E PL UR UM IB N U U S Congressional Record United States th of America PROCEEDINGS AND DEBATES OF THE 107 CONGRESS, FIRST SESSION

Vol. 147 WASHINGTON, THURSDAY, DECEMBER 20, 2001 No. 178 EXTENSIONS OF REMARKS

HONORING PEPPERELL MIDDLE tremely hard, soliciting in many ways other World War II, Korean War, Vietnam War, fall SCHOOL, ROME, GA, ‘‘34,288 CANS than just going house to house. Some stu- of the Soviet Union and now, the war against OF FOOD IN THE HALL’’ dents donated their ice cream money; they terrorism. Throughout this time period they held a dance and a talent show to raise have devoted their lives to agricultural produc- HON. BOB BARR money. The school has led the entire state in tion and determined community service. Pete OF GEORGIA Can-a-Thon donations for 8 straight years. was the president of the Crook Volunteer Fire IN THE HOUSE OF REPRESENTATIVES Eight years ago, a tornado hit the Lindale Department for 27 years and Lena was the or- community, destroying or damaging many ganist and pianist in a Crook church for over Wednesday, December 19, 2001 homes, and leaving many families homeless. 45 years. The Neins serve as a shining exam- Mr. BARR of Georgia. Mr. Speaker, the The Salvation Army was immediately there to ple, not only for their community, but for all main hall of Pepperell Middle School, located assist those families. The students of Americans. in the small community of Lindale, just outside Pepperell Middle School decided at that time As a husband and father of five, I have the city of Rome, GA, has been lined with to secure canned goods for those who experi- come to adore the example of a strong mar- 12×25 inch cardboard boxes stacked halfway enced losses due to the storm. They found riage and loving children. Pete and Lena start- to the ceiling for several weeks. The boxes great satisfaction in helping those in need; and ed their lives together humbly, working hard to were crammed with more than 34,000 cans of the tradition continues each year with the Can- build a happy and successful life together. My food; all donated by students for this year’s a-Thon. admiration for them, and the fortitude and local Salvation Army Can-a-Thon. The principal, staff, faculty, students, their commitment they have demonstrated is deep. Sponsored by Atlanta NBC affiliate WXIA families, and, indeed, the entire community, Through the good times and the bad, Pete 11-Alive; Rome radio stations WRGA, Q–102, are to be commended for their outstanding and Lena’s love has forged a seemingly un- South 107; and the Forum, the Salvation Army participation in this event. It is with great pride breakable bond. Can-a-Thon accepts donations of canned, I recognize them today as true community Pete and Lena Nein are amazing role mod- non-perishable food items in the Forum’s main leaders. I am honored to serve as their Rep- els. As a Member of Congress, it is my honor parking lot on a designated day in December. resentative in the U.S. Congress. to congratulate both Pete and Lena on their On November 1st each year, students begin f anniversary. Pete and Lena let nothing stand to solicit canned goods from family, friends, between their unceasing love for one another neighbors, and others. Last year, over 24,000 TRIBUTE TO MR. PETE AND LENA on their glorious day. I ask the House to join cans were collected by students at Pepperell NEIN me in extending wholehearted congratulations Middle School. The goal for 2001 was set at to Mr. and Mrs. Pete Nein. 26,000 cans. Once they exceeded that total, a HON. BOB SCHAFFER f new goal was set at 30,000 cans. On the OF COLORADO IN RECOGNITION OF THE CITY OF morning of Friday, December 7, a large Ma- IN THE HOUSE OF REPRESENTATIVES rine Corps truck made its way to Pepperell GAINESVILLE Middle School. Upon arrival, students loaded Wednesday, December 19, 2001 34,288 cans of food onto the truck which was Mr. SCHAFFER. Mr. Speaker, I rise today HON. RALPH M. HALL escorted by the local police, and two bus to express gratitude to Mr. and Mrs. Pete and OF TEXAS loads of students from the school, making its Lena Nein of Crook, Colorado, on their 70th IN THE HOUSE OF REPRESENTATIVES way to the Forum. Wedding Anniversary. In honor of this extraor- The annual holiday Can-a-Thon collected dinary occasion, I would like to convey to Wednesday, December 19, 2001 more than 70,000 cans from throughout the them my genuine congratulations. Mr. HALL of Texas. Mr. Speaker, I rise city and county. Approximately 700 baskets Pete and Lena were married on January 3, today to speak in recognition of the City of will be filled with canned goods and will be 1932 in Sedgwick, Colorado, where they Gainesville, Texas, which has recently insti- given to families in need. The food will also go began their lives together. Mr. and Mrs. Nein tuted the Medal of Honor Host City Program. toward providing daily meals for men, women, moved to Crook, in 1934 where they rented This program, unique in the nation, will pro- and children who seek shelter at the Salvation 160 acres of land and began farming with vide a stipend to cover lodging, food and Army. horse-drawn equipment. Their first house, in some travel expenses to Medal of Honor re- Pepperell Middle School principal Frank which they lived for 42 years, had electricity cipients visiting the City of Gainesville. Pinson is justifiably and extremely proud of his installed in 1936. Indoor plumbing was not in- The Medal of Honor Host City Program students, saying, ‘‘this is a big deal thing to stalled until 1940. Pete and Lena have wit- seeks both to honor the 149 living Medal of them, and it teaches them one of the greatest nessed and experienced extraordinary events Honor recipients and to expose the citizens of lessons they learn.’’ The students work ex- including the Dust Bowl, Great Depression, Gainesville—especially its youth—to true

∑ This ‘‘bullet’’ symbol identifies statements or insertions which are not spoken by the Member on the floor. Matter set in this typeface indicates words inserted or appended, rather than spoken, by a Member of the House on the floor.

E2339

.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00001 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.000 pfrm07 PsN: E20PT1 E2340 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 American heroes. The local Veterans of For- rence and I strolled side by side through the findings as to how all criteria have been satis- eign Wars Post No. 1922, and community Capitol as he donned his signature bow tie fied. leaders, initiated the project to help recognize and me wearing a more conventional necktie. Fourth, I put forth language that would dou- these men of valor and to give the citizens of He represented the wealthy suburban Main ble—from $900,000 to $1.8 million—the re- Gainesville the chance to hear, first-hand, their Line area of Philadelphia and I represent the sources for the BIA’s Branch of Acknowledg- amazing stories. vibrant Harlem area of New York City. How- ment and Research Division to upgrade its The Congressional Medal of Honor Society ever, we had many shared interests and expe- recognition process. announced the project to its members at its riences. To help localities adversely affected by fed- October annual reunion. Two Medal of Honor Lawrence Coughlin served in the Marine erally recognized tribes, my bill provides $8 recipients visited Gainesville on Veterans Day. Corps during the Korean War. His military million in grants to local governments to assist This program was organized before the training was evident in the way he conducted such governments in participating in certain tragedies of September 11, but in light of re- himself in the Congress. He was a very dis- decisions related to certain Indian groups and cent events, projects like the Gainesville ciplined man who took a dogged approach to Indian tribes. These grants could be applied Medal of Honor Host City Program highlight tackling the difficult problems that face the na- retroactively to any local government that has the sacrifice, patriotism and sense of duty that tion and the Congress. I remember his pas- spent money on decisions related to certain have been a foundation of our great nation. sion for the youth of our great nation. This Indian groups and/or tribes. Our Medal of Honor recipients are living ex- passion was the source of his drive to do In addition, my legislation also creates a amples of those values and are the best mes- whatever was necessary during his tenure on grant program of $10 million to be made avail- sengers to tell the price of freedom. While in the Select Committee on Narcotics Abuse and able to federally impacted towns for relevant Gainesville, these extraordinary individuals will Control to rid our communities of the scourge infrastructure, public safety and social service meet with school classes, speak to civic of drugs. Although some would say, Lawrence needs directly related to tribal activities. groups and others who would like to hear had a Patrician air about him I would say he And lastly, the measure would institute a about their experiences. It gives the honorees had the air of a proud ex-marine who viewed ‘‘cooling off period’’ of one year, in which any a forum for their thoughts and gives Gaines- the war on drugs as a series of unending bat- high-level BIA official could not appear before ville the chance to thank them for all that they tles to be confronted head on until the war their former agency. have done for their country. was won and victory proclaimed. As a man of Mr. Speaker, I am proud to introduce this Mr. Speaker, I want to commend Mayor great consciousness, I will forever remember bill with three of my colleagues from Con- Kenneth Kaden for his leadership in promoting his stamina and commitment in his efforts to necticut—Mrs. JOHNSON and Messrs. SHAYS this project. It is an honor to recognize such eliminate drugs from our communities, making and MALONEY—and the gentleman from Wis- a unique and special program—The Medal of the world a better place for our youth. consin, Mr. GREEN. I urge others who care Honor Host City Program—and I look forward Mr. Speaker, I ask that all my colleagues about federal Indian recognition issues to join to seeing it succeed in Gainesville. join me in celebrating the life and the political us in working toward a recognition process f accomplishments of my great friend, the Hon- that is fair, open and respectful to all parties orable R. Lawrence Coughlin. involved. PERSONAL EXPLANATION f f HON. SOLOMON P. ORTIZ INTRODUCTION OF FEDERAL IN- STUDIES ENDORSE PROJECT DIAN RECOGNITION REFORM LABOR AGREEMENTS OF TEXAS LEGISLATION IN THE HOUSE OF REPRESENTATIVES HON. GEORGE MILLER Wednesday, December 19, 2001 HON. ROB SIMMONS OF CALIFORNIA Mr. ORTIZ. Mr. Speaker, I was unavoidably OF CONNECTICUT IN THE HOUSE OF REPRESENTATIVES detained in my district during the following roll- IN THE HOUSE OF REPRESENTATIVES Wednesday, December 19, 2001 call votes. Had I been present, I would have Wednesday, December 19, 2001 voted as indicated below. Rollcall No. 499: Mr. GEORGE MILLER of California. Mr. Yes; 500: Yes. Mr. SIMMONS. Mr. Speaker, our Federal In- Speaker, I wish to bring the results of two re- f dian recognition process is broken. Recogni- cent studies on the value of project labor tion decisions don’t take months to decide, agreements (PLAS) to the attention of my col- IN MEMORY OF HONORABLE R. they take years—and sometimes decades. leagues. LAWRENCE COUGHLIN Towns and other interested parties—some- The California Research Bureau, a non- times forced to spend millions because of fed- partisan confidential research arm of the Gov- HON. CHARLES B. RANGEL eral recognition policies—rightfully believe ernor’s office and the state legislature con- OF NEW YORK their concerns and comments are often ig- cluded that project labor agreements are ‘‘val- IN THE HOUSE OF REPRESENTATIVES nored. Criteria for recognition has been over- ued by owners and construction firms alike looked rather than upheld under previous BIA [because of] the role PLAs play in resolving Wednesday, December 19, 2001 administrators. In short, the public and Indian disputes over roles contractors and sub- Mr. RANGEL. Mr. Speaker, today is a bitter- tribes have lost faith in the current recognition contractors play in large and complex sweet day. It is with both great sadness and process. projects.’’ The CRB report also credited PLAs immense pride that I rise today in honor and A new administration has brought some for promoting local economic development, celebration of the life of my friend, the Honor- hope in fixing this important process. To this workforce training, and employment goals for able R. Lawrence Coughlin. end, I am rising today to introduce legislation women and minorities. Robert Lawrence Coughlin was born on that lays out a seven-point plan for reforming The UCLA Institute for Labor and Employ- April 11, 1929 in Wilkes-Barre, PA, and grew the federal Indian recognition process. ment has also recently released a study that up on his father’s farm near Scranton, PA. He Specifically, my bill would first require the found that PLAs do not increase labor costs, served distinguishably as a Republican Mem- BIA to notify states whenever a tribe within do not exclude non-union workers, encourage ber of the United States Congress for 24 them files for federal recognition. The state competition, promote stability, cooperation and years, from January 1969–January 1993 rep- must in turn ensure that notice is given to productivity, and reduce the likelihood of work resenting a portion of Philadelphia, PA and its towns adjacent to that tribe. stoppages or delays. surrounding suburban Main Line area. Second, the legislation would require the Mr. Speaker, these studies merely confirm Lawrence’s accomplishments were great BIA to accept and consider any testimony—in- what has long been understood by those in- during his tenure in Congress. He was a man cluding from surrounding towns and others— volved in private and public sector construc- of great honor and truly a gentleman. I had that bears on whether or not BIA recognizes tion who are not otherwise driven by ideology: the pleasure of serving with him while I was a tribe. Project labor agreements promote the timely Chairman of the Select Committee on Nar- Third, under my measure, the BIA would be completion of construction projects and in- cotics Abuse and Control and he served as required to find affirmatively that all recognition crease productivity. They are good for busi- the Ranking Republican Member. criteria are met in order to confer federal rec- ness. They also promote apprenticeship train- At first glance, one would perceive our rela- ognition and any decision conferring recogni- ing and help secure better working conditions. tionship as that of the ‘‘Odd Couple’’ as Law- tion must be accompanied by a written set of They are good for workers.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00002 Fmt 0666 Sfmt 9920 E:\CR\FM\A19DE8.004 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2341 Unfortunately, among those who are most The residents of Polk County are preparing member of the Prince George’s County Board driven by ideology is the Bush Administration. for Polk County’s 150th birthday celebration. of Election Supervisors from 1964 to 1969, According to the December 13, 2001 issue Tentative plans include special music, recogni- and as a member of the Charter Review Com- of The Washington Post, Maryland has been tion of the oldest living person in the County, mission of the city of Bowie. forced by the Bush Administration to proceed the oldest married couple, the longest married Jerry also served his community as a teach- with the enormous Wilson Bridge construction couple, the youngest citizen, and the oldest er to Prince George’s County’s youth at Gon- project without the ability to use a project labor church in the County. Commemorative coins zaga High School, Bowie State University, and agreement. I am sure that my colleagues re- and Christmas ornaments have been de- Prince George’s Community College. call that last February, shortly after taking of- signed, cedar trees have been requisitioned to In 1975, Jerry took his talent to the Mary- fice, President Bush tried to ban project labor be presented to schools, and a game of Polk land General Assembly where I had the pleas- agreements for any construction project re- historical trivia is being compiled and will be ure of serving with him for six years. He was ceiving federal money. In a decision that spe- distributed to schools. Students in Polk County a member of the House of Delegates for elev- cifically involved the Wilson Bridge project, a schools are being asked to follow specific en years and was named Freshman Legislator federal judge ruled in November that the ban guidelines to design a flag which would best of the Year by the Maryland Young Democrats issued by President Bush violated federal law represent the County. Some items which could in 1975. He was also named Legislator of the and the Constitution. Following the decision, be represented on the flag are the City of Ara- Year by the Prince George’s Municipal Asso- the Maryland State Highway Administration gon as a manufacturing utopia; the City of ciation in 1983, 1985, and 1986. again sought permission from the Federal Cedartown for its cedar trees and for its origi- Jerry stepped down from his position as As- Highway Administration to implement a project nal inhabitants; the Cherokees; and the slate sociate Judge in the 5th District Court of Mary- labor agreement. But according to the Post, quarries in Rockmart. land this past September and retired from a the Federal Highway Administration rejected Polk County’s sesquicentennial Birthday long and praiseworthy career in civic affairs. Maryland’s request saying the state had not Celebration will be held on the evening of De- During his tenure as a judge, Jerry was well- proved the need for a PLA. cember 20th, 2001, on the steps of the Court- liked and respected by both bench and bar for By effectively prohibiting the use of a project house in Cedartown, Georgia. It would be- his even-handedness and wisdom. He had a labor agreement on the Wilson Bridge project, hoove us all to take the time to celebrate our good feel for fundamental fairness and the Bush Administration continues to thwart heritage and stop to share the stories of our through it all his Irish wit and humor shone good business practice and good labor policy past with our children and grandchildren. The through. to the detriment of taxpayers and continues to term ‘‘home town USA’’ truly describes the Judge Bob Sweeney, the former Chief deny working Americans the protections they people of Polk County. They are kind, gen- Judge of the Maryland District Court, said this are entitled to under law. I commend to my erous, caring folks and I am pleased to call of Jerry, ‘‘One of the ten things that a good colleagues’ and the administration’s attention many of them my friends. Happy Birthday Polk judge needs is courage. For a judge that the reports concerning project labor agree- County!! means doing the right thing even if it is not the ments by the California Research Bureau and f popular thing. Jerry Devlin personifies that the UCLA Institute for Labor and Employment, type of courage.’’ and I sincerely hope that the Administration JUDGE GERARD DEVLIN Mr. Speaker, I would like to repeat today an reconsiders its unwise hostility for these prov- Irish Blessing for my dear friend Jerry Devlin en agreements that benefit business, tax- HON. STENY H. HOYER to thank him for his years of service and to payers, workers and the public in general. OF MARYLAND wish him well in retirement: May your bless- f IN THE HOUSE OF REPRESENTATIVES ings outnumber the shamrocks that grow,/And HONORING THE 150TH ANNIVER- Wednesday, December 19, 2001 may trouble avoid you wherever you go./May SARY OF POLK COUNTY, GA the road rise up to meet you,/May the wind be Mr. HOYER. Mr. Speaker, I rise today to always at your back,/May the sun shine down HON. BOB BARR pay tribute to a great Irish-American success upon your face,/And the rain fall soft upon story, Judge Gerard Devlin of Prince George’s your fields,/Until we meet again,/May God hold OF GEORGIA County, Maryland. Judge Devlin is called Jerry IN THE HOUSE OF REPRESENTATIVES you in the hollow of his hand. by his friends of which I am fortunate to be I ask my colleagues to join me in honoring Wednesday, December 19, 2001 one. I have known Jerry for over thirty years, this great Irish American who gave forty years Mr. BARR of Georgia. Mr. Speaker, formed since I was an intern in Senator Brewster’s of- of public service to Prince George’s County in 1851 by an act of the Georgia Legislature, fice and Jerry was an elevator operator in the and the state of Maryland. Polk County, Georgia, was named for James Capitol. f Knox Polk, a former governor of Tennessee I have valued Jerry’s friendship over those and the 11th President of the United States. three decades and have always enjoyed his TRIBUTE TO AMBASSADOR ULRIK With a population of 38,127 people and a land boisterous and comic Irish sensibility. We FEDERSPIEL area of 311 square miles, Polk County is lo- have also shared a close professional relation- cated in northwest Georgia. ship and Jerry was always a faithful ally HON. TOM LANTOS For more than a hundred years the Cher- through our days in the Young Democrats, the OF CALIFORNIA okee and Creek Indians reigned supreme in Maryland General Assembly and beyond. IN THE HOUSE OF REPRESENTATIVES north Georgia. The southernmost village in the I pay tribute to Jerry today not simply be- Cherokee Nation was on Cedar Creek, which cause he is a good and old friend but to thank Wednesday, December 19, 2001 is located just off Main Street in present-day him upon the occasion of his retirement. His Mr. LANTOS. Mr. Speaker, I invite my col- Cedartown, the county seat of Polk County. In distinguished career in public service is not leagues to join me in commending Ambas- 1826, two white men, Linton Walthall and matched by many and his affable and cour- sador Ulrik Federspiel, who was sworn-in as Hampton Whatley, visited the area. They re- teous manner is appreciated by all. Denmark’s Ambassador to the United States turned in 1832 to establish stores, and the Jerry was born in Dorchester, Massachu- in May of 2000, for his record of achievement community began to develop. In 1838, the setts on May 29, 1933. He attended public in fostering transatlantic ties. Throughout his Cherokee were moved into small forts, and schools in Dorchester and Boston, and served remarkable career, Ambassador Federspiel then forced west on The Trail of Tears. In in U.S. Marine Corps from 1955 to 1957. He has worked tirelessly to strengthen the already 1852, the first courthouse was built on a 20- went on to Boston College and Suffolk Univer- close relationship between the United States acre site which had been donated to the town sity, and graduated from the University of Bal- and Denmark. Indeed, the Danes are fortunate of Cedartown (then called ‘‘Cedar Town’’) by timore School of Law in 1969. He also earned to have such an illustrious representative in Asa Prior. Two years later the town was incor- his masters from the University of Maryland in Washington, and the United States has no porated. 1970. better friend and ally in the Diplomatic Corps The War Between the States was not kind Jerry began his career in public service as here in Washington than Ambassador to Cedar Town. However, after the war, in a staff member in the United States House of Federspiel. 1867 the area began to grow and the town of Representatives in 1959 and later worked in Mr. Federspiel began his career in the Dan- Cedartown prospered, as did much of the sur- the United States Senate. His service was not ish Foreign Service in 1971, and was imme- rounding area, including the towns of limited to the national level however. He diately assigned to the prestigious European Rockmart and Aragon. served his local community for five years as a Community office within the Foreign Ministry.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00003 Fmt 0666 Sfmt 9920 E:\CR\FM\A19DE8.009 pfrm07 PsN: E20PT1 E2342 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 His outstanding contributions on E.C. matters Ambassador has played an instrumental role American employees over the age of 65 who earned him a tenure in London as First Sec- in furthering the interests of the Home Rule were provided both Medicare and employer retary of Political Affairs from 1973 to 1977. Government and that of the Danish realm and health plan coverage and continued to actively During this time he worked in cooperation with has worked in close cooperation with the U.S. work. As a result of this legislative change, several African states in the process of de- government, especially Thule Air Base. The is- Medicare would now only provide secondary mocratizing countries including Zimbabwe, An- land and the base are strategic elements of coverage to the ‘‘working aged’’ after their em- gola and Namibia. Mr. Federspiel was espe- defense and security preparedness of both the ployer health plan. But once the ‘‘working cially active in supporting the anti-apartheid United States and Europe. aged’’ stopped working and contributing to our movement in South Africa. As a result, he was Ambassador Federspiel is also an accom- society, Medicare would again become the pri- personally invited to the inauguration of Presi- plished academic. He graduated from the Uni- mary insurance and payor of claims for these dent Nelson Mandela in 1993 and became a versity of Aarhus in political science in 1970, good people. consultant to the modern integrated South Af- and completed a year of post-graduate studies Then in 1986 the Congress again acted by rican administration. at the University of Pennsylvania, earning an passing the Omnibus Budget and Reconcili- In 1981, Ambassador Federspiel returned to MA in 1985–86. He has been a visiting lec- ation Act of 1986 which singled out yet an- Copenhagen to become Special Assistant to turer at George Washington University and other group of American workers—this group the Permanent Secretary of State for Foreign frequently lectured on international relations at of individuals was identified as ‘‘disabled ac- Affairs. A post he held until he arrived in the University of Copenhagen as well as tive individuals’’. A ‘‘disabled active individual’’ Washington to serve as Deputy Chief of Mis- served as a governing board of the university. was defined in the statute as an ‘‘employee sion at the Danish Embassy in 1984. He His interest in supporting academic excel- (as may be defined in regulations)’’. The quickly developed a reputation in Washington lence continues today. He is an Honorary OBRA Amendments of 1986 also mandated as a quick study with an imposing intellect Trustee of the Crown Prince Frederick Fund that Medicare become secondary insurance combined with a personable, friendly de- for Harvard University that supports two schol- coverage to the employer health plans for the meanor. Ambassador Federspiel came to un- arships annually for exemplary Danish univer- ‘‘disabled active individual’’. The Health Care derstand that not only does Denmark have a sity students. Ambassador Federspiel currently Financing Administration (HCFA), the respon- critical role to play in European matters, but, sits on the advisory board member of Human- sible federal government agency charged with for a small country, Denmark could ‘‘punch ity in Action (HIA), a unique educational pro- implementing the 1986 OBRA Amendments, above its weight’’ on transatlantic economic gram between Denmark, the United States, crafted a definition of employee by Agency di- and political issues. the Netherlands and Germany. HIA offers a rective—a policy which was never subjected to As State Secretary for Foreign Affairs from number of competent university students an the rigors of the Administrative Procedure Act 1991–93, Ulrik Federspiel worked to support intensive study of human rights and demo- and which was never promulgated into a regu- independence for the Baltic states, who were cratic values each year. This summer the pro- lation published in the Federal Register. emerging from the dark years of Soviet occu- gram was expanded to include internships on This ad hoc policy judgment made by the pation. Denmark was the first country in the Capitol Hill. Administrator of HCFA contradicted the very world to recognize the three former Soviet Ambassador Federspiel’s commitment to definition of employee already existing within countries of Estonia, Latvia and Lithuania. working for others is undoubtedly a result of the body of the Social Security Act and the In- From 1993 to 1997 Ambassador his and his family’s experiences growing up in ternal Revenue Code. HCFA’s definition effec- Federspiel’s outstanding record brought the war torn Europe. During the Nazi occupation tively said that if an employer continued to notice of the most senior members of the Dan- of Denmark, Ambassador Federspiel’s father, carry a disabled employee on their books in ish government and was asked to serve as Per Federspiel, was imprisoned for a year due ‘‘employee status’’ after a disability began Chief of Staff to the Prime Minister. At the EU to his involvement in the rescue of the jews in (which all employers did for employee benefit summit in June 1993 under the Danish presi- October 1943. Needless to say, Ambassador purposes), the employer health plan, not Medi- dency, Mr. Federspiel drafted the portion of Federspiel has proven himself to be a strong care, would become the primary payor for that the Copenhagen Criteria that set standards for and consistent supporter of the State of Israel. employee if he or she was unfortunate enough EU membership. Ambassador Federspiel be- After the horrible events of September 11th, to be classified as ‘‘the disabled active indi- came a staunch proponent of NATO expan- Ambassador Federspiel and the Danish peo- vidual.’’ According to the new HCFA policy, sion and has since taken a leading role in the ple were among the first to support the Amer- which remains the policy of the Agency, the process. Among his other accomplishments ican people and the cause of freedom. As a fact that the disabled employee was not actu- while in the Prime Minister’s Office, he played NATO member, Denmark is one of the strong- ally working was irrelevant. However, the com- an important role in the Danish decision to est supporters of the United States in its cam- mon law definition of employee used by Social play an active part in Bosnia, having the larg- paign against terrorism. And a recent poll of Security and the IRS states that an individual est contingency of ground troops there per the Danish population showed the Danish has to be actively working and performing capita, and the only country to have heavy people as the America’s strongest supporters services for remuneration in order to be con- armor, namely ten tanks. in Europe in our war on terrorism. sidered an employee. This ad hoc action by Mr. Speaker, since Ambassador Federspiel Mr. Speaker, it is a great honor and privi- HCFA has already directly and negatively af- arrived in the United States last May, he has lege for me to have the opportunity to thank fected numerous companies throughout Penn- been actively engaged in solving trade dis- Ambassador Federspiel for his uncompro- sylvania, Illinois and other states involving em- putes between the EU, Denmark and the mising dedication to furthering the friendship ployees that work for these companies. United States. His diplomatic skills were evi- between our two great countries. Due to HCFA’s departure from the com- dent while working with both the Congres- f monly accepted definition of employee, and sional leadership and the Administration in re- existing definitions within federal law, many solving several high-profile trade disputes, in- AMENDING TITLE XVIII OF THE employer health plans reacted to this unjusti- cluding the carousel sanctions and the import SOCIAL SECURITY ACT fied policy making of HCFA by simply taking ban on pork. Mutually beneficial trade has the easiest course of action—terminating been expanded between the U.S. and Den- HON. GEORGE W. GEKAS health coverage for their disabled employees. mark through close cooperation between the OF PENNSYLVANIA In effect, HCFA’s policy forced employers to former U.S. Ambassador in Copenhagen Rich- IN THE HOUSE OF REPRESENTATIVES begin discriminating against their disabled em- ard N. Swett and Ulrik Federspiel. ployees. Wednesday, December 19, 2001 Mr. Speaker, Ambassador Federspiel has While HCFA stated that an employer would brought his dynamism and passion to so many Mr. GEKAS. Mr. Speaker, until the early be primary payor to Medicare for their ‘‘work- political and humanitarian issues. Since com- 1980s, Medicare was always the primary ing aged’’, as soon as these individuals quit pleting his military service in the Royal Danish payor in all situations to employer health plans working, Medicare would become primary Navy in Greenland in 1970–71, Ulrik for both disabled and retired employees. How- payor. However, to these same employers, Federspiel has taken a keen interest in Green- ever, effective with the Omnibus Budget Rec- HCFA said that for your disabled employees land and its population. In 1984, when he be- onciliation Act of 1981 (‘‘OBRA’’), for the first you will be the primary payor to Medicare re- came Deputy Chief of Mission to the Danish time Medicare became the secondary payor gardless of whether these individuals are Embassy in Washington, D.C., the relationship for one group of American employees who working or not. between Greenland, the United States and were specifically singled out—the ‘‘working Due to this contradicting treatment between Denmark became one of his priorities. The aged’’. The ‘‘working aged’’ were defined as retirees and disabled employees, clarifying

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00004 Fmt 0666 Sfmt 9920 E:\CR\FM\K19DE8.002 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2343 language was finally introduced and passed tional Small Business Advisory Council. For spect and eternal gratitude, to this kind, loving by the Congress with passage of the Omnibus this, Mr. Speaker, the United States Congress and generous woman. Budget and Reconciliation Act of 1993 to treat should commend him. f both of these groups in the same and equal The National Small Business-Advisory manner. As a result, Medicare today now pays Council provides a link between small busi- TRIBUTE TO THE HONORABLE primary to employer health plans for disabled ness owners and Members of Congress, The MARY ALICE SALIZAR employees that are not actually actively work- purpose of the council is to give input on eco- ing. However, even though HCFA agrees pro- nomic and tax issues while also participating HON. SOLOMON P. ORTIZ spectively to be the primary payor once Medi- in private surveys and policy briefings. The OF TEXAS care’s ‘‘payment status’’ has been changed to council achieves this through participation in IN THE HOUSE OF REPRESENTATIVES primary, most retroactive Medicare claims sub- strategy sessions and national meetings with Wednesday, December 19, 2001 mitted for treatment received since August 10, local, state and national leaders. I applaud the Mr. ORTIZ. Mr. Speaker, I rise today to pay 1993 (effective date of statutory change) are National Small Business Advisory Council and tribute to an American patriot, Mary Alice denied. The reason for this from HCFA is that its new chairman Gerald Mayo, for creating an Salizar, who is retiring the end of this turbulent because these claims when submitted were alliance between the nation’s leadership and the small business community. year. considered to have not been ‘‘timely filed’’ in A native of Corpus Christi, Texas, Ms. conjunction with Medicare regulations. These A broker for Prudential Team Realty, Gerald Mayo has first-hand experience with small Salizar has served in the judicial branch of our claims could not have been timely filed pre- government since the early 1970s. She spent viously because they were for disabled em- businesses. His leadership and dedication to small businesses across the nation is com- the early part of her career working for local ployees whose former employers continued to attorneys and as a court reporter. pay as primary. mendable and greatly appreciated. Gerald is truly a shining example for all Americans. She wanted to be part of the federal court These employers acted honorably by con- system, and in 1973, she became part of the tinuing to pay claims from these employees as A constituent of Colorado’s Forth Congres- sional District, Gerald not only makes his com- U.S. District Clerk’s office. She has been an the primary payor because they were not integral part of the office since then. made aware of clarifying language enacted by munity proud, but also his state and country. It is a true honor to have such an extraor- Likewise, she has been an integral part of the Congress by OBRA in 1993, a change that our community, working with children and HCFA did not care to publicize. Even though dinary citizen in Colorado. I ask the House to join me in extending wholehearted congratula- young people from low-income families and the Congress in 1993 directed HCFA by clari- communities through her church. In doing so, fying the statute that Medicare is to act as the tions to Mr. Gerald Mayo. f she is part of a tradition of doing the most fun- primary payor for insurance claims for ‘‘dis- damental work Jesus instructed Christians to abled active individuals,’’ many American em- IN RECOGNITION OF MARGARET do: help the poor. ployers still have not been able to be fully and PARX HAYS While she intends on spending a great deal lawfully reimbursed and fully benefit from the of time on her crafts, quilting and others pas- legislative change intended by the Congress HON. RALPH M. HALL times, she nevertheless intends to continue by passage of OBRA in 1993. OF TEXAS her tradition of service to community through As a result, the Congress should once again IN THE HOUSE OF REPRESENTATIVES volunteering at a public school or as a senior act to direct the Administrator of HCFA to fully Wednesday, December 19, 2001 Candy Striper at a local hospital. rectify what was originally intended by the Mary Alice Salizar is the example for others Congress in 1993, namely to direct HCFA not Mr. HALL of Texas. Mr. Speaker, I rise to follow, both in the course of her life’s work to subject this unique and special class of today to speak in recognition of Margaret Parx and her desire to continue that service by vol- American employees and their respective Hays, a devoted community servant and unteering in the fields of health and education. Medicare claims to the standard Medicare former Mayor who initiated a drive to restore She will now also be spending more time timely filing regulations. These claims are not The Santa Fe Depot in the city of Gainesville, with her family, the people who supported her in any way similar to normal Medicare claims Texas. Margaret is a distinguished native of during her service to the community including: because they could never have been sub- Gainesville and has devoted considerable en- her husband Pedro Salizar; their children mitted previously or in a timely fashion due to ergy, drive, and creativity to bringing this Mark, Rick and David; and their grandchildren the problems I have illuminated in these re- project to fruition. Her efforts not only saved Annaliza and Estevan Marcos. marks. Medicare claims are normally sub- an historically significant building but helped I ask my colleagues to join me in com- mitted immediately upon or shortly after med- make the community aware of an important mending the life’s work of Mary Alice Salizar, ical treatment. Though Medicare regulations part of their history. who has spent the better part of her profes- allow for an exception to their timely filing This particular station, constructed in 1902, sional life as part of the federal judicial sys- guidelines if there is an error on the party of was Gainesville’s second depot. The city, tem. itself, received its first passenger train on Jan- the Secretary, HCFA has refused to apply this f exception to the special situation we have be- uary 2, 1887. The depot is an elegant redbrick fore us. Even more startling to this Chamber building that served the Santa Fe line when it HONORING THE ENLISTED MEN should be the fact that this very HCFA policy was originally constructed. Without Margaret’s AND WOMEN OF THE UNITED was determined to be illegal, unlawful and in- devotion to her community, though, the station STATES NAVY valid as a matter of federal administrative law would have remained an abandoned relic. by a U.S. District Court in the District of Co- Now it plays host to many community gath- HON. ROB SIMMONS lumbia in 1999 because of HCFA’s failure to erings. OF CONNECTICUT promulgate a valid federal regulation to sup- Mr. Speaker, it is with great thanks and ap- IN THE HOUSE OF REPRESENTATIVES preciation that I recognize the energy and ef- port the Agency’s policy determination, in the Wednesday, December 19, 2001 case SUNTRUST BANKS. INC. v. Donna forts of Margaret Parx Hayes, who organized Shalala, Secretary of Health and Human Serv- the effort to return the Santa Fe Depot in Mr. SIMMONS. Mr. Speaker, I rise today to ices, CA. No. 96 Gainesville, Texas to its original beauty. I have announce legislation that I have introduced to had the pleasure of knowing—and working request that the Secretary of the Navy name f with Margaret—for many years. This would be a U.S. Navy warship the ‘‘U.S.S. Bluejacket’’ TRIBUTE TO GERALD MAYO a better world, with more kindness and caring, in honor of the courageous Americans who and more success in the healthy growth of a have served as enlisted members in the HON. BOB SCHAFFER city or area, if we had Margaret Parx Hays in United States Navy. OF COLORADO each of our cities. She is, other than being a My resolution also requests that this vessel IN THE HOUSE OF REPRESENTATIVES wonderful person, a great asset to the city of bear the hull designation number ‘‘1776’’ to re- Gainesville—and all who live there who want flect the freedom and independence protected Wednesday, December 19, 2001 and expect to have gracious living. Margaret and preserved by the millions of enlisted men Mr. SCHAFFER. Mr. Speaker, it is an honor brings this to the table of public service be- and women who have proudly served in the to rise today to congratulate to Mr. Gerald cause she cares. United States Navy. Our Navy, as well as for Mayo of Estes Park, Colorado, who was re- Let us close this House of Representatives the nation, would be well served to have a cently named honorary-chairman of the Na- on this day, December 18, 2001, in loving re- ship bearing the hull number 1776.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00005 Fmt 0666 Sfmt 9920 E:\CR\FM\K19DE8.003 pfrm07 PsN: E20PT1 E2344 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 Mr. Speaker, the Second District of Con- reform passed in 1996, CCDBG has been a TRIBUTE TO CAROL ELISE necticut, which I have the privilege of rep- critical work support for many low-income fam- BENNETT resenting, has a long and proud Naval and ilies moving off welfare and many other work- seafaring history, We are home to the ‘‘The ing poor struggling to remain self-sufficient. HON. TERRY EVERETT First and Finest,’’ the Naval Submarine Base Reliable, accessible, and affordable child care OF ALABAMA New London, homeport to Submarine Squad- is important for families to continue their em- IN THE HOUSE OF REPRESENTATIVES ron Two, Four, and Development Squadron ployment and remain off welfare and for sus- Twelve, the Naval Submarine School, and taining the economic strength of this country. Wednesday, December 19, 2001 Naval Submarine Support Facility. Thousands Poor families who are unable to secure child Mr. EVERETT. Mr. Speaker, with the U.S. of men and women in my district are part of care assistance pay up to one-third of their in- House of Representatives set to conclude its the ‘‘silent service’’ and its support and train- come for child care, creating an incredible bur- work for the First Session of the 107th Con- ing structure. They are dedicating their lives, den for families struggling to make ends meet gress, I would like to add a final contribution risking their lives everyday in our great Navy. and marginalizing the value of going to work to the RECORD as we close the Congressional I believe that we should honor their service or remaining employed. Indeed, families often history book on 2001. and sacrifice by naming a ship the ‘‘U.S.S cite problems with child care as a major rea- The last twelve months have been so dra- Bluejacket.’’ son for leaving employment. matic in their significance upon this body and I urge all of my colleagues to join me in this Yet today, CCDBG does not do enough to the nation that it is easy to overlook the many effort to forever honor the bravery, dedication meet children’s developmental needs or par- vital human elements of this institution. I and service of the millions of men and women ents’ employment-related needs. CCDBG only choose to honor one here today. who have fought to defend this country in our requires states use 4% of its dollars to pro- I rise to pay tribute to a player on the Con- Navy. mote improved quality in child care, an insuffi- gressional stage who said farewell to this Finally, I would like to thank the efforts of cient amount since evaluations indicate that House of Democracy earlier this year; Carol Mr. John Thor Newlander of Gales Ferry, Con- the quality of most care ranges from mediocre Elise Bennett. For two decades, Carol has necticut. Mr. Newlander has served this coun- to poor. CCDBG also leads to subsidy rates been a part of the lives of those who served try in several of our military services, both ac- that frequently prohibit parents from choosing our nation in the House and Senate. tive and reserve duty, and has worked tire- or affording child care that meets their chil- In 1981, she began covering the Congress lessly on behalf of our enlisted military per- dren’s needs and their own employment for the Washington-Alabama News Report, du- sonnel and on this resolution. I thank him for needs. Care for infants and toddlers, care for tifully informing her statewide radio audience his service and his commitment to this worthy children with special needs, accredited care, of the efforts of the Alabama Congressional endeavor. non-standard hour care, and quality care in Delegation. She was the longest-serving of all f low-income and rural communities can be par- the press assigned to cover Alabama’s con- ticularly difficult for parents to choose and af- gressmen and she always performed her work INTRODUCTION OF CHILD DEVEL- ford. with professionalism and a particularly keen OPMENT AND FAMILY EMPLOY- Moreover, CCDBG funding only served 12% attention to accuracy. MENT ACT OF 2002 of eligible children in 1999. Many states have Carol had good reason to be at home waiting lists of thousands of families. And around the spotlight, having received formal HON. GEORGE MILLER though States have use some TANF block training in the theatre at the University of Brit- OF CALIFORNIA grants on child care, budgetary shortfalls and ish Columbia followed by acting roles on the IN THE HOUSE OF REPRESENTATIVES rising welfare caseloads are leading many stage and in film. However, Carol’s work and states to cut their child care and early edu- Wednesday, December 19, 2001 many interests never kept her from helping cation budgets at the very time that many par- others. She served as a volunteer reader for Mr. GEORGE MILLER of California. Mr. ents—who are leaving welfare or struggling to recordings for the blind here in Washington for Speaker, I am pleased to join my colleagues hold Jobs in the recession—desperately need more than a decade. Mr. ANDREWS, Mr. OWENS, Mr. MORAN, Mr. child care services. Since I came to Congress in 1993, 1 have HINOJOSA, Ms. LEE, Mr. FRANK, Ms. WOOLSEY, My bill will improve CCDBG by strength- personally valued my friendship with Carol, Mr. GREEN, Mr. KILDEE, Ms. MCCOLLUM, Mr. ening child care quality and resources and and I wish to thank her for her fairness and ABERCROMBIE, Mr. MCGOVERN, Ms. DELAURO, providing parents greater freedom to choose dedication to pursuing the truth. This institution and Mr. NADLER in introducing the Child De- the type of care they want and need for their is a better place because of the hard work of velopment and Family Employment Act. This child and their family. This bill increases the reporters like Carol. I think I can speak for all legislation reauthorizes the Child Care and quality set-aside from 4% to 16%, creates a the Alabama Delegation, both past and Development Block Grant to better meet the competitive grant program for States to im- present, in wishing Carol Bennett a happy and child care and after-school care needs of low- prove payment rates to providers, and re- equally rewarding retirement. income children and families. quires child care providers to have pre-service f Science conclusively demonstrates that chil- training in child development. This bill also dren’s experiences in their first 5 years of life provides money for states to provide stipends MEDICAL RURAL AMBULANCE have major and lasting effects on learning and to qualified child care providers to boost train- SERVICE IMPROVEMENT ACT OF academic success. Parents undoubtedly are ing, reduce staff turnover, and attract and re- 2001 the most significant and important influence on tain staff—all key goals in improving child care a child’s growth. But with 65% of mothers in quality. And this bill allocates additional re- HON. JOHN P. MURTHA the labor force raising children under age 6, sources so that CCDBG can be expanded to OF PENNSYLVANIA child care often provides important secondary reach one-third of the families for which it was IN THE HOUSE OF REPRESENTATIVES influences that also greatly affect a child’s de- intended. velopment. Child care simply is not just baby- In conclusion, Mr. Speaker, until we have a Wednesday, December 19, 2001 sitting. Early care is an important early learn- quality and affordable child care program, we Mr. MURTHA. Mr. Speaker, across America, ing period and if parents cannot afford to pro- will continue to miss the opportunity to maxi- Americans have come to expect and rely on vide their children with high quality care, it is mize the early development of young children our health care system, especially, emergency a missed opportunity to help develop a child’s and get them ready for learning in school. ambulance service. All to often, for many of school-readiness. Kindergarten teachers report Child care assistance can make the difference us, our first exposure to health care is the many of their students begin kindergarten cog- in a child’s reaching school age ready to learn, local EMS unit that responds to a call for help. nitively and behaviorally unprepared to learn. and it can make the difference in a family re- Unfortunately, for millions of Americans living For all our youth to achieve in school, we maining employed and off welfare. The reau- in a rural setting, this cornerstone of medical must ensure that they arrive at kindergarten thorization of CCDBG provides Congress with care is on the verge of collapse. with the skills needed to succeed in school. To a timely opportunity to achieve this urgent goal I, for one, am a strong believer in the impor- do that, parents need to be able to choose and meet our commitment to help meet the tance and the necessity of maintaining a quality child care that meets the needs of their needs of low-income children and families. Mr. strong effective EMS component within our children. Speaker, I urge Members of the House to join health care system. The question that we Child care assistance must allow eligible me and co-sponsor the Child Development must answer, as we debate health care, is, families to meet those needs. Since welfare and Family Employment Act. how prepared do we want and expect our

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00006 Fmt 0666 Sfmt 9920 E:\CR\FM\A19DE8.014 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2345 health care system to be. In an emergency, at eled thousands of miles and, sacrificed time gratitude for his dedication. I ask the House to that critical moment, the EMS unit is that crit- they could be spending with their own families, join me in extending hearty congratulations to ical link to our health care system that makes in order to take care of another’s. Mr. Hunter Hall. the difference between life and death. At the same time, corporate and small town f Unfortunately, be it ground or air, EMS for businesses alike have also searched for ways communities throughout America is under to help the victims of the September 11th at- CONFERENCE REPORT ON H.R. 1, enormous financial pressure. For many rural tacks; to speed along the search and recovery NO CHILD LEFT BEHIND ACT OF communities, EMS is in jeopardy of collapse. missions, and to lift the spirits of dedicated 2001 Typically, rural EMS is a small one or two unit workers still at the sites today. At this time I SPEECH OF service, staffed by volunteers, not affiliated would like to highlight one such business from with a hospital or medical facility, that re- Marietta and Canton, Georgia. HON. JAMES R. LANGEVIN sponds to 300 to 500 calls per year within a Williamson Brothers Bar-B-Q is a beloved OF RHODE ISLAND large radius (37 miles average) who’s greatest local landmark that came to Georgia from IN THE HOUSE OF REPRESENTATIVES danger to its existence comes from Medicare. Talladega, Alabama in 1989. Upon watching Thursday, December 13, 2001 In a growing number of instances, unrealistic and learning of the events of September 11th, and unresponsive Medicare reimbursement the restaurant’s owners, Larry and Danny Mr. LANGEVIN. Mr. Speaker, I rise today to fee schedules have done more to erode EMS Williamson, asked themselves what they could commend my colleagues Mr. MILLER and Mr. in America than any other threat to medical personally do to help. The answer was to load BOEHNER for their hard work in crafting a bi- care in this country. Because Medicare fees up two U-Haul trucks and drive up enough partisan education bill that provides real re- fail to accurately define or reflect the rural food to serve 2,000 Pentagon employees and form and real investments to make that reform medical environment, EMS is facing grave relief workers for a traditional southern feast— a reality. I am pleased that in the midst of danger of being put out of business by fee the Williamson Brothers Southern Salute. The fighting the war of terrorism, we were able to schedules that fall to recognize and reflect the trucks carried 300 chickens, 300 pounds of remain focused on our most pressing domes- actual costs confronting rural ambulance/EMS barbecued pork, 2,000 hamburgers and hot- tic priority—the education of our children. service. dogs, 50 gallons each of Brunswick stew, This bill tackles the persistent achievement Therefore, I am introducing the ‘‘Medical baked beans, and potato salad, and 500 choc- gap between poor and more affluent school Rural Ambulance Service Improvement Act of olate chip cookies; enough to truly feed a districts. Now more than ever education fund- 2001’’. This legislation will increase by 20 per- small army. ing will be targeted at the students who need cent the payment under the Medicare program The feast was a huge success and a tribute it most. For students in Providence and Cran- for ambulance services furnished to Medicare to the majesty of the Pentagon and the men ston, Rhode Island, the revised Title I funding beneficiaries in rural areas, require CMS to and women who serve there. The Williamson formula will translate into desperately needed define rural areas on population density by brothers are now considering making the books and supplies, bilingual education, more postal zip codes, increase mileage rates for Southern Salute an annual event. I would like high-quality afterschool programs, and ex- the first 50 miles and require the use of most to acknowledge Williamson Brothers Bar-B-Q, panded access to technology. In addition, H.R. recent data by CMS in determining payment and its employees, for their unparalleled spirit 1 authorizes critical funding for school con- adjustments. of community and patriotism, and thank them struction and modernization. With three-quar- For rural ambulance and EMS, the majority for a job well done. ters of our schools in disrepair, this need is of their revenue comes from Medicare reim- f overwhelming and cannot wait. bursements. Yet existing Medicare fee sched- H.R. 1 also expands access to teacher qual- ules are not accurate, nor do they reflect real- HONORING HUNTER HALL ity programs to give teachers better support, world costs confronting rural services. Due to mentoring, and salary incentives. The more their low-volume of calls and transfers, rural HON. BOB SCHAFFER support we provide to our teachers the more EMS providers will remain the hardest hit OF COLORADO effective they will be in the classroom and— under CMS’ fee schedules unless decisive IN THE HOUSE OF REPRESENTATIVES most importantly—the more students will learn. and corrective action takes place now. Wednesday, December 19, 2001 Timely and accurate reimbursement and fee While I was disappointed that the conferees schedules for ambulance/EMS services will be Mr. SCHAFFER. Mr. Speaker, it is an honor were not able to work out a compromise on critical to seeing that rural America continues to rise today to express gratitude and con- funding for students with disabilities, I am to receive emergency medical services. Citing gratulations to one of Colorado’s outstanding looking forward to working with my colleagues financial loss as the number one contributing young citizens, Mr. Hunter Hall, of Greeley, next year to ensure that IDEA receives the in- factor for services closing down, the ‘‘Medical Colorado, who recently traveled to Washington vestment it deserves. Schools across the Rural Ambulance Service Improvement Act of D.C. to sing at the White House. country are bleeding from the cost of edu- 2001’’ will level the playing field for rural EMS. This is certainly a high honor for him and for cating students with special needs. The fed- Good health requires an effective and thor- Colorado. Hunter, an eighth grader at Brent- eral government made a promise to help ease ough health care system. We all have some- wood Middle School, performs about 50 times the financial burden of educating these stu- thing to lose by not putting a halt to the ero- a year with Colorado’s Children’s Chorale. dents, and we owe it to our schools and our sion of EMS care in rural America. Therefore Hunter Hall is a hard worker and has per- children to honor that promise. But despite its I am calling on all Members to join with me formed with the highest degree of excellence. lack of full funding for IDEA, H.R. 1 is a strong and sponsor passage of this important and Everyone who has been fortunate enough to bill, and I am proud to support it. critical piece of health legislation. know Hunter speaks of his deep commitment f f to performing and the arts. I am glad to say Hunter Hall has been an inspiration not only to DAVID GRAUE, ‘‘ALLEY OOP’’ HONORING WILLIAMSON BROTH- other members of the chorale but also to his CARTOONIST ERS BAR–B–Q, MARIETTA AND family and friends. CANTON, GEORGIA Hunter and his parents make great sac- HON. CHARLES H. TAYLOR rifices for him to perform, and his commitment OF NORTH CAROLINA HON. BOB BARR never falters. This is an experience he will IN THE HOUSE OF REPRESENTATIVES look upon with pride. I stand today to honor OF GEORGIA Wednesday, December 19, 2001 IN THE HOUSE OF REPRESENTATIVES his persistence and dedication to the per- forming arts. Hunter Hall has dedicated much Mr. TAYLOR of North Carolina. Mr. Speak- Wednesday, December 19, 2001 of his time to the arts and I hope he will con- er, America lost a beloved citizen, World War Mr. BARR of Georgia. Mr. Speaker, the tinue to do so in the future. He is truly a fine II veteran, artist, and creative talent when tragic events of the past few months have example for all Americans. David Graue, 75, of Flat Rock, North Carolina, brought out the best in the hearts of Ameri- A constituent of Colorado’s Fourth Congres- was tragically killed in an early morning traffic cans across the nation. Our citizens have sional District, Hunter not only makes his com- accident on December 10th. Dave was a na- reached out their hands, opened their wallets, munity proud, but also of his state and his tive of Oak Park, Ill., and was a prior resident and given of their time, energy, and compas- country. It is a true honor to know such an ex- of Sarasota, Fla., and Brevard before moving sion in unprecedented ways. Some have trav- traordinary citizen and we owe him a debt of to Henderson County in 1987. He was a 1944

