Magazine article American Banker

Can FDIC Win Maxxam Case on Its Own?

Magazine article American Banker

Can FDIC Win Maxxam Case on Its Own?

Article excerpt

An Office of Thrift Supervision settlement with a key investor in a failed Texas savings and loan could doom a lawsuit the Federal Deposit Insurance Corp. has filed against him and could cost the insurance funds millions.

In light of the OTS agreement, announced last week, to settle charges against Maxxam Inc., an FDIC spokesman said Monday that it was "reviewing" its suit against Charles Hurwitz, the chairman of Maxxam, which invested in the parent company of United Savings Association of Texas.

"We haven't decided what course of action to take," the spokesman said.

Though the spokesman emphasized that there were key differences between the FDIC's case and the OTS', sources said that the settlement leaves the FDIC without one of its major allies in its battle against Mr. Hurwitz. Since the agencies filed separate suits against him in 1995, the case has engendered a countersuit and a congressional hearing on charges of a federal conspiracy to steal redwood trees.

Mr. Hurwitz has alleged that the FDIC and the OTS brought claims against him in order to pressure him to sell valuable forest land in California. Both agencies have denied the claims. Maxxam is seeking at least $30 million of legal fees from the FDIC.

Judge Lynn N. Hughes, who oversees the case in the U.S. District Court for the Southern District of Texas, had indicated that he was unlikely to rule on the countersuit until the OTS case was finished. A spokesman for Maxxam said the company would inform the judge this week of the settlement.

In the past, Judge Hughes has proven unsympathetic to the FDIC's arguments. He has consistently ruled against the agency and once compared its tactics to those of organized crime.

The FDIC has spent $12.5 million pursuing people behind the failure of United Savings. A spokesman said that amount included $5. …

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