A maverick former savings and loan executive who has tangled with regulators for more than a decade, accused the federal government of trying to steal his forest, and enlisted the help of Congress, may have finally won.
An administrative law judge ruled Wednesday against the Office of Thrift Supervision on all 12 counts of a lawsuit against Maxxam Corp. of Houston and its chief executive officer, Charles Hurwitz, that stemmed from the failure of a Texas thrift.
The ruling by administrative Judge Arthur Shipe is not binding, however, and a final decision on the case will have to be made by OTS Director Ellen Seidman or her successor.
The agency sued Maxxam six years ago for $820 million of damages for the failure of United Savings Association of Texas, which cost the thrift deposit insurance fund more than $1.6 billion when it collapsed in 1988. Maxxam was a key investor in United Savings parent company.
Judge Shipe wrote that the OTS should not win any money and minced no words in throwing out each of the agencys claims against Maxxam, including that Mr. Hurwitz had mismanaged the thrift and profited from its demise. The various claims of incompetency, and the related contentions that USAT, because of Mr. Hurwitzs derelictions, lacked appropriate trading tools, that the portfolios were poorly structured ... are not supported by credible evidence, the ruling said.
An OTS spokesman declined to comment on the recommendations because the administrative case is still active.
Ms. Seidman faces a tough choice. If she adopts the judges recommendations, the agency will lose one of its most expensive cases against a failed thrift at the same time that it is under fire for its handling of the recent failure of Superior Bank FSB of Hinsdale, Ill. But if she overrules the judge, which would be rare in these type of cases, Maxxam almost certainly will appeal to the federal court that has ruled against the agency previously in this matter.
Representatives for Maxxam were quick to praise the ruling.
This is a major victory for us, said Joshua Reiss, vice president of communications for Maxxam. On each and every charge, Judge Shipe found the governments argument to be meritless. There has never been a case before to our knowledge where Judge Shipe ruled in favor of a corporation. This is a body blow to the OTS.
It was unclear what effect, if any, the recommendations would have on another case involving Mr. Hurwitz and federal regulators. Mr. Hurwitz sued the Federal Deposit Insurance Corp. last year, claiming it had illegally funded and coerced the OTS into suing his company in 1995. He claimed that the FDIC wanted to put pressure on him to sell 63,000 acres of environmentally sensitive redwood forests in Northern California to the federal government. The land was owned by a Maxxam subsidiary.
The FDIC, which declined to comment for this article, denied wrongdoing in a House Resources Committee task hearing in December.
The facts simply do not support the allegation that the FDIC was part of some government conspiracy, testified William F. Kroener 3d, the FDICs general counsel.
Mr. Hurwitz had been successful in enlisting the help of then Resources Committee Chairman Dan Young, R-Ark., who called the hearings and issued a report that largely condemned the agencies for their actions against Maxxam.
Company representatives continue to claim that the only reason the agencies pursued any case against Mr. Hurwitz and his company was to get the redwood trees.
This was always about redwood trees, Mr. Reiss said. But for pressures to create a debt to exchange for redwood trees, neither lawsuit would have been filed.
Though Judge Shipes ruling did not specifically address that accusation, his 248-page ruling rejected all of the OTS reasons for bringing the case. For example, he dismissed the claim that there were deficiencies in the underwriting of loans to business associate of Mr. Hurwitz because of improper management practices.
There has been no showing that the losses pertaining to these loans resulted in the unjust enrichment of respondents, or others, or from the reckless disregard of any law, regulation, or order, the judge said. There is no plausible basis for imputing any alleged underwriting deficiencies with respect to these loans to respondents.