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00007 Fmt 0666 Sfmt 9920 E:\CR\FM\A19DE8.018 pfrm07 PsN: E20PT1 E2346 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 graduate of Sarasota High School and trained parents Lon and Linda, and the rest of his performances in the Third District of Arkansas. at the Art Institute of Pittsburgh. He was a family and friends who are grieving during this These singers and their foundation have tradi- U.S. Army Air Corps veteran of World War II. difficult time. tionally been special invited guests of the In 1950, he rejoined V.T. Hamlin, the cre- When the terrorists struck our country, our White House in several previous Christmas ator of the comic strip ‘‘Alley Oop,’’ whom he President made the difficult but appropriate seasons. However, the events of September had briefly worked with prior to the war. He decision to respond with our military. Through- 11th and the recent Executive Order closing took over sole production of the cartoon in out history, in any conflict involving American the White House to public events this Christ- 1970 and created both the art and continuity troops, Tennesseans have volunteered to mas has led the foundation to use their vocal for the strip until entering semi-retirement in serve. They have fought and died in every talents back home in Arkansas instead by per- 1991. Upon retirement he turned his attention corner of the world to protect freedom. Master forming at three different Northwest Arkansas to the fine arts and painting, working mostly Sgt. Davis answered the call of his country, locations to honor the victims of September with oils, and won several awards for his work. and his death will forever inscribe his name on 11th and our nation. Dave Graue will be dearly missed by his the roll of heroes who have made the ultimate The Barbara Mashburn Foundation, as the family, friends, members of the community, sacrifice, giving their life in order to protect the only vocal music scholarship program of its and countless ‘‘Alley Oop’’ fans around the lives of others. His efforts should remind us all kind in the nation, was formed in 1993 by Dr. country. Dave will be remembered for the spe- that the liberties we enjoy do not come without James and Barbara Mashburn of Fayetteville. cial Christmas cards he sent to all his friends, a price. Let us always remember these costs, The Foundation, funded entirely through dona- cards that showcased his artistic talents. His and always remember Master Sgt. Jefferson tions, fundraising events, grants and an an- last one commemorated the September 11th Donald Davis. nual gift by the founders, the Mashburns terrorist attacks on America. f themselves. Patrons of these events have told I know my colleagues join me in expressing me of the excellent job these young people sympathy to Dave’s family: his loving wife, COMMENDING ST. CHARLES have done in promoting patriotism during this Eliza B. Graue, sons Jeff and Dan, daughter SCHOOL IN LIMA holiday season. Karin Dowdy, seven grandchildren: Jordan On this day, when we remember the impor- Dowdy, Griffin Dowdy, Kelen Dowdy, Kristin HON. MICHAEL G. OXLEY tance of the holidays before us and the resur- Graue, Lauren Graue, Shannon Graue and OF OHIO gence of patriotism in this country, I would like Cian Graue. IN THE HOUSE OF REPRESENTATIVES to salute the Barbara Mashburn Singers for f Wednesday, December 19, 2001 their efforts to promote the well-being of our nation. We don’t often see individuals with HONORING THE LIFE OF MASTER Mr. OXLEY. Mr. Speaker, I would like to bring to your attention the care and concern foresight and personal sacrifices as the SERGEANT JEFFERSON DONALD Mashburns have displayed. They continue to DAVIS that students at St. Charles School in Lima, Ohio are showing for children in Afghanistan. invest their personal time and finances to The students in Lima learned about the des- mentor a new generation of contemporary mu- HON. WILLIAM L. JENKINS perate condition of Afghanistan’s children. sicians, vocalists and performers. Each of the OF TENNESSEE Through no fault of their own, the children of Barbara Mashburn Foundation Scholarship IN THE HOUSE OF REPRESENTATIVES this war-ravaged nation are facing a hard win- students gains much more than a musical Wednesday, December 19, 2001 ter without many of the basic necessities of scholarship, these students take part in lead- life. Their families often must struggle just to ership conferences; attend financial seminars Mr. JENKINS. Mr. Speaker, I rise today to and luncheons on manners; prepare and meet ask the Congress to honor the memory of find their daily food. St. Charles School students took the initia- budgets and they become goodwill ambas- Master Sgt. Jefferson Donald ‘‘Donnie’’ Davis, sadors through the promotion of their positive an American hero. tive and collected $1000 to donate to the Af- ghan Children’s Fund at the White House. lifestyles and the role music can play in every- Master Sgt. Davis was killed in action in Af- day life. ghanistan on December 5th while participating They presented the check to my office during a school assembly. I, in turn, will make sure Mr. Speaker, I ask my colleagues to join in Operation Enduring Freedom. He was a with me today in honoring the great tradition of member of the Army’s 5th Special Forces that the donation is delivered to President George W. Bush. the Barbara Mashburn Scholarship Foundation Group stationed at Fort Campbell, Kentucky. and its talented singers. Their usual perform- Yesterday, Master Sgt. Davis was buried Since the events of September 11th, the President has said many times that the United ance at the White House this Christmas sea- with full military honors near his birthplace in son will certainly be missed. May they soon Watauga, Tennessee. He had made a career States is at war with terrorists—not with the country of Afghanistan, and certainly not with return to Washington, DC and the White out of the military, serving in Korea, the Middle House Christmas celebrations of future years, East during Operation Desert Storm, Somalia, its innocent children. It is my hope that Af- ghanistan’s new government will devote itself and may they continue to serve as role mod- and Afghanistan. els for the young people of America. It is the ultimate sacrifice when a soldier to building a peaceful society where children f dies for his country. We are able to enjoy the are able to lead normal lives free of war and freedoms we have today because of men like hunger. INTRODUCTION OF BILL TO CLAR- The donation by the students at St. Charles Master Sgt. Davis and the hundreds of thou- IFY TAX TREATMENT OF CER- School will bring comfort to needy children a sands of Americans who have given their lives TAIN ENVIRONMENTAL ESCROW half-world away. I commend them for the gen- in the fight for American principles over the ACCOUNTS erous spirit that they have shown during this past 225 years. Master Sgt. Davis knew the season of peace and goodwill. particular risks of being a Green Beret and f HON. AMO HOUGHTON gladly accepted them. He was aware of the OF NEW YORK immediate dangers faced by those men, the HONORING THE BARBARA IN THE HOUSE OF REPRESENTATIVES elite fighting soldiers that this country depends MASHBURN SCHOLARSHIP FUND Wednesday, December 19, 2001 upon in times of crisis. Time and time again, AND THE BARBARA MASHBURN Master Sgt. Davis answered the call of his SCHOLARSHIP SINGERS Mr. HOUGHTON. Mr. Speaker, I am country, left his family and home, and served pleased to join my colleague from California, with distinction wherever he was sent. HON. JOHN BOOZMAN Mr. BECERRA, together with my colleagues, Mr. Master Sgt. Davis was a professional sol- BOEHLERT from New York and Mr. COYNE from OF ARKANSAS dier, a man who had earned the respect of his Pennsylvania, in introducing a bill intended to IN THE HOUSE OF REPRESENTATIVES fellow soldiers, and he was remembered fond- clarify the tax treatment of certain environ- ly by all whom had come to know him over the Wednesday, December 19, 2001 mental escrow accounts. The provisions in the 39 years of his life. He was also remembered Mr. BOOZMAN. Mr. Speaker, I rise today to bill would encourage prompt and efficient set- locally as the kind of young man that every honor the Barbara Mashburn Scholarship tlements with the Environmental Protection parent wants his or her son to be like. Fund and the Barbara Mashburn Scholarship Agency (‘‘EPA’’) for the clean-up of hazardous I know I speak for the entire Congress when Singers. waste sites. I extend sympathies to Master Sgt. Davis’ wife Recently, the Barbara Mashburn Singers Currently, there is some uncertainty in the Mi Kyong, his children Cristina and Jesse, his gave three very patriotic and festive holiday tax treatment of certain ‘‘settlement funds’’

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00008 Fmt 0666 Sfmt 9920 E:\CR\FM\A19DE8.022 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2347 which are, in effect, controlled by the EPA, in tionally, a POW/MIA bracelet is worn until Throughout her long career as an educator, their role of resolving claims under the Com- the man named on the bracelet is accounted Mrs. Sly has been recognized for her excel- for, whether it be 30 days or 35 years. prehensive Environmental Response, Com- I bought my bracelet in 1970 for $2.50. It lence not only by her students, but also by her pensation and Liability Act of 1980 has, ‘‘Lt. Col. Samuel Johnson, April 16, fellow professionals. She has received numer- (‘‘CERCLA’’). This uncertainty may prevent 1966’’ engraved on it. I wore the bracelet ous awards, both as a teacher and a principal. taxpayers from entering into prompt settle- faithfully for many years, but eventually In fact, just last year, her school won the 2000 ments with the EPA for the cleanup of Super- took it off and put it away. But every time California Distinguished School Award, a true fund hazardous waste sites and reduce the ul- I opened my jewelry box, I saw it. And every testament to her exceptional stewardship. time I saw it, I was saddened, and I thought timate amount of funds available for cleanup Not only does Mrs. Sly help develop and of such sites. of Lt. Col. Johnson, and I said a little prayer. The bracelet led to my first foray into the educate our youth, but she also works to de- Under our bill, if certain conditions are met, wonderful world of e-Bay, the on-line auction velop her fellow educators. For example, she the EPA (U.S. government) will be considered service, where I listed it for sale. I thought currently serves as a mentor for new prin- the beneficial owner of funds set aside in an that anyone who would buy it would treasure cipals and an advisor to the teacher environmental settlement fund account. These it and it would be out of my sight, out of my credentialing program. She is also active in conditions include the fund being: (1) estab- mind. To my surprise, bidding on the brace- community outreach, expressing her philos- let was brisk. lished pursuant to a consent decree; (2) cre- ophy eloquently: ‘‘We must expand the four ated for the receipt of settlement payments for On the seventh, and final, day of the auc- tion, my husband George asked me if I knew walls of our school site and guide children to the sole purpose of resolving claims under what had happened to Col. Johnson. ‘‘No,’’ I take advantage of every learning opportunity.’’ CERCLA; (3) controlled (in terms of expendi- replied. ‘‘I never wanted to know.’’ But As a teacher at Baldwin Elementary, my wife, tures of contributions and earnings thereon) by George went to the Internet, and returned Jeanne, has benefited from Mrs. Sly’s holistic the government or an agency or instrumen- with information. Of the more than twenty- approach to education. As a fellow long-time tality thereof; and (4) upon termination, dis- five hundred POWs, and the three to six educator myself, I express my deep respect thousand MIAs, only 591 men returned. My bursed to the government or an agency or in- and sincere admiration for Sue Galbreath-Sly strumentality thereof (e.g., the EPA). If such brother did not. After spending seven years as a prisoner of war, Sam Johnson did. and her life’s work. conditions are met, the EPA will be considered I was so happy I cried. the beneficial owner of the escrow account for When I contacted Congressman Johnson’s f tax purposes and the account will not be con- office, his aide, McCall Cameron, told me sidered a grantor trust for purposes of Sec- that he and Mrs. Johnson were on vacation LT. GEN. JOHN M. PICKLER, U.S. tions 468B, and 671–677 of the Internal Rev- with their grandchildren. ARMY enue Code. Grandchildren! More tears. Congressman Johnson said he would very These escrow accounts, which are estab- much like to have his bracelet. So, I can- lished under court consent decrees, are a nec- celled the e-Bay auction, and today I am re- HON. JOEL HEFLEY essary tool to enable the EPA to carry out its turning this souvenir. In the words of Randy OF COLORADO responsibilities and resolve or satisfy claims Sparks, ‘‘A million tomorrows will all pass under CERCLA. Under these types of consent away, ere I forget all the joy that is mine IN THE HOUSE OF REPRESENTATIVES decrees, the EPA should be considered the today.’’ Wednesday, December 19, 2001 owner of such funds for Federal tax purposes. And in my own words, I say to Sam, fi- nally, ‘‘Welcome home.’’ Due to the uncertainty as to the proper Fed- To Dr. Tracy, I say, ‘‘Thank you. We will Mr. HEFLEY. Mr. Speaker, I attended the eral income tax treatment of such government- never forget. God bless you.’’ retirement parade for Lieutenant General John controlled funds, taxpayers may be hesitant to Pickler. It was a sad day for the Army as they f promptly resolve their claims under CERCLA were losing one of their best to the retired by contributing to the settlement funds. One of COMMEMORATING THE RETIRE- roles. It was also a sad day for me personally the underlying purposes of CERCLA is to en- MENT OF SUE GALBREATH-SLY as over the years John and his wife Karen sure prompt and efficient cleanup of Super- have become close friends. I rise today not; fund hazardous waste sites. This goal is being HON. MICHAEL M. HONDA however, to remark on the retirement of a frustrated by the existing uncertainty in the tax OF CALIFORNIA great soldier but to thank him for a lifetime of laws. IN THE HOUSE OF REPRESENTATIVES service to our country. The bill resolves these uncertainties and ex- Wednesday, December 19, 2001 General Pickler leaves the Army after over pedites the cleanup of Superfund hazardous 36 years of dedicated service to our Nation waste sites by treating these escrow accounts Mr. HONDA. Mr. Speaker, I rise today to recognize the outstanding career of Principal and the soldiers that he loves. His biography as being beneficially owned by the U.S. gov- is distinguished. ernment and not subject to tax. We urge our Sue Galbreath-Sly. She is set to retire at the colleagues to join us in cosponsoring this leg- end of this academic year from a long and dis- Lieutenant General John M. Pickler as- islation. tinguished life in the field of education. Cur- sumed the duties of the Director of the Army rently serving in her eighth year as principal of f Staff on 17 August 1999. the Julia Baldwin Elementary School, Mrs. Sly, A native of Chattanooga, Tennessee, Gen- AMONG MY SOUVENIRS as the students call her, started teaching in eral Pickler was graduated from the United 1960. Nearly forty-two years later, Mrs. Sly States Military Academy, West Point, and HON. SAM JOHNSON has served as an educator in three states— commissioned in the Field Artillery on 9 June OF TEXAS Kentucky, Ohio, and California—at both the el- 1965. He was awarded a Master of Science in ementary and secondary levels, in the class- IN THE HOUSE OF REPRESENTATIVES Physics from the University of Virginia in 1971. room and as an administrator. Wednesday, December 19, 2001 Sue Galbreath-Sly began her career as a Prior to assuming duties as the Director of the Army Staff, he served as Chief of Staff, Mr. SAM JOHNSON of Texas. Mr. Speaker, teacher in Kentucky in 1960, and the spirit of United States Army Forces Command, Fort I submit the following article by Kay Blythe teaching has remained strong in her to this McPherson, Georgia; Commander, Fort Car- Tracy, Ph.D.: day. Visiting the principal’s office at Baldwin Elementary today, one might wonder if it is a son, Colorado and Deputy Commanding Gen- Americans now are inspired and united by eral, III Corps; Deputy Commanding General, every musical note of ‘‘God Bless America.’’ classroom because it is always filled with stu- But back in the sixties, we were a nation in dents seeking Mrs. Sly’s guidance and friend- XVIII Airborne Corps and Fort Bragg, North discord, singing many different tunes. Rod- ship. She successfully presents herself to her Carolina; Commanding General of Joint Task gers and Hammerstein wrote songs of Cam- students as just another teacher; however, Force Six, Fort Bliss, Texas; and Assistant Di- elot, while Pete Seeger asked, ‘‘Where have she is anything but ‘‘just another teacher.’’ vision Commander (Support), 4th Infantry Divi- all the young men gone?’’ Rather, she is the best kind of teacher, seeing sion (Mechanized), Fort Carson, Colorado. The story I’m going to tell you today is about what happened to one of those young her educational mission as a year-round job— General Pickler has held a wide variety of men. This story began in the sixties, when spending weekends chaperoning students to Field Artillery positions from battery through POW/MIA bracelets were conceived as a way various competitions, fairs, and conferences corps, culminating as the Chief of Staff, III to remember missing or captive American and recruiting students for summer enrichment Corps Artillery and the Director of Plans, prisoners of war in Southeast Asia. Tradi- programs. Training and Mobilization, Fort Sill, Oklahoma.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00009 Fmt 0666 Sfmt 9920 E:\CR\FM\A19DE8.026 pfrm07 PsN: E20PT1 E2348 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 Other key assignments include Instructor and and pay tribute to a leader in the firefighting the European and North African/Middle East Assistant Professor in the Department of community—Clifton Armstead outgoing Chief theaters. After the war, Jim returned to the Physics at West Point; Executive Officer to the of the Wilmington Fire Department. Clifton United States and in 1948 enlisted in the Air Director, Defense Nuclear Agency; Com- Armstead is an outstanding, dedicated and Force. He quickly rose among the ranks and mander of 2d Battalion, 81st Field Artillery, 8th caring Delawarean with an abundance of ac- in 1957 achieved the rank of Major. Jim Infantry Division (Mechanized) with concurrent complishments in this field. On behalf of my- served in both the Korean and Vietnam wars, duty as Commander of the Idar-Oberstein self and the citizens of the First State, I would and in 1968 voluntarily retired as a Lieutenant (Germany) Military Sub-community. Following like to honor this outstanding individual and Colonel. He has been honored with numerous command, he was assigned as the 8th Infan- extend to him our congratulations on his 36 medals ranging from the WWII victory medal try Division Inspector General. In 1987, he re- years in the fire department. to the National Defense Service Medal as well turned to Germany as Commander, 8th Infan- Today, I recognize Clifton Armstead for his as the Air Force Longevity Service Award with try Division Artillery in Baumholder, and then long and distinguished career in the Wil- four Oak Leaf Clusters. became the Executive Officer to the Chief of mington Fire Department. On January 4th After a distinguished career in the Air Force, Staff of the Army, Washington, DC, in 1989. In 2002 Mr. Armstead will officially retire from a Mr. Rees established himself in Riverside and addition to Germany, his overseas assign- post that he has held since 2000, but from a went into the banking business. He served the ments include Vietnam and Turkey. fire department that he has been part of for community with the same care and dedication General Pickler is a graduate of both the over three decades. He has provided service he had served our country. An avid golfer, Jim Command and General Staff College, Fort in a manner that has brought distinction not was instrumental in the revitalization of the Leavenworth, Kansas, and also the Army War only to himself but to the entire Wilmington March Air Force Base golf course. Jim has College with duty as an Advanced Operational Fire Department. also been active in the Strategic Air Command Studies Fellow at the Combined Arms Center, Family, friends and fellow firefighters can Group of Veterans and has always been Fort Leavenworth. His awards and decorations now take a moment to truly appreciate the proud to call himself a team player. include the Distinguished Service Medal; the world of difference Clifton Armstead has A love of country can only be matched by Defense Superior Service Medal with Oak brought to the firefighting community. He has a love of family. Mr. Rees has four children, Leaf Clusters; the Legion of Merit with Three served for many years as a member of En- Christine, Susan, Laura, and David, five Oak Leaf Clusters; the Distinguished Flying gine, Ladder and Rescue Companies as well grandchildren, Amy, Jennifer, Jim, Ian, and Cross; the Bronze Star with ‘‘V’’ Device; and as the Training Unit. Mr. Armstead was pro- Susan and great-grandchild, Samuel who all the Meritorious Service Medal with Three Oak moted to Lieutenant in 1983 and appointed refer to him as their hero. No greater honor Leaf Clusters. Deputy Chief of Operations in 1993 where he can be bestowed on a man who has selflessly General Pickler and his wife, Karen, have served for seven years before being appointed and wholeheartedly served our great nation. one daughter, Nevelyn, and two sons, Andy Chief of Fire in January of 2000. Mr. Speaker, looking back at Jim’s life, we and Jeff. Clifton E. Armstead has spent all of his life see a man dedicated to military service and General Pickler attended his last parade as helping the community of Wilmington and all community—an American whose gifts to the a soldier on Monday, 29 October 2001. I am of Delaware. Mr. Armstead graduated with the Inland Empire and California led to the better- proud to have had the opportunity to attend it Class of 1962 from Wilmington High School. ment of those who have the privilege to come and witness the retirement of a friend. He also attended Delaware Technical and in contact or work with Jim. Honoring him f Community College, the National Fire Acad- today is the least that we can do for all that emy and the Delaware State Fire School. Of he has given over the past 80 years of his life. PERSONAL EXPLANATION particular interest are the many supervisory f and management classes that have helped HON. BOB RILEY him to become such a successful and impor- RAYMOND M. DOWNEY POST OFFICE BUILDING OF ALABAMA tant leader to the City of Wilmington. Mr. Speaker, with his wife Dawn at his side, IN THE HOUSE OF REPRESENTATIVES SPEECH OF and his daughter Jaye, the Armstead family Wednesday, December 19, 2001 proudly and unselfishly contributes every day HON. JAMES T. WALSH Mr. RILEY. Mr. Speaker, I was unavoidably to the quality of life at home in their commu- OF NEW YORK detained for rollcall No. 499, H.R. 3379, to nity and our entire state. IN THE HOUSE OF REPRESENTATIVES designate the facility of the United States Mr. Clifton E. Armestead’s contributions Tuesday, December 18, 2001 Postal Service located at 375 Carlls Path in cannot be commended enough. As he retires Deer Park, New York, as the ‘‘Raymond M. from the Wilmington Fire Department we can Mr. WALSH. Mr. Speaker, as an original co- Downey Post Office Building.’’ Had I been be sure that his contributions will not end. His sponsor of H.R. 3379 introduced by Congress- present I would have voted ‘‘yea.’’ commitment to fighting fires and saving lives man ISRAEL, I also rise in strong support of the I was also unavoidably detained for rollcall has earned him a permanent place in Dela- Raymond M. Downey Post Office Building No. 500, H.R. 3054, to award congressional ware’s fire service history. Designation Act. This legislation is a small, but fitting, tribute to one of New York City’s brav- gold medals on behalf of the officers, emer- f gency workers, and other employees of the est fire chiefs. Federal Government and any State or local TRIBUTE TO JAMES K. REES Chief Downey was the most decorated government, including any interstate govern- member of the New York City Fire Department mental entity, who responded to the attacks HON. KEN CALVERT and leader of the department’s special oper- on the World Trade Center in New York City OF CALIFORNIA ations unit. At age 63 with 39 years on the and perished in the tragic events of Sep- IN THE HOUSE OF REPRESENTATIVES job, Chief Downey was a ‘‘firemen’s fireman’’ tember 11, 2001. Had I been present I would as they say in the fire service. He was a na- Wednesday, December 19, 2001 have voted ‘‘yea.’’ tional expert on urban search and rescue and f Mr. CALVERT. Mr. Speaker, I rise today to led a team of New York City firefighters who pay tribute to a most exceptional California In- responded to the 1995 Oklahoma City bomb- TRIBUTE TO CLIFTON E. land Empire community leader, friend and ing. Chief Downey even testified before a ARMSTEAD, OUTGOING CHIEF OF great American—Mr. James Rees. House committee in 1998 on the topic of THE WILMINGTON FIRE DEPART- Calvin Coolidge, America’s 13th President, weapons of mass destruction, sharing his val- MENT once said, ‘‘No person was ever honored for uable knowledge with our colleagues. He truly what he received; honor has been the reward defined what is meant by calling New York HON. MICHAEL N. CASTLE for what he gave.’’ And Jim Rees gave much City firefighters the ‘‘world’s bravest.’’ OF DELAWARE during his years of military service and bank- As I watched the events of September 11th IN THE HOUSE OF REPRESENTATIVES ing career. unfold in my Washington office with my staff, With true valor and love of country, Mr. I remember thinking, God be with the fire- Wednesday, December 19, 2001 Rees voluntarily enlisted in the United States fighters who are going in there to save lives. Mr. CASTLE. Mr. Speaker, it is with great Army in 1942 and became an Officer in 1944. As a true leader Chief Downey was on the pleasure that I rise today as a member of the Like many other members of the Greatest front lines with his personnel directing the res- Congressional Fire Service Caucus to honor Generation he served in World War II in both cue efforts. As he had done in the first World

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00010 Fmt 0666 Sfmt 9920 E:\CR\FM\A19DE8.029 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2349 Trade Center bombing in 1993, Chief Dow- and the poise, charisma, and dedication rarely We’ve heard talk of tax breaks for wealthy ney’s efforts saved thousands of lives. Sadly, seen in a young woman of her age, Jessica individuals. with 343 of his men, Chief Downey made the was well on her way to being a great Senator. Well, I’m here to tell you that won’t work for ultimate sacrifice on that tragic day. The State of Louisiana, her electric coopera- the community I represent! It is said that a firefighter’s first act of her- tive family, and America will miss her. Some of the cities in my congressional dis- oism is taking the oath to become a firefighter. As her high school graduating class motto trict are facing unemployment levels as high From there on, the rest is just part of the job. said: as nine percent. Nine percent! As we recognize Chief Downey today, it is im- The past is but the beginning of a beginning, People who are being laid off need help portant to remember not only his heroic deeds and all that is now—not in the future. of September 11th, but his extraordinary fire- and has been is but the twilight of the dawn. They need to make sure their unemploy- fighting career as well. His wife Rosalie com- (H.G. Wells) ment benefits last long enough to help their mented, ‘‘He never complimented himself. He May the light of that dawn shine upon Jes- family make it through the new year. always did what he had to do.’’ We as a na- sica Caroline Aiton forever more. They need to make sure their health care tion are forever grateful for what Chief Dow- f doesn’t disappear, leaving their families in the ney and his fellow firefighters did on Sep- lurch. tember 11th. We are also grateful for what our IN TRIBUTE TO MARILYN HUGHES I urge the leadership of this House to do the nation’s firefighters continue to do everyday in GASTON, MD right thing for American families and pass a this country, saving lives and property. The real economic stimulus plan which gives hard- spirit of Chief Downey will continue to live on HON. DONNA M. CHRISTENSEN working families a real boost! through this post office in Deer Park and in OF THE VIRGIN ISLANDS f the fire service forever. IN THE HOUSE OF REPRESENTATIVES HONORING EMERGENCY SERVICE f Wednesday, December 19, 2001 WORKERS DURING LOCAL HE- ROES WEEK JESSICA CAROLINE AITON (1983– Mrs. CHRISTENSEN. Mr. Speaker, after a 2001), 2000–01 YOUTH LEADERSHIP twenty-five year career in the U.S. Public COUNCIL REPRESENTATIVE Health Service, Marilyn Hughes Gaston, MD, HON. CHET EDWARDS (LOUISIANA NATIONAL RURAL Director of the Bureau of Primary Health Care, OF TEXAS ELECTRIC COOPERATIVE ASSO- within the Health Resources and Services Ad- IN THE HOUSE OF REPRESENTATIVES CIATION) ministration, is resigning and making her tran- Wednesday, December 19, 2001 sition into the private sector. Mr. EDWARDS. Mr. Speaker, it is particu- HON. RICHARD H. BAKER Dr. Gaston began her career as a physician. larly fitting, in the wake of the tragic events of OF LOUISIANA She received her medical degree from the September 11th, 2001 and the courageous IN THE HOUSE OF REPRESENTATIVES University of Cincinnati College of Medicine and selfless acts of heroism by New York’s and completed a residency training in pediat- Wednesday, December 19, 2001 police, firefighters and rescue workers which rics. Her work over the years has been were witnessed and acclaimed by the world, Mr. BAKER. Mr. Speaker, Jessica Caroline marked by staunch advocacy for the better- that we extend our gratitude to police, fire and Aiton of Greenwell Springs, LA died on Mon- ment of the health status of minorities, women emergency service workers in all of America’s day, December 17, 2001, at the age of 18, fol- and children. Dr. Gaston is an internationally communities. The citizens of Bell County and lowing a tragic car accident. Jessica served as recognized leader in sickle cell research and Copperas Cove, Texas in my congressional the 2000–2001 Youth Leadership Council her contributions to the field have resulted in district are honoring these public servants, Representative from her state for the National significant changes in the way the disease is from November 18–24, during the 10th ob- Rural Electric Cooperative Association. This treated and managed in children. servance of Local Heroes Week. means that she was one of the best and She is the first African American woman to This expression of appreciation to our local brightest students from rural America and from direct a U.S. Public Health Service Bureau public safety workers for their service to Cen- Louisiana. and she commands a primary health care tral Texas, which has grown every year since Every year, the National Rural Electric Co- budget that reaches $5 billion. Under her lead- its inception in 1992, raises funds from area operative Association (NRECA), through its ership millions of vulnerable and disadvan- businesses and organizations to endow schol- nearly one thousand member cooperatives, taged populations nationwide are assured ac- arships at Central Texas College for their im- hosts the Washington, DC Youth Tour. This cess to quality, culturally and linguistically mediate families. program brings 1,300 high school students competent, primary and preventive health As a community, we owe a special thanks from across rural America to visit their Na- care. Along with her numerous other acco- to the police officers, fire fighters and emer- tion’s Capital to learn about their heritage, and lades, she is a former Assistant Surgeon Gen- gency workers we honor and our sincere ap- about their electric cooperatives. On average, eral and the second African American woman preciation to those who organize Local Heroes Louisiana brings 25 students each year. From to reach Rear Admiral, the highest rank in the Week. The recent tragedies at the World this group, the state association selects one U.S. Public Health Service. Trade Center in New York and at the Pen- outstanding individual to be its youth spokes- Recently, Dr. Gaston co-authored ‘‘Prime tagon in Arlington, Virginia remind us that person for the year and to serve on the Time,’’ a health and wellness book for African every day, in every city and county in the NRECA national Youth Leadership Council. American women in the midyears. She is a country, these men and women put their lives Jessica was selected as the representative for phenomenal leader and mentor. Her work has on the line to protect us from harm. the 2000–2001 school year. She was one of touched the lives of many and her presence in Mr. Speaker, I ask the Members of the just 41 nationally appointed to this honor. the Public Health Service will be genuinely House of Representatives to join me in hon- Jessica had been an honor student at Cen- missed! oring these local heroes, in Copperas Cove tral High School where she graduated third in f and Bell County, and across the nation. They her class. This past fall, she started her fresh- NEED FOR ECONOMIC STIMULUS define the spirit of public service and we are man year at LSU. She began as an Account- grateful. ing major and then changed to Chemical Engi- neering. Next spring, she had planned to take HON. HILDA L. SOLIS f some political science classes, with an eye to- OF CALIFORNIA TRIBUTE TO ARMY SPECIALIST ward law school and politics. As she once said IN THE HOUSE OF REPRESENTATIVES JONN JOSEPH EDMUNDS of her future in an email to one of her former YLC counselors, ‘‘All I know is that I want to Wednesday, December 19, 2001 HON. BARBARA CUBIN go to law school and eventually become a Ms. SOLIS. Mr. Speaker, there’s been a lot OF WYOMING Senator. That much is clear.’’ Jessica was of talk here about the need to get our econ- IN THE HOUSE OF REPRESENTATIVES also an active member of the Denham Springs omy jump-started and about the best way to Church of Jesus Christ of Latter-day Saints, get that done. Wednesday, December 19, 2001 loved to run and ride horses, and had just re- We’ve heard talk of tax cuts for big business Mrs. CUBIN. Mr. Speaker, I am honored to cently joined the College Republicans. With a that will eventually trickle down to the rest of represent the great state of Wyoming in this heart for God, an incredible desire to serve, America. House of Representatives.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00011 Fmt 0666 Sfmt 9920 E:\CR\FM\A19DE8.033 pfrm07 PsN: E20PT1 E2350 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 Nothing reminds me more clearly of the true HONORING MARINE CPL. by a gifted performance by a young man nature of that honor than each time I look CHRISTOPHER T. CHANDLER named Reid McKinney, who earned honors as upon the brave men and women who wear the the game’s most valuable player. McKinney uniforms of America’s armed forces. HON. THOMAS G. TANCREDO displayed great talent and leadership exem- I have had the pleasure of meeting many of OF COLORADO plary of all his teammates on both sides of the these young patriots. Other times I see their IN THE HOUSE OF REPRESENTATIVES ball, throwing three touchdowns and running for three more, including a fumble recovery for dedicated faces in newspaper photos back Wednesday, December 19, 2001 home to announce their achievements. a touchdown that sealed the game. Mr. TANCREDO. Mr. Speaker, I rise today Their impressive 26-year-old head coach, One such photo that I’ve viewed for the to pay tribute to Marine Cpl. Christopher Bo Hembree, led and inspired his team to per- most tragic of reasons pictures Army Spe- Chandler—who is without a doubt one of form at a championship level throughout the cialist Jonn Joseph Edmunds of Cheyenne, America’s finest soldiers who fought in Oper- season. With each game, these young men Wyoming. ation Enduring Freedom. demonstrated amazing hard work, dedication, Jonn Edmunds was one of two Army Rang- On Sunday, December 16th, our nation and character. I commend the entire team and ers killed on Friday, October 19, 2001, in the learned that Marine Cpl. Christopher Chan- the coaching staff both collectively and as indi- crash of a helicopter in Pakistan. Jonn and his dler—of the 1st Light Armored Reconnais- viduals for a remarkable season, and I ap- fellow Ranger were the first American combat- sance Battalion, 1st Marine Division—lost his plaud Coach Hembree for instilling in his play- related deaths of our necessary new war. leg in a land mine explosion while guarding ers the characteristics of leaders and cham- Look at this young mans portrait and you’ll explosive-clearing teams at the Kandahar pions that they will be able to draw from for instantly recognize a fierce determination to be International airport in Afghanistan—his mis- the rest of their lives. a good warrior, a good American, and a good sion—to clear unexploded munitions and These students and their success are a trib- citizen. mines to help launch international humani- ute to their parents, their school, and the en- The military men and women defending this tarian efforts and other military operations in tire Warren community. Not only the coaches nation and its magnificent principles in and the area. Injured with Cpl. Chandler were Sgt. and players, but also the band, cheerleaders, around Afghanistan have left their homes in lit- Adrian Aranda and Lance Cpl. Nicholas Sov- students, teachers, and all those who sup- tle towns and big cities all across our country ereign, who suffered serious shrapnel wounds ported this team can take pride in their role in to serve us all. in the explosion. bringing about this accomplishment. I con- Jonn’s treasured home was Cheyenne, Wy- Chandler, a 21-year-old soldier from Aurora, gratulate Warren High School and the city of oming. He belonged to the Future Business Colorado, entered the Marine Corp. in June Warren as they celebrate this momentous Leaders of America, was a Wyoming Boys 1998, immediately after graduating from Gate- achievement. State delegate, lettered in academics, and way High School. f Mr. Speaker, I am honored to represent Cpl. played soccer. Chandler, his parents Kenneth and Rumi, and A TRIBUTE TO COMMANDER He graduated from East High School in sister Stephanie in the U.S. House of Rep- WILLIAM EBBS 1999 and quickly joined the Army. resentatives. Our nation is forever indebted to He became a Ranger five months later and Cpl. Chandler for his self-sacrifice and admi- HON. JERRY LEWIS was based in Fort Benning, Georgia as a rable actions taken on Sunday, December 16, OF CALIFORNIA member of the 75th Ranger regiment. 2001—for they will be etched in the memory IN THE HOUSE OF REPRESENTATIVES Jonn’s promising future was accompanied of America’s new war against terrorism and Wednesday, December 19, 2001 by a sworn, sincere promise to serve . . . a never forgotten. promise this young man would never dream of f Mr. LEWIS of California. Mr. Speaker, I rise breaking . . . a promise that led to this tragic today to pay tribute to Commander William WARREN HIGH SCHOOL’S loss. Ebbs, who provided invaluable service to Con- TRIUMPHANT SEASON gress on national security issues for two years In a paper written for a high school class a as a congressional liaison in the Office of the few short years ago, Jonn discussed his plans HON. MIKE ROSS Navy’s Director of Budget, and who will soon for a long-term Army career. He said, ‘‘I will be be on the front lines of our nation’s defense as contributing to myself as well as for the de- OF ARKANSAS IN THE HOUSE OF REPRESENTATIVES commander of a submarine. fense of this country and for the betterment of Originally from Atlanta, Georgia, CDR Ebbs the world.’’ Wednesday, December 19, 2001 enlisted in the Navy in May 1976. He com- No one should doubt that Jonn Edmunds Mr. ROSS. Mr. Speaker, educating our pleted boot camp at the Naval Training Cen- was ready and willing to join the fight against young people is arguably as important as any ter, San Diego and attended Nuclear Power terrorism and to help seek justice for the evils issue we deal with not only in the halls of Training at the Naval Training Center, Or- our nation has endured since the September Congress, but also in our everyday lives as lando, Florida. At the completion of his quali- 11 attacks. parents and as members of our respective fication as a nuclear propulsion plant operator, His father Donn told reporters, ‘‘I’m ex- communities. Each day, our children learn im- he was assigned to USS Von Steuben SSBN tremely proud of my son. He was doing what portant lessons in the classroom that will pre- 632, a Lafayette class fleet ballistic missile he wanted to do.’’ pare them for the days and years ahead, and submarine. After four strategic patrols on Von I’ve called Jonn’s family to express my grief we must make sure that they are given the Steuben, he was detailed in 1979 as a mem- at their loss. My prayers are with his father tools they need to compete in the 21st Cen- ber of the ship’s refueling/overhaul crew. It Donn and mother Mary, his brother Seth and tury. was during this time that CDR Ebbs applied sister Alyssa, Anne, his wife of less than a In addition to work in the classroom, another for and was accepted to participate in the year, and his other family members and important aspect of the school experience that Navy Enlisted Commissioning Program. Under friends. I pray that the pain of their sorrows can play a valuable role in the academic as this program, CDR Ebbs attended Auburn Uni- will be softened over time by sweet and loving well as social development of a young person versity and graduated with honors with a memories. is athletics, teaching the values of teamwork, bachelor’s degree in Electrical Engineering. leadership, dedication and perseverance. In Commissioned an Ensign after attending Of- Despite their terrible loss, Jonn’s family has that spirit, I would like to recognize and con- ficer Candidate School in Newport, Rhode Is- told us all that their support for President Bush gratulate a high school football team in my land, CDR Ebbs was designated a submarine and Operation Enduring Freedom remains congressional district that exemplified those officer and assigned to the USS Key West strong. When I think of Jonn and his family, I qualities, the Warren High School Lumber- SSN 722, then the Navy’s newest Los Ange- am humbled. Every American should be. jacks in Warren, Arkansas, who recently won les Class Fast Attack submarine. During this And we all should be thankful for this gift of their school’s first AAA Boys High School time, the Commander, Submarine Squadron honor and dedication in the name of justice State Football Championship. Eight, recognized him as the ‘‘1989 Junior Of- and freedom. The Lumberjacks captured the champion- ficer of the Year.’’ God bless Jonn, his family and friends, and ship in a thrilling 45-39 victory over the de- After a tour in the Manpower division on the his comrades in arms. And God bless Amer- fending state champion, punctuating a perfect Staff of the Commander, Submarine Force, ica. 15 and 0 season. The game was highlighted US Atlantic Fleet, he attended the Submarine

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00012 Fmt 0666 Sfmt 9920 E:\CR\FM\A19DE8.038 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2351 Office Advanced Course and was assigned as nity. He has been an active member of numer- assistance are given new clothing, which is the Chief Engineer on USS Atlanta SSN 712, ous organizations including the Rotary Club of paid for by the League and Target. It is a day a Los Angeles class submarine stationed in Eureka, the Boy Scouts of America, Christ of shopping and fun for the children. They are Norfolk, Virginia. Episcopal Church, KEET Public Television and allowed to choose the clothing so that when Following a tour as the submarine special the Salvation Army. His vision, enthusiasm, they put on these new clothes they feel they operations officer at the United States Atlantic and commitment are admired throughout were a part of the selection and really own the Command, CDR Ebbs was assigned as Exec- Humboldt County. clothes. This obviously helps to foster self-es- utive Officer of USS West Virginia SSGN 736, Mr. Speaker, it is appropriate at this time teem, which is needed with some of these a Trident class Fleet Ballistic Missile sub- that we recognize Theodore W. Loring, M.D. children. With a Fall and Spring Child Service marine stationed in Kings Bay, Georgia. for his leadership and commitment to the well Center, the League was able to clothe 915 In the spring of 1999, CDR Ebbs was as- being of the citizens and community of Hum- students last year. For those not able to at- signed to the Office of the Navy’s Director of boldt County, California. tend, the League offered clothing to an addi- Budget as a Congressional Liaison. During his f tional 199 students. time as a Congressional Liaison, CDR Ebbs Volunteer opportunities within the League provided invaluable support to me, the Appro- PERSONAL EXPLANATION include: After School Assistance Program priations Committee, and the various Members (ASAP), Domestic Violence, Kids on the Block and personal staff of the Subcommittee on HON. XAVIER BECERRA (a puppet show used to teach children about Defense. He displayed a unique ability to ex- OF CALIFORNIA domestic violence, handicapped people, or di- plain complex military requirements in the con- IN THE HOUSE OF REPRESENTATIVES vorce), Teen Court, and Mentorship Program text of an appropriations framework, serving Wednesday, December 19, 2001 (where a mentor is paired with a student that this Committee well and reflecting great credit is not doing well in school). These different on the Department of the Navy. CDR Ebbs left Mr. BECERRA. Mr. Speaker, on Tuesday, volunteer placements change as the needs of the Office of the Navy’s Director of Budget December 18, 2001, due to business in my the community change. earlier this year for a new assignment. District, I was unable to cast my floor vote on Mr. Speaker, League members have a Mr. Speaker, I have the great honor to in- rollcall No. 499, on Motion to Suspend the strong history as State and community lead- form the Members of the Committee and the Rules and Pass H.R. 3379, the Raymond M. ers, and I commend the Junior Service Congress that on January 11, 2002, CDR Wil- Downey Post Office Building; and rollcall No. League of Panama City for their continuing liam Ebbs will take Command of the Fleet Bal- 500 on Motion to Suspend the Rules and legacy of service and achievement. I am de- listic Missile Submarine USS Louisiana sta- Pass H.R. 3054, the True American Heroes lighted to congratulate them on its 50th Anni- tioned in Kings Bay, Georgia. We thank him, Act. versary and I wish them many more years of his wife Patricia, and their boys Arthur and Had I been present, I would have voted successful service to their community. Parker, for their years of service and sacrifice. ‘‘aye’’ on rollcall votes 499 and 500. We wish William God’s speed and protection. f f f JUNIOR SERVICE LEAGUE OF SUPPORT FOR H.R. 3423 HONORING DR. THEODORE LORING, PANAMA CITY, FLORIDA M.D., OF HUMBOLDT COUNTY, HON. RONNIE SHOWS CALIFORNIA HON. ALLEN BOYD OF MISSISSIPPI OF FLORIDA IN THE HOUSE OF REPRESENTATIVES HON. MIKE THOMPSON IN THE HOUSE OF REPRESENTATIVES Wednesday, December 19, 2001 OF CALIFORNIA Wednesday, December 19, 2001 Mr. SHOWS. Mr. Speaker, I am proud to be IN THE HOUSE OF REPRESENTATIVES Mr. BOYD. Mr. Speaker, today I rise to rec- here, as a member of the House Veterans Af- Wednesday, December 19, 2001 ognize and commend the Junior Service fairs Committee to share my strong support for Mr. THOMPSON of California. Mr. Speaker, League of Panama City, Florida as that group H.R. 3423. I rise today to recognize Dr. Theodore W. celebrates its 50th anniversary of service to In the days that followed September 11th, Loring of Humboldt County, California, who is our community. The Junior Service League is the depth of our lost was expressed in the being honored with the Distinguished Citizen a remarkable organization, dedicated to train- thousands of testimonies of families and Award by the Redwood Empire Council of the ing women for leadership in serving their com- friends who lost loved ones in the World Trade Boy Scouts of America. munities. It is committed to promoting vol- Center, Pentagon and plane crash in Pennsyl- Dr. Loring served his country in the U.S. unteerism, developing the potential of women, vania. We struggled as a nation to com- Army from 1943 to 1948, attaining the rank of and improving the community through the ef- prehend what had happened and collectively Captain. In 1951, he began his obstetrics fective action and leadership of trained volun- rose to pay tribute to the lives that were practice in Eureka, California, and since that teers. The women of Panama City have cer- ended. time he has delivered over 5,000 babies in the tainly demonstrated during the past half cen- And as stories of these people’s lives turned community. He and his wife Ruth have raised tury that hard work and good spirits can make to stories of these people’s funerals, we four fine sons of their own and enjoy five a powerful difference in the community that we learned of an injustice that had been occurring grandchildren and three great-grandchildren. live in. for years. We learned of Captain Charles Bur- Dr. Loring has consistently gone beyond the The Junior Service League of Panama City lingame, the pilot of Flight 77, who served a call of duty to serve his profession. He is the was founded on October 12, 1951 and had full reserve career in the Navy. We learned founder and past President of the Humboldt twenty charter members. The founding mem- that if he had lived his full God Given life, one Del Norte Foundation for Medical Care. He bers’ goals were to foster interest in the social, not destroyed by terrorist action, he would has held a variety of offices with the California economic, educational, cultural, and civic con- have been eligible for burial at Arlington Na- Medical Society, including Secretary, Coun- ditions of the community; to promote the inter- tional Cemetery—with all the rights and re- cilor, Member of the House of Delegates, Pro- est of its members in volunteer service to the spect from the U.S. Government he had gram Planner and Moderator and Chairman of community; and to work in harmony with the served so proudly. And yet, because his life the OB–GYN section. He has served with dis- policies of the Association of Junior Leagues. ended, before he turned 60, he was denied tinction on the American Medical Association The group began making a strong impact this honor; an honor for which he surely and the Pacific Coast OB–GYN Society. Addi- then, and I am proud to report that their work earned up till the last moment of his life. tionally, Dr. Loring is Chairman and Director has not only continued but has intensified Today we change this. Emeritus of the Union Labor Hospital Associa- since that time. The 2000–2001 League year We respect the sanctity of Arlington Ceme- tion Board, and he has served on the Board marks the 50th anniversary of this outstanding tery’s grounds and the special honor it offers of Directors of Blue Shield of California and as organization with over 80 active members and those who served our nation with distinction. a Director and Secretary of the Norcal Mutual over 200 sustainer members still dedicated to We recognize the limited burial grounds of the Insurance Company. the goals established by its charter members. cemetery and so deliberated change to their The unparalleled work Dr. Loring accom- The largest yearly project for the League is rules with care. Having done this, we deter- plished in his professional career is matched called Child Service Center through which stu- mined that service to one’s nation, not age of by his dedication to service within the commu- dents that are recognized as needing financial one’s life, should be the ultimate criterion for

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00013 Fmt 0666 Sfmt 9920 E:\CR\FM\A19DE8.041 pfrm07 PsN: E20PT1 E2352 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 interment at Arlington. And so, in this bill we Caucus helped develop. And in particular, I the school fails to meet performance objec- move forward in expanding our ability to pro- would like to thank my colleague, Congress- tives, it will be required to implement improve- vide appropriate tribute and reverence to more man RUBE´N HINOJOSA, who has worked tire- ments including professional development and servicemen who have passed. We eliminate lessly on education issues in his capacity as curriculum changes. These accountability today the age requirement for retired reserv- Chair of the CHC Education Task Force. I do measures promise to ensure that schools ists who would otherwise be eligible for in not believe we would be where we are today maintain effective bilingual programs. ground burial, and we grant families of reserv- if it were not for his dedication to expanding The second issue area in H.R. 1 that the ists who died performing training duty the right academic opportunities. Hispanic Caucus worked very hard to achieve to have their loved ones buried at Arlington. First of all, bilingual education programs are results in was migrant education. Migrant stu- This Holiday season, as we give thanks for important to limited English proficiency (LEP) dents have unique educational needs because our families and the strength of our nation, we children because they build on native lan- of their families’ need to periodically relocate recognize more than ever that our veterans guage proficiency to make the transition to all- in order to maintain employment. are our heroes. They have shaped and sus- English academic instruction. Without this The Conference Report expands education tained our nation with courage, sacrifice and foundation, many children will not be prepared services for migrant students by increasing the faith. They have earned our respect and de- to perform to high academic standards. authorized funding level of migrant education serve our gratitude. Let us join together and H.R. 1 sets a ‘‘trigger’’ of $650 million at by $30 million, from $380 million to $410 mil- do something meaningful by passing this leg- which bilingual education would convert from lion for fiscal year 2002. While this funding islation. It is the right thing to do. its current competitive grant structure to a new level would fall short of meeting all existing f formula grant, consolidated along with immi- needs, it is a significant step toward reversing grant education. This new formula, accom- the 11 percent decline in dollars spent per mi- PERSONAL EXPLANATION panied by a significant increase in appropria- grant pupil over the past two years. tions, will extend bilingual education to millions This bill also helps migrant students by im- HON. LORETTA SANCHEZ of eligible students who currently do not re- proving the way their academic and health OF CALIFORNIA ceive bilingual education services. records are transferred from one school to an- IN THE HOUSE OF REPRESENTATIVES The Conference Report does not require pa- other. Although some States have developed rental consent before students are placed in and implemented their own student records Wednesday, December 19, 2001 bilingual education, even though opponents of systems, current failures and interruptions in Ms. SANCHEZ. Mr. Speaker, on December bilingual education fought hard for this and in- records transfer result in delays in school en- 13, 1 was in Washington D.C. conducting offi- cluded it in the original House version of this rollment and academic services for migrant cial government business. It was my intention bill. Instead, the conference compromise con- students, discrepancies in student placement, to vote on Rollcall No. 498, H. Res. 314, tinues to maintain the current ‘‘opt-out’’ sys- and repeat immunizations of migrant children. which would have suspended the rules and al- tem, favored by the Hispanic Caucus. Schools Under the Conference Committee agreement, lowed suspension bills on Wednesday Decem- will be required to notify parents if their chil- the Secretary of Education is directed to assist ber 19. However, the electronic voting ma- dren are placed in bilingual education and par- states in linking existing systems of interstate chine did not properly record my vote. I re- ents will be given the information they need to migrant student records transfer. This will help quest that the CONGRESSIONAL RECORD reflect immediately transfer their children to English- eliminate two serious problems faced by mi- that had my vote been properly recorded I only classes, if they want. This system will en- grant students: (1) multiple unnecessary vac- would have voted ‘‘nay’’ on Rollcall No. 498. sure that LEP students are not deprived of cinations, which create a serious health haz- f services that will help them succeed academi- ard, and (2) denial of high school graduation cally, while giving parents flexibility and because high school credit records are miss- CONFERENCE REPORT ON H.R. 1, choice. ing. NO CHILD LEFT BEHIND ACT OF It is estimated that 50,000 new bilingual Finally, the third issue area addressed by 2001 education teachers are needed to meet the the Conference Report is high school dropout demands of a growing limited English pro- prevention. Addressing the dropout problem SPEECH OF ficient student population. At our insistence, during this ESEA reauthorization has been of HON. SILVESTRE REYES H.R. 1 now includes a set-aside program for paramount importance to the CHC. Statistics OF TEXAS professional development to improve the quali- show the dropout rate for Hispanic students is IN THE HOUSE OF REPRESENTATIVES fications of existing teachers and to recruit and approximately 30 percent compared to only 10 train new teachers. The program will authorize percent for non-Hispanic white students. For Thursday, December 13, 2001 two funding sources: one through the federal LEP students, the dropout rate is approxi- Mr. REYES. Mr. Speaker, as Chair of the government and the other through the states. mately 50 percent. At this rate, the economic Congressional Hispanic Caucus (CHC), I am In an additional boost to improving teacher and social potential of an entire generation of proud to support the Conference Report on quality, the Conference Report retains a na- Americans is at risk. H.R. 1, which reauthorizes the Elementary and tional clearinghouse for information and data Students cite a variety of reasons for drop- Secondary Education Act (ESEA). I am on bilingual education. The compilation and ping out, such as the lack of qualified teach- pleased that the conferees included most of distribution of this data provides important in- ers, lowered expectations of minority students’ the CHC’s priorities in the final bill, which will formation to educators on how to improve the academic potential, classes that fail to chal- now go a long way to reduce the disparities in quality of bilingual education. lenge them intellectually and the threat of educational achievement between Hispanic Opponents of bilingual education favored ‘‘tracking.’’ Currently, there are a variety of and non-Hispanic children. placing a three year limit on how long students programs which offer only piecemeal and in- The Census Bureau projects that by the can be enrolled in bilingual education regard- adequate solutions to the problem. The Con- year 2030, Hispanic children will represent 25 less of what level of English proficiency they ference Report takes a major step towards ad- percent of the total student population, and reach. The CHC opposed this, recognizing dressing the Hispanic dropout crisis by launch- even the most recent Census figures show that students entering the educational system ing an innovative dropout prevention program that Hispanics are now on pace to become the at different stages acquire language pro- that will comprehensively support proven nation’s largest minority sooner than expected. ficiency at different speeds. The compromise measures to reduce high school dropout rates Given these statistics, and the likelihood that bill gives students the flexibility to remain en- in schools predominantly serving low-income many of these students will come from low-in- rolled in bilingual education as long as is ap- students. I would like to express my thanks come households, the reauthorization of ESEA propriate. Senator JEFF BINGAMAN, who introduced the has been a significant priority for the Hispanic As part of the compromise, the bill requires program in the Senate, and all the conferees, Community. With appropriate funding, many of students to be tested for English reading pro- for including this dropout prevention program the programs in H.R. 1 that we helped shape ficiency after their third year in bilingual edu- in the final conference report. will improve the educational achievement of cation. However, school districts can obtain a In conclusion Mr. Speaker, I believe we are low-income and limited English proficient chil- waiver on a case-by-case basis to delay the taking a great step for our children and our dren. test for two years. The results of the test will nation’s future by passing this education re- I would like to share with my colleagues have no direct highstakes effects on individual form bill. As President John F. Kennedy said, some of the important provisions affecting His- students, but instead will be used to measure ‘‘Our progress as a nation can be no swifter panic students in H.R. 1 that the Hispanic a school’s progress and hold it accountable. If than our progress in education.’’ While we

