Remember the Hurwitz caper? While the rest of the country was busy watching the Florida election spectacle in December 2000, Doolittle and Richard Pombo were busy undermining an FDIC investigation into one of Tom Delay's Houston buddies, Charles Hurwitz.
Hurwitz is back in the news, and it's about those redwood forests again. Pete McCloskey, former Republican Congressman, is on the case. Last spring he ran as a Republican against Richard Pombo in CA-11, and was instrumental in bringing Pombo down. McCloskey, long-time land use attorney, has filed suit regarding logging practices in the the Headwaters stand of old-growth redwoods.
Cross-posted at ePluribusMedia
The whistleblower suit has been brought by the former head of the California Division of Forestry (CDF) Richard Wilson (amongst others), and alleges that Pacific Lumber - a subsidiary of Hurwitz's Houston-based Maxxam, Inc. - has defrauded the state of California of $200 million dollars. In addition to Pacific Lumber, Hurwitz is personally named as a defendant in the suit:
As part of the agreement to preserve the old-growth redwoods, California paid $213.7 million to Pacific Lumber. The company agreed to follow stringent logging practices to preserve animal habitat and promote sustainable forestry on its roughly 200,000 remaining acres of commercial timber land in Northern California.
In an exquisite bit of NewSpeak, Pacific Lumber goes by the acronym of PALCO. PALCO agreed to "sustainable yield" practices, not out of any sense of social or environmental responsibility, but in exchange for that $200+ million. Then promptly proceeded to log according to a computer model with wildly inflated regeneration numbers for "sustained yield". From a local paper in the Headwaters area, the Eureka Reporter:
The lawsuit also alleges the truthful disclosures of growth and yield during the 100-year duration of that sustainable-yield plan would have resulted in an annual harvest of approximately 90 to 125 million board feet per year — significantly less than the 178 million board feet per year PALCO claims it needs to pay its bills.
From a California blog, North Coast, which inserts some POV:
We could ask the hypothetical question "What would Humboldt County's redwoods ecosystem and economy be like IF only Doolittle had not interfered with the FDIC regulators doing their jobs and arresting Hurwitz along with his criminal accomplices??" Most likely we already know the answer, old growths, rivers and jobs intacts minus the Maxxam's corporate clearcut intrusion.
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The burden of Maxxam/PL's logging falls hardest onto the redwood forest ecosystem. The rivers are choked with eroded sediment runoff from the clearcut logging on unstable slopes. Salmon eggs suffocate as the fine clay dusts previously protected by the duff of fallen leaf litter is no longer there. Entire species of flowers like the redwood sorrel have their habitats shrunken and fragmented, while the endangered birds like the marbled murrelet become crowded by nesting competition into extinction.
Above: Marbled Murrlet (USFWS); Below: Redwoods Sorrel (NPS)
The Eureka story further notes:
The suit against PALCO will be stayed automatically, or put on hold, as a result of the company’s ongoing bankruptcy proceedings in federal bankruptcy court in Corpus Christi, Texas.
Another take on the story comes from Houston Chronicle business reporter Loren Steffy who's heart is heavy over the injustice visited upon Tom Delay's unlucky pal, Hurwitz:
It seems like Charles Hurwitz just can't catch a break
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More importantly, [the Headwaters deal] should have been a model for how private industry can work with other groups to preserve the environment.
Last week, Pacific Lumber filed for bankruptcy, strangled by new regulations made outside the agreement. "We were dealt a hand where we couldn't do anything," Hurwitz told me Monday. "It's a pure breach of contract."
Regional water boards, which weren't included in the Headwaters Agreement and therefore argue they aren't bound by it, ruled that runoff from Palco's logging was affecting rivers and streams in Northern California's scenic Humboldt County.
Steffy fails to mention the sustainability component. Though, in fairness, that aspect of the suit was still under seal in California when he wrote his column on January 23, so he might not have known about it. But it's still interesting that he's arguing that this "deal" should and would absolve Hurwitz from compliance with the Clean Water Act.
To sum up: PALCO (Maxxam) accepted over $200 million to reduce the short-term commercial value of the forest to assure its long-term conservation. In effect, one of the biggest conservation easements ever. And they've been fraudulently removing the assets from the premises - assets which they aren't legally authorized to remove. At least that's what McCloskey and his clients argue. This renders the question of the water boards as cloudy as the water polluted by the runoff from Hurwitz's overcutting.
Taxpayers already bailed out Hurwitz's failed savings and loan to the tune of $1.6 billion. Pombo & Doolittle short-circuited the FDIC's efforts to collect some of that back. Instead, the feds & the state ponied up more taxpayer money to protect the redwoods, and Hurwitz got off the hook on the 13-figure S&L bailout. Heckuva welfare program all-in-all, don't you think? McCloskey thinks so:
Former Rep. Pete McCloskey, whose Redwood City law firm is part of the plaintiffs' legal team, called the alleged deception "an elaborate fraudulent scheme fueled by corporate greed."
The California Attorney General's office declined to pursue the case, which is now proceeding under the state's False Claims Act.
[Former CDF head] Wilson, who approved PALCO’s yield plan at the time of the Headwaters Deal, alleges in the lawsuit that the "approval was obtained through fraud, in that the SYP presented yield projections that could not be obtained from those acres simulated for harvest."
"Simply put, the people of California didn’t get what they paid huge amounts of money for, namely sustained-yield plan based on the truth with the company that it would provide good jobs and a healthy economy over the long term," Wilson stated.
