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Headline: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.

Central to both the FDIC and OTS cases is the allegation that Hurwitz set in motion a complicated chain of interrelated financial transactions -- with the help of Milken and Drexel Burnham -- which effectively freed up United Savings' federally insured deposits to fund Hurwitz's hostile raid on Pacific Lumber.

Federal regulators contend that from 1984 through 1988, United Savings bought $1.4 billion of Milken's junk bonds as an incentive for Milken to peddle $1.8 billion of Maxxam's takeover bonds to other Drexel clients.

Such a cozy relationship is called a quid pro quo, or a related-party transaction -- a type of mutual back-scratching that is written off as standard procedure in most good old boy circles. But while thrifts are legally permitted to buy junk bonds, the law specifically bars them from buying bonds from people they are already doing business with. That's because thrifts play with Other People's Money -- federally insured deposits. After all, if the government has to take the fall for the losses, where is the incentive for thrift managers to sidestep junk-grade investments and deadbeat borrowers?

Both the FDIC and OTS claim Hurwitz accomplished the alleged Drexel Burnham sleight of hand by his command of United Savings' boardroom. Hurwitz denies having legal control of the S&L, but regulators firmly believe he had actual control through a combination of stock and options owned by his family and by Hurwitz friends who also sat on the thrift's board and/or did business with Hurwitz's various companies.

SEC filings show Hurwitz and his family owned 23.3 percent of United Financial Group (UFG), which in turned owned 100 percent of United Savings. Hurwitz associates Kozmetsky and Gross both held sizable blocks of UFG. And up to 9.6 percent more of UFG's stock was parked at Drexel with Michael Milken. Both Hurwitz and Drexel held options that could be converted into additional shares of common stock. So, counting stock and options, Hurwitz had effective control over more than 35 percent of the stock of United Savings' parent company. From a practical standpoint, other directors would be hard-pressed to ignore the wishes of such a powerful shareholder, even if they wanted to.

The feds certainly have no doubts that Hurwitz ran the show. Take a deep breath and follow along as the FDIC lays out the thrift's chain of command in its suit:

"Hurwitz was the controlling force of United Savings, UFG, MCO and Federated," the FDIC suit contends. "He was the controlling shareholder of Federated which, in turn, was the controlling shareholder of MCO. Through MCO and Federated, which held significant stock ownership in UFG, Hurwitz was a controlling shareholder of UFG and United Savings. He was the chairman of the board and chief executive officer of UFG, MCO and Federated. He also served as UFG's president and was a member of UFG's executive committee and the UFG/United Savings strategic planning committee. Hurwitz was also a de facto director and senior officer of United Savings and voluntarily assumed the responsibilities of an officer and director of the institution. He functioned as an active member of the United Savings board, if not its de facto chairman. He directed and controlled United Savings' investment activity; he regularly attended board and committee meetings; he selected United Savings' officers and directors; he controlled and dominated virtually all of United Savings' activities. No significant decision concerning United Savings' affairs was undertaken without his approval."

In a 1992 interview with Houston Metropolitan magazine, no less an authority than onetime S&L owner Bob Lanier dismissed the notion that Hurwitz didn't run United Savings. "Come on," Lanier was quoted as saying. "You know how these things go. It was Charles who called the shots." (Lanier declined to return repeated phone calls for this story.)

Hurwitz, of course, denies he has done anything wrong and is reportedly puzzled that his character has been called into question over matters that took place so long ago. Rather, he prefers to characterize his role in the failure of United Savings as that of a mere "investor" who lost his stake along with everybody else in the great Texas S&L crash.

"Charles Hurwitz and Maxxam have been portrayed as the controlling influence in United Savings, but Maxxam was an investor, as was Federated Development," stresses Irelan, who begins to sound like a broken record if you talk to him long enough. "If you take those two investments and add them together, you get something on the order of 23 percent. That doesn't constitute control. Maxxam was a shareholder. We were an investor, and United Savings turned out not to be a good investment."

Hurwitz's opponents say that argument handily ignores the reality that many of United Savings' directors and officers owed their livelihoods to Hurwitz and also held stock in the thrift's parent company. "If you work for an organization that has anything to do with Hurwitz, you work for Hurwitz," says Bob Martel, a Northern California attorney who is suing Hurwitz and Maxxam on many of the same charges raised by the two federal S&L suits. "Hurwitz ran this thing completely and totally. No one did anything without his approval."

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