Magazine article American Banker

End in Sight to '88 Failure Suit

Magazine article American Banker

End in Sight to '88 Failure Suit

Article excerpt

One of the last active lawsuits stemming from the savings-and-loan crisis of the 1980s may be drawing to a close.

A federal judge in Houston is scheduled to hold a last round of questioning today in the suit, which pits the Federal Deposit Insurance Corp. against Charles E. Hurwitz, an industrialist and financier who controlled United Savings Association of Texas when it collapsed in December 1988. The failure of the $4.6 billion-asset Houston thrift cost the FDIC $1.5 billion, making it the nation's 17th most expensive bailout.

Mr. Hurwitz, the chairman and chief executive officer of Maxxam Inc., wants Judge Lynn Nettleton Hughes of the U.S. District Court for the Southern District of Texas to order the FDIC to reimburse Mr. Hurwitz for money he spent defending himself against the agency.

The FDIC filed a lawsuit in 1995 that accused Mr. Hurwitz of fiduciary negligence in United Savings' collapse. It sought $250 million of restitution but dropped the suit in late 2002.

A spokesman for Maxxam -- the successor to a company Mr. Hurwitz used to buy a large stake in United Savings' holding company -- said Mr. Hurwitz has spent $40 million on legal fees and is asking the court for $60 million to account for lost interest. If he rules against the FDIC, Judge Hughes could issue further sanctions against it that would be similar to punitive damages. An FDIC spokesman said that any judgment against it would be paid from the Federal Savings and Loan Insurance Corp. …

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