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00014 Fmt 0666 Sfmt 9920 E:\CR\FM\A19DE8.045 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2353 have more work to do to improve education, collection, and in general, these new rules article XIV of that Treaty, and recalling the let us now appropriate sufficient funds to make have worked well to protect consumers. But Final Declaration adopted by the Con- the promise of H.R. 1 a reality, and be proud there is one small provision in the Fair Debt ference, held in Vienna, from 6 to 8 October 1999, we the ratifiers, together with the of what we have accomplished for our chil- Collection Practices Act that inadvertently has States Signatories, met in New York from 11 dren’s education in this session of Congress. made it more difficult—if not impossible—for to 13 November 2001 to promote the entry f an attorney to act as a debt collector and file into force of the Treaty at the earliest pos- documents with a court of law. sible date. We welcomed the presence of rep- IN HONOR OF THE STUDENTS OF Under current law, attorneys face a ‘‘Catch- resentatives of non-signatory States, inter- CANYON CREST ELEMENTARY 22’’ when they file a lawsuit against a debtor, national organizations and non-govern- SCHOOL and here’s why. mental organizations. 2. We reaffirmed our strong determination The Fair Debt Collection Practices Act re- to enhance international peace and security HON. CHRIS CANNON quires the inclusion of a specific warning no- throughout the world and stressed the im- OF UTAH tice in every document related to the debtor, portance of a universal and internationally IN THE HOUSE OF REPRESENTATIVES including those filed with a court. This warning and effectively verifiable comprehensive nu- Wednesday, December 19, 2001 notice makes good sense; it provides the clear-test-ban treaty as a major instrument debtor with information about his or her rights in the field of nuclear disarmament and non- Mr. CANNON. Mr. Speaker, many of us and responsibilities. proliferation in all its aspects. We reiterated have been dramatically affected by the tragic that the cessation of all nuclear-weapon test But the inclusion of the information required events of September 11th. As we have all explosions and all other nuclear explosions, by the Act often renders the document non- learned to cope and express our feelings re- by constraining the development and quali- compliant with the rules of the court. As a re- garding this tragedy, there have been some tative improvement of nuclear weapons and sult, attorneys are caught between a rock and shining stars that have risen beyond them- ending the development of advanced new hard place. They can include the warning on types of nuclear weapons, constitutes an ef- selves in an effort to help others. One such court documents and risk being in violation of fective measure of nuclear disarmament and group of people is the fifth and sixth grade the rules of the court, or they can exclude the non-proliferation in all its aspects and thus students of Canyon Crest Elementary School warning and be in violation of the Fair Debt a meaningful step in the realization of a sys- in Provo, Utah. tematic process to achieve nuclear disar- These wonderful students felt overcome by Collection Practices Act. mament. We therefore renewed our commit- the events witnessed that day. As the heroes Even the agency responsible for enforce- ment to work for universal ratificaiotn of of New York’s police and fire departments ment of the Fair Debt Collection Practices Act, the Treaty, and its early entry into force as bravely sacrificed many of their own to save the Federal Trade Commission, has repeat- provided for in article XIV. 3. We reviewed the overall progress made the lives of those trapped in the towers and edly acknowledged this dilemma. But the FTC cannot fix the problem administratively. The since the opening for signature of the Treaty while many others worked at the Pentagon, and, in particular, the progress made after these children all wished they could help but agency has recommended a narrowly tailored technical amendment to remedy the conflict the Conference held in Vienna from 6 to 8 Oc- felt only helplessness as they watched over 3, tober 1999. We noted with appreciation the 100 miles away. As their determination grew between Federal law and the rules of the overwhelming support for the Treaty that to assist in the recovery effort, these children court. It is this technical amendment that I has been expressed: the United Nations Gen- felt that the best way for them to assist was offer the House today. eral Assembly and other multilateral organs Under my bill, attorneys no longer will be have called for signatures and ratifications to express their appreciation for the sacrifices forced to choose between violating the rules of of the Treaty as soon as possible and have of the heroes and their desire to comfort the the court or violating the Fair Debt Collection urged all States to remain seized of the issue many who lost loved ones through writing. at the highest political level. We highlighted Their writings have been compiled in a book Practices Act. They still will be required to in- clude warning notices on all correspondence the importance of the Treaty and its entry titled From the Mountains . . . These touching into force for the practical steps for system- and heartfelt accounts relate many of the feel- with debtors, but they will be allowed to omit atic and progressive efforts towards nuclear ings that all of us experienced during the at- the warning notices only on documents pre- disarmament and non-proliferation, which tacks as well as during the weeks following. sented to the court. This simple and straight- were identified in 2000 at international fo- Mr. Speaker, today I ask that you and our forward solution maintains the spirit and the rums dealing with nuclear disarmament and colleagues join me in honoring the students of intent of the Fair Debt Collection Practices Act non-proliferation. We believe that the ces- while allowing attorneys to remain in compli- sation of all nuclear-weapon test explosions Canyon Crest Elementary for their own heroic or any other nuclear explosions will con- efforts to help us all to recover and rebuild in ance with the law and their professional stand- ards. tribute to the accomplishment of those ef- this great nation by showing us true patriotism forts. and the meaning of freedom. I urge my colleagues to support this legisla- 4. In accordance with the provisions of ar- tion. f ticle XIV of the Treaty, we examined the ex- f tent to which the requirement set out in FAIR DEBT COLLECTION PRAC- paragraph 1 had been met and decided by TICES TECHNICAL AMENDMENT FINAL DECLARATION OF THE CON- consensus what measures consistent with ACT OF 2001 FERENCE ON FACILITATING THE international law may be undertaken to ac- ENTRY INTO FORCE OF THE celerate the ratification process in order to COMPREHENSIVE NUCLEAR- facilitate the early entry into force of the HON. JUDY BIGGERT TEST-BAN TREATY Treaty. OF ILLINOIS 5. Since the Treaty was adopted by the IN THE HOUSE OF REPRESENTATIVES United Nations General Assembly and HON. EDWARD J. MARKEY opened for signature five years ago, progress Wednesday, December 19, 2001 OF MASSACHUSETTS has been made in the ratification process. As Mrs. BIGGERT. Mr. Speaker, I rise to intro- IN THE HOUSE OF REPRESENTATIVES of today, 162 States have signed and 87 States duce a common-sense technical amendment have deposited their instruments of ratifica- Wednesday, December 19, 2001 to the Fair Debt Collection Practices Act. I am tion, an increase of over 70 per cent com- pleased that this bipartisan legislation is being Mr. MARKEY. Mr. Speaker, I would like to pared with the number of ratifications at the call to my colleagues’ attention the Final Dec- time of the Conference held in 1999. Of the 44 cosponsored by my colleagues, Mr. SANDLIN States listed in Annex 2 to the Treaty whose of Texas, Mr. MOORE of Kansas, and CANTOR laration of the Conference on Facilitating the ratification is required for the entry into of Virginia. Entry into Force of the Comprehensive Nu- force of the Treaty, 41 have signed, and of For more than two decades, The Fair Debt clear-Test-Ban Treaty (CTBT). The document these, 31 have also ratified the Treaty. A list Collection Practices Act of 1978 has success- follows. of those States is provided in the appendix. Progress in ratification has been sustained. fully regulated and promoted ethical practices ANNEX—CONFERENCE ON FACILITATING THE We welcomed this as evidence of the strong on the part of debt collectors throughout the ENTRY INTO FORCE OF THE COMPREHENSIVE determination of States not to carry out any United States. The Act prohibits abusive or NUCLEAR-TEST-BAN TREATY (NEW YORK, harassing methods of debt collection, and it 2001) nuclear-weapon test explosion or any other nuclear explosion, and to prohibit and pre- requires that debt collectors treat consumers FINAL DECLARATION vent any such nuclear explosion at any place fairly. 1. Fully conscious of the responsibilities under their jurisdiction or control. In 1986, the law was amended to include which we assumed by signing the comprehen- 6. Despite the progress made and our standards for attorneys who engage in debt sive Nuclear-Test-Ban-Treaty, pursuant to strong support for the Treaty, we noted with

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00015 Fmt 0666 Sfmt 0634 E:\CR\FM\A19DE8.049 pfrm07 PsN: E20PT1 E2354 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 concern that it has not entered into force two to accelerate their ratification processes CASPIAN PIPELINE OPENS five years after its opening for signature. We with a view to early successful conclusion; therefore stressed our determination to (f) In pursuit of the early entry into force strengthen efforts aimed at promoting its of the Treaty, undertake ourselves to use all HON. JOE BARTON entry into force at the earliest possible date avenues open to us in conformity with inter- OF TEXAS in accordance with the provisions of the national law, to encourage further signature IN THE HOUSE OF REPRESENTATIVES Treaty. and ratification of the Treaty; and urge all 7. After the opening for signature of the States to sustain the momentum generated Wednesday, December 19, 2001 CTBT, nuclear explosions were carried out. by this Conference by continuing to remain Mr. BARTON. Mr. Speaker, I commend to The countries concerned subsequently de- seized of the issue at the highest political my colleagues the following article: clared that they would not conduct further level; nuclear explosions and indicated their will- (g) Agree that ratifying States will select [From the Washington Times, Dec. 3, 2001] ingness not to delay the entry into force of one of their number to promote cooperation CASPIAN PIPELINE OPENS the Treaty. to facilitate the early entry into force of the (By Christopher Pala) 8. In the light of the CTBT and bearing in Treaty, through informal consultations with ALMATY, KAZAKHSTAN.—The first pipeline mind its purpose and objectives, we affirm all interested countries; and encourage bilat- built to bring Kazakhstan’s oil to world mar- that the conduct of nuclear-weapon test ex- eral, regional and multilateral initiatives kets was dedicated in Russia last week, four plosions or any other nuclear explosion con- aimed at promoting further signatures and months late and minus the presidents of the stitutes a serious threat to global efforts to- ratification; two countries through which it passed. wards nuclear disarmament and non-pro- (h) Urge all States to share legal and tech- Speeches delivered near the Russian port liferation. nical information and advice in order to fa- of Novorossiisk called the 940-mile steel tube 9. We call upon all States to maintain a cilitate the processes of signature, ratifica- a symbol of international cooperation, and moratorium on nuclear-weapon test explo- tion and implementation by the State con- that it is indeed: The Russian Federation sions or any other nuclear explosions and un- cerned, and upon their request. We encour- and American and Russian oil companies derline the importance of signature and rati- age the Preparatory Commission for the have provided most of the $2.6 billion cost, fication of the Treaty. Comprehensive Nuclear-Test-Ban Treaty Or- and Russia stands to earn $20 billion over the 10. We noted with satisfaction the report of ganization and the Secretary-General of the 40-year life of the pipeline. the Executive Secretary of the Preparatory United Nations to continue supporting ac- But the pipeline is also: Commission for the Comprehensive Nuclear- tively these efforts consistent with their re- The first step to Kazakhstan’s ambitious Test-Ban Treaty Organization (CTBTO) to spective mandates; plan to deliver 3 million barrels a day in 15 the Conference on progress made by the Pre- (i) Call upon the Preparatory Commission years to world markets and become one of paratory Commission and its Provisional for the Comprehensive Nuclear-Test-Ban the top three oil exporters in the world. Technical Secretariat since November 1996 in Treaty Organization to continue its inter- A mutibillion-dollar bet by Chevron Corp. fulfillment of the requirement to take all national cooperation activities to promote in 1993 that is now set to pay off handsomely. necessary measures to ensure the effective understanding of the Treaty, including by An example of the difficulty of doing busi- establishment of the future CTBTO. demonstrating the benefits of the applica- ness in Russia. 11. In this connection, we welcomed the tion of verification technologies for peaceful Proof that with perseverance, it can be momentum which has been developed by the purposes in accordance with the provisions done. Preparatory Commission and its Provisional of the Treaty, in order to further encourage The pipeline, built by the 11-member Cas- Technical Secretariat across the Major Pro- signature and ratification of the Treaty; pian Pipeline Consortium, known as CPC, grammes of the Commission, as identified by (j) Reiterate the appeal to all relevant sec- starts on the desert shores of the northeast the Executive Secretary in his report. We tors of civil society to raise awareness of and Caspian Sea at Tengiz, Kazakhstan, the also welcomed the progress in building the support for the objectives of the Treaty, as world’s sixth-largest oil field. global infrastructure for Treaty verification, well as its early entry into force as provided The longest 40-inch pipe in the world then including the International Monitoring Sys- for in article XIV of the Treaty. curls around the Caspian before striking tem, with a view to ensuring that the 13. We reaffirm our commitment to the west across the broad plains north of the verification regime shall be capable of meet- Treaty’s basic obligations and our under- Caucasus range and ends at a tanker ter- ing the verification requirements of the taking to refrain from acts which would de- minal 10 miles west of Novorossiisk. Treaty at entry into force. We further wel- feat the object and purpose of the Treaty When completed, at a final cost of $4 bil- comed the conclusion of a significant num- pending its entry into force. lion, it will be able to carry up to 1.3 million ber of related agreements and arrangements 14. We remain steadfast in our commit- barrels per day (bpd), more then double its with States and with international organiza- ment to pursue the efforts to ensure that the initial capacity. tions. Treaty’s verification regime shall be capable 12. Convinced of the importance of achiev- of meeting the verification requirements of PEAK A DECADE OFF ing universal adherence to the Treaty, wel- the Treaty at entry into force, in accordance Output at the Tengiz field, now 270,000 bpd, coming the ratifications of all the States with the provisions of article IV of the Trea- is not expected to rise to a peak of 700,000 that have done so since the 1999 Conference, ty. In this context, we will continue to pro- bpd until the end of the decade, said Tom and stressing in particular the steps required vide the support required to enable the Pre- Winterton, head of the Tengizchevroil con- to achieve its early entry into force, as pro- paratory Commission for the Comprehensive sortium exploiting the field. vided for in article XIV of the Treaty, we: Nuclear-Test-Ban Treaty Organization to Thus, the pipe has plenty of room for oil (a) Call upon all States that have not yet complete its tasks in the most efficient and from other fields—and there lies one of the signed the Treaty to sign and ratify it as cost-effective way. major disputes that have delayed the open- soon as possible and to refrain from acts 15. The Conference addressed the issue of ing. which would defeat its object and purpose in possible future conferences, expressed the de- When Chevron took over Tengiz from its the meanwhile; termination of its participants to continue post-Soviet managers, it created one consor- (b) Call upon all States that have signed working towards entry into force of the tium for the oil field and a second one to but not yet ratified the Treaty, in particular Treaty and took note of the provisions con- build a pipeline to the Black Sea. those whose ratification is needed for its tained in paragraph 3 of article XIV of the For the first few years, Tengizchevroil, in entry into force, to accelerate their ratifica- Treaty. which Chevron owns 50 percent, diligently tion processes with a view to early successful overcame such obstacles as the extreme f 1 conclusion; depth of the reservoir (2 ⁄2 miles below the (c) Recall the fact that two States out of PERSONAL EXPLANATION surface), its high content of poisonous sulfur three whose ratifications are needed for the dioxide and the high pressure at which the Treaty’s entry into force but which have not oil was flowing. Production steadily climbed yet signed it have expressed their willingness HON. CHARLES A. GONZALEZ from 25,000 bpd and the jinx that gave Tengiz not to delay the entry into force of the Trea- OF TEXAS the longest uncontrolled blowout in soviet ty, and call upon them to sign and ratify it IN THE HOUSE OF REPRESENTATIVES history was overcome. as soon as possible; But in those years, the pipeline consortium (d) Note the fact that one State out of Wednesday, December 19, 2001 got strictly nowhere in its efforts to per- three whose ratifications are needed for the Mr. GONZALEZ. Mr. Speaker, on rollcall suade Russia and its pipeline monopoly Treaty’s entry into force but which have not No. 483, 484, 486, 487, 488, 489, 490, 491, Transneft to allow an outlet through Russia yet signed it has not expressed its intention 492, 493, 494, 495, 496, 497, 498. to the Black Sea. towards the Treaty, and call upon this State Had I been present, I would have voted It was not until 1996 that two newly cre- to sign and ratify it as soon as possible so as ated Russian oil giants, Lukoil and Rosneft, to facilitate the entry into force of the Trea- 483—yes, 484—yes, 485—yes, 486—yes, bought into the consortium while the Rus- ty; 487—no, 488—yes, 489—no, 490—yes, sian government took a 24 percent share. (e) Note the ratification by three nuclear- 491—yes, 492—yes, 493—yes, 494—yes, Then things started moving. weapon States and call upon the remaining 495—yes, 496—yes, 497—yes, 498—yes. Construction took less than three years.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00016 Fmt 0666 Sfmt 0634 E:\CR\FM\A19DE8.053 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2355 Transneft Director Semyon Vainshtock But if Russia, Kazakhstan and world con- for a statement of principles. We agreed that tried to fight a rear-guard battle, insisting sumers can join Chevron in rejoicing at the stimulus was needed but that it should be that what was bad for Transneft was bad for pipeline’s completion, Turkey has exhibited short-lived, to avoid converting a cyclical Russia, but the pipeline consortium, headed mostly concern. by Russian Sergei Gnatchenko and assisted The extra tankers carrying Tengiz oil, downswing into a structural deficit. We wanted by Chevron’s Fred Nelson, the consortium’s which eventually will number three a week, the budget to recover as the economy recov- deputy general director for projects, argued will further clog the Bosphorus Strait that ers. The stimulus bill reported by Ways and that Russia stood to gain from the added bisects Istanbul and increase the chances Means forsook these principles and proposed production in a non-zero-sum game. that the city of 12 million people some day more permanent tax cuts, with revenue losses That was just the beginning. will have to cope with a major oil spill or continuing long after the recession ends. ROCKY ROAD SO FAR even a fire. More than half of the surplus is gone, and ‘‘We had to go through five Russian local But turkey is committed to upholding the 1936 Montreux Agreement and, barring a ca- the plan to save the Social Security surpluses governments,’’ Mr. Nelson said recently. ‘‘It and buy back government bonds is in grave wasn’t always easy.’’ tastrophe, Caspian oil will be able to navi- Twice, customs disputes halted the flow of gate the strait to reach European markets doubt. But the administration seems to find no the oil at the Russia-Kazakhstan border. for the foreseeable future, analysts say. lesson in these results. On the same day Mr. This year, the biggest dispute among CPC f Daniels made his gloomy prediction, the White members turned ugly and public when it de- House renewed discussions on a stimulus railed the opening ceremony that had been UNDERPINNINGS OF ADMINISTRA- plan, and afterwards told the media that repeal scheduled for Aug. 6 with the Russian and TIONS’ BUDGET NO LONGER of the corporate alternative minimum tax had Kazakh presidents in attendance. HOLD Tengiz oil, until the pipeline was built, was to be part of any stimulus plan the President exported entirely through Russia and mostly signed. In the short run, this will not help the by rail. HON. JOHN M. SPRATT, JR. economy; in the long run, it will not help the Part of its highly prized light ‘‘sweet’’ OF SOUTH CAROLINA budget. In all events, it begs the question: crude (which sells for up to a dollar a barrel IN THE HOUSE OF REPRESENTATIVES How will we pay for the war on terrorism, for more than Brent, the benchmark crude oil) Wednesday, December 19, 2001 homeland defense, for reinsurance of terrorist was mixed along the way with less desirable damages, for victims’ compensation, and for Russian crudes to make ‘‘Urals Blend,’’ Mr. SPRATT. Mr. Speaker, President Bush that matter, for the baby boomers’ retirement? which trades at nearly a dollar below Brent. claims that his administration has ‘‘brought ‘‘The Russians got a free ride for years,’’ No one is blaming the administration for the said a diplomat familiar with the situation. sorely needed fiscal discipline to Washington.’’ recession, but it can be faulted for ignoring the But for the pipeline, Chevron insisted on The same day, his budget director warns us clouds and betting the budget on a blue-sky instituting what is called a quality bank—a not to expect another surplus until 2005, after forecast. We warned that its budget had no system penalizing those who would add low- the president’s first term is over. If this is fiscal margin for error if the projections it was based quality crude to the mostly Tengiz CPC discipline, it has an odd bottom line. Blend. upon failed to pan out. We warned that the tax President Bush took office with an advan- cuts left little room for other priorities, like Quality banks are used in most places in tage no president in recent times has enjoyed: the world where low- and high-quality crude Medicare drug coverage or the solvency of oils are blended in pipelines, but the Russian a budget in surplus. Ten days after his inau- Social Security. The administration acted as if partners relented only three days before the gural, the Congressional Budget Office pro- we could have it all. Now that it’s clear we planned inauguration date, which was to co- jected a surplus of $313 billion in fiscal 2002, can’t, it seems as unwilling as ever to recast incide with the loading of the first tanker. and over ten years, a cumulative surplus of its budget. This is not fiscal discipline; this fis- The ceremony already had been canceled. $5.6 trillion. More than half of that has van- cal denial. Then, the port authority of Novorossiisk ished. The Director of the Office of Manage- If the administration wants to put the econ- extended its jurisdiction to the deserted ment and Budget, Mitchell Daniels, blames the piece of coast where holding tanks are buried omy and the budget back on path, it has to economy, extra spending, the fight against ter- near the end of the pipeline. There is no port: heed the lessons of the last ten months and rorism—everything but tax cuts. floating hoses are used to fill tankers acknowledge that the underpinnings of its Last month, economists on the House and moored offshore. budget no longer hold. The move allowed the port authorities to Senate Budget Committees updated their esti- demand a hefty port tax. Negotiations mates of the economy and budget. Their anal- caused further delays. Eventually, said oil ysis is as close as you can get to a consensus f analyst Ivan Mazalov at Troika Dialog in on where we stand now. They show that over MARSHALL UNIVERSITY MARTIN Moscow, ‘‘They were bargained down quite a ten years the tax cut takes a toll of $1.7 trillion bit.’’ LUTHER KING DAY OF SERVICE Other delays pushed back the date of the on the budget and accounts for 55 percent of GRANT loading of the first tanker to Oct 13. the depletion in the surplus. Spending related By the time all the difficulties were ironed to the war on terrorism, initiated after Sep- out, five fully loaded tankers had weighed tember 11, takes another 11 percent. Other HON. NICK J. RAHALL II anchor and sailed over the Black Sea to the spending increases take 11 percent, and of OF WEST VIRGINIA Bosphorus Strait, across the Sea of that, the President’s request for defense con- IN THE HOUSE OF REPRESENTATIVES Marmara, through the Dardanelles to the stitutes two-thirds. The remaining 23 percent Mediterranean Sea, and on to refineries in Wednesday, December 19, 2001 Europe. is due to the economy. A sixth one was loading when the cere- The economy is a major factor over the next Mr. RAHALL. Mr. Speaker, the Rev. Martin mony took place. two years. But as the economy recover, its Luther King Jr., once declared. ‘‘A nation or CHEVRON GAMBLED, WON drain on the budget tapers off. The President’s civilization that continues to produce soft- While Russia and the United States ended tax cuts get bigger. minded men purchases its own spiritual death up represented by deputy ministers, Chev- Budget Committee estimates show a re- on the installment plan.’’ Dr. King devoted his ron-Texaco sent Chairman David O’Reilly maining surplus over ten years of $2.6 trillion, life to improving the minds—and the hearts and the incoming and outgoing vice chair- but virtually all comes from the Social Security and souls—of all Americans. That work con- men of the world’s fourth-largest oil com- Trust Fund, which everyone has sworn not to tinues today at Marshall University. pany. touch; and most of that is concentrated in fu- For the fourth time in five years, the Cor- That was not surprising: Both the pipeline poration of National Service has awarded Mar- and the giant oil field it serves are Chevron’s ture years where the outlook is very uncertain. babies, multibillion-dollar gambles that fi- When the President submits next year’s budg- shall the Martin Luther King Day of Service nally are paying off. As the foreign biggest et in February, an updated forecast of the Grant. It testifies to the energy and efficacy of investment in the former Soviet Union, oil economy will come with it, and the $2.6 trillion their efforts. Their work endows children and field and pipeline are testimony that with surplus will surely shrink again. Mr. Daniels no adults of all creeds and races with a sense of perseverance, Westerners and Russians can doubt had that forecast in hand when he social justice and a commitment of civil rights. work together. warned of the vanishing surplus. Their January celebration of Dr. King’s life ‘‘CPC is a bellwether project for successful international cooperation,’’ Mr. O’Reilly re- The Budget Committee estimates were put and legacy epitomizes the purpose of this na- portedly said at the ceremony. ‘‘It dem- together as part of a bipartisan search for tional holiday embodies his belief in public onstrates the confidence the international common ground. Leaders on Budget, Finance, service. But just as Dr. King’s teaching was business community has to invest in Russia and Ways and Means met to settle on policies not bounded by the walls of his church, Mar- and Kazakhstan.’’ to stimulate the economy. We settled instead shall’s work in his spirit is not restricted to only

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00017 Fmt 0666 Sfmt 9920 E:\CR\FM\A19DE8.059 pfrm07 PsN: E20PT1 E2356 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 one special day. In the upcoming year, for ex- Martin is retiring from his current position of McNeil passed away on December 11, 2001. ample, Marshall will sponsor a Youth Leader- Assistant Air Traffic Manager at the FAA Ter- He was born September 10, 1919, the second ship and Development Program, an Invest- minal Radar Approach Control (TRACON) fa- of nine children to the late John and Mary ment in Youth Leadership Forum, and a Men- cility located at Sky Harbor Airport, where he McNeil in Pritchard, Alabama. He completed tor Literacy Program, all supported by the has directed a staff of approximately 80 per- his early education at the St. James Catholic CNS grant. sonnel, and maintained responsibility for the School. His formal education came from the Marshall’s is a program that should be hon- radar operations, procedures, automation, and ‘‘Knee College’’, where he graduated from ored by all who value Dr. King’s message and administrative functions of the facility for the ‘‘the old man to the new man’’. In 1944, he by any who strive to transmit it to future gen- past 3 years. met and began a courtship with Dora James. erations. I applaud his great achievements and hard On February 18, 1945 they were married and f work during his noteworthy career. FAA em- had seven children. ployees have long guarded the safety and se- Bishop McNeil was saved and received the SALUTE TO MARTIN HARDY OF curity of our airways, and Martin Hardy has gift of the Holy Ghost at the Old Holiness GLENDALE, ARIZONA had an exemplary career in serving his coun- Church in Pritchard, Alabama. He later moved try in this way. Congratulations on your retire- to New york and God found favor with him HON. BARBARA LEE ment and best wishes as you enter a new and called him to the ministry of the Apostolic OF CALIFORNIA chapter in your life. Faith. He became Assistant Pastor of the Old IN THE HOUSE OF REPRESENTATIVES f Truth Church of the Lord Jesus Christ, in Wednesday, December 19, 2001 Brooklyn, NY, where the late Elder D. Free- IN RECOGNITION OF ‘‘CAMP man was Pastor. Ms. LEE. Mr. Speaker, I rise today to salute UNITY’’ DISTRICT OF COLUMBIA In 1963, Bishop McNeil established his own Martin Hardy of Glendale, Arizona, who began VOLUNTEERS AT PENTAGON church, The House of the Lord and Savior his career with the FAA in 1971, as an Air CRASH SITE Jesus Christ of the Apostolic Faith. He later Traffic Controller at Sky Harbor Airport in changed the name of that church to Holy Phoenix, Arizona. HON. ELEANOR HOLMES NORTON Cross Remnant Church of Jesus of the Apos- With over 30 years of air traffic experience OF THE DISTRICT OF COLUMBIA tolic Faith. in the Phoenix and Los Angeles areas, Martin IN THE HOUSE OF REPRESENTATIVES For 54 years, Bishop W.B. McNeil has been has served in a variety of capacities, including and continues to be a source of wisdom and Wednesday, December 19, 2001 Air Traffic Controller (Sky Harbor & Burbank inspiration. Through his teaching and preach- Airports); Operational Supervisor (Burbank Ms. NORTON. Mr. Speaker, I would like to ing about God, Bishop McNeil inspired Pastor TRACON/ Tower & Phoenix Approach Control call attention to the efforts of ‘‘Camp Unity,’’ Clarence Keaton, who loved him like a father; Facility); Assistant Training Manager (Phoenix the group of business people and other resi- the Bishop became the grandfather of the Approach Control Facility); Assistant Air Traffic dents from the District of Columbia, who pro- True Worship Church Worldwide Ministries. Manager (Phoenix TRACON, Phoenix Tower, vided on-site support for relief and rescue Left to cherish his memory are his loving Phoenix TRACON and Tower); Air Traffic workers at the Pentagon crash site following wife, Mother Dora McNeil, and his seven chil- Manager (Tucson TRACON & Phoenix the terrorist attacks on September 11, 2001. dren, Catherine McNeil, Frances McNeil, Willie Tower); and Staff Specialist (National Head- Led by Advisory Board Commission 8D Chair, McNeil, Jr., Anthony McNeil, Michael McNeil, quarters—Washington, DC, and Regional Robin Denise Ijames, the volunteers of Camp Crystal McNeil, Stephen McNeil and his spir- Headquarters—Los Angeles, CA). He has re- Unity offered a variety of services, including itual son, Rev. Dr. Clarence Keaton. Pre- mained in a supervisory or management role meals, chiropractic therapy, and haircuts to ceding him in death were two brothers, the since 1984 and has been committed to pro- hundreds of workers who came from all over late Rufus McNeil, the late Melvin McNeil, and viding safe air traffic service to the nation. the country to assist in rescue and recovery two sisters, the late Mable Peterson and the Throughout the past 10 years, Martin has efforts at the Pentagon. late Catherine Richardson. He is also been involved in all stages of change and Through September 28th, Camp Unity main- mourned by one of his brothers, John McNeil, progress during the tremendous growth period tained a tent at what came to be known as and two sisters, Dorothy Pease and Mattie in the Phoenix region. He established excep- ‘‘Comfort City,’’ a collection of tents organized Reed as well as a host of grandchildren, tional working relationships with many airline to aid emergency medical staff, federal law nieces, nephews and his church family, and all representatives in the industry and has re- enforcement officials, police and fire officials, the members of the Holy Cross Remnant mained involved in the coordination of air traf- Red Cross volunteers, and countless others Church of Jesus of the Apostolic Faith. fic control procedures for the third runway and assigned to the crash site. Indeed, the District The late Bishop McNeil is one of the great- north runway construction projects at Sky Har- residents at Camp Unity extended great com- est servants that God has placed on this earth bor Airport. fort to these workers, many of whom were and will truly be missed. As such his family is Martin’s extensive knowledge of the Inter- separated from their families for many days. more than worthy of receiving this recognition governmental Agreement between the cities of The services of Camp Unity volunteers proved today and I urge my colleagues to join me in Phoenix and Tempe has allowed him to work so essential that they were officially deemed honoring the life of this truly remarkable man closely with the City of Phoenix and with the part of the D.C. Fire and Rescue team for the of God. community in mitigating the noise concerns two weeks they spent at the Pentagon. f around Sky Harbor Airport. He has rep- Mr. Speaker, the District of Columbia takes resented the FAA on the following state and particular pride in the work of the volunteers of KAZAKHSTAN’S DICTATOR local committees: City of Phoenix Sky Harbor Camp Unity. I ask the House also to join me UNDERMINES U.S. INTERESTS Part 150 Study; City of Peoria Airport Master in recognizing the charitable and patriotic re- Plan Advisory Committee; State of Arizona sponse of these District residents to the trag- HON. DANA ROHRABACHER Committee for the Preservation of Military Air- edy of September 11th. OF CALIFORNIA ports; Maricopa Association of Governments; f IN THE HOUSE OF REPRESENTATIVES Williams Gateway Airport Part 150 Study; and Phoenix Airspace user Workgroup (PAUWG). IN HONOR OF THE LATE BISHOP Wednesday, December 19, 2001 He has also served as a member of NBCFAE WILLIE B. McNEIL Mr. ROHRABACHER Mr. Speaker, I under- (National Black Coalition of Federal Aviation stand that the corrupt and repressive dictator Employees). HON. EDOLPHUS TOWNS of oil-rich Kazakhstan, Nursultan Nazarbayev, Martin attended San Fernando Valley State OF NEW YORK plans to visit Washington soon. He is looking College in San Fernando, CA. Throughout his IN THE HOUSE OF REPRESENTATIVES for a White House Good Housekeeping Seal career he has completed a multitude of of Approval and a consequent dampening of courses at the FAA Center for Management Wednesday, December 19, 2001 the Administration’s criticism of the Development, Palm Coast, Florida. He is a na- Mr. TOWNS. Mr. Speaker, I rise in honor of Nazarbayev regime’s deplorable human rights tive of Eunice, Louisiana, he and his wife, a very special man of God who has recently record. He thinks that his vague offers of as- Beverly, of 31 years, reside in Glendale, AZ. left us, Bishop Willie B. McNeil. sistance in the war against terrorism will tilt They are the proud parents of 3 children—Ni- After a rich and full life serving his commu- U.S. policy concerning such repression and cole, Nichelle and Martin II. nity, his church, and his God, Bishop Willie B. corruption as is found in Kazakhstan. That

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00018 Fmt 0666 Sfmt 9920 E:\CR\FM\A19DE8.062 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2357 would be a tragic mistake. We cannot permit TRAGEDY THAT HIT AMERICA main with Mark for years to come. To describe the war against terrorism to be manipulated the magnitude of the destruction, he conveyed into an affirmation of the status quo in coun- HON. JAMES A. TRAFICANT, JR. a scene of embers, ashes and heaps of office tries that are ruled by tyrants. In the long run, OF OHIO equipment strewn all over the place. While performing his duties that day, Mark con- that would pit the United States against those IN THE HOUSE OF REPRESENTATIVES struggling for honest and democratic govern- fessed to having been concerned for his own ment, which would lose whatever goodwill our Wednesday, December 19, 2001 and his colleagues’ safety particularly since country has in this world. Mr. TRAFICANT. Mr. Speaker, the events of they were informed that another hijacked Nazarbayev, as with his fellow dictators in September 11, 2001 in New York, Wash- plane may be heading for Washington, DC. other former Soviet republics of Central Asia, ington, and Pennsylvania have struck the His duty, however, dictated that he push and assumed the title of president through sham hearts and minds of Americans everywhere. I attend to the task at hand. This, he did without elections. He is so repressive and corrupt that am especially touched by the thoughts of the any hesitation. Although Mark’s fire company was on the his regime will eventually collapse of its own young people who are the future of this great site for only 1 day, they were placed on a ‘‘call weight. Islamic extremists—already active in nation. Shanleigh Hart is a 6th grade student in Miss Shiver’s class at Southeast School in back’’ status for several days afterward. If the area—as well as China, will be scrambling given the chance to do it over again, Mark to pick up the pieces when these gangster re- Salem, Ohio, and she has written a poem re- membering ‘‘The Tragedy That Hit America’’. says that he would have no hesitation in doing gimes fall apart. But we need not let that dis- his part once more. Attention and honors have mal scenario come to be. Now is the time to Shanleigh’s words are inspiring and should all make us proud to be Americans. been heaped upon him and his colleagues for press Nazarbayev, as well as other Central their performance but Mark feels that he only Asian strongmen, to hold early free and fair TRAGEDY THAT HIT AMERICA did what was expected and required of him. elections monitored by international observers. A threat to America He is grateful for having been given the If he needs to save face, Nazarbayev could Brave Country chance to actively take part of an effort that simply confirm the many rumors that he plans Count on us Depend on our army will forever be remembered in history. to step down and retire to one of the countries The tragedy of September 11 has touched where he stashed his ill-gotten financial gains. Extreme explosions Foreign countries deny every aspect of American society. Although lo- Of course the Nazarbayev regime, like other Greatly upset cated half a world away, the people of Guam human rights abusers, threaten more than Hope shines through have felt the effects and have made contribu- their own people. Moscow’s Centre TV on Interviewing all over tions towards our Nation’s efforts to recover February 17, 2001, accused the Nazarbayev Just not fair from the effects of these attacks. Individuals regime of illegally selling weapons, like ad- Killing such as Mark Anderson exemplify the best of vanced Russian-made S–300 air defense sys- Learning to work together our island and I am proud of his patriotism Maybe there will be a war tem and heavy tanks, to rogue regions. The Never will be forgotten and call to duty exhibited on September 11. United States has had many run-ins with the Obviously not expected Mr. Speaker, I commend Mark Anderson Nazarbayev regime over arms sales. Early last Prepare for war and his colleagues for their contributions. We year, for example, Kazakhstan sold forty MIG Quietly they did it realize the value of their service and commit- fighters to North Korea. And on June 4, 1997, Respectfully we work ments. By working together as these people the Washington Times reported that the U.S. Sad as can be have, we will be able to overcome any adver- had protested plans by Kazakhstan to sell ad- Terrifying sity that comes our way. Unfair to us vanced air defense missiles to Iran. This pat- f Very disrespectful tern of weapons trafficking must stop. Clearly, World War three A SPECIAL TRIBUTE TO MR. MI- this is a policy endorsed by Nazarbayev him- Extremely unbelievable CHAEL ANTHONY GRANDILLO ON self. Young and old HIS RETIREMENT AS PRESIDENT Finally, on September 14, 2001, the Swiss Zealous people OF THE TIFFIN CITY COUNCIL Federal Department of Justice made available In memory of all the victims and their fami- to the U.S. Department of Justice the findings lies, we are not letting this one go! We are HON. PAUL E. GILLMOR of a lengthy investigation of corruption involv- America. OF OHIO ing President Nursultan Nazarbayev of f IN THE HOUSE OF REPRESENTATIVES Kazakhstan. These issues raised by this re- Wednesday, December 19, 2001 port needs to be addressed. What we have CHAMORRO FIREFIGHTER ASSISTS here is a regime condemned by leading IN PENTAGON RESCUE OPER- Mr. GILLMOR. Mr. Speaker, it is with great human rights organizations, that has trafficked ATIONS pride that I rise today to recognize a great in arms with the dregs of the world, that has man who has dedicated much of his life to his been ambiguous in its support of the war on HON. ROBERT A. UNDERWOOD community. At the end of the year, Mr. Mi- terrorism, and is under investigation for cor- OF GUAM chael Anthony Grandillo will retire as President ruption by both Swiss and U.S law enforce- IN THE HOUSE OF REPRESENTATIVES of the Tiffin City Council. For the past 14 years, he has served as Councilman of the ment agencies. Wednesday, December 19, 2001 4th Ward of the City of Tiffin in the Fifth Con- Maybe our message to Mr. Nazarbayev is Mr. UNDERWOOD. Mr. Speaker, as the Na- gressional District of Ohio. that it is time for him to go. At the very least, tion is undergoing the recovery process from Mike has had a long and distinguished ca- he should not be allowed to leave Washington the terror and destruction brought about by the reer on the Tiffin City Council. He was ap- thinking that the U.S. will acquiesce to the sta- September 11 attack on America, I would like pointed to the seat in 1985 and was re-elected tus quo in exchange for platitudes about join- to take this opportunity to share the experi- to every four-year term since then. He served ing us in the war against terrorism. ences of a former resident of Guam who was as Chairman of the Parks and Recreation Kazakhstan is a country rich in natural re- called upon to assist in the rescue efforts at Committee when the city of Tiffin experienced sources. Its people should be enjoying pros- the Pentagon. tremendous growth. He was also Chairman of perity, peace and yes, freedom. Instead, the Born and raised on the island of Guam, the Law and Community Planning Committee iron grip of despotism is strangling the demo- Mark Anderson moved to the state of Virginia who has oversight responsibility for economic cratic alternative, and with it the hopes of eco- in 1999 to pursue his dream to become a fire- development in Tiffin. Under his leadership, nomic progress for the country as a whole. fighter. Having been employed by the Fairfax Tiffin recognized as having one of the top Let us be on the side of the people of coun- County Fire and Rescue Department for the three municipal economic development pro- tries like Kazakhstan. Let us use our influence past couple of years, Mark and his colleagues grams in the State of Ohio. with those in power in such repressed were called to respond to the Pentagon attack His dedicated service to this community socieities to show them a graceful way of that fateful day. Mark assisted in fighting fires, does not stop with the Tiffin City Council. He exiting power, rather than giving them, and locating survivors and recovering bodies— is currently Secretary and Director of the their repressed populations, the mistaken no- working 10 grueling hours without any breaks. Friedman Village, a non-profit corporation tion that we are the friends of such corrupt The image of charred rubble and scorched which developed and manages an 18 acre as- and tyrannical regimes. equipment all over the site of the crash will re- sisted and independent living facility. He is an

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00019 Fmt 0666 Sfmt 9920 E:\CR\FM\A19DE8.066 pfrm07 PsN: E20PT1 E2358 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 Executive Committee Member of the Inde- Thank you for your attention to this im- HOUSE OF REPRESENTATIVES, pendent College Advancement Associates of portant matter. COMMITTEE ON RESOURCES, Ohio and Director of the Ohio Northern Uni- Sincerely, Washington, DC, December 19, 2001. JAMES V. HANSEN, The Hon. W.J. ‘‘BILLY’’ TAUZIN, versity Alumni Board. In addition to his edu- Chairman—Committee on Resources. Chairman, Committee on Energy and Commerce, cation affiliations, he is a member of Elks Rayburn House Office Building, Wash- HOUSE OF REPRESENTATIVES, COM- International, the Knights of Columbus, ington, DC. MITTEE ON TRANSPORTATION AND Kiwanis Club of Tiffin, Ducks Unlimited of Sen- DEAR MR. CHAIRMAN: Thank you for your INFRASTRUCTURE, letter regarding H.R. 3299, the Homestake eca County, and the Media Institute, a Na- Washington, DC, December 18, 2001. Mine Conveyance Act of 2001. I agree that tional Italian-American Foundation. Hon. JAMES V. HANSEN, the Committee on Energy and Commerce and Mike continues today to serve his commu- Chairman, Committee on Resources, Longworth the Committee has a jurisdictional interest nity. In addition to his post as Vice President House Office Building, Washington, DC. in H.R. 3299, and that by not seeking a se- of Development of Tiffin University, he serves DEAR MR. CHAIRMAN: Thank you for the op- quential referral of the bill, you do not com- as Director of the Tiffin Area Chamber of portunity to review, on behalf of the Com- promise your jurisdictional claim. I will also Commerce, Director of the Seneca County In- mittee on Transportation and Infrastruc- support your request to be named as a con- dustrial Economic Development Corporation, ture, the amendment to H.R. 3299, the feree on this bill or the similar Senate bill and Chairman of the Revolving Loan Com- ‘‘Homestake Mine Conveyance Act of 2001,’’ should one become necessary. that the Committee on Resources plans to mittee for Tiffin that develops the City’s infra- As you know, yesterday the House of Rep- bring to the floor under suspension of the resentatives passed S. 1389, the Senate com- structure to encourage business growth. rules. Mr. Speaker, I ask my colleagues of the panion measure to H.R. 3299, with an amend- The Committee on Transportation and In- ment under suspension of the rules. S. 1389 107th Congress to join me in saluting Mike for frastructure has a valid claim to jurisdiction had been held at the desk and thus was not his years of service to the Tiffin community. I over section 104 of the amendment, as it re- referred to any House committee. However, want to wish my friend, his wife Nancy, and lates to environmental reviews by the Ad- the two bills are very similar. To clarify the their two children, Vincent and Gina, all the ministrator of the U.S. Environmental Pro- committee jurisdiction over this matter, I best in their future endeavors. tection Agency and response actions to cor- will place your letter and my response in the rect conditions that may present an immi- f CONGRESSIONAL RECORD under the extension nent and substantial endangerment to the of remark authority granted during consid- HOMESTAKE MINE CONVEYANCE public health or environment, and section eration of S. 1389. 106 of the amendment, as it relates to liabil- ACT OF 2001 Thank you again for your cooperation on ity under the Comprehensive Environmental this issue. I am sure that Congressman John Response, Compensation, and Liability Act SPEECH OF Thune, the author of H.R. 3299, is also very and the Federal Water Pollution Control grateful. HON. JAMES V. HANSEN Act. Sincerely, The Committee on Transportation and In- JAMES V. HANSEN, OF UTAH frastructure recognizes the importance of Chairman. IN THE HOUSE OF REPRESENTATIVES this legislation. In view of your desire to f Tuesday, December 18, 2001 move H.R. 3299 to the floor in an expeditious fashion, I do not intend to seek a sequential HONORING COACH JOHN THOMP- Mr. HANSON. Mr. Speaker, the Committees referral of H.R. 3299. However, this should in on Transportation and Infrastructure and En- no way be viewed as a waiver of jurisdiction. SON AND THE JOHN THOMPSON ergy and Commerce also have a jurisdictional I would appreciate your acknowledgement of FOUNDATION CLASSIC interest in S. 1389, and it is with the coopera- the jurisdiction of the Committee on Trans- tion of Chairman Don Young and Chairman portation and Infrastructure over sections HON. ELEANOR HOLMES NORTON 104 and 106 of the amendment and an ac- OF THE DISTRICT OF COLUMBIA Bill Tauzin that the bill was considered in such knowledgement of the Transportation and an expeditiously fashion by the House of Rep- Infrastructure Committee’s right to seek IN THE HOUSE OF REPRESENTATIVES resentatives. I have letters reflecting this juris- conferees in the event that this legislation is Wednesday, December 19, 2001 dictional understanding between our three considered in a House-Senate conference. Committees regarding H.R. 3299, a nearly I look forward to working with you on this Ms. NORTON. Mr. Speaker, I rise today to identical bill, and I ask that they be placed in bill. acknowledge the John Thompson Foundation Challenge Basketball Classic on Thursday, the RECORD at the appropriate place during Sincerely, debate on S. 1389. DON YOUNG, December 20, 2001, at the MCI Center in Chairman. Washington, DC In noting this significant occa- HOUSE OF REPRESENTATIVES, COMMITTEE ON RESOURCES, HOUSE OF REPRESENTATIVES, sion, I am particularly pleased to honor the Washington, DC, December 18, 2001. COMMITTEE ON ENERGY AND COMMERCE, outstanding contributions of Coach John The Hon. DON YOUNG, Washington, DC, December 18, 2001. Thompson, my colleague at Georgetown Uni- Chairman, Committee on Transportation and The Hon. JAMES V. HANSEN, versity, where I continue as a tenured pro- Infrastructure, Rayburn House Office Chairman, Committee on Resources, Longworth fessor of law, and I ask this House to honor Building, Washington, DC. House Office Building, Washington, DC. Mr. Thompson as well today. John Thompson DEAR CHAIRMAN YOUNG: I am writing to re- DEAR CHAIRMAN HANSEN: I am writing with is a lifelong resident of Washington, DC, a na- regard to H.R. 3299, the Homestake Mine quest that the Committee on Transportation tionally recognized and much honored coach and Infrastructure waive its right to seek a Conveyance Act of 2001. sequential referral of H.R. 3299, a bill intro- I recognize your desire to bring this bill be- and teacher, and the founder of the John duced by Mr. Thune regarding the disposi- fore the House in an expeditious manner. Ac- Thompson Foundation. I would especially like tion of the Homestake Gold Mine in South cordingly, I will not exercise the Commit- to express my deepest appreciation for his Dakota. tee’s right to a referral. By agreeing to waive leadership in providing scholarships to African While the Committee on Resources re- its consideration of the bill, however, the American youth living in the District of Colum- ceived sole jurisdiction of this bill upon its Energy and Commerce Committee does not bia to pursue higher education. introduction, the Committee on Transpor- waive its jurisdiction over H.R. 3299. In addi- Mr. Thompson has made many important tation and Infrastructure would receive a se- tion, the Energy and commerce Committee contributions to lives of inner city youth resid- quential referral upon passage because of reserves its authority to seek conferees on certain provisions in the text. the provisions of the bill that are within its ing in the nation’s capital. Since the beginning I acknowledge that your waiver of this jurisdiction during any House-Senate con- of his career, John Thompson has used ath- right to a sequential referral does not waive ference that may be convened on this or letics to teach and promote the importance of the rights of the Committee on Transpor- similar legislation. I ask for your commit- discipline and education to young people who tation and Infrastructure in the future on ment to support any request by the Energy underachieve. This country needs many more similar legislation. Further, I would recog- and Commerce Committee for conferees on sports heroes and teachers to follow John nize the right of the Committee on Transpor- H.R. 3299 or similar legislation. Thompson’s extraordinary example. tation and Infrastructure to seek conferees I request that you include this letter and If our youth are to survive in this globally on any provisions of H.R. 3299, or similar leg- your response in the CONGRESSIONAL RECORD islation, that are within its jurisdiction dur- during debate on the bill. Thank you for and technologically advanced society, it will ing any House-Senate conference that may your attention to these matters. require organizations and individuals to pro- be convened. Accordingly, I would support Sincerely, vide an array of educational opportunities that your request for the appointment of con- W.J. ‘‘BILLY’’ TAUZIN, prepare them for success. Coach Thompson ferees should such a conference be convened. Chairman. has proved his commitment to young people

