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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.

A redwood country native who has dedicated his life to bringing Hurwitz down, Martel says the Humboldt County newspaper he once owned was driven out of business by a Pacific Lumber-led boycott, which was sparked by the paper's anti-Hurwitz editorials. Martel, who has an entire room in his house lined with bookcases and file cabinets stuffed with nothing but Hurwitz-related documents, grew weary of waiting for the government to pursue Hurwitz for the United failure. So he sued Hurwitz, Maxxam and other United Savings directors in 1990 on behalf of the American public, seeking $1.6 billion in actual damages, $4.8 billion in punitive damages and a fine of $10,000 a day "for each day Hurwitz persisted in the lie."

The lie, according to Martel, is Hurwitz's claim that he didn't control United Savings.

Maxxam's Irelan dismisses Martel's $5 billion suit with a disgusted wave of his hand. "It is bizarre E a frivolous lawsuit without any merit," he says. "It has not been joined by the government, though he purports to be suing on behalf of everybody. That should tell you something about its merits."

But one thing the feds and Martel agree on: "Hurwitz had a substantial role in all substantial actions or inactions we've charged (in this case)," claims Richard Stearns, the OTS' deputy chief counsel for enforcement.

That isn't to say the regulators won't have a merry task proving Hurwitz's control of United Savings to a judge and jury. One of the primary problems with proving any accusation or case against Hurwitz is the highly complex structure of Maxxam, a holding company with subsidiary components controlled by interlocking, over-lapping managers and boards of directors. Sometimes, several wholly owned subsidiaries lie between actual moneymaking assets and the parent company, and each group may have a separate layer of financing and collateral. The advantage to this setup is that each company in the pyramid can claim to function on its own; it also makes it particularly difficult to trace which company has which assets and which debts.

A glance at Maxxam's corporate organization chart reminds you of a set of those Russian nesting dolls where, when you take one doll apart, there's another doll inside, and then another and another. Except in Maxxam's case, all the dolls have Hurwitz's face.

"These types of structures are done intentionally, to shield people like Hurwitz from being too closely scrutinized," says Michael Hoffman, director of Bentley College's Center for Business Ethics, located near Boston. "Trying to figure out who owns what and who owes the debts, with so many holding companies and subsidiaries E it is very hard to know where to hit."

Allan Sloan, a Newsweek columnist who has followed Hurwitz for more than a decade, agrees that Hurwitz's elaborate corporate structure is no accident. "You've got to watch what he is doing very closely because his deals are very complicated. He'll lose you in the complexities."

Hurwitz also tends to create single-purpose subsidiaries, which spring up with the frequency of mushrooms after a rain. Sometimes these companies go away after their purpose has been fulfilled. Sometimes, the newly formed entities serve to isolate particular assets from related debts and creditors, so Hurwitz has a better chance of hanging onto them if trouble comes.

For instance, Pacific Lumber was dramatically if quietly restructured after the takeover into three separate companies: One, Pacific Lumber Co., holds title to the land occupied by the company town of Scotia, its sawmills and other operating enterprises. Another, Scotia Pacific Holding Co., carries Pacific Lumber's takeover debt and holds title to essentially all the commercial forests where logging takes place. And a little-mentioned third company, Salmon Creek Corp., holds --debt free -- the deed to the Headwaters Forest, the holy of holies for environmentalists who are trying to wrest it away from Hurwitz.

Beyond charges of reciprocal business dealings with Milken, both the FDIC and OTS accuse Hurwitz of masterminding United Savings' violation of something called the "net worth maintenance agreement," an obscure clause that was applied to United Savings as part of a deal to merge it in 1983 with another thrift that was already under Hurwitz's partial control.

Basically, the clause is a promise by United Savings to keep on hand an adequate financial cushion to protect depositors against losses. The feds say UFG agreed to kick in additional capital if United Savings' financial cushion ever sank below a particular level, specifically $242 million. But the feds say none of the Hurwitz entities ever chipped in a dime to United Savings, even when the thrift's desperate financial condition was unmistakable.

"Notwithstanding this knowledge, Hurwitz failed to report (to regulators) the true net worth of United Savings, continued to take actions that aggravated United Savings' losses and further decreased its net worth," the FDIC suit charges.

When it comes to the net worth maintenance agreement, Hurwitz has played a coy, legalistic game, arguing that the clause does not pertain to him or UFG because he never signed papers the feds sent over to him on the subject. But Hurwitz and his colleagues obviously are taking the allegation seriously, as they spent 12 pages responding to the net worth maintenance charge in their official answer to the OTS action. Among their responses: "We deny that Maxxam or Federated was obligated to infuse any assets into United Savings for any reason. We deny that Hurwitz or Munitz had an obligation to direct Maxxam to pay a non-existent obligation. In fact, as directors and officers of Maxxam, their obligation would be to ensure that Maxxam does not honor meritless claims."

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