By Andrew Clark
WASHINGTON, Dec 12 (Reuters) - A Republican lawmaker on Tuesday accused U.S. bank regulators of ``extortion'' for allegedly using long-running lawsuits against a former owner of a failed Texas savings and loan to try to gain government control of thousands of acres of California redwood forest.
The U.S. House of Representatives Resources Committee in August set up a task force to probe whether the suits were intended to pressure Houston-based Maxxam Corp. (AMEX) and its chairman and controlling shareholder, financier Charles Hurwitz, into a ``debt for nature'' swap involving ancient redwoods owned by a logging subsidiary, Pacific Lumber Co.
At a hearing of the task force on Tuesday, its chairman, California Republican Rep. John Doolittle, described the case as ``government corruption at its worst.''
The Federal Deposit Insurance Corporation (FDIC) and the Office of Thrift Supervision (OTS) brought actions against Maxxam and Hurwitz in 1995, seeking hundreds of millions of dollars over their alleged role in the $1.6 billion collapse in 1988 of the United Savings Association of Texas.
Maxxam and Hurwitz contend the cases were driven by the Clinton administration and environmental groups with a view to eventually force them to cede thousands of acres of redwoods in California's Headwaters Forest to the government.
``Although the FDIC and OTS essentially had no case, they filed one anyway to force the swap of banking debt for redwoods,'' Doolittle said. ``That is what I will simply call extortion.''
The regulators deny the charges, saying their only motivation was to recover taxpayer funds used in the S&L cleanup. They said they have repeatedly turned down offers from Maxxam and Hurwitz to use the redwoods to settle the claims.
``The facts simply do not support the allegation that the FDIC was part of some 'government conspiracy,''' the agency's general counsel, William Kroener, said. ``The FDIC has expressed its preference for a cash settlement.''
Democrats on the House Resources Committee refused to participate, calling the task force one-sided, and California Democratic Rep. George Miller congratulated the regulators for aggressively pursuing the cases.
``That's pursuit of justice,'' Miller said. ``These people showed incredibly good judgment on the behalf of the taxpayers.''
However, William Isaac, a former chairman of the FDIC retained by Maxxam to try to mediate a settlement, said he had concluded the government's case ``appeared extremely weak.'' He cited a pretrial assessment by the FDIC's legal division that rated its chances of prevailing as ``marginal at best.''
``I am very troubled by the evidence I have seen indicating that the litigation processes ... were politicized,'' he said. ``In their efforts to preserve the redwoods, it appears the FDIC and OTS may have overstepped their bounds.''
Last March, Pacific Lumber was part of a deal in which the state of California and the U.S. government paid $480 million to buy and protect from logging some 7,500 acres of old-growth forest in the Headwaters. A debt-for-nature swap in the S&L case could greatly expand that preserve.