Maxxam fed up with FDIC

Maxxam Inc., the financial conglomerate owned by Houston tycoon Charles Hurwitz, filed an appeals court brief Friday accusing the Federal Deposit Insurance Corp. of stalling the payment of $72.3 million in legal fees and sanctions.

It’s the latest development in a long-running dispute that reaches back to the savings and loan scandals of the 1980s.

Hurwitz, who lost his controlling interest in Kaiser Aluminum Corp. when the metal-maker emerged from Chapter 11 bankruptcy, has been hounded by federal regulators who blame him for the $1.6 billion failure and subsequent bailout of United Savings of Texas.

The FDIC insures the bank deposits of Americans, a role it was created to assume to replenish confidence in American banking following the Great Depression.

The agency sought $250 million in damages from Hurwitz while at the same time the Office of Thrift Supervision sought $820 million.

The agencies contended that Hurwitz used his Texas thrift to buy risky investments including junk bonds from the likes of Michael Milken during the 1980s. They also accused Hurwitz of using his influence over the thrift to fund his 1988 takeover of Kaiser.

Hurwitz fought the allegations that he misused the thrift to make risky investments and instead blamed its failure on real estate losses.

The OTS ultimately settled with Hurwitz for a mere $206,000 and the FDIC dropped its claim after failing to overcome legal maneuvers and powerful political influences.

Hurwitz then decided to pursue a counterclaim, calling the suits bogus and little more than a debt-for-nature political extortion effort led by agents of the Clinton administration to gain control of 4,000 acres of redwood trees owned by another Maxxam subsidiary called Pacific Lumber Co.

Judge Lynn Hughes agreed and handed down what is reported to be among the largest sanctions against a federal agency.

Hughes wrote: “(Maxxam) will recover their costs because the record reveals corrupt individuals within a corrupt agency with corrupt influences on it, bringing this litigation.”

He accused officials of lying under oath and slandering Hurwitz.

The FDIC appealed Judge Hughes’ ruling. The agency said the judge bought into Maxxam’s grand conspiracy theory.

The FDIC has done so on two other occasions in this case, being successful on both.

Maxxam angrily replied Friday.

“The FDIC continues to disregard its numerous rebukes for wasting taxpayer dollars in pursuit of its politically motivated and meritless litigation against a private citizen,” said J. Kent Friedman, Maxxam’s general counsel. “We are confident that the end result of this appeal will be complete exoneration for both Charles Hurwitz and Maxxam with full recognition that the FDIC has squandered its public trust by pursuing a political claim while abandoning any semblance of fairness or responsibility.”

FDIC spokesman David Barr said the agency had not had time to fully go through the brief but “we remain confident in the merits of our case and look forward to this issue being decided by the Fifth Circuit Court of Appeals.”

Hurwitz is reviled by unions and environmentalists alike. Kaiser Steelworkers accuse him of destroying their company – namely by leveraging it to the point that failure was imminent. He was the owner of the company during an illegal 20-month lockout that cost local Steelworkers tens of millions in lost wages. Those wage claims were rendered nearly worthless in the bankruptcy case, which ultimately ate into health care and retirement plans of past and present workers.