-setting case in which law firms cannot claim attorney-client privilege for their lobbying activities.
It started in 1995, when the FDIC sued Mr. Hurwitz for "gross misconduct and breach of duty of loyalty" as the principal shareholder of the failed United Savings Association of Texas, which cost $1.6 billion to resolve and still stands as one of the most expensive failures in history.
Mr. Hurwitz's countersuit alleged that the FDIC was in league with Clinton administration environmental officials who wanted to force him to sell his prized California forest to the government.
Fast forward to a court hearing two weeks ago on whether it was legitimate for the FDIC to subpoena Mr. Hurwitz's lobbying firm, Patton Boggs LLP, for any papers connected with its efforts to convince Congress and the media that the agency was trying to steal his trees. FDIC lawyers argued that Patton Boggs, a law and lobbying firm, first proposed the debt-for-nature swap, and that the firm's documents will prove there was no conspiracy.
In its response, Patton Boggs said, among other things, that its papers should be protected by attorney-client privilege.
The issue was left to Judge Thomas Penfield Jackson - the same judge who ordered the breakup of Microsoft - to decide in the U.S. District Court for the District of Columbia on July 25.
In the agency's argument, Jack Smith, the counsel representing the FDIC, referred to a case last year in a federal district court in New York in which a grand jury sought a lobbying firm's documents and testimony from attorneys who had lobbied to secure a presidential pardon for Mr. Rich.
That lobbying firm contended that, since it was also a law firm, its documents and employees were protected under attorney-client privilege. The judge in that case ruled that the lobbying firm's documents were not protected.
Though Judge Jackson hinted that he agreed with the FDIC's argument that lobbyists do not have protection, even if they are lawyers, he did not appear inclined to set any precedents. Instead, he ruled in favor of the agency on a related but different issue - that any claim to privilege was null and void because Patton Boggs had shared the documents sought by the agency to third parties, such as members of Congress.
But the case was hardly a clean victory for the FDIC. Patton Boggs persuaded Judge Jackson to stay the order until Sept. 1, pending an appeal to a Dallas judge.
Stay tuned. A connection to the Enron Corp. disaster could be next.
Don Dot-Com
Call it the chairman's board.
When Don Powell became the head of the Federal Deposit Insurance Corp. almost a year ago, he promised that he would listen to any concerns raised by employees or bankers. His latest effort shows that he is trying to take that pledge to a new level.
A month ago Mr. Powell began soliciting e-mail on ways to reduce regulatory burdens, and then began posting his responses on an online bulletin board. But since that effort began, the questions have become more free-ranging, addressing issues such as deposit insurance reform, exam procedures, the Community Reinvestment Act, and even the Federal Reserve Board's Regulation O.
FDIC officials said that he opened the board as a way to give bankers a chance to ask him direct questions about policy.
"Just e-mail to Don Powell, anonymously if you want to, and we'll take a look at it," one FDIC official said. The e-mail is burdenreduction@fdic.gov.
Fed Appointees
The Senate on Wednesday evening approved by voice vote the nominations of Ben S. Bernanke and Donald L. Kohn to the Federal Reserve.
Mr. Bernanke, an economics professor at Princeton University, will serve the remainder of a 14-year term that will end Feb. 1, 2004. Mr. Kohn, a senior Fed aide, will serve the rest of a term that began on Feb. 1 of this year. Once they are sworn in, it will be the first time May 1998 - except for a three-week period in December - that the Fed's seven-member board has been at full strength.