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00020 Fmt 0666 Sfmt 9920 E:\CR\FM\A19DE8.069 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2359 for many years. We particularly applaud projects such as the annual Christmas drop Kashmiri Muslims and over 200,000 Christians Coach Thompson and the John Thompson remains alive. This is a testament to our ca- have been killed. Foundation for their emphasis on the edu- pacity to unite as a community and as a na- Mr. Speaker, the Council of Khalistan has cational success of inner city youth. The Bas- tion in the face of adversity. There is no better published an excellent press release on this ketball Classic serves as an inspiration for way to demonstrate our compassion and gen- attack. I would like to share it with my col- those interested in expanding educational op- erosity than worthwhile projects such as this. leagues by inserting it into the RECORD now. portunities for the District’s African American I take this occasion to commend all those who [From the Council of Khalistan, Dec. 14, youth. participated and contributed towards the suc- 2001] Mr. Speaker, I ask the House to join me in cess of this year’s Christmas drop. Let us COUNCIL OF KHALISTAN CONDEMNS ALL TER- saluting Coach John Thompson, the John keep this tradition going for many more years RORISM—TERRORIST ATTACK ON INDIAN PAR- Thompson Foundation, and all those associ- to come. LIAMENT ISAPRODUCT OF INDIAN REPRES- SION ated with the John Thompson Foundation, f whose dedicated and creative energy make a (By Guru Gobind Singh Ji, Tenth Master) significant impact on the progress and the TERRORIST ATTACK ON INDIAN India Must End Its Repression Instead of lives of African American youth. PARLIAMENT CONDEMNED—AT- Blaming Pakistan—Newspaper Says Indian Government Knew of Attack in Advance f TACK IS INEVITABLE CON- SEQUENCE OF REPRESSION IN WASHINGTON, DC—The Council of Khalistan 49TH ANNUAL ANDERSEN AIR INDIA today condemned the terrorist attack on the FORCE BASE CHRISTMAS DROP Indian Parliament, but called on the Indian IN MICRONESIA government to join the fight against ter- HON. EDOLPHUS TOWNS rorism worldwide and to end its own ter- HON. ROBERT A. UNDERWOOD OF NEW YORK rorism against minorities. IN THE HOUSE OF REPRESENTATIVES ‘‘We condemn terrorism in all forms, wher- OF GUAM ever it comes from,’’ said Dr. Gurmit Singh IN THE HOUSE OF REPRESENTATIVES Wednesday, December 19, 2001 Aulakh, President of the Council of Wednesday, December 19, 2001 Mr. TOWNS. Mr. Speaker, I join with my Khalistan, the government pro tempore of colleagues and all decent people of the world Khalistan, the Sikh homeland, which de- Mr. UNDERWOOD. Mr. Speaker, 49 years clared its independence from India on Octo- ago in 1952, over the tiny island of in condemning the terrorist attack on the In- ber 7, 1987. ‘‘We strongly condemn this ter- Kapingamarangi in Micronesia, the crew of an dian Parliament. I extend my sympathies to rorist action and we condemn the Indian Air Force WB–50 aircraft assigned to the 54th the victims and their families. Terrorism is government’s terrorism that gave rise to Weather Reconnaissance Squadron in Guam never acceptable. We are currently at war this act,’’ he said. ‘‘When you repress people quickly gathered a box of goodies they had on against terrorism, as we should be. long enough, they strike back. India’s re- However, India is a country that has prac- pression of minorities made this incident in- the plane upon seeing a number of islanders evitable.’’ waving at them. Thus began the five-decade- ticed terrorism against the peoples living within its borders. It has a pattern of terrorism. Re- The Deccan Chronicle reported today that old tradition. the Indian government knew of the attack in For years, the residents of Kapingamarangi, member that two government officials there advance and did nothing to stop it. This Nukuoro and other remote islands have been were quoted last year as saying that Pakistan shows government involvement in the inci- receiving a variety of gifts such as machetes, should be absorbed into India. It is clear that dent. yet the Indian government has blamed hoes, snorkels, coloring books, soccer balls India seeks hegemony over all the peoples Pakistan for the attacks. India will use this and toiletries—items they probably would not and nations of South Asia. incident as an excuse for more repression of have been able to obtain otherwise due to In May, Indian troops were overwhelmed by the minorities, such as the Sikhs of Khalistan, the Muslims of Kashmir, the their remote location in the Pacific. This year, villagers, both Sikhs and Muslims, while they were trying to set fire to a Sikh Gurdwara and Christians of Nagaland, and others. four C–130 Hercules aircraft from the 36th Air- ‘‘India must stop blaming Pakistan for ev- lift Squadron based out of Yokota Air Base in some Sikh houses in Kashmir. Independent in- erything that goes wrong in India and end its Japan dropped 60 boxes of holiday gift items vestigations by the International Human Rights own terrorism against the Sikhs, Christians, on the 54 islands and atolls in the Micronesia Organization and jointly by the Punjab Human Muslims, and other minorities,’’ said Dr. area. The operation lasted six days and en- Rights Organization and the Movement Aulakh. ‘‘It is time for India to release more tailed cargo planes descending upon sparsely Against State Repression have conclusively than 52,000 Sikh political prisoners and the populated islands and atolls. In addition to the shown that the Indian government carried out tens of thousands of other political prisoners and end its repression,’’ Dr. Aulakh said. The goodwill spread among these communities, the massacre of 35 Sikhs in Chithisinghpora in March 2000 while former President Clinton book ‘‘Soft Target,’’ written by two Cana- the aircrew involved also benefit from the op- dian journalists, proves that the Indian gov- portunity of having their navigation and flight was visiting India. Its police broke up a Chris- ernment blew up its own airliner in 1985 to skills tested as they search out unfamiliar drop tian religious festival with gunfire. According to generate more repression against Sikhs. In zones on remote and isolated island locations. the excellent book Soft Target, written by two November 1994, the newspaper Hitavada re- This year’s organizers had a bit of difficulty respected Toronto reporters, the Indian gov- ported that the government paid the late in raising the necessary funding for this project ernment blew up its own airliner in 1985, kill- governor of Punjab, Surendra Nath, $1.5 bil- due to Guam’s current economic situation. ing 329 innocent people. According to a report lion to generate terrorist activity in Punjab However, the community has somehow man- in the Hitavada newspaper, India paid the late and Kashmir. ‘‘I salute Pakistani President Musharraf aged to get together and, in the true spirit of Governor of Punjab, Surendra Nath, $1.5 bil- for risking his political life by supporting this season of sharing, allow for another suc- lion to create terrorism in Punjab, Khalistan America and the world in its fight against cessful year. For the past several months the and in Kashmir. terrorism. It is time for India to get on Christmas Drop committee has raised funds We must work to stop terrorism wherever it board,’’ Dr. Aulakh said. ‘‘I call on India to through several events. Three scuba diving occurs. India’s terrorism is no exception. We join the fight against terrorism and I call on boat trips, a 5k run/walk, a golf tournament should stop our aid to India until it stops its re- the Sikh leadership in Punjab to stop mak- along with T-shirt and commemorative coin pression of the Christians, Sikhs, Muslims, ing coalitions with the Indian government sales generated a substantial part of the funds and other minorities, and we should declare and work for freedom for the Sikhs and the our public support for self-determination for all other minority nations of South Asia,’’ he used for this year’s operation. Despite a re- said. ‘‘There is a very good reason that there cent drop in tourism arrivals on Guam, dona- the people of South Asia in the form of a free are 17 freedom movements within India’s tions steadily flowed from island residents and and fair plebiscite on the question of inde- current borders.’’ the local business communities. Also worth pendence. The Indian government has murdered over mentioning is the effort initiated by Jacob Jan- A report published this past May by the 250,000 Sikhs since 1984. According to a re- sen as part of his community service project in Movement Against State Repression showed port in May by the Movement Against State his effort to attain the rank of Eagle Scout. that the Indian government admitted that Repression, India admitted that 52,268 Sikh Through Jacob’s efforts, a canned food drive 52,268 Sikh political prisoners are rotting in In- political prisoners are rotting in Indian jails without charge or trial. Many have been in was held at Andersen Air Force Base’s middle dian jails without charge or trial. Many have illegal custody since 1984. Over 200,000 Chris- and elementary schools as well as at Guam been in illegal custody since 1984. The Indian tians have been killed since 1947 and over High School. government has murdered over 250,000 Sikhs 75,000 Kashmiri Muslims have been killed During these times of uncertainty and hard- since 1984, according to the Politics of Geno- since 1988. The Indian Supreme Court de- ship, it is very gratifying to see that worthwhile cide by Inderjit Singh Jaijee. Over 75,000 scribed the situation in Punjab as ‘‘worse

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00021 Fmt 0666 Sfmt 0634 E:\CR\FM\A19DE8.074 pfrm07 PsN: E20PT1 E2360 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 than a genocide.’’ In May, Indian troops were The GRAMMY Signature School Program is school. Mike went on to graduate from caught red-handed trying to set fire to a developed through the GRAMMY Foundation, Georgetown University and its law school. He Gurdwara (a Sikh temple) and some Sikh a non-profit arm of the Recording Academy also received a LLM degree from the Univer- houses in Kashmir. Two independent inves- tigations have proven that the Indian gov- that is dedicated to advancing music and arts- sity of Michigan Law School before joining the ernment carried out the March 2000 massacre based education across the country. Through U.S. Army. Mike was commissioned as a first of 35 Sikhs in Chithisinghpora. U.S. Con- educational, cultural and professional initia- lieutenant and served in the Judge Advocate gressman Dana Rohrabacher has said that tives, the Foundation aims to strengthen our General’s Corps in La Rochelle, France. for Sikhs, Kashmiri Muslims, and other mi- educational system. After serving in the Army, Mike embarked norities ‘‘India might as well be Nazi Ger- What makes Burlington City’s accomplish- upon his impressive career as assistant coun- many.’’ ments so special is the knowledge that it suc- sel to the United States Senate Subcommittee India has also repressed Christians. Two cessfully competed against 18,000 public high on Constitutional Rights chaired by Senator leaders of the ruling BJP said that everyone who lives in India must either be a Hindu or schools nationwide. In the end, Burlington Sam Ervin. He then moved on to the National be subservient to Hinduism. Priests have City’s program was chosen by an independent Labor Relations Board as a trial attorney in been murdered, nuns have been raped, screening committee comprised of university the Baltimore regional office, and was ap- churches have been burned, Christian schools music professors, and representatives from pointed a Federal administrative law judge at and prayer halls have been destroyed, and no professional music organizations to receive the NLRB in 1973. Mike worked at the NLRB one has been punished for these acts. Mili- the Signature School Award for their excep- until his retirement in 1994. He also taught tant Hindu fundamentalists allied with the tional job of cultivating their arts program. labor law on the adjunct faculty of the Univer- RSS, the pro-Fascist parent organization of Mr. Speaker, I commend the faculty and sity of Maryland University College from 1956 the ruling BJP, burned missionary Graham Staines and his two young sons to death. In students in the music department for their to 1971. 1997, police broke up a Christian religious commitment to furthering music education. I Mike prided himself on fighting for the little festival with gunfire. would like to thank the school and the local guy and his work at NLRB is proof of that ‘‘Nations that do not have political power school board for their hard work and dedica- dedication. As an administrative law judge, he vanish,’’ Dr. Aulakh said. ‘‘Sikhs are a sepa- tion to providing an outstanding music edu- won national acclaim from the nation’s edi- rate nation and ruled Punjab up to 1849 when cational program that superbly serves the stu- torial pages and from Congresswoman Bella the British annexed Punjab. The nations and dents of Burlington City. Abzug on the Floor of this House for his deci- people of South Asia must have self-deter- sion in the landmark Farrah slacks case in mination now.’’ f which he detailed the mistreatment of factory f PERSONAL EXPLANATION workers in a Texas textile shop. CONGRATULATING BURLINGTON Mike and his wife, Cecelia, moved to Prince CITY HIGH SCHOOL ON ITS HON. JOHN BOOZMAN George’s County in 1958. He quickly im- GRAMMY AWARD OF ARKANSAS mersed himself in civic activism and was IN THE HOUSE OF REPRESENTATIVES elected a delegate to the statewide Demo- cratic convention in 1962. He also began forty HON. CHRISTOPHER H. SMITH Wednesday, December 19, 2001 years of involvement in County public affairs OF NEW JERSEY Mr. BOOZMAN. Mr. Speaker, yesterday, by joining efforts to adopt a home rule charter IN THE HOUSE OF REPRESENTATIVES December 18, 2001, I was unavoidably de- for the County and reform zoning practices. Wednesday, December 19, 2001 layed on my return to Washington, DC be- In 1968, Mike was elected to the Charter Mr. SMITH of New Jersey. Mr. Speaker, I cause of a security breach at Charlotte Doug- Board, which was created by the voters to rise today to honor and congratulate the stu- las Airport, where I was scheduled to transfer draft a proposed home rule charter for Prince dents and faculty of the Burlington City High flights, and a security delay at Reagan Na- George’s County. Mike chaired the five mem- School Music Department in Burlington City, tional Airport. ber board and is widely regarded as the au- New Jersey for their recognition by the na- For this reason, I missed votes on the final thor of the County’s modern form of govern- tional GRAMMY Foundation as a GRAMMY passage of H.R. 3334, the ‘‘Richard J. ment. Signature School. Guadagno Headquarters and Visitors Center Mike’s efforts helped bring about a sweep- Burlington City is now one of 100 high Designation Act’’ and H.R. 3054, ‘‘A bill to ing reform of the County’s government. The schools from across the country to receive a award congressional gold medals on behalf of County Commissioner system was abolished certificate of recognition based on its high government workers who responded to the at- and replaced by an elected County Executive level of commitment to music education. The tacks on the World Trade Center and perished and council with home rule powers. Prince GRAMMY Signature School Program honors and on behalf of people aboard United Airlines George’s County had previously been run by high school music students, teachers, prin- Flight 93 who helped resist the hijackers and the Maryland General Assembly in Annapolis. cipals, and school districts that promote and caused the plane to crash.’’ Mike’s reform efforts did not stop with the preserve music education—both performing Had I been present, I would have voted in adoption of the new Charter. He led the way and studying music—as a key part of their the affirmative for both of these bills. in the election of a bipartisan slate in 1971 curriculum. f and was appointed as the first County Attor- The importance of music education in the ney under the new Charter. overall educational experience of students is WALTER H. MALONEY Mike helped guide the new County govern- becoming clearer every day. In fact, several ment during his time as Attorney General until studies have shown a quantifiable value of the HON. STENY H. HOYER he resigned to become a Federal administra- arts in improving overall academic perform- OF MARYLAND tive law judge. The incisive and hard-hitting ance. According to the College Entrance Ex- IN THE HOUSE OF REPRESENTATIVES nature of his legal opinions as Attorney Gen- amination Board, students of the arts continue eral earned him the nickname ‘‘Iron Mike.‘‘ Wednesday, December 19, 2001 to outperform their non-arts peers on the Mike’s demanding career at NLRB did not Scholastic Assessment Test (SAT). In 1995, Mr. HOYER. Mr. Speaker, I rise today to prevent him from being active in local affairs for example, SAT scores for students who pay tribute to the late Walter H. Maloney, or from working extensively on local bond and studied the arts for four or more years were known to his friends as Mike. Mike rep- zoning issues over the years. In 1994, fol- 59 points higher on the verbal, and 44 points resented the First District on the Prince lowing his retirement from the Federal Govern- higher on the math portion of the exam, than George’s County Council at the time of his ment, Mike ran a successful grassroots cam- students with no course work on experience in death and he was a leading figure in County paign for the Prince George’s County Council. the arts. politics for four decades. He was legendary for He was re-elected in 1998. Moreover, most teachers know that music his political independence, perseverance and As a member of the Council, Mike continued appreciation and performance can often pro- his remarkable commitment to public service. to assert his political independence and to use vide a critical mechanism to engage, and stim- Mike was born in Kansas City, Missouri in his sharp mind to challenge land use and ulate interest in, other school activities. Stu- 1930 and came to Washington, DC in 1937 spending policies, and fight for the best inter- dents who otherwise would have dropped out when his father was recruited to work in the ests of the community. At the time of his of school, and put their long term economic fu- Roosevelt Administration. Mike’s mother death, Mike was ineligible to run for the Coun- tures at risk, have been re-engaged through taught music at the Sidwell Friends School in cil again thanks to term limits that he helped music and the arts. Washington, DC where Mike also attended put in place.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00022 Fmt 0666 Sfmt 9920 E:\CR\FM\A19DE8.077 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2361 Mike was a devout Catholic and had a deep TRIBUTE TO THE LIFE, LEGACY, TRIBUTE TO THE CARNEY-NADEAU interest in Catholic history. He authored a pro- AND MUSIC OF RUFUS THOMAS WOLVES, MICHIGAN HIGH file of 58 historic catholic churches east of the SCHOOL CLASS D GIRLS BASKET- Mississippi titled ‘‘Our Catholic Roots.‘‘ He BALL CHAMPIONS also received many accolades throughout his HON. HAROLD E. FORD, JR. long career in public service for his dedication OF TENNESSEE HON. BART STUPAK to his local community and the environment. OF MICHIGAN Mike is survived by his wife of 46 years, IN THE HOUSE OF REPRESENTATIVES IN THE HOUSE OF REPRESENTATIVES Cecelia Fitzpatrick, and six children, Timothy Wednesday, December 19, 2001 Wednesday, December 19, 2001 F. Maloney, Eileen Maloney Flynn, Kathy Mr. STUPAK. Mr. Speaker, I rise today to Maloney Gawne, Patrick J. Maloney, John M. Mr. FORD. Mr. Speaker, I rise today in re- pay tribute to the girls’ basketball team of Car- Maloney, and Ann Marie Maloney, and twelve membrance of one of music’s greatest icons, ney-Nadeau High School, a Class D school in grandchildren. One of his greatest prides was Rufus Thomas, who passed away in Memphis, the Upper Peninsula of Michigan in my con- his loving family and all of their many achieve- TN, on December 15, 2001, at the age of 84. gressional district. With only 86 students, Car- ments. Mike was known to boast about them As his family and friends mourn his passing, ney-Nadeau is one of the smallest schools in all and was happiest when surrounded by his it is appropriate that we pay tribute to him and its division, but the Carney-Nadeau Wolves many children and grandchildren. his legacy. proved once again on December 1 that it only takes a big heart, not a big school, to win a Mike Maloney will be sorely missed not only Rufus Thomas was known as one of Mem- state division championship. I say ‘‘once by those who knew him but also by the resi- phis’ most colorful, influential, and beloved en- dents of Prince George’s County whom cer- again,’’ Mr. Speaker, because the Wolves won tertainers during a career that spanned more tainly benefited from his dedication to his com- State titles under their same coach, Paul than seventy years. As a pioneering disc jock- munity and to the ‘‘little guy.’’ I ask my col- Polfus, in 1989 and 1990. leagues to join me in honoring this dedicated ey at WDIA, an accomplished recording artist, A team championship can be analyzed in public servant who leaves behind a loving and a prolific performer throughout his long numbers, and any sports fan will plenty of ex- family and many admirers who will miss him career, Mr. Thomas made invaluable contribu- citing statistics associated with this gusty greatly. tions to Memphis’ storied musical heritage. team, such as their season record of 26–1 and their coach’s 410–115 career record. In Rufus Thomas became widely known for the 54–32 championship game against f songs such as ‘‘Walking the Dog,’’ ‘‘Do the McBain Northern Michigan Christian, starter Funky Chicken,’’ ‘‘Can Your Monkey Do the COMMENDING THE WORK OF Tara Benson, a senior, led the Wolves with 16 Dog?,’’ ‘‘Push and Pull,’’ ‘‘Breakdown’’ and points and snagged six rebounds and six DEBORAH NOVAK AND JOHN ‘‘Do the Funky Penguin.’’ But Mr. Thomas’s WITEK FOR THEIR DOCUMEN- steals, while her sister Carly, a freshman, musical contributions went far beyond com- TARY ‘‘BLENKO RETRO: THREE went seven of eight in her shooting. Starter mercial success. A true musical pioneer, he DESIGNERS OF AMERICAN Brittany Pipkorn hit four 3-pointers. GLASS’’ opened the door for many young musicians Peel away those numbers, however, and and helped catapult African American music you will find enough stories of real people to into the limelight as a cornerstone of popular make a movie equal to any classic ‘‘underdog’’ HON. NICK J. RAHALL II culture and entertainment. Mr. Thomas helped story. You will learn that Coach Paul Polfus, found two historic recording studios, Stax who has worked at Carney-Nadeau for 26 OF WEST VIRGINIA Records and Sun Records, that helped launch years, was once a basketball player at this IN THE HOUSE OF REPRESENTATIVES the careers of many musical legends, includ- same school, coached by the current super- intendent Ron Solberg. Inducted into the U.P. ing B. B. King, Otis Redding, Isaac Hayes, Wednesday, December 19, 2001 Sports Hall of Fame in 1996, Paul celebrates and Elvis Presley. his third girls’ championship with his wife Col- Mr. RAHALL. Mr. Speaker, as our country In recognition of his great contributions, leen and their sons Jacob, Michael and Matt. began the long process of recovering from the Rufus Thomas was honored by the Rock and In our own version of ‘‘Rocky,’’ look behind Great Depression and World War II, people Roll Hall of Fame in 1998, one of many acco- the numbers to find 5-foot, 1-inch starter Tracy sought comfort and change in a variety of lades he received throughout his career. His Hernandez, who vowed after the team’s loss places and mediums. Consumers turned their songs have remained popular since their re- in the finals last year that the team would win attention to products that were both energetic lease and have been re-recorded by groups the title this year. Tracy kept her vow by re- and new, and Blenko Glass in Milton, West such as Aerosmith and the Rolling Stones. He porting to the gym every morning at 5:30 to lift Virginia was one of the American companies weights and work toward that goal. was featured as a performer at the 1996 able to adjust to this new consumerism with The story of this championship season is their award-winning pieces and unique de- Olympic Games in Atlanta. also revealed in the story of the Benson sis- signs. Yet, even with all of his successes, Rufus ters, daughters of Nancy (Janofski) Pugh, a I would like to congratulate Huntington, Thomas remained an integral part of the com- member of the first All-U.P. girls team picked West Virginia residents Deborah Novak and munity—always accessible and willing to per- in 1975, and Ed Benson, All-U.P. in 1971 and John Witek who have once again created an form for his many devoted fans. Until he be- 1972. Tara credits both parents for their help in shaping her game, but perhaps her greatest insightful and provocative documentary that came ill in November of this year, he never accomplishment is a personal one—Tara re- chronicles three of Blenko’s most famous and spoke of retiring and referred to himself as the turned to top-form play this year after sitting celebrated designers in the era of post-war ‘‘World’s Oldest Teenager.’’ He explained, ‘‘I out the 2000 season recovering from ACL sur- modernism. Titled ‘‘Blenko Retro: Three De- ain’t old. You don’t get old when you’re doing gery. signers of American Glass,’’ it is the second of what you love and enjoying every minute of The sacrifice and the hurdles met and over- its kind by the Emmy-Award winners to high- it.’’ come by each player are part of the story, as light the significance of Blenko as the industry Rufus Thomas made a life of doing what he well as the home community itself, Carney. leader in modernity in American glass. loved and for that he was loved by all who This is a community that has faced great eco- Often said to be reflective of events that knew him. A true symbol of undying youth and nomic adversity, Mr. Speaker, but, like the rest were occurring at that time, Blenko Glass was optimism, Mr. Thomas will be remembered for of the Upper Peninsula, hope and optimism able to offer a new attitude to Americans, the kind heart and boundless energy that he are characteristics of its people. And the bringing the sleek and bold creations into their displayed in all aspects of his life, and for the school proving that education and sports go homes that were parallel to the thirst for mo- mark he left on musical history. hand in hand, was honored this week in the dernity and change that swept the nation at Michigan Golden Apple Awards program as the end of the World War II. Novak and Witek Mr. Speaker, it is with profound reverence one of the state’s most improved schools in highlight the role of this American institution, that we honor Rufus Thomas. He will be performance on Michigan Educational Assess- emphasizing the important and permanent po- missed and remembered fondly by his family ment Program tests. sition that Blenko Glass and its designers hold and friends, an entire community, and musi- In light of the great challenges facing this in creative history. cians and music lovers everywhere. team, the championship run of the Carney-

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00023 Fmt 0666 Sfmt 9920 E:\CR\FM\A19DE8.080 pfrm07 PsN: E20PT1 E2362 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 Nadeau Wolves caught the attention and While I appreciate recent words of support Mr. Speaker, I would like to place the Dec- fueled the enthusiasm of sports writers in the from the Indian Government regarding Amer- can Chronicle article into the RECORD. ica’s war against terrorism, it is important that nearby large communities of Menominee and [From the Deccan Chronicle, Dec. 14, 2001] Escanaba. Tom Kaeser, assistant sports editor we do not forget some recent actions by the for the Menominee, Mich.-Marinette, Wis. very same government. For example, in May DELHI KNEW BUT ADVANI SLEPT 1999, the Indian Express reported that the In- EagleHerald, has followed Carney-Nadeau for NEW DELHI, Dec. 13. Union Home Minister a decade. He described the 2001 Class D dian Defense Minister convened a meeting L K Advani had full intelligence information champs as ‘‘a team that came together, loved with the Ambassadors from Cuba, Communist of a terrorist attack on Parliament. China, Russia, Serbia, Libya, and Iraq—the each other and worked hard together for its Despite this, no measures were taken to bright, shining moment.’’ Dennis Grall, Esca- latter two known terrorist nations and potential tighten security in and around the Par- naba Daily Press sports editor, summed up targets in the ongoing effort to eradicate ter- liament House with the five terrorists driv- the team’s season in a Dec. 3 story. ‘‘For 11 ror—to set up a security alliance ‘‘to stop the ing in past two security parameters manner months the Carney-Nadeau Wolves lived U.S.’’. by the Delhi police and the CRPF, unchal- under unbelievably immense expectations and It is also important to re-examine India’s lenged. pressure,’’ ‘‘Dennis wrote. He was on hand— own human rights record in a number of In his first reaction to the terrorist attack, and described the celebration—when the state areas. It has been reported that India re- Advani claimed, ‘‘There has been no breach champs returned home at the head of a two- presses its Christian minority. Specifically, it of security.’’ He said there was ‘‘no intel- mile-long motorcade and were given a police has been reported that nuns have been raped, ligence lapse’’. He said on television that priests have been murdered, and a missionary there could be no protection against fidayeen escort and a fireworks display along the final and his two sons were burned to death. The attacks maintaining that they even ‘‘had the leg of their trip from Escanaba to Carney. media reports that numerous churches have temerity to attack Pentagon.’’ The Home Mr. Speaker, basketball is a team sport, been burned. A few years ago, police gunfire Minister said it was not possible to provide and, as such, every member of the team de- closed a Christian religious festival. In addi- fool-proof security cover in a democracy serves credit for her contribution during this ‘‘where everything was open.’’ The Union tion, the pro-Fascist RSS, the parent organiza- championship season. I am pleased to share Home Ministry has been flooded with intel- tion of the ruling party, published a booklet de- with you the full roster of the 2001 Michigan ligence information about a possible attack tailing how to bring false criminal complaints Class D girls basketball state champion Car- on Parliament by terrorists. The other two against Christians and other minorities. Press ney-Nadeau Wolves: Tara and Carly Benson, targets were identified as Rashtrapati reports indicate that Prime Minister Vajpayee Bhavan and the Prime Minister’s residence. Cindy Charlier, Rachael Folcik, Trisha Her- promised a New York audience that he would Intelligence reports have also suggested nandez, Rachel Kuntze, Leslie Linder, Emily ‘‘always be’’ remain a member this organiza- Marsicek, Jenna Mellen, Trisha Otradovec, the use of women suicide squads. These have tion. also spoken of terrorists using State vehicles Brittany Pipkorn, Cassandra Relken, Shawn Since 1984, certain human rights organiza- to launch the attack, similar to the modus Retaskie, Erin Schetter, and Roseann tions have reported that the Indian govern- operandi of the terrorist groups in Kashmir Schetter. ment has murdered over 250,000 Sikhs. Since for over a decade now. I ask you, Mr. Speaker, to join me and our 1947, over 200,000 Christians have been Despite this, the security agencies were House colleagues in recognizing the skill, de- killed, and since 1988, over 75,000 Kashmiri not alerted. The terrorists used a white am- termination, hard work, optimism, hope, love, Muslims have been killed. In addition, tens of bassador car with a red light, the symbol of and teamwork of the Carney-Nadeau Wolves, thousands of other minorities, such as Dalit government officialdom. Michigan Class D basketball champions. ‘‘untouchables,’’ Tamils, Assamese, Manipuris, They were dressed Black Cat commandos, f and others have been killed. and were detected only after they got out of A May report issued by the Movement the car and displayed their weapons in full NEWSPAPER SAYS INDIAN GOV- public view. Advani, who had been full of ERNMENT KNEW OF PAR- Against State Repression cited the Indian gov- ernment’s admission that 52,268 Sikh political praise for the Delhi police, did not explain LIAMENT ATTACK prisoners are rotting in Indian jails without how the two security rings manned by the police outside Parliament were penetrated charge or trial. It further claims that many with such ease. HON. DAN BURTON have been in illegal custody since 1984. Tens OF INDIANA of thousands of other minorities are also being In fact defence minister George Fernandes stepped out of line by admitting before the IN THE HOUSE OF REPRESENTATIVES held as political prisoners in the country that cameras that the government had full infor- Wednesday, December 19, 2001 proudly proclaims itself ‘‘the world’s largest de- mation about a possible terrorist attack on mocracy.’’ Parliament. Mr. BURTON of Indiana. Mr. Speaker, the Also in May, Indian troops set fire to recent attack on India’s Parliament by terror- He said, ‘‘We had intelligence information Gurdwara (a Sikh temple) and some Sikh of this, we knew that the fidayeen could at- ists must be condemned. While there are homes in a village in Kashmir. Two inde- many legitimate grievances against the Indian tack Parliament.’’ Even so, the home min- pendent investigations have shown that the In- ister claimed there had been no intelligence government, terrorism is never acceptable. dian government carried out the massacre of lapse while briefing reporters after the meet- Nevertheless, the Deccan Chronicle, an Indian 35 Sikhs in Chithisinghpora. These incidents ing of the Cabinet committee on security. newspaper, reported something very inter- are just the tip of the iceberg of Indian terror Najma Heptullah, who was in her room in esting about the recent attack. It reported that against its minorities and its neighbors. Parliament when it was attacked, said, ‘‘The the Indian government knew about the attack Again, while I am grateful for recent words Home Minister knew of the Al Qaeda threat, in advance and did nothing. Thirteen people, of support from the Indian Government regard- he should have increased the security in Par- including the terrorists, lost their lives as a re- ing America’s war against terrorists, the U.S. liament.’’ sult of the attack. Government and the American public should She said she had herself asked for meas- Mr. Speaker, India has a history of sup- not forget about these recent acts of repres- ures to be taken to beef up Parliament secu- porting terrorism and making it look like the sion. Democracies are not supposed to be- rity. ‘‘There are all these people roaming work of others in order to condemn people have this way. If we are going to fight ter- around all over the building’’ but nothing who oppose the actions of the Indian govern- rorism, then we must be consistent. There are had been done. ment and to justify their own attacks on these actions we can take that will help influence Interestingly Advani himself spoke of a targets. According to Soft Target, published in India to end its reign of terror in South Asia. threat to Parliament at a Border Security 1989 by two Canadian journalists, the Indian We must end our aid to India until they dem- Force function a few days ago. Officials point government blew up its own airliner in 1985, onstrate a better regard on human rights. The out that despite the security threat little killing 329 innocent people, including some hard-earned dollars of the American people was done to take stock of the entire situa- tion and work out a comprehensive strategy Americans, to create the impression of ‘‘Sikh should not be going to support countries that to deal with it. terrorism’’ and enhance its repression of the practice terrorism. We should also show our Sikhs. In November 1994, the Hitavada news- support for freedom rather than terrorism by ‘‘It was all in the realm of talk, we have al- ways known that the terrorists have been paper reported that the Indian government supporting a free and fair plebiscite on the using and would use the cover of the govern- paid Surendra Nath, who was then the gov- question of independence in Khalistan, Kash- ment-like vehicles and uniforms to penetrate ernor of Punjab, the equivalent of $1.5 billion mir, Nagalim, and all the nations of South Asia our security layers, but obviously we were to generate and support terrorist activity in that seek freedom from repressive occupation. unable to get this across to our people,’’ a Kashmir and Punjab, Khalistan. Let us strike a blow for freedom, not terrorism. senior official said.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00024 Fmt 0666 Sfmt 0634 E:\CR\FM\A19DE8.083 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2363 ‘‘THE MOMENT’’ BY BEN STROK in part by the World Trade Center attack in Osama bin Laden had demonstrated their 1993 and the Oklahoma City federal building zealotry in 1993 in the initial attempt to bombing in 1995, have conveyed the anti-im- take down the symbol of world capitalism. HON. BOB BARR They struck again in Saudi Arabia, in OF GEORGIA migrant sentiment in the United States and Yemen, in Tanzania and Kenya before the have sought to reduce the rights and benefits IN THE HOUSE OF REPRESENTATIVES devastating blow on the mainland of the available to immigrants. United States. Wednesday, December 19, 2001 Since 1996, many of us have worked to Al Qaeda had managed to pull together Mr. BARR of Georgia. Mr. Speaker, a 20 undo the damage done to this community. But jihad warriors from Muslim countries in Bos- year-old student at Hunter College in Manhat- our overreaction to September 11th’s attack nia, Algeria, Egypt and Pakistan. This fierce band of warriors with the capacity to kill ci- tan, Ben Strok wrote this poem reflecting on stand to prevent us from advancing our ef- forts. As Americans we pride ourselves in our vilians along with the Taliban in Afghani- the September 11th terrorist attacks. It was re- stan have manifested to the world an inca- cently read at one of my town hall meetings in historical knowledge in looking at the past and pacity to fight against the United States Holly Springs, Georgia, by my constituent, learning from our successes and failures. Im- military. The Al Qaeda and Taliban warriors Becky Babcock. As we enter this holiday sea- mediately following the attacks we strove to have shown an inability to wage modern son, let us remember how invaluable life is respond in an unconventional manner, both warfare. and make the most of each and every mo- here and abroad. Yet, just four months later, That prompts the question, what is left of the Al Qaeda international network? As bin ment. we sit by and allow the Attorney General to in- definitely detain aliens, the use of military tri- Laden forces disintegrate in Afghanistan, THE MOMENT does Al Qaeda remain a formidable terrorist bunals to try those suspected of terrorism, and (By Ben Strok) network capable of threatening American interviews by law enforcement agencies based national security? The extra-constitutional The smoke rises, on ethnic and religious identities. The echoes measures that Attorney General Ashcroft and the ashes fall of Japanese internment camps and McCar- claims that is necessary to save American on someone you know. lives is based on the assumption that the Someone you have not recently told thyism are ringing in the halls of Congress and remnants of bin Laden are still capable of how dear they are to you. I know I am not the only one who hears them. additional savagery. Your last chance, Dr. Wilson cautions, ‘‘in a global society, there is a danger that America will project to The 1993 attack on the World Trade Center may have been a minute ago. and the destruction of the Federal building Your last chance, the world that it only values the life of its own in Oklahoma in 1995, prompted the Clinton might be one minute from now. citizens. The constitution and life will be pre- Administration and Congress to pass the 1996 One precious minute, served for Americans but different standards Anti-Terrorist Act. That Act and the Immi- one precious moment. will be used to measure those who are not gration and Responsibilities Act reduced What does that moment mean to you? citizens of Rome.’’ measurably the rights of permanent resi- I’ll tell you what it means to me. More critically than the projection to the dents and foreigners living in the United That moment, States. Even the Acts passed since Sep- this moment, world, we will tell our fellow countrymen and teach our children that the immigrant life tember 11, 2001 respects the constitutional right now, rights of citizens but run roughshod over is all that matters. should be valued less than the citizen’s life those who are domiciled in the United States What good is the moment that the immigrants who have been the build- and are not citizens. The Patriot Act is simi- if it is not lived for? ing blocks of our pluralistic society generation lar to the Walter/McCarran Act passed in What is life, after generation should stay at the bottom. Dr. 1952. Then the fear was communist organiza- if it is not being relished Wilson warns that this treatment is a ‘‘slippery tions and the law allowed the Immigration for all that it is? slope that can readily lead to the dehumaniza- and Naturalization Service to bar those who It is not life, sought to enter the United States who were it is a wasted moment tion of others.’’ More than ‘‘can lead’’, it does lead, perpetuating an environment of inequal- members of communist or organizations you will never recapture. sympathetic to communism. It is an emotion, ity. With the Patriot Act, the attempt is to you will never again If we sacrifice the constitutional liberties that interdict or deport non-citizens who are have the opportunity to express. we are asking our armed services to defend, members of a terrorist organization or who It is a person then I ask what are we fighting for? Each time seek to raise or to give funds to any terrorist you will never again we give up one of our precious freedoms, we organization. The Attorney General does not be able to see, open the door to surrender more. need to bring the defendants to trial and the and hold, It does not matter if we give up these rights non-citizen can be immediately deported. and tell them for our citizens versus our immigrants because The Attorney General has now assumed how much you love them. powers to indefinitely detain aliens. This It is time, one day these immigrants will be citizens. amounts to a suspension of habeas corpus made up of endless moments, They will not forget that from the inception and the Attorney General now has the power the only differentiating factor being they were told they were less then the people to supersede the rights of INS judges to re- how you lived their children will attend school with. lease a detainee providing that detainee is from one to the next. Our enemy is not the immigrant. Do we suspected to be linked to terrorist activity. f honestly believe that if we harshly punish the No evidence has to be presented in court. immigrant community we are now secure, that Such powers exercised by the state are trou- IMMIGRANTS AND THE NATIONAL we are now safe? bling to constitutional scholars. The ration- INSECURITY By condoning a society that devalues the ale given is national security but there are no checks or balances to ensure that the immigrants’ contributions and vital role in our rights of the defendants are duly protected. HON. CHARLES B. RANGEL community, we degrade ourselves and our Officials at the Justice Department are in- OF NEW YORK history and we condone the inequity that is sisting that the investigation must cast an IN THE HOUSE OF REPRESENTATIVES present in the United States and in the world. extensive net. Thus far the Attorney General If there is one history lesson we should all re- has indicated after prodding from Congress Wednesday, December 19, 2001 member it is our treatment of the most vulner- that 93 persons have been charged with Mr. RANGEL. Mr. Speaker, I rise today to able of our citizens that defines our national minor visa or criminal violations unconnected to events of September 11, 2001. bring the Congress’s attention to a recent arti- character. We are only as strong as our weak- The files of 11 have been sealed and 22 Middle cle in the Carib News entitled ‘‘Immigrants and est link and if we truly want a country where Eastern men who were engaged in obtaining the National Insecurity’’ by Dr. Basil Wilson. all are equal and prosper, we must empower licenses to transport hazardous materials His opinion editorial cogently details our Na- each part of it to succeed. across state lines, all but one, have been re- tion’s current struggle with ensuring our per- IMMIGRANTS AND THE NATIONAL INSECURITY leased. Approximately 548 are in custody, mostly comprised of Middle Eastern males. sonal security while continuing to uphold the [Carib News, Week Ending Dec. 11, 2001] founding principles of this country. The article To extend the dragnet, the Justice Depart- (By Dr. Basil Wilson) ment is asking state and city policy to co- highlights some of our past reactions to times The planning and executing of the bombing operate with them to interview 5,000 Middle of strife and their dramatic impact on our im- of the Pentagon in Washington, D.C., and the Eastern men between the ages of 18 and 33 migrant community. Most notably, the passage implosion of the twin towers led us to be- who entered the United States from January of the 1996 Anti-Terrorist Act and the 1996 lieve that the United States was confronted 2000. They are not necessarily suspected of Immigration and Responsibilities Act, spurred with a formidable foe. The henchmen of any crime but the Justice Department wants

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00025 Fmt 0666 Sfmt 0634 E:\CR\FM\A19DE8.086 pfrm07 PsN: E20PT1 E2364 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 to conduct voluntary interviews with the ex- A liberal columnist like Thomas Freedman world safe for Christians, Jews, Muslims and pectation it might produce leads to deter- equivocates. He recognizes the danger of the non-believers. mine the state of the Al Qaeda network in extra-constitutional decrees but his position the United States. is that the nation is up against an enemy f This amounts to a vulgar form of racial with no love for life and cannot carry out profiling. Racial profiling as it was aimed at business as usual. DUTY SUSPENSIONS African Americans on the New Jersey Turn- In a global society, there is a danger that pike or the unconstitutional search and sei- America will project to the world that it HON. BENJAMIN A. GILMAN zures conducted in Black and Latino neigh- only values the life of its own citizens. The OF NEW YORK borhoods in New York City are examples of constitution and life will be preserved for the might of state power being used against Americans but different standards will be IN THE HOUSE OF REPRESENTATIVES the powerless to maximize domestic secu- used to measure those who are not citizens Wednesday, December 19, 2001 rity. Events of September 11, 2001 necessitate of Rome. It is a slippery slope that can read- additional vigilance on the part of law en- ily lead to the dehumanization of others. Mr. GILMAN. Mr. Speaker, today I am intro- forcement but it is dangerous to pass legisla- Treasuring the e¨weı´ and not the e¨they´ is ducing three bills H.R. 3526, H.R. 3527, and tion oblivious to the rights of non-citizens inextricably linked to the present human H.R. 3528, which would suspend duty on since such legislation jeopardizes the rights condition. That is the troubling issue in the three chemicals imported into the United of all American citizens. Middle East. It is that thought process that States. led to the bombings in Jerusalem. Saturday President Bush announced on November 13, These chemicals are used in the manufac- in his capacity as Commander-in-Chief of the night that resulted in the death of 25 Israelis Armed Forces that the government would re- and over 250 wounded. It is that same men- ture of corrosion inhibitors that protect metal serve the right of trying foreigners during tality that has led to the unending grieving coatings, as well as solvent-based coatings for the course of the war in military tribunals. of the 3,000 lives lost in the World Trade Cen- a variety of industrial and consumer products. Military tribunals were used during the ter. I understand these products are also ‘‘environ- American Civil War and in World War II. Some emergency measures are sorely nec- mentally friendly’’ because they use organic Military tribunals do not require the prepon- essary in light of the holocaust of September molecules, instead of heavy metals, to prevent derance of evidence necessary for conviction 11, 2001. But one of the stranges phenomenon corrosion. in a civilian court or in military courts used of the latter twentieth and the beginning of I have been advised that these chemicals for court martial cases. Conviction in the the twenty-first century is the increasing in- Military Tribunal would not require the security of human life and the proposed solu- are not domestically produced. Thus, enact- same rules of evidence and a two-thirds vote tions to enhance safety which seem to aug- ment of this legislation would allow businesses of the commissioners could lead to a convic- ment the quasi-incarcerated nature of our in this country to reduce their costs and there- tion even in the case of a death penalty. lives. It has prompted the expansion of the by make U.S. industries more competitive in As the New York Times editorial on Sun- penal state with millions in prison and hun- world trade markets. day, December 2, 2001 stated, it is very dif- dreds of thousands leaving prison to be re- Copies of these bills are set out below. ficult to criticize a President when the na- integrated into an economy that is jetti- tion is at war but the editorial board felt soning those who are presently employed. H.R. 3526 compelled to speak out against the extensive The military reserve now provides addi- Be it enacted by the Senate and House of Rep- extra-judicial powers assumed by the Bush tional security on our streets. Airport secu- resentatives of the United States of America in administration. A conservative columnist rity has been federalized and new legislation Congress assembled, like William Safire, who writes for the New has been passed by Congress to counter ter- SECTION 1. TEMPORARY SUSPENSION OF DUTY York Times has condemned the Military Tri- rorism. The Attorney General is convinced ON (2-BENZOTHAZOLYTHIO) bunals as kangaroo courts. Safire is mindful that expanded powers will make us more se- BUTANEDIOIC ACID. of the spectacle of a bin Laden trial and the cure. This should be seen as a temporary (a) IN GENERAL.—Subchapter II of chapter security risks that would entail and suggests holding action. We fought a war in yester- 99 of the Harmonized Tariff Schedule of the rather dispassionately that the United year to make the world safe for democracy. United States is amended by striking head- States should ensure that Osama bin Laden We need to explore a new politics and to con- ing 9902.32.31 and inserting the following new is bombed to smithereens. struct a new global system to make the heading:

‘‘ 9902.32.31 (2-Benzothiazolythio) butanedioic acid (CAS No. 95154–01–1) Free No change No change On or before ’’. (provided for in subheading 2934.20.40). 12/31/2004 H.R. 3527 SECTION 1. TEMPORARY SUSPENSION OF DUTY ON 60–70% AMINE SALT OF 2- (b) EFFECTIVE DATE.—The amendment Be it enacted by the Senate and House of Rep- BENZOTHIAZOLYTHIO SUCCINIC made by subsection (a) applies to articles en- resentatives of the United States of America in ACID IN SOLVENT. tered, or withdrawn from warehouse for con- Congress assembled, (a) IN GENERAL.—Subchapter II of chapter sumption, on or after the 15th day after the 99 of the Harmonized Tariff Schedule of the date of the enactment of this Act. United States is amended by inserting in nu- merical sequence the following new heading:

‘‘ 9902.38.35 60–70% amine salt of 2-benzothiazolythio succinic acid in sol- Free No change No change On or before ’’. vent (provided for in subheading 3824.90.28). 12/31/2004 H.R. 3528 SECTION 1. TEMPORARY SUSPENSION OF DUTY ON 4-METHYL-g-OXO-BENZENE- BU- (b) EFFECTIVE DATE.—The amendment Be it enacted by the Senate and House of Rep- TANOIC ACID COMPOUNDED WITH 4- made by subsection (a) applies to articles en- resentatives of the United States of America in ETHYLMORPHOLINE (2:1). tered, or withdrawn from warehouse for con- Congress assembled, (a) IN GENERAL.—Subchapter II of chapter sumption, on or after the 15th day after the 99 of the Harmonized Tariff Schedule of the date of the enactment of this Act. United States is amended by striking head- ing 9902.38.26 and inserting the following:

‘‘ 9902.38.26 4-Methyl-g-oxo-benzenebutanoic acid compounded with 4- Free No change No change On or before ’’. ethylmorpholine (2:1) (CAS No. 171054–89–0) (provided for in sub- 12/31/2004 heading 3824.90.28).

