WASHINGTON - Former savings and loan association executive Charles E. Hurwitz is expected to file a lawsuit against the government today claiming the Federal Deposit Insurance Corp. illegally funded a suit against him through another federal agency.
The lawsuit, to be filed in U.S. District Court for the Southern District of Texas, counters a 1995 suit the FDIC filed against the former chairman of bankrupt United Savings Association of Texas, according to attorneys for Mr. Hurwitz. The government is suing Mr. Hurwitz and the two Houston-based companies he runs, Maxxam Inc. and Federated Development Co., to recover some of the $1.6 billion it cost to resolve the thrift's 1988 failure. The FDIC is pursuing two cases, one of which was brought by the Office of Thrift Supervision.
Mr. Hurwitz wants the court to stop the FDIC from funding the thrift superviser's case, which it has already provided $4 million. He is also seeking $30 million to cover attorney fees.
The FDIC, Mr. Hurwitz claims, circumvented federal law prohibiting the agency from paying another federal office to prosecute civil claims on its behalf. He argues that the agency used the OTS to bring an administrative hearing against him and his companies to avoid statute-of-limitations restrictions under Texas law.
"This is out-and-out bribery, because you have one agency paying another to do its dirty work," said Jacks C. Nickens, one of Mr. Hurwitz's lawyers. "We have concluded that this is illegal and that there is no statutory basis for the FDIC to extend itself in this way."
The suit will also argue that the agency did not satisfy its own criterion - a better than 50% chance of success - for bringing civil suits against individuals.
An FDIC official on Tuesday said the agency did not violate any laws or its own standards.
"Whatever arguments they want to make about guidelines or whatever, the FDIC's board made the decision to go ahead with this case," said general counsel William F. Kroener 3d.
"There's nothing new here," he said. "This counterclaim comes late in the case, almost five years after the complaint was filed. It comes at a point when the OTS has completed its case and is awaiting a decision from the administrative law judge. That raises a serious question about why they waited so long."