By Camilo Smith
By Craig Malisow
By Jeff Balke
By Angelica Leicht
By Jeff Balke
By Sean Pendergast
By Sean Pendergast
By Jeff Balke
Info:Correction date: May 23, 1996
The Case Against Hurwitz
In one of the last big S&L cases from the '80s, two federal agencies are pursuing Charles Hurwitz over the failure of united Savings. And for once, Hurwitz may have no place to hide.
By Laurel Brubaker Calkins
On a crisp, midwinter day on the University of Texas campus, Houston financier Charles Hurwitz's famously pained smile was growing more pained by the moment. Beads of sweat were faintly detectable on his forehead, and his knuckles were noticeably whitening as he gripped the sides of the lectern.
Clad in his trademark dark pinstripe suit and starched white shirt, the CEO of Houston-based Maxxam Corp. was trying to lecture fledgling MBAs on -- of all things -- business ethics. But he was repeatedly interrupted midsentence by the muffled shouts of protesters surrounding the lecture hall. Accompanied by the drumming of angry fists on the wall outside and by the crackle of police walkie-talkies bleeding into the auditorium's sound system, Hurwitz's high-minded speech descended rapidly into farce.
Hurwitz struggled grimly to a conclusion and then took a few questions from the audience. To his obvious consternation, the students peppered him with accusations lifted straight from the protesters' fliers. Hurwitz nervously dodged several pointed queries, then stopped abruptly and fled -- pale and shaken -- out a back door to avoid the protesters.
It was the first time Hurwitz had come eye to eye with his most vociferous opponents, and the confrontation clearly rattled him. He had gone to Austin in that February of 1990 expecting to encounter only a sympathetic audience of business students. The lecture was the idea of his longtime mentor, George Kozmetsky, former dean of the UT business school and a board member of Hurwitz's Houston-based United Savings Association, which was Texas' largest thrift until it collapsed in 1988 at a cost to taxpayers of $1.6 billion.
Instead of a receptive student audience, Hurwitz was blind-sided by more than 40 protesters from the fringes of the environmental movement, some of whom had flown in from California strictly to heckle the reclusive corporate raider over the redwood logging practices of Maxxam's Pacific Lumber. Chanting "Axe Hurwitz, not the redwoods" and "Redwoods, not deadwoods," the protesters were barred from the lecture hall. But they busied themselves outside, picketing on the sidewalks and singing protest songs, keeping time with the music by beating on the auditorium walls.
One of those booing Hurwitz that day was Neal Tuttrup, an Austin landscaper and member of Earth First!, who got a glimpse of Hurwitz as he scurried from the rear of the lecture hall under police escort and dove into a waiting red Camaro with the license tag "CHEERZ." The activist gleefully recalls the fear in Hurwitz's eyes as the Camaro squealed away from the curb, racing off toward the highway that would take him back to Houston.
"I don't think he was used to having to deal with his opponents so directly," Tuttrup says, grinning at the memory. "He looked like a cornered rat."
Not that combat and opposition were anything new to Hurwitz. He's been dogged by angry investors and government regulators for almost his entire business career. But today, Hurwitz is the target of two different federal agencies that are pursuing what are expected to be the last big legal cases arising from the savings and loan debacle of the 1980s. And Hurwitz is finding it isn't so easy to duck out the back door, when it is federal regulators -- instead of a mob of disruptive protesters -- who are chasing you.
Charles E. Hurwitz, 55, rides at the helm of an aluminum, real estate and forest-products conglomerate that has been cobbled together over the past 15 years through a combination of junk bonds, hostile takeovers and steely nerves. With assets of $3.8 billion and 1995 revenues of $2.57 billion, Maxxam Inc. is one of the largest industrial concerns in America. Yet few people have heard of it, even here in its hometown.
That low profile could change dramatically later this year, when federal regulators plan to haul Hurwitz into court to face the most serious charges of his career. He stands accused by the Federal Deposit Insurance Corporation and the U.S. Treasury Department's Office of Thrift Supervision of running his old savings and loan into the ground for the personal benefit of himself and his friends.
The alleged wrongdoings took place in the mid- to late 1980s, but the case against Hurwitz and the officers and directors of United Savings has taken almost a decade to wend its way to court. Once there, it will likely prove the fight of Hurwitz's life. While he has not been accused of any activity that could send him to jail, Hurwitz might nonetheless end up stripped of many of the possessions he has toiled a lifetime to accumulate. The asset that die-hard environmentalists want most to see wrestled from Hurwitz's grip is a grove in California's ancient redwood forests, which Maxxam came to possess through a controversial chain of transactions that lies at the heart of the government's case against him.
The $1.6 billion failure of United Savings wasn't the biggest thrift crash Texas saw; Gibraltar Savings Association actually holds that record, costing taxpayers more than $5 billion. But for perspective, it should be noted that United's failure cost 26 times more than the $60 million collapse of Madison Guaranty, the Arkansas S&L that is the centerpiece of the Whitewater affair.