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00026 Fmt 0666 Sfmt 0634 E:\CR\FM\A19DE8.088 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2365 (b) EFFECTIVE DATE.—The amendment CONFERENCE REPORT ON H.R. 1, past five decades the Guam Women’s Club, made by subsection (a) applies to articles en- NO CHILD LEFT BEHIND ACT OF working on its own and with the support of tered, or withdrawn from warehouse for con- 2001 other civic and service organizations, have sumption, on or after the 15th day after the made great contributions towards the better- date of the enactment of this Act. SPEECH OF ment of the island of Guam. The club was HON. RUSH D. HOLT taken under the wing of the Federation of f Asian Women’s Association (FAWA) in 1958. OF NEW JERSEY Due mainly to the Guam Women’s Club’s af- 21ST CENTURY MONTGOMERY GI IN THE HOUSE OF REPRESENTATIVES filiation, this international organization has BILL ENHANCEMENT ACT Thursday, December 13, 2001 since held four conferences on Guam. AMENDMENTS Mr. HOLT. Mr. Speaker, I rise today to ad- Education is one of the Guam Women’s dress my colleagues regarding H.R. 1, No Club’s paramount concerns. The club has SPEECH OF Child Left Behind. awarded high school, college, and university Although we passed this important legisla- scholarships since its inception. Since 1991, HON. CYNTHIA A. McKINNEY tion last week, I must express my reservations three full time scholarships have been put in place—awarded annually to deserving stu- OF GEORGIA about certain language included in the con- ference report: dents of the University of Guam. To acknowl- IN THE HOUSE OF REPRESENTATIVES edge the value of the teaching profession and The conferees recognize that a quality to honor the island’s teachers in both public Tuesday, December 11, 2001 science education should prepare students to and private schools, the club has held numer- distinguish the data and testable theories of ous gatherings which came to be known as Ms. MCKINNEY. Mr. Speaker, I rise in science from the religious or philosophical claims that are made in the name of science. ‘‘Teachers Teas.’’ strong support of H.R. 1291, the Veterans’ The club has also been very active in beau- Benefit Act of 2001. This bill contains numer- Where topics are taught that may generate controversy (such as biological evolution), tification and facility improvement campaigns. ous provisions that will help our nation’s vet- the curriculum should help students to un- A GWC project in 1954 initiated the establish- erans obtain greater educational opportunities, derstand the full range of scientific views ment of the Guam Museum. GWC was instru- it increases the resources available to assist that exist, why such topics may generate mental in the construction of facilities such as veterans with finding housing, and most impor- controversy, and how scientific discoveries the public pool in Hagaûtn˜a. The construction of can profoundly affect society. tantly, the bill corrects and expands legislation the Padre Palomo Park, for which the club re- to provide compensation and benefits to vet- Outside of the scientific community, the ceived national recognition, the Lalahita Park erans who are disabled. I commend the chair- word ‘‘theory’’ is used to refer to a speculation overlooking the village on Umatac, and the man of the Veterans’ Affairs Committee, Mr. or guess that is based on limited information beautification of San Ramon Hill were made SMITH from New Jersey, and the ranking or knowledge. Among scientists, however, a possible through their efforts. The post office member, Mr. EVANS for their hard work in theory is not a speculation or guess, but a log- petition project they initiated culminated to the bringing this bill to the floor. ical explanation of a collection of experimental opening of a post office in Dededo, the is- One provision in this that I am personally data. Thus, the theory of evolution is not con- land’s most populous village. proud of is section 201, which removes the troversial among scientists. It is an experi- Through both individual and group efforts, 30-year time limit for the presumption of serv- mentally tested theory that is accepted by an GWC members have been directly involved ice connection of respiratory cancers for Viet- overwhelming majority of scientists, both in the with community and civic undertakings. In nam War veterans. This provision is adapted life sciences and the physical sciences. 1963, the club received national recognition from H.R. 1587, the Agent Orange Respiratory The implication in this language that there from the General Federation of Women’s Cancer Act of 2001, which I introduced and are other scientific alternatives to evolution Clubs for their islandwide clean-up campaign. which was cosponsored by 47 of my col- represents a veiled attempt to introduce cre- The GWC Hospital Committee donates an av- leagues. ationism—and, thus, religion—into our erage 150 hours of volunteer work at the schools. Why else would the language be in- Guam Memorial hospital. GWC made signifi- Agent Orange has rained havoc on the lives cluded at all? In fact, this objectionable lan- cant contributions towards the transition of of thousands of Vietnam veterans, causing guage was written by proponents of an idea Guam Youth, Inc. to the Guam Recreation cancer, diabetes, and birth defects. Thankfully, known as ‘‘intelligent design.’’ This concept, Commission—another project that gained for most veterans suffering from their expo- which could also be called ‘‘stealth cre- them national recognition. sure to this herbicide, benefits were made ationism’’, suggests that the only plausible ex- GWC additionally actively participates and available. Unfortunately, a seemingly arbitrary planation for complex life forms is design by contributes toward several local civic programs 30-year time limit was placed on the presump- an intelligent agent. This concept is religion and institutions. From support organizations tion of service connection for respiratory can- masquerading as science. Scientific concepts and facilities such as the Alee Shelter, Erica’s cers—among the most deadly types of cancer. can be tested; intelligent design can never be House, Child Care Co-op, the Guam Lytico Those veterans who suffered from respiratory tested. This is not science, and it should not and Bodig Association, St. Domicic’s Nursing cancers that appeared 30 years after their be taught in our public schools. facility and Rainbows for all Children to na- service were denied service connection, and Mr. Speaker, I am a religious person. I take tional organizations such as Crime Stoppers, thus benefits and assistance for these dis- my religion seriously and feel it deeply. My the Salvation Army, the Guam Chapter of the eases. In effect, the U.S. government told point here is not to attack or diminish religion American Red Cross, and the American Can- them that they were on their own. in any way. My point is to make clear that reli- cer Society’s Guam Unit, the range of GWC’s In a recent study, the Institute of Medicine gion is not science and science is not religion. efforts and interest seems boundless. GWC is stated that there was no evidence that a time The language is this bill can result in dimin- a great contributor to holiday projects such as limit could be placed on the presumption of ishing both science and religion. Sugar Plum Tree and the annual Air Force service connection, and this bill rightly makes f Christmas Drop to sparsely populated outlying that correction to past law. No longer will vet- islands. A benefactor of the Guam Symphony erans who suffer respiratory cancers have to FIFTIETH ANNIVERSARY OF THE Society, GWC is also a major contributor to worry about their government forgetting about GUAM WOMEN’S CLUB the local public broadcasting stations KPRG their service and neglecting their needs. Rare and KGTF. is it that common sense prevails in Congress HON. ROBERT A. UNDERWOOD As the Guam Women’s Club—the island’s to help those in greatest need, but I believe OF GUAM oldest women’s club—celebrates its fiftieth an- that this provision, and this bill, achieve such IN THE HOUSE OF REPRESENTATIVES niversary, I would like to take this opportunity status. I thank the Veterans Committee Chair- to recognize the organization and its mem- man and Ranking Member for their dedicated Wednesday, December 19, 2001 bers. For 50 years, GWC has made substan- attention to the plight and troubles of Amer- Mr. UNDERWOOD. Mr. Speaker, in Feb- tial contributions toward the transformation of ica’s veterans, for including the Agent Orange ruary 1952, a group of women set out to es- Guam and its people. I am confident that the provision in the Veterans Benefits Act of 2001, tablish a non-profit organization designed to island of Guam will continue to reap the bene- and for passing this important piece of legisla- help improve the general education, health fits of GWC’s endeavors for many more years tion. and welfare of the people of Guam. For the to come.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00027 Fmt 0666 Sfmt 0634 E:\CR\FM\A19DE8.091 pfrm07 PsN: E20PT1 E2366 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 HOME OWNERSHIP EXPANSION RESIST A BILL WITH TAX CUTS not intend for the sun to set on their tax cuts. AND OPPORTUNITIES THAT WOULD DRAIN THE SUR- They stuck in a ‘‘repealer’’ to diminish the ap- PLUS parent size of the tax bill, knowing that Con- gress will be hard-pressed to repeal tax cuts HON. RUBE´N HINOJOSA HON. JOHN M. SPRATT, JR. already in place. In time, the ‘‘repealer’’ itself will probably be repealed. If so, the revenue OF TEXAS OF SOUTH CAROLINA IN THE HOUSE OF REPRESENTATIVES loss will be $373 billion over 2003Ð2012. IN THE HOUSE OF REPRESENTATIVES When each of these actions is taken into Wednesday, December 19, 2001 account, an additional $1 trillion in revenue Wednesday, December 19, 2001 Mr. SPRATT. Mr. Speaker, a year ago, losses has to be deducted from the budget economists surveyed the future and saw noth- Mr. HINOJOSA. Mr. Speaker, I rise today to between 2003 and 2012, along with an addi- ing but surpluses: $5.6 trillion over the next express concerns over the introduction of H.R. tional $143 billion in debt service. The impact ten years. Today, the ten-year surplus is at 3206, the Home Ownership Expansion and on the budget, all told, comes to $1.2 trillion. $2.6 trillion and falling, and virtually all that’s This dashes any hope that the nation can Opportunities Act of 2001. The legislation left comes from Social Security. When the repay its publicly held debt before the baby would allow Ginnie Mae to alter its current role President submits next year’s budget, an up- boomers retire. It also puts the ‘‘stimulus pack- from guaranteeing federally backed mortgage dated economic forecast will come with it, and age’’ in context. Disdaining the vanishing sur- securities to guaranteeing federal and conven- the surplus will officially shrink again. plus and the agenda of tax cuts to come, Re- tional mortgage securities. In short, this legis- the Director of the Office of Management publicans on the Ways and Means Committee lation transforms this entity into a full func- and Budget, Mitchell Daniels, blames the brought forth a stimulus package full of tax tioning Government Sponsored Enterprise. economy, extra spending, the fight against ter- cuts with doubtful effects on the economy, but While I am not necessarily opposed to the rorism—everything but tax cuts. All of these with a clear impact on the surplus, reducing it creation of an additional Government Spon- have an impact, but over ten years, the Bush by $250 billion over the next ten years. If this sored Enterprise, I am opposed to the creation tax cuts take a toll of $1.7 trillion on the budg- bill became law, it would push the overall price of an entity that draws from Federal capital et, and account for 55% of the depletion in the of the pending tax-cut agenda to almost $3.5 surplus—and this is just the toll of tax cuts al- and is not subject to government guidelines trillion and wipe out what remains of the sur- ready passed. Marking time is a little-noticed and goals geared toward increasing home plus. agenda of highly probable, politically compel- ownership and improving the American econ- The projection of ten-year surpluses soaring ling tax cuts that could wipe out much of the omy. toward $6 trillion left in its wake a sense of eu- remaining surplus. phoria, a feeling that we could have it all. It’s This legislation would allow Ginnie Mae to At the top of this agenda, awaiting a fix, is clear now that we can’t, but in the meantime, operate with equal flexibility and larger secu- the alternative minimum tax (AMT). Last year out-sized tax cuts have overridden other prior- rity than current Government Sponsored En- only 1.5 million individual taxpayers had to ities, like prescription drug coverage under terprises in the housing mortgage market, in- deal with the AMT, but due to inflation, rising Medicare. If we want to put the economy and cluding Fannie Mae and Freddie Mac. How- incomes, and an unindexed exemption, the the budget back on path, there is an axiom ever, it would not require that Ginnie Mae AMT will become a household acronym to mil- worth recalling from the days of intractable meet the housing goals established by the lions of middle-income Americans. deficits: When you find yourself in a hole, the U.S. Department of Housing and Urban Devel- Before enactment of the Bush tax cuts, the first rule is to quit digging. That’s why we opment. These goals are designed to ensure number of individual taxpayers affected by the should resist a bill with tax cuts that would AMT was expected to mushroom to 17.5 mil- that every American can and one day will be drain the surplus without stimulating the econ- lion by 2010. The Bush tax act created new able to achieve the dream of home ownership. omy. tax benefits without corresponding adjust- f Therefore, it is unclear how this legislation ments to the AMT, at least not after 2004. As would help consumers or expand homeowner- a result, the number of taxpayers affected by PERSONAL EXPLANATION ship opportunities for minorities, low- to mod- the AMT will double by 2010, grow to 35.5 mil- erate-income families, and other traditionally lion—or to one in every three individual tax- HON. MIKE McINTYRE underserved markets. The legislation that ex- payers. When these folks find that tax benefits OF NORTH CAROLINA are extended in one part of the code only to pands the role and scope of Ginnie Mae does IN THE HOUSE OF REPRESENTATIVES not make them subject to mandatory afford- be retracted in another, they will protest bit- able housing goals, borrower income caps, or terly, and in time Congress is certain to fix the Wednesday, December 19, 2001 limit their business to first time buyers. These AMT so that it does not come down on mid- Mr. MCINTYRE. Mr. Speaker, on rollcall ideals have made organizations like Fannie dle-income taxpayers. The cost of confining Nos. 499 and 500, I was absent since I was Mae and Freddie Mac an attractive and worthy the AMT to its ambit before the Bush tax cuts unavoidably detained because of a security government sponsored enterprise and prompt- would be about $268 billion over 2003Ð12. But breach at the Charlotte Douglas Airport, which ed them to create new ways to expand the this would leave more than 17 million tax- caused me to be unexpectedly re-routed number of first-time borrowers or break down payers facing the AMT. If taxable income ex- through another airport on a later flight. empt from the AMT were indexed at last barriers to homeownership. This occurred on Tuesday, December 18, year’s level, those affected in 2010 could be 2001. Had I been present, I would have voted What this legislation does is make this gov- limited to about 8 million, but at a heavy cost, ‘‘yea.’’ ernment entity function like a private corpora- a further revenue loss of $241 billion. f tion, allowing Ginnie Mae to guarantee loans Just as probable as some fix to the AMT is not just to people who need the extra help, but the renewal of tax benefits set to expire. The COMMENDING THE CANTON JUN- also to those who can and should be using tax code is full of short-lived benefits. CBO IOR/SENIOR HIGH SCHOOL’S SEP- the private market. Under these rules, I see no and OMB do not try to divine what Congress TEMBER 11 REMEMBRANCE PRO- need to provide federal support for an organi- will do when these deductions and credits GRAM zation that will perform a function in the hous- reach the end of their legislated lives. They ing market that can be executed by a private simply assume that expiring provisions will not HON. NANCY L. JOHNSON banking organization. be renewed. But these are popular tax bene- OF CONNECTICUT fits, and they are almost always renewed. The IN THE HOUSE OF REPRESENTATIVES Mr. Speaker, our nation’s housing finance revenues forgone by renewing the most promi- system is the model of the world. We should nent tax benefits from 2003 through 2012 Wednesday, December 19, 2001 be concentrating our resources, time and ef- would be about $174 billion. Mrs. JOHNSON of Connecticut. Mr. Speak- fort in closing the gap of homeownership rates This, however, omits the largest expiring er, I rise today to honor the students and fac- between minority families and the larger provision. In an effort to shoehorn as many tax ulty at Canton Junior/Senior High School in homeownership rate. We have the tools nec- cuts as possible into a package limited to Connecticut’s Sixth Congressional District for essary to improve ownership numbers; let’s $1.35 trillion, congressional Republicans put a their beautifully touching remembrance pro- use what we have to successfully meet our ‘‘sunset’’ in their tax bill, terminating all of the gram held in honor of the victims of the Sep- laudable goals. cuts by the end of 2010. They obviously do tember 11th terrorist attacks.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00028 Fmt 0666 Sfmt 9920 E:\CR\FM\A19DE8.095 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2367 The students took the initiative to plan and the flame that was lit so long ago burning Clarene Lincoln and her twin brother were run the entire program, in which stories, bright and true. For if we keep on pouring born in the Shenandoah Valley of Virginia, poems and songs were shared, honoring our heart and soul into our songs, prayers, near the town of Tenth Legion on January 11, and actions, then there is nothing and no one 1902. Clarene rode horseback to elementary those who so unexpectedly and tragically lost that can ever douse the flame. their lives. They also created a chain of 6,000 school and went by sleigh in the winter. When AS ONE WHOLE circles, which was looped around the audito- she entered high school, she went to live dur- rium, to provide a dramatic reminder of the (By Robin Engelke, Grade 8, Canton Junior ing the week in Harrisonburg, Virginia, and High School) number of people who were thought to have came home on the weekends. She graduated died on that terrible day. The chain captured As one whole, from Elon College in North Carolina in 1925. we share one soul. both the enormity of the tragedy and the value After teaching at Huntington Girls’ College in of each individual life. But ever optimistic, the We all pray and hope, Montgomery, Alabama, she went to Duke Uni- As a nation we cope. chain, as one student eloquently said, was a versity for a Master’s Degree and met W.B. reminder that after the attacks, ‘‘the great Tragedies don’t always bring bad, Robertson. Their summer romance has lasted Look back to the one’s we’ve already had. chain of America—the chain that links every 65 years. They married in 1936 and moved to single citizen of our country—strengthened ten ‘‘Always for the best.’’ I say Rutherfordton, North Carolina, where Clarene All I can think about is that day. thousand fold.’’ began her 30-year teaching career at Central That vital and heartfelt presentation cap- The one where the towers fell, High School. She initially taught both English tured the spirit of America’s journey as we That day felt as if we went to hell. and American History, but she moved to his- watched the unfolding events in horror and As one whole, tory only when one of her students said, ‘‘Oh, disbelief and then as we grieved with great the tragedy was a form of defeat, Mrs. Robertson, you learned me all the but not for America we hadn’t been beat. sorrow at the lives and dreams shattered by English I ever knowed.’’ evil. Despite the anger and hatred that has As everyone fumbled to find a loved one Mrs. Robertson gave birth to her only nat- In New York City there was no sun. touched all our hearts, these students dem- ural child, daughter Mary Ella in January 1938. onstrated the power of love for others. It is No sun to shine or gleam or burn, Arthur, her stepson from Mr. Robertson’s pre- Those fires did burn, but who did this to us vious marriage, died at age 65. Clarene and that power that will make our free and caring will take their turn. country able to defeat the hatred of those ‘‘Robby’’ have five grandchildren and eight As one whole, great grandchildren. Only a year or so ago, whose poverty made them easy prey for the we share one soul preachers of death and destruction. they moved from Rutherfordton to Blanco, I commend the students of Canton Junior/ Texas, where they live with Mary Ella and her REFLECTION husband David. Senior High for expressing in words and ac- (By Louise Eich) tions the thoughts and feelings of Americans Clarene Robertson taught high school September 11th, 2001 was a day when the everywhere. American History like a college course. Some clock stood still. Loved ones ran to each students opted to take the required course in MEMORIAL SERVICE other, crying, embracing as the ground summer school to avoid the rigor of her class. (Patriotic Paper by Lauren Schwartzman) shook from the buildings crumbling. Fire- Others—some willingly, some reluctantly— September 11th. Do you feel what I feel fighters and police officers showed braveness submitted to her demanding academic stand- when you hear that date? Can you feel the needed in a war, to fight and die for other’s happiness. The black scorched their helmets, ards. Those students often completed the death in that date? The tears cried by three course with both a deeper knowledge of and hundred million eyes for six thousand people. made their throats dry and itchy, but they People whose lives were so brutally, so cru- marched on. appreciation for our Nation’s history and an elly cut short that day. We are crying for Everything stopped at that moment again, eagerness to follow current events and en- those dreams shattered and lost, dreams of as they watched the second tower fall. Si- gage in civic and political life. life that will never be fulfilled. lence struck the air, and the first scream and Doug Tanner graduated from high school in Can you feel the hatred in that date? The siren pierced through the stillness. 1964, having taken her history class in 1962Ð awful, black hate these terrorists must feel The country went through a breakdown, a 1963. Both he and Mrs. Robertson recall that toward us to have done such unbelievable cry for help as everything turned to chaos. Doug entered the class reflecting and embrac- Planes were brought down, schools canceled, things. ing the strong racial prejudice typical of white Can you feel the shock in that date? The as the city of New York shut down. shock of a fact we have ignored for so long. But America stayed strong. We stepped Southerners at the time. Clarene Robertson That fact that maybe we are taking the safe- right back up. New York has been opened up was not about to let him continue to carry that ty of America for granted. That maybe tak- again, our flags wave high, and we promised attitude without her having challenged it as ing it for granted has left it not so safe any- to fight the evil that possessed the planes to thoroughly and effectively as she possibly more. The shock that made every Ameri- crash on us. could. can’s heart skip several beats, the shock We will stand strong, America. We will re- The civil rights movement was nearing its that branded a look of sadness on our faces. build a nation of togetherness, and we will height in the spring of 1963, and current Traces of that helpless look still linger, and come out victorious. They can destroy our events were a regular part of the curriculum. it will be a long, long time before they com- towers, but they can never destroy the foun- In addition, Mrs. Robertson required Doug to pletely fade away. dations of our hearts. Can you feel the anger in that date? The read John Howard Griffin’s ‘‘Black Like Me’’ acid fire that was lit in our hearts the mo- f and, in spite of resistance, assigned him to a ment we knew the names of those inhuman IN TRIBUTE TO CLARENE LINCOLN select group of students to make a presen- people who attacked our country. The same ROBERTSON tation on African-American history to the rest fire that kindles our attacks on these terror- of the class. Although several other students ists now. This fire will also take a long time readily volunteered for the project, Mrs. Rob- to turn to cold ashes. But can you also feel HON. NANCY PELOSI ertson assigned some of them to other topics. that other little bit I feel in that date? Can OF CALIFORNIA She insisted that Doug be among those who you feel in that date the great chain of IN THE HOUSE OF REPRESENTATIVES would learn and wrestle with all the issues of America, the chain that links every single citizen of our country, strengthen ten thou- Wednesday, December 19, 2001 race in America. Mrs. Robertson also served sand fold? Can you feel that? Through all of as advisor to the student government, and the death and tears and hate and shock, can Ms. PELOSI. Mr. Speaker, many of us in worked closely with Doug in his capacity as you feel that bit of unity and hope shining the U.S. House of Representatives have had junior class president. through? That light that embodies America our lives enriched and our spirits strengthened The following summer, when the civil rights better than any two buildings ever could. An through the work of Rev. Doug Tanner, Presi- movement touched Doug’s heart more directly untouchable flame that cannot be doused by dent of the Faith & Politics Institute. His teach- through experiences in his southeastern Meth- hate or death or any mere person! For I look er and mentor, Clarene Lincoln Robertson odist Youth Fellowship, his mind was prepared at America as a candle. Some people call it taught American History to Doug at Ruther- to embrace the monumental change that racial the fabric, or the foundation, but I call it the fordton-Spindale Central High School in North candle. A candle built by the courage of desegregation was bringing throughout the Americans, expanded by the courage of Carolina in 1962Ð1963. Doug Tanner was one South. It was in that notable historical context Americans, protected by the courage of of the students whose life and vocation she that Doug received his calling into a ministry Americans, made free by the courage of profoundly influenced. I rise today to pay trib- combining faith, racial justice, and politics. Americans, and now we must do whatever it ute to Clarene Lincoln Robertson who will be Today, Clarene Robertson’s influence on takes to protect that freedom. We must keep 100 years old on January 11, 2002. Doug has helped him to lead the Institute’s

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00029 Fmt 0666 Sfmt 9920 E:\CR\FM\A19DE8.098 pfrm07 PsN: E20PT1 E2368 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 Congressional Conversations on Race pro- HONORING R. LAWRENCE interest in understanding human motivation. gram and its Congressional Civil Rights Pil- COUGHLIN, JR. While a student at the University of Rhode Is- grimages to Alabama. We are indebted to land, she fought to affect public policy, found- Mrs. Robertson for being such an exceptional HON. WILLIAM J. COYNE ing the URI Chapter of the Campaign to End teacher and mentor. It is with great pleasure OF PENNSYLVANIA the Death Penalty, volunteering with America and appreciation that we wish her a very IN THE HOUSE OF REPRESENTATIVES Reads and mentoring children in Head Start. happy 100th birthday on January 11, 2002. In her spare time she mastered equestrian Wednesday, December 19, 2001 arts and Tai Kwan Do kickboxing. At Oxford, Rachel will study English and f Mr. COYNE. Mr. Speaker, I rise today to join in this special order honoring our former theater history, and when she returns she TRIBUTE TO ROBERT LAWRENCE colleague, R. Lawrence Coughlin. I want to hopes to direct theatrical performances. Al- COUGHLIN, JR. thank Mr. GEKAS for organizing this special ready, Rachel has shared her talent with Per- order. ishable Theater in Providence where she Larry Coughlin represented a suburban works full-time. HON. F. JAMES SENSENBRENNER, JR. Philadelphia district in the House of Rep- I know my colleagues understand the high resentatives for 24 years. He was a gracious honor that the Rhodes Scholarship bestows. It OF WISCONSIN gentleman who represented his constituents signals tremendous achievement and even greater promise. On behalf of the entire Sec- IN THE HOUSE OF REPRESENTATIVES with integrity and wisdom. Mr. Coughlin had a remarkable background. ond Congressional District of Rhode Island, I Wednesday, December 19, 2001 Raised on a farm in Pennsylvania, he earned want to express our pride in Rachel’s success. a degree in economics from Yale and an MBA Her example is inspiring and her future is Mr. SENSENBRENNER. Mr. Speaker, it is from Harvard. He subsequently attended night overflowing with possibility. I just hope she with sadness that I note the death of a former school at Temple University to get his law de- comes home once in awhile to remind all colleague and a great Pennsylvanian, Mr. gree while working during the day as a fore- Rhode Islanders that the smallest of states Robert Lawrence Coughlin, Jr., who passed man in a steel plant. His academic accom- can produce the biggest of successes. away last month. plishments speak to his energy and ability. f Larry grew up on his father’s farm near Mr. Coughlin was also a dedicated public BEST PHARMACEUTICALS FOR Scranton, Pennsylvania. But he was no farm- servant. He served in the Marines in Korea CHILDREN ACT hand. Making the most of his opportunities, during the Korean War as a aide-de-camp to Larry graduated from the Hotchkiss School in legendary Marine Lt. General Lewis B. SPEECH OF ‘‘Chesty’’ Puller. He served ably in the Penn- Connecticut in 1946, he received an Econom- sylvania House of Representatives and Sen- HON. SHEILA JACKSON-LEE ics degree from Yale in 1950, a Masters de- OF TEXAS ate before running for—and winning—a seat in IN THE HOUSE OF REPRESENTATIVES gree in Business Administration from Harvard, Congress in 1968. and a law degree from Temple University’s During his 12 terms in Congress, Rep- Tuesday, December 18, 2001 law school in 1958. While at Temple, Larry at- resentative Coughlin served on the House Ju- Ms. JACKSON-LEE of Texas. Mr. Speaker, tended classes at night, and was a foreman diciary Committee, the House Appropriations I rise in support of S. 1789, the Best Pharma- on a steel assembly line during the day. Committee, and the House Select Committee ceuticals for Children Act. As Chair of the This ‘‘steely’’ resolve served him well on Narcotics Abuse and Control. He was par- Congressional Children’s Caucus, the welfare throughout his career. As a Marine, Larry ticularly active in working to increase federal of children has always been a top priority for fought in the Korean War, and was aide-de- housing and transportation assistance to our me. The bill before us today is reauthorizing camp to Lt. General Lewis B. ‘‘Chesty’’ Puller. nation’s cities. Mr. Coughlin understood that legislation designed to ensure that more medi- When he was elected to Congress, he was even affluent suburbs like the ones he rep- cines are tested for children and that useful Chairman of the Capitol Hill Marines, which resented depend upon central cities for their prescribing and dosing information appears on represented Members who had been in the continued economic well-being. Our nation is labels. Under a 1997 law, pharmaceutical compa- Marine Corps. healthier and more prosperous as a result of his service in Congress. nies that test drugs on children at the request Larry was first elected to the U.S. House of Larry Coughlin was always a quiet, upbeat, of the FDA are given an extra six months of Representatives in 1968. He came from a courteous man. It was an honor and a pleas- exclusive marketing rights. This law was family that had some experience in the field of ure to serve in the House of Representatives aimed at encouraging drug companies to test public service as his uncle, Clarence Coughlin, with him. I join my colleagues in mourning his their products on children so that a pediatri- was a former Republican Representative. passing. cian would be able to prescribe appropriate Representing a wealthy suburb of Philadelphia f doses for children. As a result of this law, we from 1969 to 1993, Larry was so popular per- have seen more drugs for children on the mar- HONORING RACHEL WALSHE FOR sonally and politically, that he was almost al- ket that have a label telling how they can be RECEIVING A RHODES SCHOLAR- ways easily elected. It wasn’t until after he re- used, and even more basic information for pe- SHIP tired that Democrats were able to field signifi- diatricians. cant competitors for that seat. The difficulty of prescribing medicine for HON. JAMES R. LANGEVIN children results from various factors: a child’s A tall and authoritative man, Larry always OF RHODE ISLAND weight and metabolism, the quick metamor- had a way with people. With his military back- IN THE HOUSE OF REPRESENTATIVES phosis of a child’s body, and a child’s inac- ground and penchant for bow ties, Larry came curate information about how medicines are Wednesday, December 19, 2001 across—rightfully so—as a gentleman and a affecting them. scholar. While he briefly served on the House Mr. LANGEVIN. Mr. Speaker, I rise to pay A recent six-week study done in Boston Judiciary Committee, he spent most of his ca- tribute to Rachel Walshe, who hails from my found that over that time, 616 prescriptions reer on the Appropriations Committee. Al- hometown of Warwick, Rhode Island, and is written for children contained errors. Of those, though I never had the opportunity to directly the first woman from a New England public 26 actually harmed children. Of the errors that work with him on the Judiciary Committee, I university to receive a Rhodes Scholarship. were caught before the medication was ad- did work with him on several issues. The na- Rachel was selected for the prestigious ministered, 18 could have been fatal. Medica- tion last a good legislator when Larry re- Rhodes Scholarship from among 925 appli- tion errors in hospitals occur three times more signed, and on November 30, the world lost a cants from across the nation for her leadership often with children than with adults. This bill potential, academic achievement, and per- good man. can help prevent such mistakes by prescribing sonal integrity. Throughout her 23 years, Ra- adequate testing and proper labeling. It is with a heavy heart that I say good-bye chel has consistently demonstrated all of Mr. Speaker, S. 1789 also requires that the to Larry. My wife Cheryl and I would like to ex- these characteristics. Graduating last year General Accounting Office (GAO) study the in- press our condolences to his wife Susan, and from the University of Rhode Island with high- clusion of children of ethnic and racial minori- the entire family, in this time of sorrow and est honors, she focused on the philosophy of ties in drug studies. Ethnic and racial minori- sadness. They will be in our prayers. religions, a major she crafted to explore her ties make up a substantial percentage of our

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00030 Fmt 0666 Sfmt 9920 E:\CR\FM\A19DE8.100 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2369 population, yet many studies do not reflect the REMEMBERING MARSHA HANLEY H.R. 3178, WATER INFRASTRUC- multi-cultural and multi-racial fabric of our soci- TURE SECURITY AND RESEARCH ety. HON. BRIAN D. KERNS DEVELOPMENT ACT Mr. Speaker, S. 1789, which reflects a con- OF INDIANA sensus of the sponsors of both the earlier SPEECH OF House and Senate passed bills, is a good bill. IN THE HOUSE OF REPRESENTATIVES It is a necessary bill—necessary to protect the Wednesday, December 19, 2001 HON. SHEILA JACKSON-LEE OF TEXAS welfare of our nation’s children. Mr. KERNS. Mr. Speaker, today I rise to f recognize a great Hoosier, a great American— IN THE HOUSE OF REPRESENTATIVES TRIBUTE TO HABITAT FOR HU- Marsha Hanley. Marsha wore many hats dur- Tuesday, December 18, 2001 MANITY IN SPRINGFIELD, MIS- ing her lifetime—wife, mother, grandmother, Ms. JACKSON-LEE of Texas. Mr. Speaker, SOURI volunteer, community leader, and an advocate I am pleased that ‘‘H.R. 3178, Water Infra- for homeless children. structure Security and Research Development HON. ROY BLUNT On this day, Marsha Hanley was laid to rest Act’’ and the Development of Anti-Terrorism by her husband, Harold, children, family, and OF MISSOURI Tools for Water Infrastructure was brought to friends after leaving our world this past Sun- IN THE HOUSE OF REPRESENTATIVES the floor today. day. The manner in which she led her life— Wednesday, December 19, 2001 Mr. Speaker, the nation’s water supply and her kindness, her love of country, her devotion water quality infrastructure have long been Mr. BLUNT. Mr. Speaker, I rise today to pay to her family—serves as an example for oth- recognized as being potentially vulnerable to tribute to a group in Southwest Missouri that ers to follow. terrorist attacks of various types, including intends to turn a careless act of pollution into A life-long Republican, Marsha cared deeply physical disruption, bioterrorism/chemical con- hope for families. Part of the American dream about her community and country. She fol- tamination, and cyber attack. Interest in such is buying a home for your family. Home own- lowed the issues closely with great interest problems has increased since the September ership in America is at record levels. Two of and was not afraid to express her opinion. 11, 2001 attacks on the World Trade Center three families owns or is buying their primary Mr. Speaker, I would like to have been and the Pentagon. Damage or destruction to residence. But for many families that dream is home in Indiana to pay my respects, but as these systems by terrorist attack could disrupt beyond reach. you know—and as I am sure she would un- Working with Habitat for Humanity, the the delivery of vital human services, threat- derstand—we have important legislation be- ening public health and the environment, or House of Representatives has supported in fore us in Congress on this day. While my word and deed a commitment to home owner- possibly causing loss of life. heart is with Marsha and her loved ones in In- Water infrastructure systems include surface ship for low-income families. Members of this diana, my duties keep me in our nation’s Cap- body have assisted in raising funds and work- and ground water sources of untreated water itol. for municipal, industrial, agricultural, and con- ing on homes that are ‘‘dreams come true’’ for We are all richer for having known Marsha, many disadvantaged families. In Southwest sumer needs; dams, reservoirs, aqueducts, and the lives of so many others have been en- and pipes that contain and transport raw Missouri I have assisted in putting up the walls riched because of her good work. While we on four homes in what has become an annual water; treatment facilities that remove contami- will miss her, we take comfort in the knowl- nants; finished water reservoirs; systems that event that my staff and I look forward to. Habi- edge that she is now in a better place and tat for Humanity is a charity that has been in- distribute water to users; and wastewater col- with our Father in heaven. lection and treatment facilities. Across the strumental in helping thousands of families God bless you Marsha Hanley. find permanent and affordable shelter. Home country, these systems comprise more than ownership contributes to building strong fami- f 75,000 dams and reservoirs, thousands of lies. It inspires a family’s desire to improve miles of pipes and aqueducts, 168,000 public IN RECOGNITION OF MARY and protect it’s personal stake in the commu- drinking water facilities, and about 16,000 pub- DANIELS ON HER RETIREMENT nity as well as promotes civic participation and licly owned wastewater treatment facilities. involvement. Ownership and management are both public More importantly today, I am pleased to an- HON. JAMES R. LANGEVIN and private; the federal government has re- nounce that Habitat for Humanity of Spring- OF RHODE ISLAND sponsibility for hundreds of dams and diver- field, Missouri has received a grant from the IN THE HOUSE OF REPRESENTATIVES sion structures, but the vast majority of the na- tion’s water infrastructure is either privately Corporation for National Community Service Wednesday, December 19, 2001 specifically to fund a service event on the Mar- owned or owned by non-federal units of gov- tin Luther King Jr. holiday this coming year. Mr. LANGEVIN. Mr. Speaker, I am pleased ernment. The $7,500 grant will be used to fund the or- to recognize one of my constituents, Mary Mr. Speaker, the federal government has ganization’s kick-off of their new program ‘‘Alu- Daniels of Cranston, as she begins her retire- built hundreds of water projects over the minum Cans Build Habitat Houses.’’ On Martin ment at the impressive age of eighty-four. years, primarily dams and reservoirs for irriga- Luther King Jr. Day 2002, hundreds of youth On Friday, December 7, Mary completed tion development and flood control, with mu- will be working throughout my district picking her final day of work at Leviton, an electrical nicipal and industrial water use as an inci- up and recycling aluminum cans. The money equipment manufacturer that is one of the dental, self-financed, project purpose. Be- raised from collecting the cans will be used to largest employers in Rhode Island. For thirty- cause of the size and scope of many of these build Habitat houses and also to provide a seven years, Mary served as a dedicated and facilities, they are critically entwined with the scholarship for a high school student in our diligent worker, completing any task that was nation’s overall water supply, transportation, district. put before her. She will be remembered by and electricity infrastructure. Threats resulting I commend my local chapter for its contin- her coworkers for her kindness to her friends in physical destruction to any of these systems ued involvement in Southwest Missouri and its and family, her impressive work ethic, and her could include disruption of operating or dis- proactive efforts to engage young people in strong character. tribution system components, power or tele- public service. Those of us who have been After many years of working to support her communications systems, electronic control privileged enough to help on Habitat projects family, Mary may now take full advantage of systems, and actual damage to reservoirs and have seen the unity that this organization can her retirement. I am certain that she will enjoy pumping stations. A loss of flow and pressure bring to our communities. Few things are more these golden years, as her strong spirit will would cause problems for water customers inspiring than witnessing people from vastly keep her active. Her four children and eight and also would drastically hinder firefighting different backgrounds and ethnic heritages grandchildren are also certain to benefit now efforts. Bioterrorism or chemical threats could working together to help a family achieve their that she has more time to prepare family deliver massive contamination by small dream. meals and her famous lemon meringue pie. amounts of microbiological agents or toxic It is fitting that this grant, given in honor of I encourage Mary to take full advantage of chemicals and could endanger the public Martin Luther King Jr., be used for a project her retirement years, to spend more time with health of thousands. that unifies. I can think of no better way to her loved ones, and to pursue all of her Water supply was one of eight critical infra- honor the legacy of a man who sought to dreams. I now ask my colleagues to join me structure systems identified in President Clin- sweep away the barriers that kept all Ameri- in congratulating this impressive woman on ton’s 1998 Presidential Decision Directive as cans from pursuing the American dream. her notable achievement. part of a coordinated national effort to achieve

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00031 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.002 pfrm07 PsN: E20PT1 E2370 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 the capability to protect the nation’s critical in- utes to each and every one of our Sheridan successful, the Department of Energy moved frastructure from intentional acts that would di- experiences. the plant into a standby shutdown. minish them. Community service for those less fortunate For nearly ten years, this standby mode Mr. Speaker, since September 11, the na- than ourselves; the appreciation of nature at cost the American taxpayers $32 million per the mountain campus that has made us all tion’s drinking water utilities have been on a better stewards of our environment; both of year, even though there was no functional pur- heightened state of alert to protect against the these are hallmarks of the Sheridan experi- pose for maintaining this standby status. I potential disruption of water service and bio- ence. have twice introduced legislation to perma- logical and chemical contamination of drinking No graduate will soon forget the times nently close this environmentally risky, fiscally water supplies. Fortunately, before September we’ve had or the things we’ve learned. But wasteful, and technologically unnecessary fa- 11, the water supply community was already more importantly, we won’t forget each cility. at work with the U.S. Environmental Protection other. The friendships we have made will Mr. Speaker, nuclear contamination from the stick with us the rest of our lives. It is very Hanford Nuclear Reservation has long threat- Agency, the Federal Bureau of Investigation rare that you get to have such a close rela- and other federal agencies to develop meth- tionship with your fellow classmates at ened the Columbia River and the hundreds of ods and tools to protect water system facilities school. Although sometimes it is frustrating thousands of Oregonians living downstream. and consumers. Several drinking water organi- to have such a small class and small school, The millions of dollars previously spent keep- zations and EPA are currently sponsoring var- in the end it is uniquely Sheridan because ing the FFTF on standby can finally be used ious research and development projects ad- your classmates and school are always there to perform the clean up that is essential to en- dressing water system security issues. These for you in any situation. All of us, including sure environmental safety and clean drinking projects include tools for assessing me, can remember when Sheridan was there water for Oregonians. to support us, to share our joy, or lessen our The Department of Energy has taken an im- vulnerabilities, preparations for response and sorrow. If there is one thing we all take away recovery in the event of an attack, under- from Sheridan it is the friendships we have portant step today to remedy the environ- standing the impact of potential biological and made. mental problems caused by the Hanford facil- chemical agents, and training of water system On behalf of my entire class and the entire ity. I look forward to working with Secretary personnel on security issues. student body, I would like to thank the fac- Abraham in the coming months and years to Mr. Speaker, I would like to thank my col- ulty and the wonderful staff. All of you have ensure that Hanford will no longer pose a leagues on the Science Committee for sup- helped us in ways you can not imagine. health threat to those living in the Columbia porting my amendment on H.R. 3178. The Thank you especially to all of the teachers River region. amendment I offered, which was passed in the who have taught us over the years. Mrs. Lytle in kindergarten, Mrs. Miller and Mrs. f Committee is to ensure that the grants award- Curtis in second grade. Mrs. Goldstein in ed under this bill are made to meet the needs PAYING TRIBUTE TO THOMAS third and fifth grade. Mrs. Pelton, Mrs. MOORE of water supply systems of various sizes and Arcuri, Ms. Provonsil, Mr. Walton, Mrs. are provided to geographically, socially and Cresswell, Mr. Powell, Mrs. Kotler, Mrs. economically diverse recipients. Haggerty, Senorita Fabiola, Mrs. Garcia HON. SCOTT McINNIS Mr. Speaker, this bill is critical in protecting deMendoza, Mrs. Sacher and Madame. Of OF COLORADO course, a special thanks to Ms. Brown and one of our nation’s most precious resources— IN THE HOUSE OF REPRESENTATIVES the water supply. As indicated, protecting our Mr. Helfand for helping us through this year and the high school admissions process. Mr. Thursday, December 20, 2001 water supply is important to the future of this Plummer, thank you for being a great prin- Mr. McINNIS. Mr. Speaker, I would like to nation and ensuring that our children are pro- cipal, always smiling, and always having tected from any terrorist act. H.R. 3178, I be- candy. take this opportunity to recognize Thomas lieve has the greatest potential to ensure the In conclusion, earlier I mentioned the Moore of Grand Junction, Colorado and thank safety of our water systems. privilege of a Sheridan education. him for his service to this country. Thomas f However, this privilege demands responsi- began his service to our nation as a sailor, bility from all of us here today. A responsi- joining the Navy at a young age to travel and AMERICAN YOUTH bility to be a friend, a responsibility to help experience the world. Early in his service, others, and a responsibility to respect our Thomas participated in a moment that would environment. change the world and bring this nation into HON. SAM JOHNSON But most importantly, a responsibility to OF TEXAS honor the values and education we were priv- war. The moment was Pearl Harbor on De- IN THE HOUSE OF REPRESENTATIVES ileged to receive. The Sheridan experience cember 7, 1941. Thomas was assigned to the battleship USS Wednesday, December 19, 2001 has shaped our lives. Thank you parents, thank you teachers, Maryland on that December morning. He was Mr. SAM J0HNSON of Texas. Mr. Speaker, thank you classmates, thank you Sheridan. serving as a hospital apprentice, learning the one of the best aspects of our job is the ability f skills to assist surgeons in operating proce- to call to the attention of our colleagues, ex- dures. As his ship, along with other ships, amples of the leadership, maturity, patriotism ON THE DECISION OF SECRETARY were bombed and torpedoed in the harbor, and values of our American youth. I have in- OF ENERGY SPENCER ABRAHAM Thomas was thrust into a position to save serted in the RECORD a speech from the June TO PERMANENTLY CLOSE THE men’s lives. He spent the next several days 2001 eighth grade graduation address of Mi- FAST FLUX TEST FACILITY ON assisting the wounded with their battle injuries chael Robert Glennon. He was the President THE HANFORD NUCLEAR RES- and doing what he could to ease the shock of the Student Council at Sheridan School in ERVATION NEAR RICHLAND, WA and pain of U.S. sailors. Washington, DC. As a result of the attack that day, twelve Michael is currently a ninth grader at the HON. DAVID WU U.S. ships were sunk, beached, or destroyed Hotchkiss School, Lakeville, Connecticut. OF OREGON by Japanese action. The U.S. armed forces Parents, Grandparents, Faculty, Students, IN THE HOUSE OF REPRESENTATIVES suffered heavy casualties losing 2,400 men to Special Guests, and Classmates, welcome enemy action and 1,100 casualties as a result and thank you for sharing our special day. I Wednesday, December 19, 2001 of enemy fire. This nation was given no choice am honored to be here representing my fel- Mr. WU. Mr. Speaker, I rise today to ap- but to declare war on Japan and thus enter low graduates to discuss the Sheridan experi- ence and everything that the Sheridan com- plaud Secretary Abraham’s decision to perma- World War II. Thomas, like many other serv- munity has meant to us. nently close the Fast Flux Test Facility (FFTF) icemen and women, would know the horrors First, however, we must be thankful for located on the Hanford Nuclear Reservation of war for the next four years. the love, efforts, and wisdom of our parents near Richland, Washington. Mr. Speaker, as we remember the 60th an- who have made possible the privilege of a The FFTF is a 400-megawatt sodium cooled niversary of Pearl Harbor let us also remem- Sheridan education. Thank you parents. nuclear reactor that operated from 1982 to ber the recent victims of our nation’s quest for What do we mean by the Sheridan experi- 1992 to test advanced fuels and materials in freedom. The attacks on this country Sep- ence? Sheridan can not be defined simply by what happens on the sports field or in the support of the national Liquid Metal Fast tember 11 again have plunged us into war. As classroom. It is after school, during recess, Breeder Reactor Program. In 1992, this use we fight to redeem our fallen friends let us and during lunch, when students and teach- was terminated. The FFTF then became a fa- also pay tribute to the soldiers throughout our ers interact on a more personal level. That is cility without a mission. When efforts to iden- nation’s history who gave their lives to protect what makes Sheridan so unique and contrib- tify a long-term mission for the FFTF were un- our way of life. It’s dedicated men like Thomas

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00032 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.006 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2371 Moore to whom we should pay homage and friend Ginny Wood then had the opportunity to one out of 270 programs evaluated nation- thank for his service to this nation. fly surplus planes to Alaska. They landed in wide. This is a first for them, an achievement f Fairbanks on January 1, 1947 with tempera- for a program smaller than many of its coun- tures at minus 50 degrees and never looked terparts. This recognition makes our island PAYING TRIBUTE TO WESTERN back. very proud and is testament to the hard work STATE COLLEGE CROSS-COUN- Celia, Ginny Wood, and Ginny’s husband of the cadets, cadre, and recruiters of the Tri- TRY TEAMS Woody built Denali Camp in 1951 on the edge ton Warrior Battalion. of then-Mt. McKinley National Park. Their vi- Since the founding of UOG’s ROTC pro- HON. SCOTT McINNIS sion for an ecologically friendly, conservation- gram in 1979, students have been well trained OF COLORADO education, backcountry camp survives today to become commissioned officers in both the IN THE HOUSE OF REPRESENTATIVES under the management of Wally and Geri active and reserve components of the U.S. Cole, who purchased the tourism accommoda- Army. The program has commissioned some Thursday, December 20, 2001 tion from Celia and Ginny in 1975. In 1960, of Guam’s finest men and women as officers Mr. McINNIS. Mr. Speaker, I would like to Celia and Ginny, with a few others in Fair- and produced some of the Army’s most ex- take this opportunity to recognize an out- banks, founded the Alaska Conservation Soci- ceptional leaders. In its 22 years, the program standing group of dedicated young men and ety, the first statewide conservation organiza- at UOG has commissioned over 240 Second women from Western State College in Gunni- tion run entirely by volunteers. The Alaska Lieutenants, and this year they are expected son, Colorado. The group is the men’s and Conservation Society was the precursor to to- to commission 20 more. women’s cross country teams, who for the day’s three regional organizations, the North- The U.S. Army Cadet Command, the super- second year in a row brought back to their ern Alaska Environmental Center, the South- vising headquarters for all ROTC battalions school a national championship. I would like to east Alaska Conservation Council, and the nationwide, annually assesses ROTC pro- commend them on their efforts and mention Alaska Center for the Environment, as well as grams. A multitude of criteria is used to deter- several of their accomplishments. the Alaska Conservation Foundation, another mine performance ranking. While enrollment, The teams this year won the national title at organization Celia helped to establish and on retention, basic camp attendance, commission Slippery Rock State University in Pennsyl- whose board she served for two decades. In and contract accomplishment are all part of vania. By taking the title this year and in 2000, the latter part of the 1970s, Celia served as the criteria, the most important factors contrib- Western State has made cross-country his- executive director of the Wilderness Society, uting to the evaluation are commission and tory. It is only the second time in NCAA I, II, and in 1991 the Sierra Club awarded Celia its contract accomplishments. III Championships that both a men’s and wom- highest achievement award, the John Muir Commission accomplishment is based on en’s team from the same school have taken Award. the number of cadets commissioned in the both titles. Their latest achievement cul- She also fought, literally until her death, to course of a year. This year, UOG’s ROTC pro- minates a successful year for all the athletes preserve the Arctic National Wildlife Refuge. I gram received a commission mission of ten, on the team. All of this was accomplished had the opportunity to visit this beautiful land however, they surpassed that number by com- under the guidance and leadership of their in July, and while there I witnessed an explo- missioning 20 officers. Next year, they have coach Duane Vandenbusche, who for his ef- sion taking place on the coastal plane of the been tasked to commission 12 and it is ex- forts was awarded Coach of the Year at a Arctic—an explosion of life. In fifty years of ex- pected that they will again exceed the tasked conference, regional, and national level. ploring the back country of America, from Yel- commission requirement by doubling the num- Mr. Speaker, I am always proud to recog- lowstone to the Appalachian Trail, I have ber of commissioned officers. In 2003, it is an- nize the accomplishments of those who have never seen such activity—birds singing, car- ticipated that the commission accomplishment dedicated their time and efforts to achieving a ibou calving, and tundra flowers blooming. It will exceed the requirements three times over. difficult goal. The Mountaineers of Western was hard to take a step in the soggy, tussock- UOG’s ROTC program’s contract accom- State College have made great sacrifices in filled tundra without scaring up a well-camou- plishment is the ability of the program to meet their lives and have done a wonderful job rep- flaged ptarmigan, stepping on some happy its fiscal year missions and goals for con- resenting the College and the State of Colo- Mountain Aven blossom, or spying a bunch of tracting cadets into the advanced course for rado. Their championship is well deserved and caribou heading for their traditional calving juniors advancing toward senior status. While I look forward to watching their next season grounds. The Arctic Refuge represents the the contract mission for fiscal year 2002 is 20 with pride and admiration. largest intact ecosystem in America, a unique cadets, UOG’s ROTC program has exceeded expectations and contracted 34 cadets. Pres- f expanse where industrialization has not bro- ken one link in the chain of life. ently, UOG’s ROTC program has 111 cadets TRIBUTE TO CELIA HUNTER Celia Hunter was an inspiration to a genera- enrolled, however they continue to witness an tion of wilderness enthusiasts and others who annual enrollment increase. During these difficult and trying times, the HON. JAY INSLEE wished to make the world a better place. In a men and women of the Triton Warrior Bat- OF WASHINGTON 1986 interview she said, ‘‘Each one of us has talion are to be commended. Together, they IN THE HOUSE OF REPRESENTATIVES a responsibility to take care of the part of the are an excellent example of the leadership, world we live in.’’ Celia wanted to live in a Thursday, December 20, 2001 determination and courage needed to safe- world where there were wild places, peace guard our freedoms and our democracy. My Mr. INSLEE. Mr. Speaker, I rise today to and quiet, and compassion for her fellow man congratulations to all the cadets and instruc- pay tribute to a great conservationist, Celia and woman. In this vision, she led by exam- tors of UOG’s ROTC program. May they con- Hunter, who died December 1 at the age of ple, and she will be sorely missed, but never tinue to achieve success in the years to come. 82. We need to acknowledge heroes of the forgotten by those who worked with her, lived conservation community like Celia so that fu- near her, and met her. f ture generations may see and know what f ON THE INTRODUCTION OF LEGIS- made this country the great nation that it is LATION TO PREVENT TEEN today, what shaped us as a freedom-loving CONGRATULATING GUAM’S ROTC PREGNANCY people, and what made us kind and consid- PROGRAM erate stewards of the land. HON. JANE HARMAN Though she was born and raised in Arling- HON. ROBERT A. UNDERWOOD ton, Washington, Celia’s greatest contributions OF CALIFORNIA OF GUAM IN THE HOUSE OF REPRESENTATIVES came in protecting our last frontier, Alaska. IN THE HOUSE OF REPRESENTATIVES Our national parks, our wildlife refuges, and Thursday, December 20, 2001 Thursday, December 20, 2001 our national forests in Alaska have come to be Ms. HARMAN. Mr. Speaker, today, with my heirlooms that we may pass on to our children Mr. UNDERWOOD. Mr. Speaker, it is an colleague NANCY PELOSI, I am pleased to in- and their children in large part because of honor to congratulate the University of Guam’s troduce legislation today to strengthen our na- Celia Hunter. (UOG) Army Reserve Officer Training Corps tion’s commitment to preventing teen preg- Celia was a member of the Women’s Air (ROTC) program upon their distinction as the nancy. Force Service Pilots, flying fighter planes from best in the nation for mission accomplishment The United States has the highest rates of factories where they were built to airfields and and quality. UOG’s ROTC program, the Triton teen pregnancy and births in the western in- ports for use in World War II. She and lifelong Warrior Battalion, was recently ranked number dustrialized world. Nearly four in 10 young