The California AG's office stated that their decision not to proceed did not reflect on the merits of the case. It might, however, have something to do with this:
There were three major motions filed by interested parties in the Palco bankruptcy last week, and each of them sheds light on different aspects of Hurwitz's breathtakingly audacious play to engineer the company's demise to his own maximum benefit. The general idea, it is plain, is to hold on to the company long enough to extract yet more of its assets. There's a hearing on these matters this morning (Thursday, Feb. 15) in Corpus Christi. It's hard to see how Hurwitz could possibly get his way, given the out-and-out flagrancy of the thing, but don't forget -- this is Texas we're talking about.
The first fantastical element is Maxxam's creation of a shell company -- "Scotia Development" -- in order to hold the Palco bankruptcy proceedings in Texas rather than California. Since it was reported in this space two weeks ago, this move has received a great deal of press, most notably in an amusing pair of Times-Standard stories by ace reporter John Driscoll last week. In short, Maxxam created this "Scotia Development" firm last summer, and headquartered it in a 344-square-foot office five blocks from the Corpus Christi branch of the federal bankruptcy court. Maxxam is arguing that this "phone booth" office gives the Texas branch of the court legitimate jurisdiction over the Palco bankruptcy, since "Scotia Development" -- big surprise -- went kaput at the same time as its 130-year-old sister corporation in California.
The California AG bowing out, and the subsequent whistleblower suit being filed, has led to the case being unsealed. Given Doolittle's role in scuttling the FDIC matter, so that Hurwitz got paid to log the Headwaters "properly", rather than relinquishing title to pay off a portion of his S&L boondoggle, the timing isn't to his advantage, because it reminds us again of the kind of unsavory folk he carries water for. The complicated array of corporate "Three-Card Monte" players has left a point of entry for the whistleblower suit with the parent corporation Maxxam, and its principal owner, Hurwitz. The SF Chronicle:
Pacific Lumber filed for bankruptcy protection in Texas in January and, under federal law, that automatically stays any lawsuit filed against it, said Don Warren, an attorney in Newport Beach (Orange County) who specializes in false claims law and is not a party to this case. But because Hurwitz and Maxxam are not in bankruptcy protection, Warren said it is possible the plaintiffs could ask the bankruptcy judge to let the case against them proceed.
All in all, Charles Hurwitz sounds like an employment security center for lawyers, because he's sued back:
PALCO filed its own lawsuit in California Superior Court in December seeking to recover damages for what the company claims is "serious harm that has been inflicted" by the state’s breach of the historic Headwaters agreement. PALCO’s lawsuit alleges that actions by the state actions have restricted the company’s ability to harvest their timberlands to a degree that prevents the companies from remaining economically viable.
But before any of these can proceed there's that little matter of jurisdiction (mentioned above) to work out. You really have to follow the link to read the whole article, because there's too much good stuff in it for me to post here (copyright & al.):
The motion alleges that Maxxam wanted the case heard in Texas in order to limit the participation of creditors, of which the State of California is one, and to limit future environmental regulation: "In their bankruptcy filings, Debtors have asserted that their operations have been `negatively impacted' by the `continued regulatory restraint.' This statement strongly suggests that Debtors will attempt to use the bankruptcy forum as a vehicle to relieve themselves of their regulatory obligations."
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The second fantastical element concerns the nature of Scotia Pacific, the Pacific Lumber subsidiary that was created in 1998 to carry the company's debt. When Maxxam reorganized the company at that time, it transferred title of most of Pacific Lumber's 200,000 acres of Humboldt County timberlands to the new entity, Scotia Pacific (or "Scopac"). The company then sold bonds that were backed by the land itself. The bonds, which have a face value of over $700 million, traded on the open market. The company serviced them by paying around $60 million annually in interest-only payments. The inability to make that payment is what triggered the bankruptcy.
FWIW, the bond-holders, who are seeking title to the forest lands, are basically mainstream Wall Street including Bank of America, Citigroup and J.P. Morgan. This story looks like one that will be worth keeping tabs on. Pete McCloskey seems to have more than a trick or two up his sleeve: this gambit's good for the environment, good for the taxpayers of California, and an effective additional front against Doolittle. It would appear his approach to skinning this is entirely different than how he went after Pombo. You go, Pete!!
Meanwhile, Charlie Brown's announced a rematch against John Doolittle in CA-04 for 2008. Doolittle took the election with a mere three-point margin, and less than 50% of the vote overall. It's not to soon to give him contributions now.
Aside on Rick Renzi (AZ-01)
This diary's too long to cover the Renzi land swamp, too, so I'll just give the link to a good Wall Street Journal story from this past Saturday. The link's still good at this writing, and the story well worth reading for those keeping up on the Republican Culture of Corruption. But this diary's gonna stay focussed on the Doolittle-Hurwitz Axis of Corruption. WSF teaser:
North America's largest copper lode is believed to be buried more than a mile beneath Apache Leap, the stark red cliffs that loom above this storied Old West town about an hour east of Phoenix. Resolution Copper Co., a joint venture between Rio Tinto and BHP Billiton, wants to mine it. But first it needs Congress to approve a federal land exchange, under which Resolution would swap 5,000 acres of private land for 3,000 acres of public land near its planned mine.
In exchange for supporting the bill, the local congressman, Rick Renzi, a Republican, insisted on something in return: He wanted Resolution to buy, as part of the land swap, a 480-acre alfalfa field near his hometown of Sierra Vista, according to documents and people involved in the deal.