FDIC to Pay Texas Financier $10M to Settle Legal Defense Claim
Ending a legal battle that began after the 1988 collapse of a Texas savings and loan indirectly controlled by financier Charles Hurwitz, the FDIC has agreed to pay him $10 million. The award is intended to cover his defense costs in earlier litigation involving both the thrift’s failure and, a federal judge has determined, a stand of endangered California redwood trees.
That settlement represents something of a victory for the Federal Deposit Insurance Corp. after a federal court award of $72 million to Hurwitz in 2005 in the case, which was reduced on appeal to about $17 million earlier this year, according to a Houston Chronicle business blog.
However, “this case isn’t about the money and never was,” the Chronicle notes in an April article about the appeals court reduction of the award. “The banking regulator still faces the prospect of being one of the few federal agencies ever ordered to pay a fine to a private citizen,” the newspaper wrote at that time.
And, even at $10 million, the settlement still is “one of the largest sanctions ever paid by the government to an individual,” the blog post today states. “Hurwitz said he hopes his decision to fight will change the government’s behavior.”
The settlement concerns a 10-year court battle that started with a 1995 complaint by the federal banking regulator, in an attempt to collect $800 million from Hurwitz in a banking practices lawsuit, explains a Washington Post article. It was written in 2005, after Hurwitz was awarded the $72 million in a blistering opinion by a federal judge in Texas.
The FDIC eventually dropped the suit against Hurwitz in 2002. But evidence showed that, as the Post paraphrases the opinion, “the FDIC brought the case largely because of pressure from environmental groups, members of Congress and the Clinton administration,” U.S. District Judge Lynn Hughes says in a scathing 131-page ruling.
“The reason: Hurwitz’s Pacific Lumber Co. owned 3,500 acres of endangered redwoods in Northern California,” the Post article continues. “Hughes found that the FDIC, in close concert with environmental groups, sued Hurwitz to pressure him into a ‘debt-for-nature’ swap, in effect giving the government his trees in exchange for his supposed liability in the failure of the United Savings Association of Texas.”
Although an FDIC spokesman vowed in 2005 to fight Hughes’ ruling, according to the Post, the agency approached Hurwitz with a $1 million settlement offer after the federal appeals court ruling cutting the award to about $17 million, the Chronicle blog reports today.
“The settlement brings this long-standing case to a close and it ends the uncertainty and expense of continued litigation,” another FDIC spokesman now tells the Chronicle.