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00033 Fmt 0666 Sfmt 9920 E:\CR\FM\K20DE8.001 pfrm07 PsN: E20PT1 E2372 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 women become pregnant at least once before The present system works well and when Therefore, I would discourage my colleagues they reach the age of 20—one million a year. someone comes up with an idea to change to from supporting this bill. This is a problem that has a devastating im- system, we must be very mindful of the maxim f pact on California as a whole (which has the ‘‘Do No Harm.’’ One such proposal to alter this second worst teen pregnancy rate in the na- system is called the Home Ownership Expan- TRIBUTE TO MR. WILLIAM (BILL) tion) and Hispanic teenagers in particular, who sion and Opportunities Act, H.R. 3206 or HEVERT have the highest rates of teen pregnancy of Ginnie Mae ‘‘Choice.’’ For the first time, this any ethnic group. The cost to the United legislation would place the full faith and credit HON. ELIOT L. ENGEL States in health care and education alone is at guarantee behind conventional mortgage OF NEW YORK least $7 billion annually, and the human cost loans. IN THE HOUSE OF REPRESENTATIVES Ginnie Mae ‘‘Choice’’ would—in effect—cre- in dreams deferred and children with limited Thursday, December 20, 2001 opportunities is immeasurable. Reducing un- ate yet another housing GSE, but with the dif- wanted pregnancies also reduces the number ference being that this one would have an ex- Mr. ENGEL. Mr. Speaker, I rise today in of abortions. plicit government guarantee behind all that it order to honor William (Bill) Hevert on the oc- We must act now to build on the success of does, unlike the current housing GSEs such casion of his retirement after 28 years of dedi- existing programs that have helped reduce as Fannie Mae, Freddie Mac, and the Federal cated service to Bessemer Trust Ltd. teen pregnancy rates nationwide so that we Home Loan Banks. Born in the Bronx on September 22, 1943, may ensure young women and men have the The Ginnie Mae Choice proposal would au- Bill graduated from Dewitt Clinton High School information and confidence they need to make thorize Ginnie Mae (GNMA) to guarantee se- in June 1961. After graduating with a BA from wise choices about their sexual behavior. curities backed by mortgages with loan-to- City College of New York-Baruch School in The approach of our legislation is very value ratios of over 80 percent. Interest and 1965, Bill took a job with the Internal Revenue straightforward: fund programs that work. principle payments on these mortgages would Service (IRS). In 1966 he joined the Medical Over the past decade, a wide variety of teen be insured first by partial private mortgage in- Services Corps at Fort Meade in Laurel, Mary- pregnancy prevention programs have shown surance (PMI), second by insurance issued by land where he received the Army Commenda- dramatic results in delaying teenagers’ sexual the United States Department of Housing and tion Medal for service through January 1968 activity, promoting the safe use of contracep- Urban Development (HUD), and lastly by the as a First Lieutenant. After finishing his serv- tives, and reducing teen pregnancy. These GNMA guarantee. ice in the U.S. Armed Forces, Bill went back programs don’t fit a particular model: some Private mortgage insurers would assume a to the IRS for two years before he joined SD provide comprehensive sex and HIV edu- minimum first loss position that varies from 12 Leidersforf as an accountant. After two years cation, some provide information on and ac- to 35 percent of outstanding principal and in- at SD Leidersforf, Bill joined Bessemer. cess to contraception, some provide economic terest depending on the loan-to-value ratio, For most of his life, Bill lived in the Bronx or service opportunities to youth. Some use and the federal government (HUD and GNMA where he was respected and admired by the media campaigns, some intervention and combined) would assume all residual risk. In community around him. His dedication has counseling, and some youth development pro- general, loans potentially qualifying for the touched many others, including former Presi- grams. GNMA Choice program are conforming loans dent George H. W. Bush and the former First Successful education programs do, how- that meet the PMI requirements. Lady Barbara Bush, who had the pleasure of ever, all share a common feature: they deliver I would like to thank my colleague, Rep- working with Bill in the preparation of their the message that abstaining from sexual activ- resentative MARGE ROUKEMA (RÐNJ) for intro- own tax returns. Lewis Goldstein, a friend of ity is the only 100 percent effective way to ducing the bill. We share the common goal of Bill for over forty years, fondly recalls the prevent teen pregnancy, but recognizing that wanting to increase homeownership, but upon many holiday celebrations they shared and the teens will not always abstain from sex, also reflection, I am not certain that this bill will many trips to places such as Palisades provide accurate information on contraception achieve the stated goal. In contrast to Fannie Amusement Park and the Bronx Zoo. He also and other means to prevent pregnancy. Mae and Freddie Mac, this legislation would recalls many summers spent at Rockaway The grant program authorized by the bill we impose no housing goals on Ginnie Mae. If where Bill and his family rented a bungalow introduce today targets new funding at high- the goal of the legislation is to increase home- for many years. risk communities and groups, and allows a ownership among low-income families, it After retiring from Bessemer, Bill plans on wide range of organizations—from local coali- would seem logical to have some kind of spending time in New York as well as Florida. tions to State agencies—to apply for funds. housing targets or loan amounts. Yet, this leg- He also plans on traveling extensively with his This bill represents an effective and proven islation is silent in that regard. partner, Larry Bartelsen, who is also retiring. way to move forward on teen pregnancy pre- As a practical matter, I remain unconvinced Bill and Larry hope to use their new free time vention. The program will fund diverse teen an agency within HUD has the capacity to to enjoy the things they love, including the pregnancy prevention programs, so long as manage a mortgage volume of some $30 bil- New York Philharmonic, the Metropolitan and they are based on methods and programs that lion per year. Granted, private MIs would pick New York City Operas, theater and dining out. work. up 12 to 35 percent of losses, but the pros- I would like to congratulate both Bill and Larry This legislation is a win-win deal for teens, pect of this agency being able to manage both and wish them all the best in their retirement. their families, and their communities across credit and interest rate risk on these mort- f the nation, and I urge all of my colleague to gages is somewhat dubious. HUD’s manage- support it. ment track record in this regard is spotty at HONORING BOB KELSEY f best. H.R. 3206 contemplates no Risk Based HON. SCOTT McINNIS RECOGNIZING THE GINNIE MAE Capital Standards (RBCS). Fannie Mae and OF COLORADO CHOICE PROPOSAL Freddie Mac must adhere to strict RBCS im- IN THE HOUSE OF REPRESENTATIVES posed from the 1992 legislation that revised HON. BOB BARR their charters. Both companies are now doing Thursday, December 20, 2001 OF GEORGIA business under the RSBCSs from the 1992 Mr. MCINNIS. Mr. Speaker, I would like to IN THE HOUSE OF REPRESENTATIVES legislation. Indeed, under the Risk Based Cap- recognize the selfless contributions of one in- ital Standards applied to Fannie Mae and dividual in the Grand Junction community of Thursday, December 20, 2001 Freddie Mac, GNMA would experience losses Colorado who has rallied the support of others Mr. BARR of Georgia. Mr. Speaker, as a in the range of $9.35 billion under severe for a noble cause. In 1997, Bob Kelsey found- member of Congress, and a member of the Fi- stressful conditions to $1.86 billion under less ed, and has since directed, the Catholic Out- nancial Services Committee, I share the goal stressful conditions—according to an analysis reach Day Center. of increasing homeownership opportunities for by Pricewaterhouse Coopers. Mr. Kelsey was inspired by the words of a American families. Our government and the In conclusion, it seems H.R. 3206 is uncer- homeless man who was trying to find work Congress have made policy choices to sup- tain to achieve its stated goal of increasing one day. With the help of Catholic Outreach port this goal. These policy choices have paid homeownership significantly, while at the and an initial grant from the city, his vision has off for our nation and for American families same using the explicit backing of the United become a reality. The Catholic Outreach Day with more than 67 percent of American fami- States Government to potentially cause losses Center performs basic services for homeless lies owning their own homes today. of several billion dollars to the taxpayers. people and provides opportunities for them to

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00034 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.010 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2373 find employment. Not only does it give them a Chiefs’ Association, the California Fire Chiefs’ HUMAN RIGHTS IN CENTRAL ASIA place to shower and do their laundry, but it Association, the National Fire Protection Asso- also aids in giving those less fortunate the ciation, and the Special Fire Districts’ Associa- HON. CHRISTOPHER H. SMITH tools needed to look for employment. These tion of California. OF NEW JERSEY simple services greatly increase the odds of An active participant in community service IN THE HOUSE OF REPRESENTATIVES getting a job for those with very few re- and community affairs, Chief Sporleder will be Thursday, December 20, 2001 sources. sorely missed by the Fire Department and the Bob Kelsey has been the director of the County. I cannot thank Chief Sporleder Mr. SMITH of New Jersey. Mr. Speaker, on Friday, December 21, Kazakhstan’s President Catholic Outreach Day Center since its cre- enough for his years of service to the people Nursultan Nazarbaev will be meeting with ation in 1997, but at the age of seventy he is of Santa Clara County, and wish him nothing President Bush. Sometime in January, passing his responsibilities on to another. In but the best in the future. He is a leader as Uzbekistan’s President Islam Karimov is likely the four years of the day center’s existence, well as someone I am proud to call my friend. Bob, with the help of over 40 volunteers, has to arrive for his visit, The invitations to these Heads of State obviously reflect the overriding helped to provide more than one thousand f jobs to the less fortunate members of the U.S. priority of fighting international terrorism community. IN MEMORY OF SUSAN M. FAGAN and the corresponding emphasis on the stra- Mr. Speaker, Bob Kelsey has dedicated tegic importance of Central Asia, which until many resources and provided many opportuni- HON. DAVE WELDON September 11 had been known largely as a ties to those members of his community who resource-rich, repressive backwater. OF FLORIDA As Co-Chairman of the Commission on Se- are less privileged. The Catholic Outreach Day curity and Cooperation in Europe, I have Center has become a very valuable asset for IN THE HOUSE OF REPRESENTATIVES chaired a series of hearings in recent years fo- Thursday, December 20, 2001 many people. Mr. Kelsey has touched the cused on human rights and democratization in lives of so many and will be greatly missed, Mr. WELDON of Florida. Mr. Speaker, I rise the Central Asian region. but through the ongoing support of his com- to commemorate the life and service of Susan Clearly, we need the cooperation of many munity his vision will survive to make a dif- M. Fagan, a Peace Corps volunteer, who lost countries, including Afghanistan’s Central ference. Thanks Bob for your efforts on behalf her life after serving in Ghana in November. At Asian neighbors, in this undertaking. But we of others. the time of her death, Susan was visiting her should not forget, as we conduct our multi- f family in Ohio. The cause of death is believed dimensional campaigns, two vitally important TRIBUTE TO CHIEF DOUGLAS G. to be malaria. points: first, Central Asian leaders need the SPORLEDER Mrs. Fagan, of Barefoot Bay, Florida, had support of the West at least as much as we served in the Peace Corps from November 29, need them. 1999, to November 2, 2001, in Akwida, Unfortunately, Central Asian presidents HON. ZOE LOFGREN Ghana, where she started tourist management seem to have concluded that they are indis- OF CALIFORNIA committees so that the villagers could benefit pensable and that we owe them for allowing IN THE HOUSE OF REPRESENTATIVES directly from the burgeoning tourist industry in us to use their territory and bases in this fight Thursday, December 20, 2001 Ghana. Before completing her service, Susan against the terrorists and those who harbor them. I hope Washington does not share this Ms. LOFGREN. Mr. Speaker, I rise to com- had developed and presented to the Ghana Tourist Board a longterm plan for promoting misapprehension. By striking against the rad- mend Chief Douglas G. Sporleder on his re- ical Islamic threat to their respective security tirement from the Santa Clara County Fire De- tourism in the Akwida region. Thanks to Su- san’s hard work, that plan is being utilized and that of the entire region, we have per- partment. Chief Sporleder is retiring after 21 formed a huge service for Central Asian lead- years of service to the people of Santa Clara today. Susan is survived by her father, William Wil- ers. County. Second, one of the main lessons of Sep- son, her stepmother, Linda Wilson, her sisters, Santa Clara County Fire Department serv- tember 11 and its aftermath is that repression Debra Moore and Shelby Wilson, and step- ices an area of 137 square miles and a popu- of political opposition and alternative view- brothers, Terry and Brandan Zastrow. A me- lation of 259,000, and consists of 270 paid points is a key cause of terrorism. Secretary of morial service was conducted in East Liver- personnel and 40 volunteers operating a re- State Colin Powell and National Security Ad- pool, Ohio, on Thursday, December 6, 2001. gional network of sixteen fire stations with a viser Condoleezza Rice have declared that the A second memorial service was held in Florida $32 million budget. war on terrorism will not keep the United Chief Sporleder is third-generation fire serv- on December 13, 2001. Susan is also sur- States from supporting human rights. I am ice. His father and grandfather were also chief vived by her deceased husband’s family, fa- hopeful the administration means what they officers in the fire services. Upon his retire- ther and mother-in-law, Raymond and Dona have said. But given the sudden warming of ment, Douglas Sporleder will have been fire Fagan, brother-in-law, William Fagan, and sis- relations between Washington and Central chief for over 21 years, nearly half the time ter-in-law, Dori Ziomek. Asian leaders, I share the concerns voiced in that the Santa Clara County Fire Department Susan embodied the best traditions of many editorials and op-eds that the United has been in existence. Peace Corps Volunteers, and her life and States will downplay human rights in favor of Starting as a volunteer firefighter in 1963, work will be deeply missed by all who knew cultivating ties with those in power. More Chief Sporleder attained the rank of chief in and worked with her. Our thoughts and pray- broadly, I fear we will fall into an old pattern 1980 after progressing through the ranks of ers are with her family and friends. In memory of backing repressive regimes and then being firefighter, captain, training chief and assistant of Susan Fagan, the Peace Corps flag was linked with them in the minds and hearts of chief. He is also the Santa Clara County Fire flown at half-staff on December 6, 2001. their long-suffering peoples. Marshal and the Local Mutual Aid Fire and Susan helped the people of interested coun- In that connection, Mr. Speaker, on the eve Rescue Coordinator, and a member of the tries and helped promote a better under- of President Nazarbaev’s meeting with Presi- Governor’s Special Arson Task Force and the standing of Americans on the part of the peo- dent Bush and in anticipation of the expected California Fire and Rescue Service/ ple she served. Susan always saw the humor visit by President Karimov, as well as possible FIRESCOPE Board of Directors. in a situation and never allowed the frustrating visits by other Central Asian leaders, I want to Chief Sporleder’s other professional accom- things about living in a developing country get highlight some of the most glaring human plishments include: speaking at the National her down. She considered herself very lucky rights problems in these countries. Fire Academy and the International Associa- to have had such an opportunity. To begin with, corruption is rampant tion of Fire Chiefs conference; certificates of ‘‘I am very proud to say that Susan’s life throughout the region, and we should keep appreciation from Santa Clara County, the embodied the Peace Corps goals,’’ said this in mind as the administration requests American Heart Association; and the recipient Ghana Country Director Leonard Floyd. We more money for assistance to Central Asian of the American Legion Certificate of Com- will all miss her—her family, friends, the regimes. Kazakhstan’s President Nazarbaev mendation for Heroism. He has served as Peace Corps staff, the Peace Corps Volun- and some of his closest associates are under president of the Santa Clara County Fire teers and all of the people who considered her investigation by the U.S. Department of Jus- Chiefs’ Association, and is a member of the a friend and family in her Ghana home of tice for massive corruption. Not surprisingly, to International Association of Fire Chiefs, the Akwida.’’ Indeed, her example will continue to keep any information about high-level mis- IAFC Metro Chiefs Division, the Western Fire inspire us. deeds from the public—most of which lives in

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00035 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.014 pfrm07 PsN: E20PT1 E2374 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 dire poverty—the Nazarbaev regime has Uzbek Government can harass and imprison oners. I hope that the Government of cracked down hard on the media. Family or individuals for attending unregistered religious Turkmenistan will immediately and uncondi- business associates of President Nazarbaev meetings, as well as deny property purchases tionally release them, as well as all other pris- control most media outlets in the country, in- and formal education opportunities. As you oners of conscience. cluding printing houses which often refuse to can see, Mr. Speaker, Uzbekistan’s record on Rounding out the Central Asian countries, print opposition or independent newspapers. human rights, democratization and religious Tajikistan also presents human rights con- Newspapers or broadcasters that try to cover freedom is unacceptable. cerns. A report has recently emerged con- taboo subjects are harassed by the govern- I am not aware that Kyrgyzstan’s President cerning the government’s religious affairs ment and editorial offices have had their prem- Askar Akaev has been invited to Washington, agency in the southern Khatlon region, which ises raided. The government also controls the but I would not be too surprised to learn of an borders Afghanistan. According to reliable two main Internet service providers and regu- impending visit. Once the most democratic sources, a memorandum from the religious af- larly blocks the web site of the Information An- state in Central Asia, Kyrgyzstan has gone the fairs agency expressed concern about ‘‘in- alytical Center Eurasia, which is sponsored by way of its neighbors, with rigged elections, creased activity’’ by Christian churches in the Kazakhstan’s main opposition party. media crackdowns and repression of opposi- region, calling for them to be placed under In addition, libel remains a criminal offense tion parties. At a Helsinki Commission hearing ‘‘the most stringent control.’’ Tajik Christians in Kazakhstan. Despite a growing international I chaired last week on democratization and fear that this statement of intolerance could be consensus that people should not be jailed for human rights in Kyrgyzstan, we heard from a precursor to persecution. Keston News what they say or write, President Nazarbaev the wife of Felix Kulov, Kyrgyzstan’s leading Service reported that law enforcement officials on May 3 ratified an amendment to the Media opposition figure, who has been behind bars have already begun visiting registered church- Law that increases the legal liability of editors since January 2001. Amnesty International es and are trying to find formal grounds to and publishers. Furthermore, a new draft reli- and many other human rights groups consider close them down. Additionally, city authorities gion law was presented to the Kazakh par- him a political prisoner, jailed because he in the capital Dushanbe have cracked down liament at the end of November without public dared to try to run against President Akaev. on unregistered mosques. consultation. If passed, it would seriously cur- Almost all opposition and independent news- Mr. Speaker, as the world focuses on Cen- tail the ability of individuals and groups to papers which have sought to expose high- tral Asia states with unprecedented energy, I practice their religious faith freely. level corruption have been sued into bank- wanted to bring these serious deficiencies in Uzbekistan is a wholesale violator of human ruptcy. their commitment to human rights and democ- rights. President Karimov allows no opposition With respect to the proposed religion law racy to the attention of my colleagues. All parties, permits no independent media, and the Kyrgyz Parliament is drafting, which would these countries joined the Organization for Se- has refused even to register independent repeal the current law, significant concerns curity and Cooperation in Europe soon after human rights monitoring groups. Elections in exist. If the draft law were enacted in its cur- their independence from the Soviet Union a Uzbekistan have been a farce and the Organi- rent emanation, it would categorize and pro- decade ago. By becoming OSCE participating zation for Security and Cooperation in Europe hibit groups based on beliefs alone, as well as States, they agreed without reservation to (OSCE) rightly refused to observe the last allow arbitrary decisions in registering religious comply with the Helsinki Final Act and all sub- presidential ‘‘contest,’’ in which Karimov’s groups due to the vague provisions of the sequent agreements. These documents cover ‘‘rival’’ proclaimed that he was planning to vote draft law. I encourage President Akaev to sup- a wide range of human dimension issues, in- for the incumbent. port a law with strong protections for religious cluding clear language on the human right of In one respect, however, Karimov is not freedom. Implementing the modification sug- religious freedom and the right of the indi- lacking—brazen gall. Last week, on the eve of gested by the OSCE Advisory Panel of Ex- vidual to profess and practice religion or belief. Secretary Powell’s arrival in Tashkent, Uzbek perts on Religious Freedom would ensure that Unfortunately, as I have highlighted, these authorities announced plans to hold a ref- the draft religion law meets Kyrgyzstan’s countries are failing in their commitment to erendum next month on extending Karimov’s OSCE commitments. promote and support human rights, and over- tenure in office from five years to seven. Mr. Speaker, this morning I had a meeting all trends in the region are very disturbing. Some members of the tightly controlled par- with Ambassador Meret Orazov of The goals of fighting terrorism and stead- liament urged that he be made ‘‘president for Turkmenistan and personally raised a number fastly supporting human rights are not dichoto- life.’’ The timing of the announcement could of specific human rights cases. Turkmenistan, mous. It is my hope that the U.S. Government have had only one purpose: to embarrass our the most repressive state in the OSCE space, will make issues of human rights and religious Secretary of State and to show the United resembles North Korea: while the people go freedom paramount in bilateral discussions States that Islam Karimov will not be cowed hungry, megalomaniac President Saparmurat and public statements concerning the ongoing by OSCE commitments on democracy and the Niyazov builds himself palaces and monu- efforts against terrorism. In this context, the need to hold free and fair elections. ments, and is the object of a Stalin-style cult considerable body of OSCE commitments on I am also greatly alarmed by the Uzbek of personality. No opposition of any kind is al- democracy, human rights and the rule of law Government’s imprisonment of thousands of lowed, and anyone who dares to express a should serve as our common standard for our Muslims, allegedly for participating in extremist view counter to Niyazov is arrested. relations with these countries. Islamic groups, but who are probably ‘‘guilty’’ Turkmenistan is the only country in the OSCE f of the ‘‘crime’’ of attending non-government region where places of worship have been de- approved mosques. The number of people stroyed on government orders—in November COLONEL KARL ‘‘KASEY’’ WARNER jailed on such dubious grounds is estimated to 1999, the authorities bulldozed a Seventh-Day RETIREMENT be between 5,000 and 10,000, according to Adventist Church. Since then, Niyazov has im- Uzbek and international human rights organi- plemented his plans to provide a virtual bible HON. SHELLEY MOORE CAPITO zations. While I do not dismiss Uzbek govern- for his benighted countrymen; apparently, he OF WEST VIRGINIA ment claims about the seriousness of the reli- intends to become their spiritual as well as IN THE HOUSE OF REPRESENTATIVES gion-based insurgency, I cannot condone im- secular guide and president for life. prisonment of people based on mere sus- Turkmenistan has the worst record on reli- Thursday, December 20, 2001 picion of religious piety. As U.S. Government gious freedom in the entire 55-nation OSCE. Mrs. CAPITO. Mr. Speaker, I rise today to officials have been arguing for years, this pol- The systematic abuses that occur almost honor Colonel Karl ‘‘Kasey’’ Warner of the icy of the Uzbek Government also seems weekly are an abomination to the internation- United States Special Operations Command counterproductive to its stated goal of elimi- ally recognized values which undergird the who is retiring from the United States Army nating terrorists. Casting the net too broadly OSCE. Recent actions by Turkmen security after 27 years of active duty. and jailing innocent people will only inflame in- agents against religious groups, including har- Colonel Warner has served this great coun- dividuals never affiliated with any terrorist cell. assment, torture and detention, represent a try with dedication and honor for over 27 years In addition, Uzbekistan has not only violated catastrophic failure by Turkmenistan to uphold in uniform, but his service to his country has individual rights, but has also implemented its human rights commitments as a partici- not ended. He will be taking on the duties of policies that affect religious groups. For exam- pating OSCE State. In addition, last January, the United States Attorney for the Southern ple, the Uzbek Government has consistently Mukhamed Aimuradov, who has been in pris- District of West Virginia for the term of four used its religion law to frustrate the ability of on since 1995, and Baptist pastor Shageldy years. religious groups to register, placing them in a Atakov, imprisoned since 1999, were not in- Colonel Warner began his military career as ‘‘catch-22’’. By inhibiting registration, the cluded in an amnesty which freed many pris- a cadet at the United States Military Academy

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00036 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.017 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2375 at West Point. It was there that he graduated TRIBUTE TO THE NEW YORK CITY and Finance, which is located next door to and was commissioned a Second Lieutenant PUBLIC SCHOOLS COMMUNITY Leadership, and their Principal, Dr. Patrick in 1974. Colonel Warner’s career epitomizes Burke. Two secretaries from Economics, Kath- leadership and selfless service. He has served HON. CAROLYN B. MALONEY leen Gilson and Joan Truteneff, wanted to his country well both as a line officer in Field OF NEW YORK stay and answer calls from frantic parents but Burke told them ‘‘No way, you have to come Artillery and later as a Judge Advocate. IN THE HOUSE OF REPRESENTATIVES with me.’’ Colonel Warner attended West Virginia Uni- Thursday, December 20, 2001 Right as the students got to Rector Street versity School of Law and graduated in 1980. Mrs. MALONEY of New York. Mr. Speaker, the first building collapsed and a dust ball, full He has served primarily as a trial litigator and I rise today to pay special tribute and to recog- of debris, began to chase them. One teacher has been an instructor of criminal law at the nize the courage and professionalism of the shouted to her kids, ‘‘Run! Now you can run!’’ Army Judge Advocate General School. His ca- New York City Public Schools community dur- and they hopped over benches as many raced reer has taken him from the parade grounds ing the attack on September 11, 2001. for Battery Park at the tip of lower Manhattan while others headed north and east. Once in of West Point to foreign lands and harsh living I know that none of us will ever forget where Battery Park, the students hopped on ferries conditions—he was the joint task force and we were and what we were doing when the attacks on the World Trade Center occurred. to Jersey City and Staten Island. Nearly 100 multinational force staff judge advocate at For the New York City Public Schools commu- of the students, those who could not make it Port-au-Prince, Haiti in 1994Ð1995. nity, the attacks were not something they home that night, were fed and spent the night In Haiti, he designed a procedure for detain- watched on television, they were in the middle on cots in Curtis High School on Staten Is- ing Haitians—as a matter of policy they deter- of the mayhem. In the immediate aftermath land, accompanied by their teachers. Still oth- mined that detainees should be afforded the eight schools which were located in the ‘‘fro- ers were housed and fed by parishioners of a same treatment accorded to detained persons zen zone’’ were closed, displacing nearly Jersey City Catholic Church. John O’Sullivan, an earth science teacher at under the 1949 Geneva Prisoner of War provi- 6,000 students, a number which is more than Economic and Finance, said that when the 21⁄2 times the average school district in the sions (food shelter medical care)—the treat- first tower fell, he thought they were finished. ment was so good by Haitian standards that U.S. Not only did the faculty and staff in these af- ‘‘It was an optical illusion, but it looked like it often people would ‘‘confess’’ in the hopes of was falling on us,’’ said the teacher. ‘‘I’ll never being detained. However by all accounts the fected schools react with extraordinary calm, grace and bravery to evacuate their schools forget the look on the face of one of my stu- Joint Detention Facility was an unqualified and to ensure that every child in their care dents from last year. The look of terror. It was success. Colonel Warner also arranged for the was safe and accounted for, the students and like that picture of the little girl running from appointment of four judge advocates to be au- staff from these heavily impacted schools the napalm attack in Vietnam,’’ he said. Other thorized to serve as a one-member foreign worked together in spite of the fact that over teachers walked students home over the Man- claims commissions and the appointment of 1,500 students and 800 staff members lost a hattan Bridge to Brooklyn. Mr. O’Sullivan and three more judge advocates to serve as a family member or loved one as a result of the several of his colleagues walked north with a three-member commission. disaster. Consider these snapshots from one group of students and then caught a bus to O’Sullivan’s apartment. Once there, the teach- Prior to becoming the prestigious Special of the most horrific days in our history. Jordan Schiele, ajunior at Stuyvesant High ers fed pizza and soda to the students and put Operations Judge Advocate, Colonel Warner on a video until their parents could pick them was the deputy legal counsel to the Chairman School, retold his experience in a recent arti- cle in The Washington Post. Jordan was in up. of the Joint Chiefs of Staff. In whatever chal- What make Principal Dolch’s heroism even band class when the first plane hit Tower One. lenge he was tasked with, he excelled and more remarkable is that she performed all of He saw the second hit, in the middle of a constantly personified the words General these acts of bravery while knowing that her class debate on the best form of government. Douglas MacArthur made famous and synony- sister Wendy Wakeford, who worked for an in- From the window, he watched what he first vestment banking firm on the 100th floor of 1 mous with West Point: ‘‘Duty, Honor, Coun- thought were fax machines and later realized try.’’ World Trade Center, was more than likely a were people falling from the Tower’s top victim of the attack. Her sister remains miss- Colonel Warner’s military decorations in- floors. As Tower One collapsed, the lights in ing. ‘‘She was in the first building that was hit. clude the Defense Superior Service Medal, his classroom flickered, the whole Stuyvesant I think that she was caught in the fireball. We Legion of Merit, Defense Meritorious Service building rumbled, and Jordan fled with his haven’t heard from her,’’ Dolch said shortly Medal with oak leaf cluster, Meritorious Serv- classmates out of the building and began run- after the attack. ‘‘I prayed she was safe, but ice Medal with four oak leaf clusters, Army ning north up the West Side Highway, looking I had kids to worry about, I knew I had to get Commendation Medal with oak leaf cluster; back as a cloud of dust engulfed his school. them out.’’ two Joint Meritorious Unit Awards; and the ‘‘I’ll never forget when the dust engulfed The teachers at P.S. 234, the Independence Armed Forces Expeditionary Medal. He is Stuyvesant,’’ he remembers. ‘‘I felt it was en- School, which is located dangerously close to qualified to wear, in addition to Master Para- gulfing my future, because school is your fu- the crash site, had to evacuate 6- and 7-year chutist Wings, the coveted Ranger tab and Air ture at this age.’’ old students during the most harrowing part of Assault wings. He has also been accorded the Ada Dolch, Principal at the High School for the disaster immediately after the second honor of receiving the Jump Wings of the Aus- Leadership and Public Service just four blocks Trade Center tower collapsed and enveloped tralians, British, and Saudi Arabians. from the site of the Twin Towers, made a se- the school in a debris-filled cloud. Many of the ries of decisions that students, staff and par- children were screaming for parents who actu- Colonel Warner and his wife, Joanie, have ents credit in saving innumerable lives. When ally worked in the towers. As one teacher four children: Margaret who is a lieutenant the first explosion came, Principal Dolch stepped into the street, a small child saw the with the Army Corps of Engineers in Germany; looked outside and what she saw made her burning bodies falling from the towers and Frances, a speech pathology graduate student immediately fear for her 600 students. She cried out, ‘‘Look teacher, the birds are on fire!’’ at Vanderbilt University; Kole, who serves with watched in horror as debris rained down on Taking some students by the hand and car- the West Virginia National Guard and attends Liberty Plaza and waves of frightened people rying others on their shoulders, the teachers West Virginia University and Travis, age 13. ran into the school lobby for safety. She plunged through the rubble-strewn streets that It is with great pride and honor that I wish moved her students away from the 6-by-6-foot were clogged with adults running for their windows in every classroom out into the hall- Kasey and his family the best as he retires lives. With their small charges in tow, they ways and told her kids to remain calm. Then from the United States Army and continues his walked 40 minutes north to the nearest safe the second plane hit and Stephen Kam of the school in Greenwich Village. Some children service to our great country as the U.S. Attor- New York Police Department’s Division of whose parents could not come to get them by ney for the Southern District of West Virginia. School Safety raced into the lobby and said to the close of the day went home with their He has set an inspiring example of dedication Principal Dolch that it was time to get the stu- teachers, and stayed with them until their to the defense of freedom and to the protec- dents out. Dolch agreed and teachers quickly mothers or fathers could be reached by tion of the basic liberties that the citizens of moved students out of the building floor by phone. our country enjoy by taking his turn at ‘‘stand- floor. Mr. Speaker, I salute the New York City ing on the wall’’ and now continues to defend Once outside, they met up with 750 of their Public City School community for their cour- freedom and liberties as a U.S. Attorney. peers from the High School for Economics age on September 11, and I ask my fellow

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00037 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.020 pfrm07 PsN: E20PT1 E2376 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 Members of Congress to join me in recog- task of shaping major education reform that recent years with technique, strategy, and tal- nizing their efforts by becoming, a co-sponsor would improve school policy in Missouri. She ent surpassing the highest of expectations. of House Resolution 325, which recognizes advocated for education policies that set high Athletics have become an integral element in the courage and professionalism of the entire academic standards for elementary and sec- educational programs for our youth; teaching New York City Public Schools community dur- ondary students, and she fought to give each teamwork, responsibility, pride, and discipline. local school district the same opportunity for ing and after the attack on the World Trade I am proud to say that in Georgia’s 7th Dis- state funds. Serving as both a commissioner Center on Tuesday, September 11th, 2001, as trict, at least six high school football programs on the Education Commission of the States well as supporting Federal assistance to the are to be congratulated on their outstanding and a member of its steering committee, An- school community. success this year. Paulding County and Troup nette Morgan was able to affect education pol- f High Schools made it to the final four in the icy on a national scale and use this expertise AAAA Division, while Cartersville High School HONORING THE MEMORY OF THE to benefit education in Missouri. She went on represented the district in AA competition. HONORABLE ANNETTE MORGAN, to serve as Co-chair of the Missouri Commis- FORMER MISSOURI STATE REP- sion on the Future of Teaching and as a Mem- Cedartown and LaGrange made the final four RESENTATIVE ber of the National Commission on Teaching in AAA, and will continue on to play each and America’s Future, and was a leader in key other for the state title, along with Bowdon HON. KAREN McCARTHY education reform legislation in Missouri, in- which will play Gwinnett County’s Buford High cluding the Excellence in Education Act in School for the A state championship. In addi- OF MISSOURI 1985 and the Outstanding Schools Act of tion to Buford, I would like to highlight Collins IN THE HOUSE OF REPRESENTATIVES 1993. The Outstanding Schools Act contained Hill for its accomplishments in the AAAAA divi- Thursday, December 20, 2001 lasting school reform to improve the state’s sion, and congratulate the Parkview Panthers on the team’s fourth trip to the state cham- Ms. MCCARTHY of Missouri. Mr. Speaker, I formula for distributing money to schools and pionship game in seven years. rise today to honor Annette Morgan, whose increase funding. The major education reforms death on December 18, 2001, is an immeas- to schools during the 1985Ð1995 decade are The spirit and camaraderie of high school urable loss to our community, the State of a credit to her persistence and unwavering athletics cannot be taught in a classroom, but Missouri, and our nation. Annette touched the commitment to the cause she loved. A former the lessons learned on the field will shadow lives of the people who knew her and the peo- public school teacher and dedicated education their counterparts for a lifetime. I congratulate ple she fought for as a State Representative advocate, she was the recipient of many hon- each team for their perseverance and dedica- in the Missouri General Assembly. A stalwart ors and awards as her abilities as a leader, tion, and thank the people who supported champion of the education needs of our chil- educator, legislator, and outstanding citizen them along the way. dren, she has left an indelible mark on count- were recognized by numerous groups. She was recently named to the Jackson County less lives. The school communities of Missouri f Honor Role, honoring the top 175 Jackson have Annette Morgan to thank for many of the Countians in celebration of the county’s 175th pioneering reforms established during her ten- HONORING CARL WARE anniversary. Annette’s legislative victories ure as a State Representative and during her were not limited to education. She initiated career as a champion for quality education. legislation that authorized the first 24-hour Throughout her career, Annette Morgan was HON. EDDIE BERNICE JOHNSON skilled nursing facility in the Midwest for HIV- a dedicated public servant, committed to our AIDS patients. OF TEXAS community and dedicated to our children. A Mr. Speaker, please join me in expressing lifelong resident of the state of Missouri, An- IN THE HOUSE OF REPRESENTATIVES sympathy to her loving family; her son John nette Morgan grew up in Kennett. She earned Allen Morgan, daughter-in-law Veronica; Thursday, December 20, 2001 degrees at the University of Missouri-Columbia daughter Katherine Morgan Campbell, son-in- and the University of Missouri-Kansas City in Ms. EDDIE BERNICE JOHNSON of Texas. law David, granddaughter Alexis Morgan Mr. Speaker, I rise to pay tribute to Mr. Carl social work and adult and continuing edu- Campbell; and loving friend William P. Mackle. cation. Annette pursued a teaching career that Her love of family and friends will be forever Ware. For almost a third of a century, he has began in the Bootheel, helping migrant work- remembered. She will live on in all those been a leader in the drive for responsible cor- ers. She later taught at William Chrisman High whose lives she touched. porate citizenship. He has been an inter- School in Independence and was coordinator national leader, and an ambassador of good- of adult and continuing education at Avila Col- f will not only for Coca-Cola, but for the entire lege. RECOGNIZING TOP GEORGIA HIGH country. Annette and I shared many memorable mo- SCHOOL FOOTBALL PROGRAMS Mr. Ware joined Coca-Cola twenty-seven ments when we served together in the Gen- years ago and since that time, he has rep- eral Assembly for 14 years. We enjoyed cher- HON. BOB BARR resented the best in American business. He ished morning walks that allowed us to reflect OF GEORGIA began as a government and urban affairs spe- upon the issues of the day and of our lives. IN THE HOUSE OF REPRESENTATIVES cialist, and then went on to lead the organiza- Our commutes to Jefferson City by Amtrak tion’s efforts to market to African-American Thursday, December 20, 2001 and auto provided us the opportunity to devise and Hispanic consumers. He has overseen successful strategies for legislative challenges Mr. BARR of Georgia. Mr. Speaker, it is no the company’s philanthropic efforts, with sig- and delight in the victories these strategies secret football is a second religion to the peo- nificant responsibility for international affairs. achieved. Our apartment afforded late night ple of the south, especially those that call He rose through the ranks to become Execu- gatherings of women members of the House Georgia their home. The sport dominates cas- tive Vice President of Global Public Affairs and and Senate that strengthened our resolve and ual conversation at least six months out of the Administration. enabled us to forge lasting bonds. year; it rules households and weekends, de- Perhaps, Mr. Ware’s greatest legacy is as Politics and government ran in Morgan’s termines anniversaries and the scheduling of architect of Coca-Cola’s strategy to divest blood. Her father, John Noble, was a 16-year political events, and occasionally instigates ar- from South Africa. The African National Con- state senator from Kennett in the Bootheel. guments ranging from ‘‘just what is the prob- gress applauded the company’s actions as a Her grandfather, John Bradley, served on the lem with the University of Georgia or the world model. Mr. Ware has been saluted by, Missouri Supreme Court. And her mother, Georgia Tech offense,’’ to ‘‘are you listening to Alletha Noble, was a lawyer and a teacher. me?’’ The traditions that are Sanford Stadium, among others, former South African President Because of her heartfelt interest in serving our Bobby Dodd Field, and the Georgia Dome Nelson Mandela and Archbishop Desmond community and state, Annette Morgan was have come to be a part of Georgia culture, yet Tutu. elected to the Missouri State Legislature in the hype that surrounds this spectacular sport Mr. Speaker, Mr. Ware will step down from 1980 and served in the House for 16 years. starts much sooner than the day the college his position with Coca-Cola next year. The en- She earned the Chairmanship of the Missouri boys strap on their pads and take to the field. tire nation is indebted to him for his leadership House Education Committee in 1985, and it High School football in Georgia has been in the causes of corporate world citizenship was in this capacity that she embraced the taken to a whole new level of competition in and global human rights.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00038 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.023 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2377 CONFERENCE REPORT ON H.R. 1, H.R. 2187, CLEANUP FUNDS FOR United States. To many Vietnamese in San NO CHILD LEFT BEHIND ACT OF COLORADO OIL SHALE RESERVE Jose, Nguyen Van Thieu’s name is synony- 2001 mous with the struggle of the Vietnamese peo- HON. MARK UDALL ple to live freely without fear of Communist re- pression. As a founding member of the Con- SPEECH OF OF COLORADO IN THE HOUSE OF REPRESENTATIVES gressional Dialogue on Vietnam, I feel it is im- HON. NITA M. LOWEY portant that we in the House continue that Thursday, December 20, 2001 fight on behalf of those in Vietnam and around OF NEW YORK Mr. UDALL of Colorado. Mr. Speaker, I sup- the world who are unable to speak, assemble, IN THE HOUSE OF REPRESENTATIVES port this bill, which I have cosponsored with or worship freely. my colleague, the dean of the Colorado dele- Thieu was born April 5, 1923 as the young- Thursday, December 13, 2001 gation, Representative HEFLEY. est of five children in the poverty-stricken town H.R. 2187 would enable the Bureau of Land of Phan Rang in central Ninh Thuan province. Mrs. LOWEY. Mr. Speaker, I rise today in Management (BLM) to begin environmental He attended the Merchant Marine Academy support of the conference report. I want to restoration activities at the Naval Oil Shale and the National Military Academy in Dalat, commend Chairman BOEHNER and Ranking Reserve 3, near Rifle, Colorado, using existing and was commissioned as a 2nd lieutenant in Member MILLER for putting together a strong funds in a special Treasury account. 1949. As an infantry platoon commander in compromise on such an important issue. This account was specifically designated in the French campaign against the Viet Minh— This legislation has the potential to dramati- the Strom Thurmond National Defense Act for the precursor to the Viet Cong—he became cally change the public education system in Fiscal Year 1998 (Public Law 105Ð85) which regarded as a good strategist and capable this country. It authorizes significant levels of transferred administration of the two Colorado leader. Naval Oil Shale Reserves—Numbered 1 and President Thieu passed away with family funding. It says to parents that Congress be- 3, and known as NOSR 1 & 3—from the De- present in the suburbs of Boston, where he lieves education is a top priority, and that we partment of Energy to the Department of the spent the last years of his life. I wish to again will make good on our goal—that every child Interior for management by BLM. extend my condolences to his family and in America should get a quality education. This provision was added to that act by an those grieving his loss, and hope that one day I am pleased with the changes this bill amendment offered by Mr. HEFLEY with the the dream he shared of democracy, freedom, makes. Changes to the Title I formula will pro- assistance and support of my predecessor, and human rights will come to Vietnam. vide a 29-percent increase for New York City Representative David Skaggs. It specifies that f schools. For years, the New York City school receipts from existing mineral leases in NOSR IN MEMORY OF DOUGLAS system has provided an education to tens of 3 are to be retained in a special account in- ECCLESTON thousands of low-income and disadvantaged tended for cleanup of contamination caused children, while receiving less than their fair by previous activities on these lands. How- share of Title I funding. This money is espe- ever, to avoid Budget Act problems the HON. DAVE WELDON cially important as New York City schools re- amendment provided that subsequent legisla- OF FLORIDA cover from the continuing effects of Sep- tion would be required to authorize BLM to IN THE HOUSE OF REPRESENTATIVES tember 11. have access to the funds. Thursday, December 20, 2001 Since enactment of Public Law 105Ð85, the This legislation also promises parents that Interior Department has collected approxi- Mr. WELDON of Florida. Mr. Speaker, I rise their children will have qualified teachers in mately $8.5 million in lease receipts, which are to commemorate the life and service of Doug- the classroom, and that student progress will currently held in the special cleanup account. las L. Eccleston, a Staff Sergeant with the be closely monitored to ensure that they are Enactment of H.R. 2187 will allow BLM to United States Air Force, who lost his life on on the right track. use up to $1.5 million of these funds for the December 7, 2001, while performing a rescue mission 1,000 miles off the coast of Florida. I’ve had the pleasure to work with Chairman preliminary analyses needed before cleanup work can begin and to prepare an estimate of His heroic action successfully saved the life of RALPH REGULA and Ranking Member DAVID the cost of completing the project. BLM can a critically ill sailor. OBEY in crafting the Labor, Health and Human then begin work, unless the estimated cost of Mr. Eccleston honorably served his country Services and Education Appropriations bill. the work would be more than the total in the for 15 years and was a member of the elite They have both worked tirelessly to provide special account. If the estimate indicates that Pararescue team assigned to the 920th Res- significant increases in education funding this more would be required than the total in the cue Group at Patrick Air Force Base in Sat- year, and we will vote on the fruits of their account, a subsequent authorization will be re- ellite Beach, Florida. His service included mili- labor next week. quired before work can begin. tary action in Operation Just Cause and Oper- But while we will provide these increases Mr. Speaker, this is important legislation that ation Desert Storm as a Combat Controller. this year, the prospects for continuing to pro- will allow BLM to begin the process of clean- During the first part of his career, Doug was vide the resources necessary to continue our ing up the lands involved and reducing the a combat controller, an airman who helps di- efforts on education are dim. The faltering risks of contaminated runoff reaching the Col- rect air strikes from the ground, often in haz- ardous territory. During the last part of his ca- economy, coupled with the increasing impact orado River. I commend Mr. HEFLEY for intro- reer, Doug worked to become a Pararescue, of the President’s tax cut, will make the appro- ducing the bill and urge its approval by the also known as a ‘‘PJ’’, an airman who rescues priations process exceedingly difficult in the House. f downed aviators anywhere in the world under coming years. We will be forced to make any conditions. some difficult choices. TRIBUTE TO PRESIDENT NGUYEN Mr. Eccleston’s military decorations include: This same dilemma will be felt in all fifty VAN THIEU Air Force Commendation Medal, Air Force states. School districts across the country are Achievement Medal, Air Force Reserve Meri- being forced to slash their budgets as state HON. ZOE LOFGREN torious Service Medal, and National Defense revenues have plummeted. If we enforce OF CALIFORNIA Medal. these new requirements without ensuring that IN THE HOUSE OF REPRESENTATIVES Doug is survived by his wife, Stacie, his lov- ing parents David and Donna Eccleston and schools have the funding to implement them, Thursday, December 20, 2001 our school districts will have to make choices sisters Dana Mohr and Dianna Coulton. Sev- they shouldn’t be asked to consider. Ms. LOFGREN. Mr. Speaker, I rise to ex- eral hundred people attended the memorial tend my sincere condolences to the family of service that was conducted at Pelican Beach I support this legislation, and I urge my col- former Vietnamese President Nguyen Van Park in Satellite Beach, Florida, on December leagues to support it as well. I also hope that Thieu, who died on September 29, 2001. 11, 2001. Funeral services were held in Mid- our support for education does not stop at au- President Thieu played an important role in land, Texas on December 13, 2001. thorizing funds, but that this vote today is the the history of his country and that of the Doug will be remembered by those who first step in the process of providing the nec- United States. loved him as a fun loving, caring man. His essary resources. Our children deserve no Thieu’s passing closes a sad chapter in the life’s passions included family and surfing. In less. history of two nations—Vietnam and the memory of Doug Eccleston’s love of surfing,

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00039 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.026 pfrm07 PsN: E20PT1 E2378 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 six of Eccleston’s surfing buddies and fellow Harriet Miller grew up in Idaho and attended From Northeast, he went on to attend the Uni- airmen paddled out on surfboards into the At- Whitman College in Walla Walla, Washington, versity of Missouri, where he received his lantic Ocean and cast a wreath on the water. graduating with a Bachelor of Arts degree in bachelors degree in 1931 and his law degree Our thoughts and prayers are with his family chemistry. After graduation, she went on to in 1933. In 1935, he wed his wife, Gertrude. and friends. earn a Master of Arts degree in political Floyd and his lovely wife have raised three ‘‘There’s no greater gift than giving your life science from the University of Pennsylvania, successful and talented children, Charles, so that another may live,’’ said Chief Master and later received an Honorary Doctorate in John, and Catherine, while demonstrating a Sgt. Greg Lowdermilk. ‘‘He gave the ultimate Humane Letters from Whitman College. distinguished career in public policy and the sacrifice and we’ll always remember him for Education has always been a driving force law. Judge Gibson entered private law prac- that. We’ve lost another great American.’’ We in Harriet’s life. From 1950Ð1955 she served tice in the Kansas City area, where he rose to will all miss him. Doug Eccleston is a true as an Associate Professor and Associate become a named partner in three firms. While hero. Dean of Students at the University of Mon- in private practice, Judge Gibson was elected f tana. She was then elected as the Super- County Counselor for Jackson County. intendent of Public Instruction for the State of He later turned his efforts to state govern- OLYMPIC TORCH BEARER GEORGE Montana in 1956, and additionally served the ment where he served 21 years in both the M. MOORE state as a member of the Board of Land Com- House and Senate of the Missouri General missioners, the Library Commission, the Assembly. He believed ‘‘politics is the HON. SHELLEY MOORE CAPITO Teachers Retirement Board and the Board of handmaiden of the law and should be actively pursued by members of the legal profession OF WEST VIRGINIA Education, in addition to being an exofficio Re- as an avocation.’’ The Judge distinguished IN THE HOUSE OF REPRESENTATIVES gent of the Montana University system. In 1969 Harriet first moved to Santa Barbara himself in the Missouri Senate as Chairman of Thursday, December 20, 2001 and started HMA, a management consulting the Judiciary Committee, Majority Floor Lead- Mrs. CAPITO. Mr. Speaker, I rise today in company. Yet after seven years of serving as er, and in his final term as President Pro Tem of the Senate. His success did not go unno- honor of a constituent of mine, Mr. George M. president of the company, Harriet relocated to ticed—in 1960 the ‘St. Louis Globe Democrat’ Moore. I have the pleasure of knowing George Washington, D.C. and over the next several newspaper named Floyd Gibson the Most Val- personally, and I am proud to recognize him. years served as Executive Director of the uable Member of the Missouri State Legisla- Tonight, George will carry the Olympic torch in American Association of Retired Person, the Martinsburg, West Virginia. ture. National Retired Teachers Association and the With such credentials, President John F. Although George considers this a once in a U.S. Occupational Safety and Health Review lifetime opportunity, it will actually be his sec- Kennedy nominated him in 1961 to become a Commission. She then returned to Santa Bar- U.S. District Judge for the Western District of ond time to run the Olympic torch. Seventeen bara and was appointed to Santa Barbara City Missouri. Judge Gibson was named to the po- years ago, George carried the flame for the Council in 1987, was elected during the same sition of Chief Judge one year to the day of 1984 Olympic games. year, and was reelected as a City Council his September 1961 appointment. In June of In service to our country, George Moore has member in 1992. 1965 President Johnson appointed Judge Gib- sacrificed much. As a United States Air Force In January, 1995, Harriet was appointed as son to the U.S. Court of Appeals for the fighter pilot, Moore did two tours of duty in Mayor, and then went on to become elected Eighth Circuit. He served as Eighth Circuit Vietnam from 1967 to 1970, when his plane as Mayor in November of 1995. She was then Chief Judge from 1974 to 1980 when he as- crashed into runway construction. Injuries from reelected in 1997. During her tenure, Harriet sumed senior status. As a dedicated public this accident put George in a wheelchair. He Miller served the City in many ways, including servant, he continued to serve the Bench ac- was only 26 at the time. serving as either a chair, active member, or on tively until June of 2000. Today George Moore is an active member the Board of Directors for countless agencies. Judge Gibson has received numerous of our West Virginia community. He serves as Throughout the years, Harriet Miller has awards and honors. He received the Univer- the director of the Martinsburg Veterans Af- been a pleasure to work with and after step- sity of Missouri Faculty-Alumni Award. He was fairs Medical Center. He is a devoted father ping down from office she will surely be named Phi Kappa Psi Man of the Year. The and husband. His active life is proof that missed. The City of Santa Barbara has been Missouri Bar Foundation honored Judge Gib- George has the ability to overcome any chal- fortunate to have such a distinguished woman son with the Spurgeon Smithson Award. He lenge or obstacle with which he is faced. as Harriet as Mayor, and the City will never was an Honorary Member of the Order of Coif. In the Olympic spirit, George has dedicated forget all her wonderful achievements. I would He received the Kansas City Bar Association his stretch with the torch to the victims of the like to thank Harriet today for her dedication to Annual Achievement Award and was a recipi- September 11th terrorist attacks. His compas- Santa Barbara, and wish her the best of luck ent of the Lawyers Association’s Charles sionate and determined approach to life is im- in all her future endeavors. Evans Wittaker Award. A member of the Mis- pressive and truly embodies the Olympic spirit. f souri, Kansas City, Federal, and American Bar George Moore is an inspiration to all of his Associations, Judge Gibson has distinguished A TRIBUTE TO THE HONORABLE fellow West Virginians. George is extremely himself through his legal work. deserving of this privilege of carrying the AND DISTINGUISHED LIFE OF Judge Gibson’s service to his community in- Olympic torch in our home state of West Vir- EIGHTH CIRCUIT COURT OF AP- cluded the Chairmanship of Manufacturers ginia. I am honored to commend George PEALS SENIOR JUDGE FLOYD R. Mechanics Bank and Blue Valley Federal Sav- Moore and I wish him all the best tonight. GIBSON ings & Loan. He had an intense interest in ag- f riculture and was a member of the Gibson HON. KAREN McCARTHY Family Limited Partnership, which owns the HONORING MAYOR HARRIET OF MISSOURI Lone Summit Ranch and other farm ground in MILLER IN THE HOUSE OF REPRESENTATIVES Jackson County, Missouri. Judge Gibson also Thursday, December 20, 2001 gave back to the Kansas City community HON. LOIS CAPPS through his service on the Board of Trustees OF CALIFORNIA Ms. MCCARTHY of Missouri. Mr. Speaker, I for the University of Missouri-Kansas City and IN THE HOUSE OF REPRESENTATIVES rise today to pay tribute to Floyd R. Gibson, as an Advisory Director to the Greater Kansas Senior Judge, U.S. Court of Appeals for the Thursday, December 20, 2001 City Community Foundation. He was recently Eighth Circuit who died Thursday, October 4, recognized as one of the top living contribu- Mrs. CAPPS. Mr. Speaker, today I would 2001. Judge Gibson was a stalwart for justice tors to the University Missouri-Columbia Law like to pay tribute to a woman who is not only and his professional career exemplifies his un- School. an extraordinary citizen of Santa Barbara, wavering dedication to public service. His ten- Judge Gibson’s life is celebrated by a host California, but has also served the city as ure in the Missouri State Legislature and his of loving family, friends, and colleagues who Mayor for the last eight years. On December 34 years on the Eighth Circuit, created a leg- mourn his loss. Mr. Speaker, please join me in 30, 2001, the City of Santa Barbara will honor acy of commitment to Justice and the common expressing our heartfelt sympathy to his de- Harriet Miller and pay tribute to her for all the good. voted wife of 66 years, Gertrude, his sons, wonderful things she has accomplished not Judge Gibson was born in the Arizona Terri- John and Charles, his daughter, Catherine, his only during her tenure as Mayor, but through- tory in 1910. He moved to Kansas City at age daughters-in-law, Judy and Bonnie, his be- out her life. 4 and graduated from Northeast High School. loved grandchildren, Heather Allen, Jennifer

