The Original Mean CEO?

By J.A. Savage, AlterNet. Posted August 8, 2002.

Long before Ken Lay was squandering his employees' 401(k) plans, Charles Hurwitz was pioneering the pension fund raid of about $55 million, money that had been set aside for lumber workers in the economically challenged rural north coast of California. Before WorldCom’s Bernie Ebbers allegedly mismanaged the $100 billion company into bankruptcy, Charles Hurwitz was at the helm during the $1.6 billion collapse of a savings & loans. Prior to Aldephia’s John Rigas ever dreaming he would be led away in chains, Charles Hurwitz’ company was investigated for its responsibility for the death of logging protester David Chain. Lagging, however, was Hurwitz dismissal of corporate accountant Arthur Anderson -- he waited until four months after the Enron scandal to let the firm go.

If there were a role model in business school for sheer corporate meanness, Charles Hurwitz as chair and chief executive officer of Maxxam, would be featured prominently -- according to tenacious Hurwitz watchers. Hurwitz is proof that while Lay, Ebbers and Rigas may all be guilty, they're not original.

Maxxam spokesperson Josh Reiss, after verbally attacking this journalist for even considering a comparison of Hurwitz’ legacy and ongoing operation to the spate of current high-profile corporate miscreants protested, "To say that you’re lumping of Mr. Hurwitz [in with the others] is bizarre, absurd."

Hurwitz, has developed a loyal (or disloyal, depending on how you look at it) following of critics in the last 15 years. The core of inquisitive souls after Hurwitz centers in Humboldt County, California. Most of the nation knows Humboldt County as the font of all things hemp. But its rugged forest land and the ripe climate for trees to turn to lumber has been its more traditional economic base. Hurwitz moved into the rural area with a swagger and arrogance that Ken Lay and his minions barely touch, according to the Hurwitz watcher network. Unlike the other CEOs in the news for various transgressions, Hurwitz is still getting away with it.

In 1985, the sleepy, well-fed, well-manicured, company town of Scotia, California, got a rude awakening. Its bread-and-butter, the Pacific Lumber Company was taken over by Maxxam. It was a classic "greed is good," 1980s’ event. The little logging company had a lot of land on which grew giant redwoods. The little logging company had been harvesting redwoods in a manner that allowed re-growth on a long-term basis. In other words, there were still giant redwoods as far as the eye could see. What Hurwitz apparently saw were chainsaws turning those trees into lumber for cash to pay off the high-demand junk bonds used in the little logging company’s takeover. The company doubled its rate of logging, according to the Environmental protection Information Center, a local watchdog group. A company document listed the 1997 tree cut rate as 253 million board feet. That’s a lot.

By threatening to cut down some of the vestiges of the ancient forest, Maxxam was able to cut a deal with taxpayers to buy out some of its property to avoid logging. The Headwaters forest, about 3,800 acres, cost taxpayers in the vicinity of $400 million in debt-for-nature swap. Also part of the deal is a Habitat Conservation Plan. According to Maxxam, the March 1999 debt-for-nature swap agreed to include managing its forest on 100-year sustainable level. However, in recent documents to shareholders, Maxxam complains about that 100-year sustainability clause for causing the company’s fortunes to decline.

Neighbors have complained and filed lawsuits over the effects of increased logging. It’s not just the barren hillsides that once hosted lush forests and wildlife, including the spotted owl, but the increased flooding that have severely impacted some of the local community.

A lawsuit by Earthjustice and Environmental Protection Information Center from July 2001 charges Maxxam’s Pacific Lumber with illegal dumping and violating the Clean Water Act on the 6,000 acre Bear Creek watershed. The case is still in federal district court, according to Earthjustice attorney Mike Lozeau.

There was a fatality. The disloyal Hurwitz watchers got under the company’s skin with their incessant logging protests, most notably that embodied by tree-sitter Julia Butterfly Hill. In 1998, logging protestor David Gypsy Chain was killed by a tree felled during a Pacific Lumber logging operation. After a three-month investigation, the Humboldt County Sheriff decided not to press charges against the company. Hurwitz watchers called it a whitewash. Remarkably, tree sitting and logging protests continue to this day on the company’s territory, according to Earth First! organizer Darryl Cherney.

In addition to the chance to plunder the forest, Hurwitz also seems to have noticed the company workers' well-stocked pension fund. In an era before 401(k)s, Pacific Lumber had set aside money for its workers’ retirement. When Hurwitz took the company over, the pension fund disappeared as far as the workers were concerned. Later on, right before Christmas 2001, Hurwitz laid off 10 percent of the logging company’s workforce.

Maxxam also had a bit of a worker problem with a subsidiary, Kaiser Steel. Maxxam bought the company in 1988, when it was still in hungry buy-out mode ofter the Pacific Lumber take-over. But by 1999 and into 2000, the company locked out Kaiser steelworkers over labor demands for 19 months. By early this year, Kaiser had filed for Chapter 11.

Even before the logging and the labor disputes, Hurwitz was in trouble for his business practices. Two federal agencies, the Treasury Department’s Office of Thrift Supervision (OTS), and the Federal Deposit Insurance Corporation, have brought actions against Hurwitz. Hurwitz allegedly had a hand in the demise of the United Saving Association of Texas in 1988. Backed by the FDIC, OTS was seeking $820 million against Hurwitz. In September 2001, an OTS administrative law judge recommended Hurwitz and the company be cleared. Hurwitz, via Maxxam, filed counter claim against the FDIC earlier this year. The agency has yet to make a final decision.

And after all that help from taxpayers, all that raiding of workers’ pension, all that nasty flooding from all that wicked logging of giant redwoods, what does Hurwitz have? As far as Maxxam goes, its latest report to the Securities & Exchange Commission show a shaky operation at best. In the first quarter of the year it showed a $55 million deficit. Meanwhile, a statement from last year to stockholders reveals Hurwitz has a total package of $1.8 million in income--$786,000 in salary, $910,000 in bonus and $142,000 in "other" recompense.

"The master of the shell game is a shell of itself," noted dogged Hurwitz watcher Cherney. And the shell games eventually fold.

Hurwitz still shows up in the Houston society columns -- same as George W. and Ken Lay -- according to Cherney. Whether the CEOs currently in the news for corporate malfeasance actually paid that much attention to Hurwitz' career path is unknown. But Hurwitz's past shows that the kind of "corporate creativity" that leads to forgiven personal loans, accounting tricks and general hubris has its biography.

Still, Hurwitz remains different from Kenny Boy and some of the other CEOs. Hurwitz remains, somehow, unscathed.

More information can be found from Hurwitz watchers at www.jailhurwitz.com.

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