Consider it the Charles E. Hurwitz Relief Fund. After bailing out the Texas dealmaker's failed savings and loan association to the tune of $1.6 billion, the U.S. government is now on the verge of doling out thousands of acres and hundreds of millions of dollars' worth of federal lands to him. The package of properties would include valuable timberlands and may contain such gems as the aptly named Treasure Island, a rare parcel of undeveloped San Francisco Bay real estate recently vacated by the Navy.
Why would the Clinton Administration cut such a deal? Hurwitz, chief executive of Houston-based Maxxam Inc., is currently the target of a Federal Deposit Insurance Corp. lawsuit and an Office of Thrift Supervision complaint alleging mismanagement of the United Savings Assn. thrift, which went under in 1988. He faces potential liabilities in the two actions of nearly $750 million. But Hurwitz, a central figure in the Drexel Burnham Lambert Inc. junk-bond deals of the 1980s, also controls Pacific Lumber Co. and its rare 3,000-acre stand of old-growth redwoods, Headwaters Forest. Hurwitz declined to comment, but he has said in the past that the government actions are "without merit" and asserted that the S&L failure resulted from the collapse of the Texas economy.
GREEN POINTS. Hurwitz has been trying to chop down Headwaters Forest for nearly a decade. But blocked by activists and court actions, he hasn't been able to get at it. He claims the lumber is worth at least $700 million, and he has even filed "takings" suits against the U.S. and the state of California, charging that they have denied his company use of its property. "We expect just compensation," says Pacific Lumber President John A. Campbell. The suits are pending. So Hurwitz now is proposing to swap the forest for federal lands of equal value. And, eager to score green points in an election year, the Administration seems all too eager to take the bait.
It shouldn't. Saving the redwoods and the wildlife they harbor is a critical goal. But the Administration has another option, and so does Hurwitz. If the government dropped the thrift-related charges against Hurwitz in exchange for taking title on the Headwaters Forest, it would limit its costs in the deal. For his part, Hurwitz could rid Maxxam of a cloud that has been a factor depressing its share price for years. He could also achieve a major public-relations coup.
Such a trade may sound outlandish, but the government has resorted to similar solutions before. Starting in the 1980s, for instance, the U.S. federal government released several Latin American countries from debt obligations in exchange for the creation of protected parklands and the like in their countries.
In addition to smacking of election-year politics, the land-for-land proposal creates the risk that by giving Hurwitz prime federal acreage, negotiators could easily wind up giving away too much. Development rights to Treasure Island alone could be worth several hundred million dollars. It doesn't help that handling the talks for Clinton is Deputy Interior Secretary John R. Garamendi, the former California Insurance Commissioner, who may be overly eager to get a deal done. "The door is open for serious negotiations," he says. Hurwitz, on the other hand, is legendary for his brilliant, brinkmanship bargaining tactics.
"ATTILA." Some officials realize what they're up against. Says one close to the talks: "It's a game for Hurwitz. He's rich, powerful, and knows he has the one thing we want." Some insist they have little choice. "If Attila the Hun has the Mona Lisa and you want it back, you deal with Attila the Hun," says Representative George Miller (D-Calif.).
But that is exactly the same flawed logic that the townsfolk adopted in Scotia, Calif., when Hurwitz acquired Pacific Lumber in 1986. For decades, Pacific Lumber thrived as a conservatively managed steward of its forest holdings, cutting down just what it needed to turn a tidy profit and keep the locals employed. Hurwitz promised he would maintain the tradition. But once he bought the company, he doubled production rates to clear-cut thousands of acres of old-growth redwoods.
Headwaters Forest should be saved. For now, Hurwitz isn't interested in anything but a land deal. But the Administration shouldn't be in any rush to hand over federal land. If it proceeds with its scheme to buy off Hurwitz, we can all chalk it up to greenmail, in the greenest sense of the word.