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00040 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.030 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2379 Ringgold, Lynn Gibson-Lind, Scott Gibson, Women. She stood up for the rights of Anita Celia drove to work, she passed by Everett David Gibson, Joshua Glick and Amber Glick, Hill, she raised awareness of domestic abuse, Airport and saw an opportunity. An admirer along with his great-granddaughter, Isabelle and she fought against those who would re- of Amelia Earhart, she decided to learn to fly. One week after her 21th birthday she Allen. Judge Floyd R. Gibson will be greatly gard women as second class citizens. took off on her first flight and was imme- missed, but his legacy and commitment to jus- Through it all, she developed a reputation for diately hooked. tice and equality will live on in the hearts and integrity and effective action. During the election controversy of 2000, she ‘‘The viewpoint from on high is so dif- minds of those he touched. ferent, and so much more comprehen- Judge Gibson was active and energetic as was a consistent champion of the right of sive...just that whole feeling of being a leader of the Democratic Party of Missouri; Americans to have his or her vote counted. aloft. It gives you a feeling that birds must however, he left partisan politics at the door of She has helped move NOW squarely into a have. In fact, I think, if I wanted to be re- the courthouse when he became a member of role as a leading civil rights institution. incarnated, I’d like to be a bird of some the Federal Judiciary. He is remembered by Throughout her lifetime of service, Ms. Ireland sort.’’ all who knew him and those who appeared has stood up to those in power and spoke up Celia had discovered her first wilderness. before him as a fair, direct and competent for those who would otherwise not have had Her love of flying led her to train with the judge. He loved his work as a judge, and even a voice. Women Airforce Service Pilots, and she be- after retirement in 1979, he continued to serve Mr. Speaker, Ms. Ireland stepped down as came skilled at flying a number of aircraft, the Bench and his country in active senior sta- President of NOW earlier this year. The coun- including large aircraft such as the P–47 that try looks forward to her continued leadership, zoomed up to 300 mph. Celia ferried aircraft tus until June of 2000. Judge Gibson served across the country for the Air Force during his country for most of the Twentieth Century. and is indebted to her for her service. WWII and dreamed of flying to Alaska one He served with honor and distinction. He f day to see the vast wilderness that other pi- asked for no more and we cannot think of a lots had described. better epitaph. TRIBUTE TO ALASKA’S CELIA HUNTER In December 1946, she and pilot friend f Ginny Hill were hired to fly two Stinson air- planes from Seattle to Fairbanks. They ar- RECOGNIZING GWINNETT COUN- HON. MARK UDALL rived in a snowstorm at Weeks Field in Fair- TY’S NEW HIGH-TECH COLLEGE OF COLORADO banks on January 1, 1947, nearly a month- CAMPUS IN THE HOUSE OF REPRESENTATIVES long trip with all the weather delays. They decided to stay and work in the tourism in- HON. BOB BARR Thursday, December 20, 2001 dustry, ferrying visitors to a travel lodge in Mr. UDALL of Colorado. Mr. Speaker, ear- Kotzebue during the summer. OF GEORGIA lier this month news came of the death of one This experience inspired Celia, Ginny Hill IN THE HOUSE OF REPRESENTATIVES of the pioneers of the conservation movement Wood, and Woody Wood to build Camp Thursday, December 20, 2001 in Alaska, Celia Hunter. Denali, a wilderness camp just outside the original boundary of McKinley National Mr. BARR of Georgia. Mr. Speaker, recent A founder of the Alaska Conservation Soci- ety—Alaska’s first statewide organization of its Park. There visitors could see Denali and changes in global economics have had a di- enjoy hiking and wildlife-viewing in a mag- rect effect on the face of America’s job mar- kind—Celia Hunter was involved in many de- nificent setting. ket. To be professionally competitive some de- bates over the future of Alaska, including the ‘‘Project Chariot’’ plan to use nuclear explo- In 1960, Celia and Ginny help found Alas- gree of higher learning is rapidly becoming a ka’s first statewide environmental organiza- necessity. Educational administrators in Geor- sives to dig a new deep-water port and the tion, the Alaska Conservation Society. This gia have recognized the growing need for proposed Rampart Dam on the Yukon. small group of pioneering conservationists these resources and have taken action to And in the late 1970’s, she was among the was inspired by Olaus and Margaret Murie to meet increasing demands. many people from across the country whose work for the establishment of the Arctic Na- Three institutions have come together to strong support made possible the enactment tional Wildlife Range and to protect the spe- create a new learning facility in Gwinnett of the Alaska National Interests Land Con- cial and unspoiled lands of Alaska. County. The collaborative efforts of the Board servation Act, introduced in the House of Rep- Working together, Celia and Ginny have of Regents, the University of Georgia, and resentatives by my father, Mo Udall of Ari- tackled all of Alaska’s major environmental Georgia Perimeter College will all be revealed zona. issues. They fought against Project Chariot Now Congress has again been debating the and the Rampart Dam project, became lov- on January 7, 2002, with the opening of ing stewards and advocates for Denali Na- Gwinnett’s new high-tech campus; helping al- proper balance between development and conservation in Alaska, and again Celia tional Park, and worked to create and pass leviate higher educational needs for the North- the 1980 Alaska National Interest Lands Con- east metro-Atlanta community. The University Hunter was active and involved in that debate servation Act, the greatest lands conserva- of Georgia and Georgia Perimeter College will right up to the day of her death. As she ex- tion act in world history. plained earlier this year, it remained her view serve as partners in this new endeavor and In the late ’70s, Celia’s leadership moved to promise to bring forth the very latest in tech- that ‘‘If we lose wild spaces, we could be a the national level when she served as Execu- nological and educational services available to much poorer nation . . . the whole concept of tive Director for the Wilderness Society. She students. natural areas, with intact ecosystems is vital to also began writing memorable environ- I would like to take this moment to congratu- life . . . we need places of the world that are mental columns for the Fairbanks Daily late the successful efforts of the forming team still natural.’’ News-Miner. Fearless and outspoken, Celia Mr. Speaker, in the words of the Fairbanks carefully studied a diversity of issues and and wish them the best of luck with the new wrote articulate and compelling columns for campus. Daily News-Miner, Celia Hunter’s death was a ‘‘great loss for Alaska,’’ and it leaves the more than 20 years. Dedicated to the con- f servation movement, she also helped found whole country poorer. She earned our thanks the Alaska Conservation Foundation in 1980. HONORING MS. PATRICIA IRELAND and remembrance. She will be greatly missed. For the benefit of our colleagues, I am at- Through the years, Celia not only devoted her energy to environmental causes, she also HON. EDDIE BERNICE JOHNSON taching a brief outline of her life as well as a loved people and the web of connections be- OF TEXAS newspaper editorial. tween them. She had the natural ability to IN THE HOUSE OF REPRESENTATIVES CELIA’S LIFE inspire and nurture countless individuals by listening to their ideas and dreams and shar- Thursday, December 20, 2001 Many are called, but few choose to hear and give of themselves completely. Celia ing her views. Her glacial-blue eyes could Ms. EDDIE BERNICE JOHNSON of Texas. Hunter heard the call of the wilderness at an look into one’s soul and bring out the best of Mr. Speaker, I rise to pay tribute to Ms. Patri- early age and answered it with her adven- a person’s spirit including a good laugh. cia Ireland. During her many years of service turesome spirit, loving heart, and thoughtful Celia leaves a tremendous legacy of con- in the fight for equal rights, Ms. Ireland has mind. servation accomplishments. Her vibrant spir- Born on January 13, 1919 in Arlington, it will live on in the wilderness she loved, in been a tireless crusader for the fundamental Washington, Celia grew up during the De- the lives of those she inspired, and in the leg- principles of our democracy. She is a true pression in a logging community. After high islation that holds her tireless effort to pro- America heroine. school graduation, she worked as a clerk for tect what she truly loved. The earth and all For ten years, Ms. Ireland served as the Weyerhauser Timber Company for $50 a its a living things are grateful. Alaska will president of the National Organization for month, enough to buy a car. Each day when forever remember Celia.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00041 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.034 pfrm07 PsN: E20PT1 E2380 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 [From the Fairbanks Daily News-Miner, Dec. TRIBUTE TO CAPTAIN VIRGIL one of three finalists considered for the posi- 4, 2001] AUGUSTUS KING tion in a selection process that lasted just A GREAT LOSS FOR ALASKA three months. Upon reaching the finalist cat- HON. ZOE LOFGREN egory, it became an easy board decision to Celia Hunter died still doing the work she name Dr. Applbaum to the University’s top loved most—fighting for Alaska’s environ- OF CALIFORNIA IN THE HOUSE OF REPRESENTATIVES post. The doctor was selected trusting that he ment. can continue to lead the University of South- The night before her death Hunter had Thursday, December 20, 2001 ern Colorado to the prominence and stature been putting together a list of U.S. senators Ms. LOFGREN. Mr. Speaker, I rise to com- that the educational institution maintains today who might be considered undecided regard- mend Captain Virgil Augustus King, who will in the State of Colorado. ing the Senate vote on drilling in the Arctic be retiring from the Santa Clara County De- Dr. Applbaum has enjoyed a long and dis- National Wildlife Refuge. partment of Correction on December 28th tinguished career in higher education. He has Hunter spent more than 50 years as a pio- after twenty-six years of service to Santa served in numerous academic positions for neer and conservationist in Alaska, most Clara County. several colleges and universities throughout often working side-by-side with her long- Captain King joined the Department of Cor- the country. He received a bachelors and time companion and fellow conservationist rection in 1989 after serving as a Deputy masters degree in speech communication Ginny Wood. Sheriff and Sergeant for the Sheriff’s Depart- from California State University and later a Hunter’s years of dedication to the protec- ment. Since that time, he has served as a doctorate in the field from Pennsylvania State tion and preservation of Alaska and her Sergeant in the Main Jail, Work Out of Class University. He served as the Vice President of work to that end on the local, state and na- Lieutenant in The Training Unit, Personnel Academic Affairs for the University of Texas- tional levels meant that she played a vital Unit and the Elmwood Complex. Captain King Pan American and Dean of the School of Hu- role in shaping Alaska’s environmental fu- was promoted to Captain in July of 1999, and manities for Long Beach State. His rise to ture. currently serves as the Programs Division, USC’s top post began with a term as presi- Her work and contributions to increase Professional Compliance and Audit Unit and dent of Westfield State College in Massachu- public awareness of Alaska’s unique natural Special Projects Commander. setts, and serving as the President of Kean resources have been pushed even more into Captain King was integral to the develop- University in New Jersey since 1996. the public eye as the nation began focusing ment of the Regimented Corrections Program Mr. Speaker, it is my pleasure to welcome on solving national energy policy issues. One (RCP), a modified boot-camp program with a Dr. Ronald Applbaum to Pueblo and the Uni- of the biggest questions directly related to strong emphasis on education. RCP has been versity of Southern Colorado. The community Alaska has been what role if any should a highly successful program which this De- is truly fortunate to gain this new and distin- ANWR play in that policy—the very issue cember is celebrating its 5th Anniversary. guished leader. I would like to further welcome Hunter contemplated during her last days. Captain King was also instrumental in the de- his family to the area and look forward to Hunter and Wood first flew in Fairbanks in velopment of the Artemis Program, a similar meeting them in the coming year. Congratula- January 1947, piloting two planes to be deliv- program designed for pregnant women and tions on your latest achievement, Dr. ered to the Interior. Extreme temperatures women with young children, which was se- Applbaum, and welcome to your new home. I kept the pair here longer than expected, and lected as the 2001 recipient of the Thomas M. am confident when I say the commitment to after spending a bit of time in Europe, they Wernert Award for Innovation in Community were back to stay. higher education is strong with leaders such Behavioral Healthcare. The latest innovative as yourself and I am assured you will continue The list of her works in conservation and program developed under Captain King’s di- to perform great work! environmentalism are lengthy. In the 1950s, rection is Women in Community Services, a f Hunter and Wood built Camp Denali, an pre- and post-program for female inmates in early combination of ecology and tourism. Santa Clara County, which starts with classes PAYING TRIBUTE TO JACOB Not long after, Hunter was a founding mem- inside the jail and extends into the community SCHOOLEY ber of the Alaska Conservation Society, the first statewide conservation society in Alas- for supportive aftercare. Each of the partici- ka. Later on, she was instrumental in the pants is matched up with a professional men- HON. SCOTT McINNIS formation of the Alaska Conservation Foun- tor for up to six months to assist them in the OF COLORADO dation and served as its first board chair. successful achievement of their individual IN THE HOUSE OF REPRESENTATIVES Hunter was interim executive director of The goals. Thursday, December 20, 2001 Wilderness Society in the 1970s. In 1991, she I wish to thank Captain Virgil King for his was presented the Sierra Clubs’ highest compassionate dedication to the County and Mr. McINNIS. Mr. Speaker, I would like to honor and has received innumerable awards wish him the best in his future endeavors. His take this opportunity to recognize and pay trib- in recognition of her dedication and service innovation and loyalty will be sorely missed, ute to a hero of the community of Glenwood to conservation. but the people of the County are the richer for Springs, Colorado. Jacob Schooley recently News-Miner readers recognize Hunter as a his service. distinguished himself in a local fire that threat- longtime contributor to this page—she began f ened to destroy a historic building and injure writing her column in 1979. While her opin- several residents. I would like to highlight Ja- ions quite often differed from our own, our PAYING TRIBUTE TO RONALD cob’s heroics and thank him for his service. respect for Hunter was beyond question. APPLBAUM Jacob arose to a regular morning on Satur- day, December 1, 2001, until he heard fire In the days since her death, Hunter’s friends and associates have described her in HON. SCOTT McINNIS alarms ringing throughout his residence. After a variety of ways: pioneer, voice of respon- OF COLORADO making a call to 911, Jacob proceeded to sible environmentalism, adventurer, kind IN THE HOUSE OF REPRESENTATIVES awaken his neighbors to the danger that lay ahead. After finding the source of the fire, and honest with everybody. And all said that Thursday, December 20, 2001 her passing would leave a void in Fairbanks Jacob extinguished the flames and directed and in Alaska. Mr. McINNIS. Mr. Speaker, I would like to the residents to safety. Jacob continued to In during a 1986 interview with a News- take this opportunity to recognize the new fight the fire until firefighters arrived on the Miner reporter, Hunter said that her basic President of the University of Southern Colo- scene to control the blaze. As a result of his philosophy was that much of the damage rado, Ronald Applbaum. The University and quick reaction, the fire damage was minimal done to the earth was caused by people mak- the community of Pueblo are fortunate to have and the residents were allowed to reoccupy ing a living. That creates an obligation, she Dr. Applbaum join their extended family. As he their homes soon thereafter. said: ‘‘Each one of us has a responsibility to prepares for his new post, I would like to rec- Mr. Speaker, I again commend Jacob take care of the part of the world we live ognize several of his academic achievements Schooley for his quick action and decisiveness in.’’ and wish him the best of luck when he takes in a time of crisis. The fire harmed several Hunter’s life-long goal was to minimize the his new post in July. residents and firefighters with burns and footprints that humans leave on our environ- Dr. Applbaum was selected to head the Uni- smoke inhalation, but without Jacob’s efforts, ment. But through her work and her passion versity based on his impressive academic re- the toll could have been much worse. I am Alaska, she has left behind an impression sume and past successes he has enjoyed in honored to represent citizens like Jacob and that will long be remembered. other higher education institutions. He was his community of Glenwood Springs. Thank

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00042 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.040 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2381 you for your efforts Jacob and this body ap- servants, community members, and media a cessation of nuclear explosions. These preciates your dedication to helping others in representatives have taken part in its activi- events led to the Limited Test Ban Treaty of a time of need. ties. In the Russian city of Ryazan, which had 1963, which prohibited all nuclear explosions f been marked by anti-Semitic acts, the Climate in the atmosphere, in space, and under water. of Trust program proposed several initiatives Next came the Threshold Test Ban Treaty of BREAKING THE ABM TREATY which were later enacted and are in the proc- 1974, which limited the explosive force of un- COULD SPARK A NEW ARMS RACE ess of implementation. In 2002Ð03, the Bay derground tests, and the Peaceful Nuclear Ex- Area Council plan is to continue their activities plosions Treaty of 1976, which extended that HON. RUSH D. HOLT in Ryazan and expand them to several other limit to nuclear explosions for ‘‘peaceful pur- OF NEW JERSEY Russian communities outside of Moscow. This poses’’. These two treaties were ratified in IN THE HOUSE OF REPRESENTATIVES is a worthy and important work that earned 1990 but fell short of limiting all nuclear explo- Thursday, December 20, 2001 Bay Area Council a tribute in the 2001 State sions. Department International Religious Freedom Mr. HOLT. Mr. Speaker, It is with tremen- Report. The end of the Cold War and the thawing of dous concern that I note the President’s an- Not only our government has recognized the U.S.-Russia relations reinvigorated efforts to nouncement that the United States will with- Climate of Trust program as effective and suc- seek a total ban of nuclear test explosions. In draw from the Anti-Ballistic Missile (ABM) cessful in training Russian law enforcement 1994, I cosponsored H. Con. Res. 235, which Treaty. This is an ill-advised decision that and other government officials in promoting lauded the President for maintaining a morato- could have dangerous repercussions in the tolerance. The government of the Russian rium on testing nuclear weapons and for being long run. Federation also identified the Climate of Trust supportive of a comprehensive test ban. With The most troubling part of the President’s program as a key component of its 2001Ð2005 strong international support, the CTBT was fi- decision today is the rationale supporters have national program for preventing extremism and nally opened to signature in September 1996 used to justify backing out of the treaty: they promoting tolerance in Russian society. When and was promptly signed by the President. claim it interferes with the United States’ de- Congress graduates Russia from Jackson- The ball then moved to the Senate’s court. In velopment of a National Missile Defense Vanik next session, the role of the Bay Area September 1997, I cosponsored H. Res. 241, (NMD) system. This is clearly a straw man ar- Council and other non-govemmental organiza- which urged the Senate to give its advice and gument. tion will become even more important in the consent to ratification of the CTBT. Despite The United States is nowhere near devel- human rights dialogue between our countries. certification by the President that there were oping or fielding a working NMD system, after The Climate of Trust is exactly the kind of no safety or reliability concerns about the nu- decades and billions of dollars of effort. To program we should be supporting in Russia. It clear arsenal that required underground tests, back out of the treaty at this time, a time when is cost-effective and it works at the grass-roots consideration of the Treaty was held hostage we are working closely with Russia and other level with communities throughout Russian by politics and, in 1999, was rejected by the allies in the international war on terror, is Federation. The program is interactive and re- Senate. unneeded and simply off base. And to do so sponsive to the needs of these communities, Now we come to the present day when 162 for such a technologically premature program I am confident it has immediate and lasting ef- States have signed the treaty and 87 have is clearly folly. fect on individuals and communities besieged ratified it. The Treaty has still not entered into Backing out of the ABM treaty is not without by xenophobia. The Russian Democracy Act, force, however, and the United States is not serious repercussions. For example, a senior legislation which I authored and which passed among the ratifiers. The current administration Russian lawmaker predicted in response to to- the House unanimously last week, earmarks has emphatically refused to consider a com- day’s news that Russia will pull out of the at least $50 million for activities designed to prehensive test ban and did not even send a Start I and Start II arms reduction treaties. I support Russian civil society at all levels. I re- representative to the Conference. fear that today’s action will lead to a spiral of spectfully ask the Administration and the State action and reactions, sparking a new arms Department to extend all possible support to The administration’s rejection of the CTBT race would not make us less, not more, se- the Bay Area Council so that the Council may and withdrawal from the Anti-Ballistic Missile cure. expand and continue its grassroots efforts at Treaty send the wrong message to the inter- f combating xenophobia and promoting civil so- national community about our commitment to ciety in Russia. nonproliferation. Our whole nonproliferation SUPPORT FOR BAY AREA COUNCIL stance is linked to the CTBT, since it signals FOR JEWISH RESCUE AND RE- f our intention to meet the expectations of the NEWAL TIME TO RATIFY THE CTB Nuclear Nonproliferation Treaty (NPT). Under the NPT, nuclear weapons States pledged to HON. TOM LANTOS HON. EDWARD J. MARKEY work in good faith toward total disarmament in OF CALIFORNIA OF MASSACHUSETTS exchange for an agreement by non-nuclear IN THE HOUSE OF REPRESENTATIVES IN THE HOUSE OF REPRESENTATIVES weapons States to limit their use of nuclear Thursday, December 20, 2001 Thursday, December 20, 2001 technology to peaceful applications. Cessation of testing new weapons is a vital part of any Mr. LANTOS. Mr. Speaker, I rise today to Mr. MARKEY. Mr. Speaker, I rise today to serious disarmament plan. If the United States express my support for the Bay Area Council express my concern over recent reports that won’t even agree to consider a test ban, and for Jewish Rescue and Renewal (Bay Area the administration is considering the develop- is clearly signaling its intention to go forward Council), an exemplary organization which has ment of so-called ‘‘low-yield’’ nuclear weap- with development of nuclear missile defense, been carrying out important work in the Rus- ons. While these mini-nukes are allegedly how can we possibly persuade other nations sian Federation. being considered to promote a longstanding to forego their weapons programs? The Bay Area Council has designed and im- nonproliferation goal of destroying buried plemented a Climate of Trust program to en- stockpiles of chemical and biological weapons, In this age of heightened concern over ter- able Russian law enforcement officials to com- testing these weapons would break a 9-year rorist threats we need the CTBT now more bat ethnic and religious intolerance and xeno- moratorium on nuclear testing and would have than ever. Much work remains to be done to phobia in Russia by providing a sustained and grave implications for nonproliferation. This ac- reduce the threat of terrorists obtaining and supportive relationship between American and tion would continue to undermine the future of using weapons of mass destruction. A ban on Russian communities, law enforcement profes- the Comprehensive Test Ban Treaty (CTBT), all nuclear explosions limits the ability of ter- sionals, city administrators, prosecutors, which is already under assault in this adminis- rorists to develop their own nuclear weapons human rights activists, educators, and local tration. or to acquire them from hostile nonnuclear media representatives. The goal is to promote The CTBT is the culmination of a series of weapons States. The CTBT should be an inte- tolerance and reduce incidents of hate-based incremental efforts to stop the threat of nu- gral part of our anti-terrorism efforts and I urge violence in Russia through training, seminars, clear war following the explosion of two nu- my colleagues to support its ratification. When workshops, and symposiums. clear weapons during World War II. The radio- the President comes to Congress to get the The Climate of Trust program has brought active fallout from hundreds of test explosions 1994 ban on the development of new nuclear in tangible results. Over the 2000Ð01 period, in the 1950’s and the near catastrophe of the weapons lifted I urge my colleagues to vote no more than five hundred Russian officers, civil Cuban Missile Crisis strengthened support for to the President’s request.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00043 Fmt 0666 Sfmt 0634 E:\CR\FM\K20DE8.003 pfrm07 PsN: E20PT1 E2382 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 REMARKS ON ACCELERATED As a young man who once shined shoes on ber-crew of an Air Force BÐ1B bomber that DEPRECIATION the corner of First Street and Gage Avenue in crashed on December 12th in the Indian East Los Angeles, Jesus saw his hard work Ocean. In particular, I would like to highlight HON. CHARLES A. GONZALEZ and perseverance take him from the lowest the role of Boatswain Mate 1st Class Stephen OF TEXAS position in the Los Angeles County Fire De- Lyons, a native of my District. IN THE HOUSE OF REPRESENTATIVES partment, suppression aid, to fire fighter, then In addition, Mr. Speaker, I would like to note Thursday, December 20, 2001 inspector, to Captain by 1984. Five years later that I am proud of him and all the military per- he was promoted to Battalion Chief, and by sonnel from Northeastern and Central Penn- Mr. GONZALEZ. Mr. Speaker, I would like 1994 he had become Assistant Fire Chief, sylvania and grateful for their willingness to to express my strong support for efforts to in- serving for a time as Los Angeles County Fire serve America. crease the depreciation deduction. In my view Marshal. I would now like to enter into the record the accelerated depreciation is one of the most ef- Chief Burciaga has accomplished many following article about Boatswain Mate 1st ficient and effective ways for Congress to spur ‘‘firsts.’’ He became one of the youngest fire- Class Lyons from the December 17th edition business investment in our country. fighters to qualify for Captain at the age of of the Wilkes-Barre Citizens’ Voice: Mr. Speaker, as you know this year has twenty-five. He became the first Fire Marshal CITY NATIVE INVOLVED IN INDIAN OCEAN seen a dramatic drop off in business invest- of Latino descent in the County’s history. And ment. Business investment was one of the RESCUE he is certainly the first fortyseven year old fa- (By Gene Skordinski and Tom Venesky) foundations of the economic boom that our ther of five daughters whom I have witnessed nation enjoyed during the Clinton Administra- A Wilkes-Barre native was one of the mem- retain not only his hair but its natural dark bers of the USS Russell who rescued the four tion. It is therefore critical that Congress does color. what it can to restart the capital investment member-crew of an Air Force B–1B bomber I met Jesus more than thirteen years ago at that crashed Wednesday in the Indian Ocean. engine that has propelled our nation’s econ- a ‘‘Career Day’’ session at a local elementary Boatswain Mate 1st Class Stephen Lyons, omy to extraordinary heights over the last dec- school where we both were presented before 38, operated one boat that rescued the crew. ade. a class of fifth graders. Captain Burciaga was The rescue boats were launched from the Mr. Speaker, in addition to reductions in in- dressed in uniform; I, Deputy Attorney General destroyer USS Russell after the jet crashed terest rates and balancing the budget, one of on its way to bomb targets in Afghanistan. Becerra, wore my suit. There was no contest: the most important things the Federal Govern- The $280 million bomber went out of con- he glittered, I gawked. He told the kids of his ment can do to increase business investment, trol and fell into the ocean about 60 miles battles with fire, I battled to keep their eyes on in my view, is to accelerate the depreciation north of Diego Garcia after taking off from me. It would not surprise me if some of those the British island, government sources re- schedule for business purchases. Depreciation young students today are firefighters. ported. schedules reflect the Federal Government’s Chief Burciaga has a passion for service It was the first manned, fixed wing U.S. own somewhat arbitrary calculation of what is and a devotion to our youth. As President of aircraft lost in the Afghanistan campaign. the economic life of capital. Accelerating the Crew members ejected from the plane at the United Hispanic Scholarship Fund he has depreciation allowance for new capital invest- 15,000 feet and were in the water about two helped raise $500,000 to make the dream of ments provides a direct and immediate incen- hours during the night. college a reality for more than one thousand tive for businesses to build factories, purchase Lyons, who is on the USS Russell, was driv- students. He volunteers his ‘‘spare time’’ to ing one search and rescue boat that re- new equipment, and generally expand oper- support his brethren internationally, delivering sponded to the crash. ations. This inevitably creates jobs and results surplus but valuable firefighting vehicles and All four crew members were in good condi- in a long term improvement in the productivity equipment and teaching the latest fire fighting tion, said officials. rates of American industry. Additionally, unlike Lyons Joined the Navy following his grad- techniques to firefighters in countries like Mex- many other proposed tax incentives, acceler- uation from Meyers High School in 1983. ico. ated depreciation is directly tied to business During his Navy career, he has served But, without question, his greatest passion aboard the USS Guam for five years as well investment. A business-person can not enjoy and devotion, which has earned him our undy- this tax incentive unless he or she commits to as the USS Savannah. He has served in Bei- ing respect and affection, belongs to his fam- rut, Somalia and the Gulf War. He has also a capital expenditure. ily. Ana Burciaga has fought every one of her completed several six-month tours of sea Mr. Speaker, it is for these reasons, I firmly husband’s fires. In her eyes you see the val- duty in the Mediterranean Sea and the In- believe that the long term economic benefits ues that have made the Burciaga family so dian Ocean. of accelerated depreciation far outweigh the strong. Ana and Jesus and their five accom- Lyons was responsible for collecting per- immediate revenue loss consequences of any sonal items from sailors on the USS Guam as plished daughters—Elenor, Catherine, Luz, such tax cut. It is my hope than in the 2002 well as the embassy personnel during the Natalie and Sarah—have every right to be session of the 107th Congress we will pass evacuation of the embassy in Somalia. proud today. into law an acceleration of the depreciation al- Aside from operating search and rescue Mr. Speaker, on this day, December 20, craft, Lyons drives the captain’s launch, a lowance. 2001, family, friends and colleagues gather at boat used to shuttle the ship’s captain to and f Descanso Gardens in La Ca«nada, Flintridge, from shore. IN RECOGNITION OF JESUS California to witness the official appointment of He has also served at Norfolk, Va.; Pax River, Md.; Kings Bay, Ga., and Pearl Har- BURCIAGA Jesus Burciaga as Deputy Fire Chief for the bor. County of Los Angeles and to celebrate 28 While at Pax River, he worked in the test- HON. XAVIER BECERRA years of courage, integrity, and consummate ing of hovercraft and with the David Taylor OF CALIFORNIA professionalism. It is with great pride that I ask Research in Norfolk. IN THE HOUSE OF REPRESENTATIVES my colleagues in this beloved House of Rep- He is the son of Harold and Jean Lyons, 160 resentatives to join me today in saluting Jesus Wood St., Wilkes-Barre. Boatswain Mate 1st Thursday, December 20, 2001 Burciaga, an exceptional man and cherished Class Lyons is married to the former Sharon Mr. BECERRA. Mr. Speaker, it is with ut- friend. Gula, formerly of Edwardsville. They have two sons, Stephen, 13, and Justin, 11, and the most honor and pleasure that I rise to recog- f nize Mr. Jesus Burciaga, a gifted leader and family resides in Pearl Harbor. His grand- WILKES-BARRE NATIVE HONORED mother, Lucy Machinshok, resides in the Po- outstanding firefighter from La Habra, Cali- cono area. fornia. Today, Jesus achieves another mile- FOR ROLE IN BOMBER CREW His mother said he is currently on his stone in an already storied career. In the proc- RESCUE fourth six-month cruise since joining the ess, he affirms our belief that devotion, deter- Navy in 1984. He is set to return after Easter. mination, and discipline still pay handsome HON. PAUL E. KANJORSKI Although his exact location is classified, she said she keeps in touch with her son dividends in life. OF PENNSYLVANIA through e-mail. This 20th of December, the Los Angeles IN THE HOUSE OF REPRESENTATIVES County Fire Department elevates Jesus to the ‘‘He e-malls me three times a week,’’ she rank of Deputy Fire Chief, third in command of Thursday, December 20, 2001 said, adding it can be difficult not knowing where he is. the second largest fire protection agency in Mr. KANJORSKI. Mr. Speaker, I rise today ‘‘You worry and wonder and thank God America. His promotion highlights a career of to call the attention of the House of Rep- when you hear from him that it’s good exceptional public service which began more resentatives to the dedication of the team from news,’’ she said. ‘‘He can’t tell us where he is than a quarter century ago. the USS Russell who rescued the four mem- or even where he’s going.’’

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00044 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.049 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2383 Mrs. Lyons explained that the long months TRIBUTE TO MR. MITCHELL He had style in his clothes, in his cars, in away from his family are accepted as part of ROBINSON his hats, in his dancing, in the showrooms at her son’s job. Modern Supply, in the ‘‘Pitch from Mitch’’ sta- Although it can be difficult to be gone for HON. JOHN J. DUNCAN, JR. tionary, in the incentive trips for his customers extended periods of time, she said her son is that he so tediously planned and enjoyed. He doing what he loves. OF TENNESSEE bought things in a big way whether it was a ‘‘He’s happiest when he’s on the ocean. IN THE HOUSE OF REPRESENTATIVES truckload of sinks, shirts for himself, or There’s a certain calm about it that he en- Thursday, December 20, 2001 joys while he’s on the ship,’’ she explained. smoked turkeys for gifts. He was able to Mr. DUNCAN. Mr. Speaker, on December charm about anyone he met, particularly the Mr. Speaker, I am pleased to call to the at- 10th my good friend Mr. Mitchell Robinson females. He had an appetite for food and peo- tention of the House of Representatives the passed away after a lengthy illness. He was ple that was enormous. service to our nation of the crew of the USS someone who made a difference and dreamed Mr. Robinson was a leader, perhaps not al- Russell, including Boatswain Mate 1st Class the American Dream, and he truly represented ways knowing where he was going, but know- Stephen Lyons, as well as all the military per- what this country is all about. The following is ing he was going somewhere. His devotion to sonnel from Northeastern and Central Penn- a tribute to my friend. his business was inspiring. His family’s con- sylvania, and I send my best wishes to them Mr. Robinson, a Knoxville native for 77 tributions to the religious community in time and their families. years, founded Modern Supply Company in and money are in the record books. 1949. He devoted his life to family, business Members of the community called on him f and philanthropy. He was married to Natalie when something was needed for those who INTRODUCTION OF THE ELEC- Levison Robinson for 50 years. were less fortunate. He was always there. He TRONIC MARKETPLACE OWNER- Mr. Robinson was a lifelong member of was generous to a fault and has set a stand- SHIP DISCLOSURE ACT Heska Amuna Synagogue and was a leader ard for all of us to follow. as chairman and longtime board member. He In a Yom Kippur Sermon several years ago, also chaired the Knoxville Jewish Federation. Rabbi Joseph Weinberg, said: HON. CAROLYN B. MALONEY He established the Sylvia Robinson Memorial ‘‘Always we are commanded to seize the OF NEW YORK Fund and endowed the A.J. and Sylvia Robin- day, to create a life which will be remembered son Chapel at the synagogue in memory of IN THE HOUSE OF REPRESENTATIVES as a blessing. Not how long, but how well did his parents. I live? Not how many honors did I obtain, but Thursday, December 20, 2001 Mr. Robinson, who served as president of how honorable was my life. Not how many Mrs. MALONEY of New York. Mr. Speaker, the Southern Wholesalers Association and a things did I acquire, but how much was I able today I introduced the Electronic Marketplace Director of the American Supply Association, to give.’’ Ownership Disclosure Act. This legislation re- pioneered the concept of bath and kitchen This quote is very fitting for the life of Mitch- quires operators of Internet sites that match showrooms in East Tennessee. ell Robinson. I would like to offer my deepest buyers and sellers to disclose whether they He was also active in the Knoxville business sympathy to the Robinson family. Our Nation have financial relationships with parties in- community, where he was a charter member and our community have suffered a great loss. volved in transactions that take place on their of the Midtown Sertoma Club. He was a loyal f sites. Some Internet sites portray themselves supporter of the University of Tennessee, con- tributing to the Departments of Judaic Studies HONORING DAVID SAYLES as disinterested third parties that simply host ENGLISH a site matching buyers and sellers. The Elec- and Athletics. A World War II veteran, Mr. Robinson tronic Marketplace Ownership Disclosure Act served as a flight controller in the U.S. Air requires companies hosting such sites to af- HON. DOUG OSE Corps Radar Unit in the Pacific. firmatively disclose corporate relationships OF CALIFORNIA His beloved family also includes children they have with companies offering goods or IN THE HOUSE OF REPRESENTATIVES Rabbi Rayzel and Dr. Simcha Raphael of services on their site. Thursday, December 20, 2001 Philadelphia, A.J. Robinson and Dr. Nicole Many consumers now rely on Internet mar- Ellerine of Atlanta, and Pace and Karen Rob- Mr. OSE. Mr. Speaker, I rise today to honor ketplace sites to compare prices and buy inson of Knoxville; grandchildren Yigdal and David Sayles English of Arlington, Virginia, as goods. They should have the right to know Hallet Raphael; Micaela, Ethan and Nathaniel he joins the Arlington County Police Depart- who really owns an Internet exchange pur- Robinson, and Asher and Eli Robinson; sister ment. porting to provide a neutral marketplace. The and brother-in-law Fay and Bob Gluck of Throughout most of his adult life, David Electronic Marketplace Ownership Disclosure Boynton Beach, Fla.; brother-in-law Gilbert English has devoted himself to the safety and Act will enable consumers to make more in- Levison of Knoxville; brother- and sister-in-law protection of others. A 1989 graduate of York- formed purchasing decisions. In the long term, Jarvin and Deanne Levison of Atlanta; and town High School in Arlington, Virginia, Mr. the continued growth of Internet commerce many nieces, nephews, cousins and friends. English attended Western Maryland College depends on the medium’s integrity as a mar- Mitchell spent most of his 77 years in Knox- prior to serving in the United States Army. His ketplace. This legislation will support the Inter- ville, Tennessee. He was part of a generation service in the military, most notably at Fort net’s continued growth by increasing public that had a significant impact on Knoxville and Greely, Alaska and Fort Detrick, Maryland, confidence. the surrounding area. He came back from gave him a unique insight into helping his fel- There is a tangible need for this legislation. World War II with no money, no business, and low man. Last year, Money magazine disclosed that a limited education. But he had enduring self- Following his honorable discharge from the Quickenlnsurance.com, a site owned by Intuit confidence, determination, and a desire for ac- military, Mr. English put his medical knowl- Corporation, claimed to provide the ‘‘best complishment that stayed with him his entire edge to work as an Emergency Medical Tech- prices from America’s top insurance and loan life right up to the end. nician (EMT) while earning his paramedic’s li- companies.’’ However, according to the article, He was part of that ‘‘greatest generation’’ cense. Shortly after earning his license, David Quicken does not disclose on their site that that we read so much about today, and who returned to his hometown to work as a fire- they receive a commission from every insur- Tom Brokaw has made so famous. Men and fighter at Fire Station #8 in Arlington County, ance policy they arrange. women who have impacted and enriched all of Virginia. As it has been his lifelong dream to The American people deserve honesty, our lives over the last half of the 20th century. work in law enforcement, David joined the Ar- whether they are shopping online or in person. But as many of you know, and as Sinatra lington County Police Department earlier this For too long, some Internet retailers have sings, Mitch did it his way . . . whether it was year. avoided telling consumers the truth about who in his business, in his synagogue, or the var- Tomorrow morning, December 21, 2001, they are owned by and who benefits for spe- ious other circles he traveled. Everyone was a David Sayles English will graduate from the cial arrangements that may do harm to con- part of his empire, family, friends, customers, Arlington County Police Academy, officially be- sumers. The Electronic Marketplace Owner- and employees alike. He shared the good and coming a Police Officer in Arlington, Virginia. ship Disclosure Act let American consumers the bad with everyone. He joins an illustrious group of men and know the whole truth. This bill is good for con- The child of immigrant parents, he created women throughout our nation of whom I am sumers, it is good for businesses, and it will his own style, his own flair in everything he did proud. Let me extend my personal thanks to benefit the Internet. and everybody he touched. those who serve in uniform. If the efforts of

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00045 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.049 pfrm07 PsN: E20PT1 E2384 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 our civil servants taught us anything on Sep- accomplished residents of the District of Co- rowing and clean audits has been achieved. tember 11, 2001, it is that this badge is a sym- lumbia. The huge task of restructuring and reforming bol of heroism and honor. I know that he will This year, the Authority completed six years each city agency is proceeding with many no- wear it with pride. that have brought the District of Columbia out table improvements. The Authority, working f of the worst financial crisis in a century. To with elected officials has improved the most cope with this crisis, Congress passed the critical agencies, including public safety and HONORING COPELAND AND WI- District of Columbia Financial Responsibility education, where resident concern was pro- NONA GRISWOLD ON THEIR 50TH and Management Assistance Authority Act in nounced. These financial and management WEDDING ANNIVERSARY 1995. The city had followed several others— improvements are among the many rich fea- Philadelphia, New York, and Cleveland among tures of the Authority’s legacy, HON. JEFF MILLER them—to junk bond status indicating an inabil- However, the Authority also left an important OF FLORIDA ity to borrow, or insolvency. As with the cities warning not only for the city but for Congress IN THE HOUSE OF REPRESENTATIVES that preceded them, the District required a about the future of the city. Despite remark- ‘‘control board’’ or Authority in order to con- able city improvements and the Revitalization Thursday, December 20, 2001 tinue to borrow the necessary money to func- Act’s assumption of $5 billion in pension liabil- Mr. MILLER of Florida. Mr. Speaker, it is my tion. Unlike other cities, however, the nation’s ity and some state functions, the Authority distinct pleasure to announce to you and the capital reached this point not only because of warned of a structural deficit not of the city’s other members of this distinguished body, that local mismanagement, but also because it is a making that urgently needs congressional at- on December 21, 2001, my in-laws, Copeland city without a state and a city that carried the tention. Next session, I will introduce a bill to and Winona Griswold of Chumuckla, Florida, full complement of state functions and costs. meet the structural problem the Authority has will celebrate their 50th wedding anniversary. To the credit of the prior administration of left Congress to remedy. Copeland and Winona were married on De- President Bill Clinton, which designed a pack- Today, however, let us be grateful that the cember 21, 1951. They met in Chumuckla, age relieving the city of the most costly state most difficult part of the job of revitalizing the Florida during grade school and later became functions and of the Congress, which ap- nation’s capital has not been left to Congress. high school sweethearts and valedictorians of proved it, the District has had a remarkable re- It has been done by nine extraordinary citi- their senior classes. They have lived in covery. zens who asked nothing from Congress, not Chumuckla these past 50 years, and have Working countless hours with the Mayor and pay, and not even praise. Yet, considerable shared their love with their children Marty, the City Council, the Authority helped the Dis- praise is the least they are due from the Con- Von, Vicki and Paul, and their many grand- trict achieve investment grade bond status by gress of the United States. It is praise and children and great grandchildren. the third year of the control period, rather than honor that I ask this House to give to these The Griswolds were agricultural pioneers in in four years; create a budget reserve of $150 nine Washingtonians today from a grateful the State of Florida. They were named the million and left the city well on its way to cre- Congress and a grateful nation. Farm Family of the Year for Santa Rosa ating a 7-percent cash reserve three years THE DISTRICT OF COLUMBIA FINANCIAL County in 1985, and Copeland was inducted ahead of schedule; repay all borrowings from MANAGEMENT AND ASSISTANCE AUTHORITY into the Florida Agriculture Hall of Fame in the U.S. Treasury; eliminate the accumulated FIRST AUTHORITY February of this year. deficit; and post four years of balanced budg- Andrew Brimmer (Chair) Their love story is one that is still in ets with surpluses, two years ahead of the Dr. Andrew Brimmer served as the first progress. I can tell you firsthand their love for congressional mandate to do so. chair of the Authority. Mr. Brimmer, the each other has grown even stronger through Elected officials, who continued to run the first African American to serve on the Fed- the years and serves as an inspiration to us city throughout, deserve credit for this im- eral Reserve Board, has long been recognized all. provement. However, they would doubtlessly as a distinguished economist. Among his Love has flourished between these two agree that more than any single group or indi- many posts and achievements is service as hearts, and I wish them continued happiness viduals, the Financial Authority deserves the an economist at the Federal Reserve Bank of New York and posts teaching economics at and love for years to come. credit for the four-year rapid recovery of the Michigan State University, the Wharton On behalf of the United States Congress District. It was the credibility of the individuals School, the University of Pennsylvania, and and the people of Northwest Florida, I extend on the Authority and the extraordinary job they other colleges and universities. Dr. Brimmer our sincere congratulations to Copeland and did that enabled the District to borrow in its is the President of Brimmer and Company. Winona Griswold, whose love stands as a own name. The city never had to have the Au- Dr. Brimmer became the chair of the Au- shining example to an entire community. thority borrow for the District. It was the Au- thority when the city was at its lowest point thority that worked hand in glove with D.C. of financial and management disrepair. He f led the Authority as it took on very large elected officials to assure that the finances and intractable fiscal and operational prob- IN HONOR OF THE ACHIEVEMENTS and the management of the D.C. government OF THE DISTRICT OF COLUMBIA lems and managed them with skill and deter- would proceed apace to improve. And it was mination. FINANCIAL RESPONSIBILITY AND the Authority that gave Congress the con- Stephen Harlan (Vice Chair) MANAGEMENT ASSISTANCE AU- fidence that the city would be ready for the THORITY MEMBERS Stephen Harlan served as vice chair for the sunset of the Authority on September 30, first term of the Authority. He was the chair 2001. of H.G. Smithy Company, a specialized real HON. ELEANOR HOLMES NORTON It would be difficult to overestimate the im- estate firm providing mortgage banking, fi- OF THE DISTRICT OF COLUMBIA portance of these Washingtonians to the re- nance and investment, and multi-family property management services. He pre- IN THE HOUSE OF REPRESENTATIVES covery of the city or the difficulty of the work they were called upon to do—and did. The viously served as vice chairman of KPMG Thursday, December 20, 2001 Peat Marwick. District could never have purchased from ex- Mr. Harlan successfully led the Authority’s Ms. NORTON. Mr. Speaker, as Congress perts of their special competence what each public safety revitalization at a time when prepares to end this session, unique in our gave to the city as a contribution of unique ex- crime was the primary concern of District history, I ask the House to recognize the work pertise, endless hours, extraordinary effort, residents and officials. of nine Washingtonians who have just com- and plain, priceless wisdom. Joyce Ladner pleted a uniquely important public service for The city the Authority found had been Dr. Joyce Ladner has served as Interim our nation’s capital, and therefore for our na- wracked with many years of overspending and President of Howard University, Vice Presi- tion. The nine served the District of Columbia an accumulated deficit as well as a dysfunc- dent for Academic Affairs, and professor of on the District of Columbia Financial Respon- tional government of city agencies. The city sociology at the Howard University School sibility and Management Assistance Authority. they have left has had four straight years of of Social Work. She is currently a Senior They are the two chairs, Andrew Brimmer and balanced budgets plus surpluses and a much Fellow of Government Studies at the Brook- ings Institution. Alice Rivlin, the vice chairs, Stephen Harlan improved fully functioning city government. At Dr. Ladner successfully concentrated on and Constance Berry Newman, and the mem- the end of the last fiscal year, the District had improving public schools when education bers, Eugene Kinlow, Darius Mans, Joyce a larger surplus than Maryland and larger than was the primary concern of the Authority. Ladner, Edward Singletary, and Robert Wat- Virginia, which had no surplus. The bottom Constance Berry Newman kins. They are very distinguished Americans line that is expected of every jurisdiction of liv- Constance Berry Newman, one of the most and among the most distinguished and most ing within its budget, credit to assure bor- versatile officials in the public life of the

