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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.

What Irelan doesn't say is that an OTS judge is undoubtedly going to be vastly more familiar with thrift case law than a Houston district court judge. And Judge Hughes tends to side more often with anti-government arguments than he does with pro-federal views, which makes his court a doubly promising venue, from Maxxam's point of view.

Rick Stearns, who is handling the OTS case against Hurwitz, says his agency is under no obligation to roll its case in with that of another federal agency. In fact, he suggests that if the OTS is forcibly rolled in with the FDIC, he may refile the entire action again, and drag Hurwitz and the other defendants right back up to Washington.

It should be underscored that none of the charges lodged against Hurwitz by the federal thrift regulators warrants jail time, primarily because the word "fraud" never appears in any of the court papers.

Stearns says the OTS decided not to file civil fraud charges against Hurwitz and the others because it was principally interested in recovering the bailout money, not in setting Hurwitz up for a criminal prosecution.

"All we have to prove is willful and reckless disregard of the regulatory requirements," Stearns explains. "That is a much lesser standard of proof than a fraud charge. And there's no sense in our trying to prove a more difficult case when we can recover damages under regulatory violations."

The mere mention of fraud or criminal charges arouses Maxxam spokesman Irelan.

"In nothing that has been handed down by anybody is there any suggestion of criminality," he says emphatically. "None. Zero."

Passions run much higher in the United Savings case than in any of the previous actions against dead Texas thrifts because of how Hurwitz allegedly used the thrift to indirectly leverage his raid on Pacific Lumber, the corporate guardian of the largest remaining private stands of ancient redwoods in the world. After gaining control of Pacific Lumber, Hurwitz doubled and in some cases tripled logging rates to make enough money to pay down his huge takeover debts. Not only did that earn him the unceasing enmity of environmentalists, it also apparently led to his name appearing on a list of potential mail bomb targets compiled by the man accused of being the Unabomber, according to published reports.

And it has resulted in California environmentalists vigorously pushing their own solution to squaring United's debt to taxpayers by having the government expropriate the Headwaters Forest.

"There is a unique twist to this S&L case in that an outside group that has nothing to do with the FDIC is trying to push their own agenda -- something called debt-for-nature," says FDIC spokesman David Barr. "I guess it could be done, if it could be determined that whoever owned those trees was directly, financially responsible for decisions at that S&L. But there are a lot of legal things that would have to be ironed out to prove that."

The environmentalists see no such legal roadblocks. "We believe it is a very reasonable conclusion to this whole mess," says lawyer Jill Ratner of the Rose Foundation, a California group that studies economic and environmental issues. "The government has very substantial claims against Hurwitz and Maxxam as a result of the failure of United Savings. We believe those claims are real, and we believe the American people are entitled to receive something of value for the $1.6 billion we put into bailing out that S&L. Headwaters Forest would be an excellent property for the United States to receive in settlement of that claim."

Maybe so, but as Barr asks, "What's the FDIC going to do with a bunch of trees? We're in this to recover money."

Hurwitz has repeatedly said he is open to selling the Headwaters -- for the astronomical price of $500 million -- or trading it for prime federal lands. But he remains adamantly opposed to any plan that would reward his opponents with "something for nothing."

"There is no debt," Irelan reiterates. "Even if someone, somehow was to determine there is a debt, it has absolutely no ties to Pacific Lumber. This dialogue has to be recognized for what it is -- an attempt to get something -- the Headwaters Forest -- for nothing, a debt that doesn't exist."

Lately, Hurwitz has taken to characterizing the debt-for-nature swap as a frontal attack on private property rights. He has warned darkly in several op-ed pieces that such a deal would be the first step down a slippery slope to mass federal seizures. In an editorial published by the Houston Chronicle in mid-January, Hurwitz gravely cautions: "The tactics I describe could be imposed anywhere unless we, as American citizens, are steadfast in our resolve to defend what is fair and what is constitutional."

Irelan suggests Hurwitz may sue the federal government for damages under the Constitution's "takings" clause if loggers aren't permitted back into forests that are currently off limits through court orders protecting such endangered species as the spotted owl.

Numerous legislative efforts to create federal funding vehicles to pay for Headwaters have been unsuccessful, notes Irelan.

There were several state and federal bills that -- if Pacific Lumber had thrown its considerable weight behind them -- might have passed, setting up mechanisms whereby the government could acquire the Headwaters. However, the company backed a candidate (who had previously lobbied for Pacific Lumber) to unseat the author of the best of those measures. That Hurwitz-backed congressman -- Frank Riggs -- recently introduced legislation related to old-growth forests that one environmentalist describes as having "something to horrify everyone."

The Riggs measure would give Hurwitz a green light to do as he pleases in old-growth forests, where the enormous, clear-grained trees are worth several times the value of younger, knottier trees. The bill says if the federal government can't fork over the cash for Headwaters within 18 to 24 months, Pacific Lumber can enter the grove and log it indiscriminately, with total disregard for any impact on the ecosystem or endangered wildlife.

Irelan says Maxxam appreciates Riggs' efforts to get the issue "off dead center." But he says the whole notion of a debt-for-nature swap or a public buyout of Headwaters ignores the larger question of how many redwood trees the public wants to save.

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