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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.

The co-defendants repeatedly charge that various internal memos and documentary evidence the feds cite in their suits are quoted out of context, misunderstood or misrepresented, and they also offer the same catch-all defense any child knows to try in a pinch: it wasn't our fault and, besides, everybody was doing it. Their joint response states: "United Savings' problems stemmed primarily from the depressed real estate market in the areas served by United Savings in the early 1980s and from other forces beyond its control that resulted in the failure of every similarly sized thrift and many of the largest bank holding companies in Texas."

Hurwitz's co-defendants in the OTS action responded jointly with him to the charges, and declined to return phone calls from the Press to elaborate in their defense. However, some of United Financial Group's old annual reports and shareholder communiques offer an unintentionally humorous insight into what some of the players might have been thinking, back when the game was still in full swing.

In UFG's 1987 10-K report to the SEC, Jenard Gross -- who doubled as president of both United Savings and its parent, UFG -- made this pledge to stockholders: "I will not suggest to you that we have the answer to making United profitable in 1988 E. I can and will promise you, however, that our management team is of such strength and character that we will make the most out of this environment."

That they did. Although the thrift failed within a year, the directors and officers collected millions in paychecks and severance bonuses for three more years. Court documents show these payments included almost $1 million cash paid out to Barry Munitz, now chancellor of the California State University System, and the forgiveness of principal and interest on a $835,000 loan UFG had made to Jenard Gross.

To make sure United Savings would be able to pay these exorbitant salary contracts and golden parachutes, court documents show the officers stashed $6.6 million in an escrow account just ten weeks before the thrift failed so shareholders couldn't get hold of it. At the time, United was so wobbly it could ill afford to have any money siphoned off. But even after receiving written notice from regulatory watchdogs that the golden parachutes and bonuses were illegal, the board granted them anyway, and gift wrapped them in blanket indemnifications to boot.

If Hurwitz and his friends are guilty of anything, it may be of having gone right up to the legal limit and then leaning way, way over the line. While such actions may not be technically illegal, they could easily be unethical. Can you go to jail for unethical behavior? Probably not. Can you be stripped of millions in assets for shaving the line a bit too close for the comfort of a particular judge and jury? Maybe.

"Hurwitz was always within the boundary of the law," says ethics and environmental studies professor Newton. "But he is a perfect example of how it is possible for a person to be ethical at one level and totally unethical at another. He's like a robber baron who coaches Little League and is a great father on his own time. He does not have the foggiest idea that what he's doing from 9 a.m. to 5 p.m. Monday through Friday has a terribly damaging effect on the public."

"But Hurwitz must have gotten a clue somewhere along the line that ethical considerations are a problem for him, because he does walk the line so carefully," Newton adds. (This opinion, incidentally, has earned the professor the attention of Maxxam's lawyers. After a case study she had presented on Hurwitz, Maxxam and Pacific Lumber at a business ethics seminar was published in a collection of academic essays, Newton received threatening letters designed to muzzle her from Maxxam general counsel Anthony Piero. Of all the corporations and executives profiled at seminars conducted by the Center for Business Ethics in the past 20 years, only Maxxam has threatened to sue over its portrayal.)

The question of whether or not someone can be held liable for operating in a moral gray zone may be one reason Hurwitz is trying so hard to consolidate the OTS case into the FDIC case. While there is the temptation to view the FDIC and OTS actions as duplicative, there are substantial differences between the two. First and foremost, the FDIC action is a true lawsuit against Hurwitz alone, which will be tried in Judge Lynn Hughes' federal district court in Houston. The OTS case is an administrative court action against Hurwitz, his companies and the officers and directors of United Savings, which will be heard in front of an administrative judge in Washington, D.C., where the government's case may presumably be a bit easier to prove. Hurwitz has filed papers with the federal district court in Houston seeking to combine the two actions in his own home court.

Maxxam's Irelan insists that request is a practical matter. First, the company would like to hold down legal costs and defend only one trial. But more important, Irelan says, if Hurwitz loses to the OTS in administrative court, he will appeal to the nearest federal district court, and the FDIC case already is in the federal courts system. "Why go through an administrative action when you already have the whole subject before a court?" Irelan says.

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