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00046 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.052 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2385 country, served as vice chair during the sec- Federal Reserve System Board of Governors. OBITUARY OF EVA LOU ond term of the Authority and is the only He is currently Country Director at the BILLINGSLEY RUSSELL member that served both terms. She has World Bank for several large African na- been appointed by Presidents of the United tions. States four times to major federal posts and Dr. Mans’ strong institutional and aca- HON. EARL F. HILLIARD has been a Woodrow Wilson Visiting Fellow, demic financial background was very useful OF ALABAMA and a member of the adjunct faculty at the to the Authority’s work on D.C.’s finances. IN THE HOUSE OF REPRESENTATIVES Kennedy School at Harvard University and a Robert Watkins, III Thursday, December 20, 2001 trustee of the Brookings Institution. Ms. Newman has served as Undersecretary of the Robert Watkins, a distinguished lawyer, Mr. HILLIARD. Mr. Speaker, Eva Lou Smithsonian Institution, Director of the Of- has been a partner at Williams and Connolly Billingley Russell, also affectionately known as fice of Personnel Management, and consult- since 1977. His background includes leader- ‘‘Grandma Rap’’, 82 of Birmingham, died on ant to foreign governments and inter- ship posts in the Office of the U.S. Attorney Friday, December 14, 2001. Mrs. Russell was national organizations, among other posts. for the District of Columbia when he was an Assistant U.S. Attorney and work in the the owner of Fraternal Cafe« in downtown Bir- Ms. Newman is currently the Assistant Ad- mingham for more than 20 years. She was a ministrator for the Bureau for Africa for the Civil Rights Division of Justice Department. Mr. Watkins successfully worked on justice Civil Rights activist most noted for feeding the U.S. Agency for International Development. local as well as national civil rights movement Ms. Newman successfully led a number of issues and the Metropolitan Police Depart- areas for the Authority, ranging from public ment during a period when the Department for many years. In addition, Mrs. Russell oper- schools to procurement. underwent substantial reform and crime was ated feeding programs for the homeless and reduced. Edward Singletary poor, years before, attention was given to this problem in our communities. Edward Singletary is a retired business ex- She spent considerable time encouraging ecutive with experience in accounting, budg- f young people to get an education and to stay eting, financial planning, finance operations MONROE TOWNSHIP CELEBRATES and telecommunication. He worked in the away from drugs. Many times this message telecommunications industry for nearly 30 THE CAREER OF RETIRING was ‘‘rapped’’ to the children. It is not uncom- years. During his business career, he served COUNCIL VICE PRESIDENT LEO- mon to pick up a magazine and find one of the city as chair of the Washington Conven- NORA FARBER her poems or to hear a child reciting one of tion Center, a member of the D.C. Retire- her poems in a church or at a school through- ment Board, and President of the Wash- out the city. She is the author of the book ington Convention and Visitors Association. HON. RUSH D. HOLT OF NEW JERSEY ‘‘Golden Threads’’—A Collection of Poems While on the Authority, Mr. Singletary About About the Black Family. She also has successfully worked on government-wide ad- IN THE HOUSE OF REPRESENTATIVES three other manuscripts of books that are yet ministrative issues for the city, including Thursday, December 20, 2001 technology and procurement. unpublished. Mrs. Russell has received numerous awards SECOND AUTHORITY Mr. HOLT. Mr. Speaker, I rise today in rec- ognition of retiring Monroe Township Council throughout her life. A few of these include: Alice Rivlin (Chair) Channel 13 Hometown Hero—1991, WENN Dr. Alice Rivlin, one of the country’s most Vice-President, Leonora Farber. For many years, Councilwoman Farber has Radio Favorite Person, Beautiful Activist respected economists, served as chair of the Award, SCLC Humanitarian Award, Crystal Di- Financial Authority for its second term. She made invaluable contributions to the Township has had one of the most distinguished public of Monroe and to the State of New Jersey amond Award for Community Service; Awards service careers in the nation as Vice Chair of through her exceptional commitment to civil from: University of Alabama, Birmingham, the Board of Governors to the Federal Re- service, education, and the arts. Lawson State Community College, Booker T. serve, Deputy Director, then Director of the Throughout her career Lee Farber has self- Washington Business College, and Miles Col- Office of Management and Budget, and as the lessly contributed her time and energy to her lege. She has also received numerous awards first director of the Congressional Budget Of- from elementary, middle and high schools in fice, among others. Dr. Rivlin is currently a community and has embodied the spirit of public service that we in Congress hold so the Birmingham area. Senior Fellow in Economic Studies at the She was very active at Saint Joseph Baptist dear. She began her career of service as a Brookings Institution. Church where she has been a member for a public school teacher after receiving her Mas- Dr. Rivlin was the chair of a landmark number of years. Most recently, she was a commission on the District government and ters Degree in Secondary School Administra- deaconess, Chair of the Pastor’s Aide Board, its finances that bears her name and that tion and Supervision from Hofstra University. and worked with the Missionary Society, predicted the problems of the city years con- Her unwavering support of education in New Homeless Committee, Willing Workers and siderably before they resulted in the crisis Jersey continued when she became the Chair that brought on the need for the Authority served in numerous other capacities of leader- she led. When Dr. Rivlin became chair of the of the New Jersey Training School for Boys ship throughout her membership at the Authority in September 1998, she led the de- Citizens Review Board. church; including Vice President of the St. Jo- tailed financial work on government oper- In her efforts to advance the interests of her seph Day Care Center, Youth Supervisor and ations necessary to manage a careful transi- neighbors, Councilwoman Farber has also Chair of the Deaconess Board. tion of control of the District to the Mayor served as Whittingham’s representative to the Mrs. Russell leaves the following survivors: and City Council. Adult Communities Advisory Board, as a Three sons: Joseph Russell (Ida), Sac- Constance Berry Newman (Vice Chair—see member of the Executive Board of Greenbriar ramento, CA., Leonard Russell (Juanita)-Bir- above) at Whittingham Residents Association, and of mingham, Carl Russell (Constance), Eugene Kinlow the Executive Board of U.F.T. Retirees. Pembrook Pines, FL.; Two daughters-Bir- Eugene Kinlow is a native Washingtonian Lee Farber has passionately supported mingham, Sandra Russell Jackson, Carolyn with exceptionally strong community ties, women’s rights and has provided a voice to Russell Todd (Walter); son-in-law-Jerome including service as a former chair of the the concerns of the disabled as a member of D.C. Board of Education. He is a retired Dep- Huguley, Atlanta, GA. And a daughter-in-law, uty Assistant Secretary for Human Re- the League of Woman Voters and as Council Rosa Mae Russell, Birmingham; Two brothers sources in the Department of Health and representative to the Americans with Disabil- and one sister from Cleveland, OH: Richard Human Services and a recipient of the high- ities Committee. Billingsley, Simon Billingsley (Eula) and est award for federal executives, the Presi- An outspoken advocate of environmental Johnnie Billingsley; a sister Hattie Riddle dential Distinguished Rank Award. He pre- issues, Councilwoman Farber is the former (Will), Knoxville, TN; a sister-in-law, Margaret viously served as a staff statistician at the chairperson of Monroe’s Environmental Com- Billingsley, Columbus, OH. Mrs. Russell also U.S. Commission on Civil Rights, and mission where she helped protect New Jer- had 17 grand children, 21 great grand chil- worked as the Housing Research Director. sey’s air, water, and land from pollution and Mr. Kinlow’s 30 years of community service dren, a God daughter and son and a host of in the Anacostia area led to his determined degradation. An arts patron and enthusiast, nieces, nephews, relatives and friends. work as the Authority’s lead member on re- Councilwoman Farber also currently serves as The, Home Going Service for Mrs. Russell vising health care for the District. Council Liaison to the Cultural Arts Commis- will be Saturday, December 22, 2001 at Saint Darius Mans sion. Joseph Baptist Church, 500 9th Avenue North, Dr. Darius Mans was a manager for com- Lee Farber has led a distinguished career of Birmingham. Roberts Central Park Chapel di- pensation policy and administration at the public service in New Jersey that sets an im- recting. Visitation is scheduled for Thursday, World Bank. Prior to his work at the World portant example for us all. I hope my col- December 20, from 11 a.m. to 7 p.m. and Fri- Bank, Dr. Mans was an economist for the leagues will join with me in honoring her. day, December 21, from 4 to 9 p.m.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00047 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.056 pfrm07 PsN: E20PT1 E2386 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 YOUTH COURT: CIVIC ENGAGE- not as a politician but ‘‘an apple peddler work- To maintain and strengthen that unity for the MENT AND CHARACTER EDU- ing for the people.’’ work that lies ahead, we need to find new CATION THROUGH JUVENILE AC- I would like to thank Ferris Belman for a job ways to solve conflict and to overcome the COUNTABILITY well done. His selflessness and devotion to his suspicions that arise from differences in cul- constituents and Virginia are to be com- ture, race, religion, economic condition and HON. J. DENNIS HASTERT mended, and his service will be missed. political ideology. Establishment of shared tra- OF ILLINOIS f ditions that promote intercultural contact will help. IN THE HOUSE OF REPRESENTATIVES STATEMENT BY THE HONORABLE On December 15, 2000, the 106th Congress Thursday, December 20, 2001 SOLOMON P. ORTIZ ON H.R. 3525 unanimously approved a measure that calls Mr. HASTERT. Mr. Speaker, I rise to praise for annual worldwide commemoration of the the efforts of the Constitutional Rights Founda- HON. SOLOMON P. ORTIZ successful ‘‘One Day in Peace January 1, tion and the Constitutional Rights Foundation OF TEXAS 2000’’ with shared meals, inter-cultural ex- change, pledges of non-violence, and gifts to Chicago. Their work encourages schools, IN THE HOUSE OF REPRESENTATIVES youth programs, attorneys, judges, and police the hungry. departments to work together to form and ex- Thursday, December 20, 2001 One Day in Peace provides an unparalleled pand diversionary programs. Mr. ORTIZ. Mr. Speaker, the Rio Grande example of global cooperation that is both in- These programs, known as Youth Courts, Valley thanks the House for this economic structive and inspiring. On that first day of the are where juveniles, under the supervision of stimulus package for the border***our new millennium several billion people and representatives from the education and legal economic opportunities were severely curtailed nearly every government in the world acted re- communities, determine sentencing for first this fall when the extension of a deadline to sponsibly, cooperatively and with astonishing time Juvenile offenders who are charged with obtain new border crossing cards was held up success to avert the combined threats of un- misdemeanors or minor infractions of school for three months. ruly crowds, terrorism and fears of Armaged- rules. The efforts of the House Border Caucus don—as well as feared panic and hoarding re- The program displays that as a sentencing have borne fruit with the inclusion of the ex- lated to expected computer failures. The option, community service can serve both the tension of the deadline to replace old Border ‘‘OneDay’’ movement, begun by children and offender and the community. Crossing Cards (BCCs) with new ‘‘laser eventually pledged by one hundred countries, 1000 organizations in 135 countries, 25 U.S. f visas.’’ This is the perfect Christmas present to the governors and hundreds of mayors worldwide TRIBUTE TO FERRIS BELMAN Southwest Border from the United States Con- surely helped. The result could be called the gress. world’s first deliberate day of peace. HON. JO ANN DAVIS In the aftermath of the September 11 ter- We believe this collective achievement by much of humankind is worth remembering and OF VIRGINIA rorist attack, the increased vigilance at the repeating each year. The United Nations Gen- IN THE HOUSE OF REPRESENTATIVES border has also translated into a rougher tone eral Assembly agrees. It recently adopted a Thursday, December 20, 2001 in the Congress with regard to what should have been a pro forma extension of the dead- resolution (56/2) inviting all Member States, Mrs. JO ANN DAVIS of Virginia. Mr. Speak- line. and all people in the world to celebrate ‘‘One er, I rise to pay tribute to a distinguished con- The Southwest border has seen extensive Day in Peace 1 January 2002, and every year stituent and public servant whose more than economic damage as a result of the deadline thereafter.’’ At this season, as we enjoy the time-hon- 30 years of service will come to a close at the not being extended, as expected, in Sep- ored holiday traditions of our separate faiths, end of this month. tember. let us also celebrate a new tradition with a Ferris Belman of Stafford County, one of the I encourage the Senate to expedite consid- simple, world-wide all-faith holiday observance jurisdictions within the 1st District of Virginia, eration of the bill since the House has over- (comparable to our American Thanksgiving) is a retired businessman who has devoted come the objections now. that demonstrates our mutual resolve to create much of his adult life to serving the people of As the Co-Chairman of the House Border a future world of peace and sharing. both the city of Fredericksburg and Stafford Caucus, I thank the House for including this The schoolchildren who brought the concept County. provision so important to the Rio Grande Val- of the ‘‘OneDay’’ holiday to Capitol Hill (some For 13 years he was a member of the Fred- ley. of the youngest and most energetic lobbyists ericksburg City Council and has served as a I am also pleased that the bill authorized we’ve seen) urge all Americans to celebrate member of the Stafford Board of Supervisors funding for additional staff and training to in- OneDay by pledging non-violence to one an- for 18 years, twice as a board chairman. He crease our border security. other on January first. They also ask us to was also just recently the President of the Vir- I am particularly pleased that the bill in- seek out someone of another culture and ginia Association of Counties. cludes a more complete monitoring program of share a meal together, then match or multiply Mr. Belman has served on numerous com- foreign students, as since September 11 it is the cost of that meal with a gift to the hungry mittees and commissions over the years and glaringly apparent that data and reporting at home or abroad, in tangible demonstration played a leading role in promoting economic gaps must be filled. growth and development in both in the city of our desire for increased friendship and and county. f sharing. Ferris is a man of great honesty and char- A HOLIDAY MESSAGE ABOUT We think these young peacemakers have a acter who has worked diligently on behalf of UNITY good idea. Happy holidays, both old and new! the people of Virginia. As Stafford County Ad- f ministrator C.M. Williams notes, Ferris Belman HON. HENRY J. HYDE INDUSTRIAL DEVELOPMENT BOND helped insure that Ferry Farm in Stafford, the PROMOTION ACT OF 2002 boyhood home of George Washington, would OF ILLINOIS be preserved intact. He was also largely re- HON. JOHN CONYERS, JR. HON. AMO HOUGHTON sponsible for the county’s acquisition of Gov- OF MICHIGAN OF NEW YORK ernment Island, the site of quarries that pro- IN THE HOUSE OF REPRESENTATIVES IN THE HOUSE OF REPRESENTATIVES vided the stone for construction of the United States Capitol building and the White House. Thursday, December 20, 2001 Thursday, December 20, 2001 Ferris Belman will leave office with the Mr. CONYERS. Mr. Speaker, in this holiday Mr. HOUGHTON. Mr. Speaker, I am grateful appreciation of the thousands of peo- season we are grateful for the familiar tradi- pleased to be joined by my colleagues, Mr. ple whose lives he has touched through his tions of each of our faiths that comfort us and NEAL and Mr. ENGLISH, in introducing the ‘‘In- service. He will be remembered as a public of- connect us with others. We are also thankful dustrial Development Bond Promotion Act of ficial who always found time to listen to the for the unprecedented unity of the Congress, 2002.’’ While retaining the dollar limit on the concerns of his constituents, and went the the country, and the larger global community tax-exempt issue itself, the bill broadens the extra mile to do all he could for those he rep- in its shared determination to aid the victims of pool of manufacturers who may be eligible to resented. Ferris, who once owned several gro- September 11, and to defeat the forces of ter- take advantage of the benefits of qualified cery stores, always said he thought of himself rorism. small issue bonds.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00048 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.064 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2387 Qualified small issue bonds play an impor- is responsible for the ongoing management of vember 2002 general election. These are the tant role in creating and sustaining a vibrant the ever growing city-county public health pro- infamous ballots used in Florida and else- manufacturing sector in rural communities. grams. These programs include disease con- where. Today, however, the so-called ‘‘$10 million trol, preventive and environmental health and H.R. 3295 also creates a bipartisan Election limit’’ impedes many growing manufacturers medical services. Assistance Commission, which is intended to from taking advantage of the benefits of quali- Harold is a proven problem solver. He is a be a national clearinghouse for information fied small issue bonds. This rule states that master at bringing people together—those and to review the procedures used for Federal the aggregate face amount of the issue, to- who need the service and those who provide elections. gether with the aggregate amount of certain it. His soft-spoken manner, intelligence and It authorizes $2.25 billion to help states im- related capital expenditures during a six-year broad experience in public health issues prove their voting systems. Specifically, this period beginning three years before the date makes Harold Bengsch an invaluable resource bill will help states establish and maintain ac- of issue and ending three years after that to his community and well respected through- curate voter lists; encourage voters to get out date, must not exceed $10 million. This $10 out the state of Missouri. and vote; improve voting equipment; improve million limit was imposed in 1978. It does not The unreasonable actions of government the processes for verification and identification consider changes in the economy, inflation, or bureaucrats are regularly criticized on the of voters; recruit and train poll workers; im- the increased costs associated with the con- Floor of the House. In this case I want my col- prove access for voters with disabilities; and fi- struction of manufacturing facilities. Even in leagues to know there is at least one bureau- nally, educate voters about their rights and re- small rural communities like those in the dis- crat who is doing an outstanding job of serving sponsibilities. trict, industrial development authorities have the public. I can assert without hesitation that Most importantly, H.R. 3295 will establish projects that routinely exceed this $10 million the public health of Springfield Greene County minimum federal standards for state election limit and are therefore ineligible for this type of and Southwest Missouri is better today be- systems regarding voter registration systems, financing. cause of the work, effort and vision of Harold provisional voting, the maintenance of accu- The Industrial Development Bond Promotion Bengsch. racy of voter registration records; overseas ab- Act of 2002 would permit capital expenditures f sentee voting procedures, permitting voters of $30 million to be disregarded in determining with disabilities to cast a secret ballot, and the aggregate face amount of certain qualified PERSONAL EXPLANATION allow voters an opportunity to correct errors. small issue bonds. Now, as I said earlier, this bill is not perfect. Given today’s global economy and proof HON. MICHAEL G. OXLEY In fact many well-respected organizations in that U.S. manufacturers are not adverse to OF OHIO the civil rights community oppose this legisla- building and manufacturing offshore, it is most IN THE HOUSE OF REPRESENTATIVES tion. I understand and share some of their important that the calculation of the limit be frustrations. However, I believe that by pass- Thursday, December 20, 2001 changed. Across the country, manufacturing ing this bill today, we can move the process jobs are declining. The manufacturing sector’s Mr. OXLEY. Mr. Speaker, I was absent from forward in hopes that the bill that comes back share of all U.S. jobs slipped from 17 percent the House floor during yesterday’s rollcall from the Senate will have many improve- ten years ago to 13 percent today. Small issue votes on H. Res. 320, H.R. 3529, and the mo- ments. bonds are a valuable tool to local economic tion to recommit H.R. 3529. Had I been I commend my colleagues Mr. NEY of Ohio development authorities and go a long way to- present, I would have voted ‘‘aye’’ on H. Res. and Mr. HOYER of Maryland for their hard work ward creating and maintaining investment in 320 and H.R. 3529, and ‘‘nay’’ on the motion in crafting this legislation. I encourage them, manufacturing facilities in communities to recommit H.R. 3529. however, to work with Mr. CONYERS of Michi- throughout our country. f gan and Senator DODD to ensure that if there We encourage our colleagues to join us in is a conference on this bill, we can vote for an H.R. 3295, HELP AMERICA VOTE cosponsoring this legislation. even better bill. ACT f Vote yes on H.R. 3295. f HAROLD BENGSCH AWARDED 2001 HON. TOM UDALL HUMANITARIAN OF THE YEAR OF NEW MEXICO PUBLIC HEALTH SECURITY AND IN THE HOUSE OF REPRESENTATIVES BIOTERRORISM RESPONSE ACT HON. ROY BLUNT Thursday, December 20, 2001 OF MISSOURI HON. JOHN SHIMKUS IN THE HOUSE OF REPRESENTATIVES Mr. UDALL of New Mexico. Mr. Speaker, OF ILLINOIS today, the House is considering H.R. 3295, IN THE HOUSE OF REPRESENTATIVES Thursday, December 20, 2001 the ‘‘Help America Vote Act of 2001,’’ an elec- Mr. BLUNT. Mr. Speaker, I rise to honor a tion reform proposal that seeks to address Thursday, December 20, 2001 dedicated civil servant who is working daily to many of the problems with our national elec- Mr. SHIMKUS. Mr. Speaker, as a sponsor improve the health of residents in the Seventh toral system. It has been over a year since the of H.R. 3448, which was introduced in the Congressional District of Missouri. 2000 Presidential Election, which brought House on December 11, 2001, I would like to Earlier this month, Harold Bengsch, the Di- many of these problems to light. Although it is include for the record the following description rector of the Springfield-Greene County, Mis- not perfect, this legislation is long over-due, of the bill: souri Health Department, was awarded the and I urge my colleagues to support its pas- Section 302 would provide the Secretary au- 2001 Humanitarian of the Year Award, estab- sage. thority to administratively detain any article of lished by the Community Foundation of the I won’t rehash the events of the 2000 Cam- food where FDA has credible evidence or in- Ozarks. The recognition comes with a $5,000 paign, as we are all too familiar with hanging formation indicating that such article ‘‘presents cash award that is to be divided between the chads, the flawed butterfly ballot, and the a threat of serious adverse health con- recipient and the charities of their choice. Mr. countless ballots in Florida—and elsewhere— sequences or death to humans or animals.’’ Bengsch, true to the reasons why he was so that were discarded and not tallied. That was The ‘‘serious adverse health consequences’’ honored, gave the entire amount to charity. a national tragedy. We’ve had a year to do standard, which is used consistently in Title III Harold received the award for three dec- something here in the House, and I am glad of this Act, relates to the situation in which ades of outstanding work improving the area’s we are finally acting. I hope we can use this there is a reasonable probability that the use public health. His dedication and vision were important legislation to address many of the of, or exposure to, a violative product will instrumental in cutting the number of children shortcomings of our national voting system. cause serious adverse health consequences testing positive for elevated blood lead levels H.R. 3295 is just a first step in our ongoing ef- or death. This corresponds to FDA guidance in Greene County from 28 percent to 15 per- fort to restore our constituents’ trust in the sys- pursuant to Title 21, Section 7.3 of the Code cent. Under his leadership, immunization rates tem of how we conduct our elected officials. of Federal Regulations. for children at two years of age has increased Our constituents deserve to have that trust re- The authority provided under Section 302 from less than 50 percent to more than 90 stored. may not be delegated by the Secretary to any percent. As director of the local health depart- This bill authorizes $400 million for one-time official less senior than the FDA district direc- ment, Harold has conducted research, had his payments to states or counties to replace tor in which the article is located. Under this studies published in professional journals and punch card voting systems in time for the No- authority, the article may be detained for a

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00049 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.065 pfrm07 PsN: E20PT1 E2388 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 reasonable period, not to exceed 20 days, un- particular items of food meet the standard for data). Nor does it permit access to marketing less the Secretary requires up to an additional detention. plans. 10 days. Because there is potential for food of Section 303 provides authority to the Sec- Under Section 304 the Secretary must take limited shelf life to be detained, the ‘‘reason- retary to debar from importing articles of food, appropriate measures to prevent the unauthor- able period’’ may, depending upon the perish- any person that is convicted of a felony relat- ized disclosure of trade secret or confidential ability of the food, be significantly shorter than ing to food importation, or any person that re- information obtained by the Secretary pursu- 20 days. The Secretary is required to institute peatedly imports food and who knew, or ant to this section. The Secretary shall ensure rulemaking to establish expedited procedures should have known, that the food was adulter- that adequate procedures are in place to en- for the detention of perishable foods, such as ated. This section would authorize debarment sure agency personnel will not have access to fresh produce, fresh fish and seafood prod- following a felony conviction regarding food records without a specific reason and need for ucts. The Secretary should promptly complete importation. In the great majority of situations such access, and that possession of all copies that rulemaking. permissive debarment authority will be em- of records will be strictly controlled, and that Within 72 hours of filing an appeal the Sec- ployed in situations involving a felony convic- detailed records regarding all handling and ac- retary is required to provide opportunity for an tion. In addition, this section includes authority cess to these records will be kept. informal hearing and render a final decision that would allow debarment of a person with- Section 305 requires all facilities (excluding regarding the appeal. The Secretary’s decision out a relevant criminal conviction. This author- farms) that manufacture, process, pack or hold regarding the appeal is subject to judicial re- ity is intended to bolster efforts to deter bioter- food for consumption in the United States to view consistent with the Administrative Proce- rorism. The Secretary should primarily use this file with the Secretary, and keep up to date, a dure Act, Title 5, Section 706, of the United authority to debar bad actors that repeatedly registration that contains the identity and ad- States Code. There is great need for timely re- and knowingly import food that seriously dress of the facility and the general category view of an administrative detention order and threatens public health. of food manufactured, processed, packed or the Secretary should assure that appeals are Most forms of adulteration do not pose a se- held at the facility. This section authorizes the resolved in a timely manner. The value of per- rious threat to public health and many forms of Secretary to exempt certain retail establish- ishable foods may be lost entirely, and even adulteration pose no public health threat at all. ments only if the Secretary determines that the value of foods that have considerable shelf When food adulteration occurs, food importers the registration of such facilities is not needed life may be reduced substantially if administra- are often innocent purchasers of the food. for effective enforcement. The purpose of reg- tive and judicial review are inappropriately de- This debarment authority should not be used istration under this section is to authorize the layed. against innocent purchasers of food, nor is Secretary to compile an up-to-date list of rel- While an article of food is subject to admin- this authority to be used as an administrative evant facilities to enable the Secretary to rap- istrative detention, the Secretary may order shortcut to act against an importer where idly identify and contact potentially affected fa- that it be held in a secure facility. Detention of criminal prosecution is not sustainable. cilities in the context of an investigation of bio- the food in a secure facility is not a require- Section 304 provides the Secretary the au- terrorism involving the food supply. ment. The Secretary should ensure that the thority to inspect and copy all records relating Enforcement of Section 305 would be de- food would be held under commercially appro- to an article of food if the Secretary has cred- layed 180 days from the date of enactment, priate conditions of cleanliness, temperature, ible evidence or information indicating that an and this section requires the Secretary to take humidity and whatever other considerations article of food presents a threat of serious sufficient measures to notify and issue guid- are reflected in industry practice regarding health consequences or death to humans or ance within 60 days identifying facilities re- holding the article of food under detention. animals. This provision excludes farms and quired to register. This section also requires Conditions of the secure storage facility should restaurants and is subject to certain limitations the Secretary to promulgate adequate guid- not erode the safety or quality of a detained including limitations to ensure the protection of ance, where needed, to enable facilities to de- article. The Secretary should also take reason- trade secrets and confidential information. termine whether and how to comply with these able precautions to protect against an inappro- Section 304 authorizes the Secretary to registration requirements. The Secretary is en- priate release of a detained food. Secured issue a regulation requiring maintenance of couraged to utilize the notice and comment storage requirements should apply if there is a additional records that are needed to trace the process as an appropriate method for notifying reasonable apprehension that the article of de- source and chain of distribution of food, in potential registrants of their obligation to reg- tained foods are likely to be inappropriately re- order to address credible threats of serious ister and to receive advice and assistance leased. This section does not impose any obli- adverse health consequences to humans or from registrants on how best to develop a reg- gation on the owner of a detained food to bear animals. This provision excludes restaurants istration system that is both workable and the cost of the secure storage facility. and farms, and the Secretary is provided the cost-effective. In many instances, additional This section also permits the Secretary to authority to take into account the size of the steps may be needed since the notice and order a temporary hold for a reasonable pe- business when imposing any record keeping comment may not be adequate to inform small riod of time, but not longer than 24 hours, of requirements and tailor the requirements to businesses and other importers who may not food offered for import if an FDA official is un- accommodate burden and costs consider- have the resources or capabilities to research able to inspect the article at the time it is of- ations for small businesses. and track federal regulatory notices in a timely fered for import and where the Secretary al- Section 304 authorizes the issuance of reg- manner prior to the expiration of the 180-day ready has ‘‘credible evidence or information in- ulations to require the maintenance of so- enforcement bar. dicating that such article of food presents a called ‘‘chain of distribution’’ records that This section does not impose a registration threat of serious adverse health consequences would enable the Secretary to trace the fee, and calls for a one-time registration. In or death to humans or animals;’’ the same source and distribution of food in the event of other words, once a facility is registered it will standard employed for administrative detention a problem with food that presented a threat of only have to amend its original registration in under this section. The period of the hold is in- serious adverse health consequences or death a timely manner to reflect any changes. This tended to allow the Secretary sufficient time to to humans or animals. This authority may not section also allows and encourages electronic dispatch an inspector to the port of entry in be used to require a business to maintain registration to help reduce paperwork and re- order to conduct the needed inspection, exam- records regarding transactions or activities to porting burden, but registration would also be ination or investigation. The authority to tem- which it was not a party. The Secretary has in- permitted using a paper form. The Department porarily hold an article of food is not provided dicated that chain of distribution records that should work in a cooperative manner with fa- to facilitate mere administrative convenience. document the person from whom food was di- cilities in terms of their obligations to register, Instead, it is intended to reflect the physical rectly received, and to whom it was directly and should be reasonable in situations where absence of an inspector at the port of entry, delivered, would sufficiently enable adequate facilities are making good faith efforts to com- or other situations, that render inspection im- tracing of the source and distribution of food. ply. possible at the time of entry. The authority to This records access would not extend to the Registration should be made as simple as temporarily hold an article of food under this most commercially sensitive or confidential possible (such as permitting both electronic section should not delay or unnecessarily dis- records, including recipes, financial data, pric- and paper registration, as well as permitting a rupt the flow of commerce, and both the au- ing data, personnel data, research data, or headquarters to register on behalf of all estab- thority to detain foods and the authority to sales data (other than shipment data regard- lishments of a company) and the Secretary temporarily hold foods under this section are ing sales). This authority would not permit ac- shall promptly complete a rulemaking regard- intended to be used to deter bioterrorism and cess to any records regarding employees, re- ing exemption from registration requirements therefore apply to specific instances where search or customers (other than shipment for various types of retail establishments. As

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00050 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.069 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2389 part of this rulemaking the Secretary should UNITED STATES FOREST SERVICE nopoly—the ‘‘pediatric exclusivity’’—which the look broadly at the various types of the food AND FISH AND WILDLIFE SERV- drug companies then use as a marketing tool establishments in order to ascertain whether ICE REPORTS to promote and increase the drug’s sales. they should be exempted and shall exempt What I find horrifying is the grant of exclu- from registration those facilities that are not HON. GEORGE R. NETHERCUTT, JR. sivity takes place after the drug company does necessary to accomplish the purpose of this OF WASHINGTON its study but before anyone knows what is in- section. The Secretary should assure that im- IN THE HOUSE OF REPRESENTATIVES cluded in the results of the study. Nothing is plementation of this section does not unneces- Thursday, December 20, 2001 said to the general public—which includes par- sarily disrupt the flow of commerce. ents and pediatricians—or prescribing physi- Mr. NETHERCUTT. Mr. Speaker, the recent cians about the safety, effectiveness, or dos- Section 306 requires the Secretary to pro- published reports about the planting of false age requirements. Under S. 1789, there is no mulgate a rule to provide for prior notice to the evidence by biologists with the United States requirement to change the labeling on the Secretary of food being offered for import. The Forest Service and the United States Fish and drug to reflect the changes that may be need- prior notice is to occur between 24 and 72 Wildlife Service are alarming. ed when the drug is dispensed to young peo- hours before the article is offered for import. In An internal Forest Service investigation has ple. There is no label to tell doctors, patients, found that the science of the habitat study had circumstances where timely prior notice is not and their families the proper dosage, or how been skewed by seven government officials: given, the article is to be held at the port until to dispense or use the drug. three U.S. Forest Service employees, two U.S. such notice is given and the Secretary, in no Fish and Wildlife Service officials and two em- My argument has always been this: before more than 24 hours, examines the notice and ployees of the Washington Department of Fish you grant pediatric exclusivity to a pharma- determines whether it is in accordance with and Wildlife. ceutical company and before this exclusivity is the notice regulations. At that time, the Sec- These officials, according to published re- then marketed as being FDA approved for pe- retary must also determine whether there is in ports, planted three separate samples of Ca- diatric use, shouldn’t you at least know what his possession any credible evidence or infor- nadian lynx hair on rubbing posts used to is the effect of the drug on young people? mation indicating that such article presents a identify existence of the creatures in the two Under current law—and this bill would ex- threat of serious adverse health consequences national forests. Had the deception not been tend current law after the study is completed, or death to humans or animals. This deter- discovered, the government likely would have exclusivity is granted, but whether the drug mination by the Secretary should not delay or banned many forms of recreation and use of helps or hurts young people remains a secret unnecessarily disrupt the flow of commerce. natural resources in the Gifford Pinchot Na- and is not disclosed to the doctors, patients, tional Forest and Wenatchee National Forest and their families for an average of 9 months. Section 306 is not intended as a limitation in Washington State. The restrictions would Shouldn’t this information get out to these on the port of entry for an article of food. In have had a real-life devastating impact on the people before they ingest this medicine? some instances, such as inclement weather, economy of Washington State. I have a chart, which I have used on the routine shipping delays, or natural disasters, a Today I join with many of my colleagues in floor before. It highlights the problems with S. shipment of food may arrive at a port of entry demanding that these employees, upon evi- 1789, which does not require labeling changes other than the anticipated port of entry pro- dence of their guilt is established, be imme- until 11 months after the drug is being used in vided on the notice. When such situations diately terminated. It is unacceptable that the pediatric population. How many of you arise, arrival at a port other than the antici- these employees have simply been counseled would give your child a drug and not know pated port should not be the sole basis for in- for their planting of evidence. Federal employ- whether it helps or harms your child until 11 ees should be held accountable for their ac- validating a notice that is otherwise in accord- months later? tions—period. ance with the regulations. Also, the importer of Further, I support a complete review of the There have been 33 drugs granted pediatric an article of food is required to provide infor- lynx study as well as a review of any other exclusivity. Only 20 have been re-labeled to mation about the grower of the article of food, projects on which these employees may have reflect the results of the pediatric study, and if that information is known to the importer at worked. The integrity of these agencies and even those label changes have taken an aver- the time that prior notice is being provided in our future efforts to protect threatened and en- age of 9 months. accordance with the regulations. This provi- dangered species depends on these reviews. For 9 months, doctors, patients, and their sion only requires the importer to provide any As a member of the Interior Appropriations families have no idea if the child is receiving information he has in his possession at the Subcommittee, I intend to make sure that this the proper dosage or even if the drug is really time that prior notice is being provided. The kind of activity never happens again and that safe! Secretary shall closely coordinate this prior the agencies involved are not perpetrating a Now why can’t doctors, patients, and their notice regulation with similar notifications that fraud on the American people. That is my families know this information before the grant highest responsibility. are required by the U.S. Customs Service with of pediatric exclusivity is given? I was not al- the goal of minimizing or eliminating unneces- f lowed a chance to offer my amendment before sary, multiple or redundant notifications. BEST PHARMACEUTICALS FOR the full House. My amendment is very simple CHILDREN ACT and very commonsense: before pediatric ex- f clusivity is granted, all drugs must be labled SPEECH OF especially for pediatric use. PERSONAL EXPLANATION HON. BART STUPAK Under other prescription drug patent exten- sion programs, labeling is an absolute pre- OF MICHIGAN requisite to receiving patent extension. But not HON. HAROLD E. FORD, JR. IN THE HOUSE OF REPRESENTATIVES pediatric exclusivity. Why would we treat our Tuesday, December 18, 2001 children any differently? OF TENNESSEE Mr. STUPAK. Mr. Speaker, I rise tonight to For the love of me, I cannot understand why IN THE HOUSE OF REPRESENTATIVES urge Members to vote against the pediatric ex- the majority does not want doctors, patients, Thursday, December 20, 2001 clusivity bill, S. 1789. It is the product of a and their families to know the effect of drugs flawed negotiating process, a flawed legisla- may have on children! Mr. FORD. Mr. Speaker, regrettably, I was tive process, and a flawed regulatory process What is the proper dosage? What is the effi- not present for the vote on final passage of which was instituted back in 1997. cacy? What is the safety level for our chil- H.R. 3529, the Economic Security and Worker First approved in 1997, pediatric exclusivity dren? granted drug companies an extra six-month Assistance Act, or the preceding motion to re- Why do we wait an average of 9 months be- commit. extension on their patent if they would conduct a study to determine what the effects were on fore we see proper labeling? Why must we Had I been present, I would have voted young people. The FDA sends a written re- wait to find out if a child has received the ‘‘Yea’’ on rollcall vote number 508, the motion quest for a pediatric study to the drug com- proper dosage? to recommit, and ‘‘Nay’’ on rollcall vote 509 pany. Upon completion of the study, FDA Let us defeat this legislation. I urge a no final passage of H.R. 3529. grants a six month extension of the patent mo- vote.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00051 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.072 pfrm07 PsN: E20PT1 E2390 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 UNITED STATES SECURITY ACT destruction. We have the best military in the was kind enough to provide me with a copy of world; however, the war on terrorism is unlike that issue of the magazine. HON. JERRY F. COSTELLO any we’ve ever fought, and enhancement of Mr. Speaker, the article states that in Au- OF ILLINOIS current training is important. gust 1952, ‘‘with the opening of the hadj only IN THE HOUSE OF REPRESENTATIVES Mr. Speaker, I believe that we have pro- a few days away, nearly 4,000 desperate duced a good bill. This legislation addresses Moslems found themselves in Lebanon . . . Thursday, December 20, 2001 many real needs in enhancing the security of with air tickets but no reservations. Commer- Mr. COSTELLO. Mr. Speaker, I rise today in the United States. I urge my colleagues to join cial lines, flooded with applications, could take support of the Democratic Caucus’ Homeland me in support of the legislation. only a few.’’ As you may know, Mr. Speaker, Security bill, the United States Security Act f the hadj is the annual pilgrimage to Mecca (USA Act). which each Muslim is expected to undertake This legislation is a collaborative effort craft- HONORING THE DEDICATED at least once in his or her life if possible. ed by my democratic colleagues on the Home- SERVICE OF DANIEL HARTER The article continues, ‘‘To help in the emer- land Security Task Force. I was honored to gency, American Ambassador Harold B. Minor have served as the vice chair of the Transpor- HON. BART GORDON asked the United States Air Force to fly 14 CÐ tation Security task force with my friend, BOB OF TENNESSEE 54s from Libya and Germany. Quickly a shut- BORSKI, who chaired the task force. IN THE HOUSE OF REPRESENTATIVES tle service was set up; in 75 flights 3,763 pil- The USA Act addresses funding needs to grims were transported 900 miles from Beirut Thursday, December 20, 2001 improve our homeland security in the following to Jidda in time to begin their hadj. In grati- areas: public health, transportation, physical Mr. GORDON. Mr. Speaker, I rise today to tude, the Mufti of Lebanon ordered prayers for and informational infrastructure, law enforce- bid farewell to Daniel Harter, an intern with my Americans in all mosques, and King Abdul ment and the military. As the attacks of the office. Daniel has provided a unique perspec- Aziz al Saud presented Arab robes to 86 air- 11th clearly and unfortunately demonstrated, tive along with legal expertise as a member of men.’’ our nation is vulnerable to attack. This bill my staff for the past three months, and be- The article also states, ‘‘The Air Force ac- goes a long way to minimize those came an invaluable resource. cepted no money for the pilgrim passages. vulnerabilities. Daniel started with me shortly after com- Fares collected by commercial airlines, for In the past five years—and prior to the pleting law school, wanting to learn as much flights they were unable to complete, went to 11th—there have been international events as possible about the workings and intricacies Moslem charity.’’ which highlighted potential weaknesses in our of Capitol Hill. Despite being confronted with Mr. Speaker, I would again like to thank transportation systems. In Tokyo, Japan, indi- challenges and pressures most would fold Leonard Mulcahy for making sure that Amer- viduals caused harm by releasing sarin gas in under, Daniel persevered and became a val- ica’s assistance to the Muslim pilgrims in 1952 the subway system. The USGS Cole was at- ued part of my Washington, DC, office. is not forgotten. Despite our imperfect history, tacked in a seaport that, although in Yemen, Like so many capable and hard working Americans can be proud that ours is a gen- was considered safe. While these attacks oc- young congressional staff members, Daniel is erous and tolerant nation, and I believe the curred overseas, they could have taken place moving on to work as an attorney. Although fact that we provided this type of assistance to here in the States. my staff and I are saddened to see him leave, thousands of Muslims nearly half a century With the passage of the Aviation Security Daniel’s commitment to the legal process, his ago helps to illustrate that fact. Act earlier this year, significant improvements passion for public service, and his vigorous f to aviation security were mandated. However, pursuit of perfection will serve his clients and other modes of transportation could still be his profession well. FEDERAL LEGISLATION TO PRO- susceptible to attack. This legislation author- Daniel tackled every task head on, from TECT THE VOTING RIGHTS OF izes funds to secure bridges, tunnels, dams, helping with day-to-day operations, to aiding ACTIVE DUTY MILITARY MEM- seaports, rail, and public transit. with the daunting legislation and constituent BERS WHOSE HOME OF RESI- Specifically, the bill provides $3.6 billion to demands of post-September 11 life on the Hill. DENCE IS AMERICAN SAMOA strengthen bridge and tunnel structures, im- His contribution to our office and his work for prove inspection facilities and the inspection of the people of Middle Tennessee will be HON. ENI F.H. FALEOMAVAEGA Hazmat materials on highways, supply the missed. OF AMERICAN SAMOA traveling public with real-time information f IN THE HOUSE OF REPRESENTATIVES about availability roads and bridges if terrorist attacks were to occur again, and improve se- U.S. HAS LONG TRADITION OF Thursday, December 20, 2001 curity for locks and dams. It also provides HELPING MUSLIMS, AS SHOWN Mr. FALEOMAVAEGA. Mr. Speaker, I rise $992 million to enhance security at our sea- BY 1952 EMERGENCY ASSISTANCE today to introduce federal legislation to protect ports by increasing coast guard personnel, es- TO NEARLY 4,000 MECCA PIL- the voting rights of active duty military mem- tablishing a sea marshal program, requiring GRIMS bers whose home of residence is American transponders for foreign vessels in U.S. wa- Samoa. ters, and screening ship cargo by x-ray. To HON. PAUL E. KANJORSKI Since 1977, active-duty service members improve security on transit systems, $3.2 bil- OF PENNSYLVANIA serving overseas or on the United States lion is authorized. Funds would be used to IN THE HOUSE OF REPRESENTATIVES mainland have been excluded from fully par- hire additional security personnel, improve ticipating and voting in both general and runoff Thursday, December 20, 2001 communications and refine mass transit evac- Federal elections in American Samoa due to uation plans. With the appropriation of funds, Mr. KANJORSKI. Mr. Speaker, I rise today several factors, including local law that re- the security of these transportation systems to call the attention of the House of Rep- quires active duty military members to register will markedly improve. resentatives to the fact that our nation has a in person, limited air and mail service between The USA Act also authorizes funds to long history of helping Muslims. While we are the U.S. mainland and American Samoa, and strengthen communities responses to emer- familiar with the actions America has taken in delays in the preparation of new ballots in the gency incidents. This is done by increasing recent years to intervene for the benefit of case of runoff elections. the number of firefighters, providing grants to Muslims in Somalia, Bosnia and Kosovo, However, under the provisions of 42 U.S.C, communities and first responders and improv- among numerous other locations around the 1973ffÐ1, Federal law states that: ing technology so that important information world, America is hardly new to coming to the Each State shall— can be more readily shared between local, aid of people of the Islamic faith. (1) permit absent uniformed services voters state and federal governments. Our nation’s In particular, I would like to call the attention and overseas voters to use absentee registra- first responders are an integral component in of the House to an instance brought to my at- tion procedures and to vote by absentee ballot response to a terrorist attack, and we must tention by an alert constituent, Mr. Leonard in general, special primary, or runoff elections ensure that they are well prepared. Mulcahy of Wyoming, Pennsylvania. In light of for Federal office; In addition, the bill also takes major steps recent events, Mr. Mulcahy recalled seeing an (2) . . . towards improving the preparedness of the article in the July 1953 issue of National Geo- (3) permit overseas voters to use Federal military to effectively fight terrorism and pre- graphic magazine about the U.S. Air Force as- write-in absentee ballots . . . in general elec- venting the proliferation of weapons of mass sisting nearly 4,000 Muslims in 1952, and he tions for Federal office.’’

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00052 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.075 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2391

American Samoa law requiring uniformed INTRODUCTION OF THE SPECIES has great concern with. Mr. UNDERWOOD has service voters to register to vote in person is PROTECTION AND CONSERVA- chosen to be an original cosponsor because contrary to the Uniformed and Overseas Citi- TION OF THE ENVIRONMENT of the enormous impacts the brown tree snake zens Absentee Voting Act. The Uniformed and (SPACE) ACT has on Guam, its power lines and native bird Overseas Citizens Absentee Voting Act recog- species. nizes that there is a considerable cost in- HON. NICK J. RAHALL II The Species Protection and Conservation of volved for a service member, and often a OF WEST VIRGINIA the Environment Act, or SPACE Act, would provide the missing link in existing efforts to spouse, to travel to his/her home of residence IN THE HOUSE OF REPRESENTATIVES to register to vote. Federal law also recog- combat the pernicious and destructive space Thursday, December 20, 2001 nizes that active duty service members have invasion of some of our most valuable natural little to say about where they are stationed. Mr. RAHALL. Mr. Speaker, the United areas by: Yet, wherever they are sent, and whatever States is an economic powerhouse. We work 1. Providing incentive money to States to dangers they may encounter, Federal law rec- to keep the economy strong and to maintain a write State-wide assessments to study exactly ognizes that our service members are fun- high standard of living for the people who re- where their native species are being threat- damentally entitled to the right to vote. side here. Yet we have a drain on the econ- ened by harmful nonnative species; omy estimated to be $137 billion annually, a 2. Providing incentives for projects to imple- Mr. Speaker, the discrepancy that exists be- ment the State assessments; tween Federal and territorial law must be ad- drain that goes unchecked and relatively unpublicized because it is not a ‘‘glamorous 3. Encouraging the formation of partnerships dressed. Soldiers from American Samoa serv- among the Federal government and non-Fed- ing in the active-duty military should be af- topic.’’ This drain is spreading, continually in- vading our natural spaces and crowding out eral land and water owners and managers; forded a fair opportunity to vote in American 4. Addressing harmful nonnative species’ our native flora and fauna. Samoa as required by federal law. migratory pathways; In this regard, I am referring to harmful non- 5. Implementing specific recommendations The fact of the matter is our military men native species, invasive species; an issue of the National Strategy written by the National and women place their lives on the line to pro- which is not yet fully in the public’s eye. Even tect our freedoms. The least we can do is en- Invasive Species Council; if a person has little concern with native fish 6. Creating a Federal-level rapid response sure that their fundamental right to vote is also and wildlife and the habitats they live in, even protected. Now more than ever, when our capability; and if that person resides in a city where the major 7. Tasking the National Invasive Species country is at war, and our nation is in crisis, wildlife is found only in alleys, the fact remains we should make every effort to afford our Council to develop standard monitoring re- that invasive species are a drain on our econ- quirements for projects combating harmful service members and their dependents the omy. Included in the $137 billion figure I re- right to vote. nonnative species. ferred to earlier are the negative impacts on Using a two-pronged approach, the SPACE To ensure that American Samoa’s election agricultural production, control costs, and Act would provide resources to States and laws comply with Federal law, I have sug- costs in lost land and water resources and U.S. territories, including Indian Tribes, to ad- gested that a division should be created within uses. This number is too large to ignore, par- dress real problems and real solutions. The our local election office to deal specifically with ticularly when trends suggest that the number first prong is a grant program to provide re- absentee ballot and registration procedures. I will only go up over time. sources to States, territories and tribes to de- also believe that the territory needs to recon- For example, my home State of West Vir- velop assessments to control their harmful sider matters pertaining to run-off elections. ginia is a relatively small in terms of land nonnative species. Participation in the pro- Under territorial law, it is nearly impossible mass, but here are only a few of the impacts gram would be voluntary, but once this bill be- for absentee voters to cast votes in a run-off felt from harmful nonnative species: comes law we believe that all States, terri- election because local law mandates the run- The balsam fir tree, on the state list of rare tories and tribes will want to take advantage of off election to be held two weeks after the plants, is being infected by a small insect, the this opportunity and the benefits it can bring to general election. This local mandate discrimi- balsam wooly adelgid, which sucks the sap, them, aiding them in the organization, nates against active service members and killing the tree. This tree is a unique species prioritizing and specific actions with regards to other absentee voters. To address this prob- for the State, and unless drastic measures are their harmful non-native species problems and lem in terms of Federal elections, I believe the taken, it will be completely wiped out by this allowing them to apply for what the bill refers best solution is to establish non-partisan pri- insect. to as Aldo Leopold Grants. Technical assist- mary elections during an election year in the Shale barrens, one of the most unique nat- ance would also be available to the States, event that there are three or more candidates ural plant habitats in West Virginia, have been territories and tribes through the National running for Congress. invaded by many non-native species over the Invasive Species Council to ensure that all as- Primary elections in the summer followed by years, but two of the most problematic are sessments would be effective and include the general elections in the fall will afford all of our spotted knapweed and barren bromegrass. recommendations of the Council’s overarching qualified voters an equal opportunity to cast These plants out-compete native species and Management Plan. The second prong is implementing the as- their ballots. This will also ensure that our ac- slowly eradicate them from these unique eco- sessments through what would be known as tive duty service members are afforded the systems. In a continuation of the plight of the Great Aldo Leopold Native Heritage Grant Program, same rights and privileges as every other Lakes, the zebra mussel has found its way to which would be available on a 75% federal, American serving in the U.S. Armed Services. West Virginia. So far, the zebra mussel is re- 25% non-federal cost sharing basis. Through Mr. Speaker, I urge my colleagues to sup- sponsible for the federal listing of five species a variety of partnerships land and water own- port this legislation and I look forward to its of mussel in the Ohio River, not to mention ers and managers would be eligible to receive timely passage. economic damage from its clogging of water grants administered by the Secretary of the In- pipes. terior. The approved assessment would serve f These are only three of the over 150 harm- as a guide for developing projects with part- ful non-natives that currently affect West Vir- ners, including Department of Interior and For- PERSONAL EXPLANATION ginia. In my view, we have an obligation to our est Service lands, working together to control native species to protect, conserve and re- or eradicate harmful nonnative species on the HON. MAJOR R. OWENS store them from the introduction of harmful lands and waters under their governance. With invasive species. the assessment as the foundation for all OF NEW YORK For these reasons, today I along with the projects, this legislation would encourage ad- IN THE HOUSE OF REPRESENTATIVES gentleman from Maryland, WAYNE GILCHREST, dressing all problems at the ecosystem level Thursday, December 20, 2001 and the gentleman from Guam, ROBERT and including all land and water owners. To UNDERWOOD, are introducing a bill to protect, support the use of innovative methods and Mr. OWENS. Mr. Speaker, because I had to conserve and restore our native fish, wildlife technologies, grants would be available on an return to my district to handle very urgent and their habitats by addressing the threat of 85% federal, 15% non-federal basis if new business, I missed a number of rollcall votes. these space invaders, harmful invasive spe- techniques are used. Reporting and moni- Had I been present, I would have voted ‘yea’ cies. Maryland, for example, has a nutria prob- toring requirements are mandated by the on rollcall votes 505 and 508. On rollcall votes lem, too many nutria, and the veined rapa grant, allowing for the creation of a database 506, 507 and 509, I would have voted ‘‘nay’’. whelk, both of which I know Mr. GILCHREST which would track the methods and results of

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00053 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.079 pfrm07 PsN: E20PT1 E2392 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 each project, both over the short and long leader—Reverend William Holt Hargrave. For to help a young man, dying of leukemia, get term. more than 25 years, Reverend Hargrave home to his family. Greyban Saenz, a 24 year To facilitate and demonstrate how these re- served with distinction as the Pastor of the old native of Honduras, wanted to be with his lationships between federal and other public Ebenezer Baptist Church in Englewood, New family. The Buddy Kemp Cancer Caring and private lands and waters should work, the Jersey. As a former Mayor of Englewood, I House in Charlotte contacted Dan the Monday SPACE Act would also create a demonstration have had a wonderful opportunity to see him before Thanksgiving to see if there was any- program with the National Wildlife Refuge Sys- lead his congregation, and to experience his thing that he could do to help. Dan didn’t think tem. This program would implement coopera- warmth and kindness firsthand. twice. He jumped right in to help find an af- tive projects to be carried out on lands and The members of the Ebenezer Baptist fordable flight and someone to accompany waters of the National Wildlife Refuge System Church are some of the most patriotic and Greyban on that flight. He worked through and their adjacent neighbors, demonstrating spiritually uplifting people that I have ever had Thanksgiving, and got Greyban a flight, met cooperation and helping to address the oper- the pleasure of knowing. The congregation is him at the airport, made sure he was safely on ations and maintenance backlog of the Refuge filled with decent, honest, God-loving people the plane, and he even translated the doctor’s System. Because this is a demonstration who have a tremendous sense of community. discharge papers’ into Spanish. Dan did all project, the non-Federal lands involved would Certainly, Reverend Hargrave’s leadership has this for a man he had only known for 5 days. not have to have a State assessment yet in had a tremendous impact on all of their lives. Greyban flew home to his family the Saturday place. These projects would be the first to op- As a voice of comfort and reason, Reverend morning after Thanksgiving. Dan later said erate under this Act, and the results would be Hargrave committed himself to the church and that as sick as Greyban was, he was ani- reported to the Council for inclusion in a data- provided guidance and wisdom to those in his mated and excited that morning. Glad to going base. congregation and community. Anyone who home. I’m thankful for people like Dan Rami- Finally, this legislation would create a rapid has ever known Reverend Hargrave knows full rez who go the extra mile to help someone in response capability under the National well that his heart is filled with love, compas- need. It’s people like that make America Invasive Species Council. The Governor of a sion, and faith. His presence always put ev- strong. State experiencing a sudden invasion of a eryone at ease. f harmful nonnative species may apply to the I wish Reverend Hargrave and his family all Secretary for monetary assistance to eradicate the best. We all thank him for his service and TRIBUTE TO CREDIT UNIONS’ AS- the species or immediately control it. All as- commitment to the Ebenezer Baptist Church SISTANCE TO AFFECTED BY sistance would be given by the Secretary in and all the people of the great and good city FIGHT AGAINST TERRORISM consultation with the Council, and each rapid of Englewood. response project would have the same moni- f HON. WALTER B. JONES toring and reporting requirements as an Aldo OF NORTH CAROLINA Leopold Grant project. COMMEMORATING THE CENTEN- IN THE HOUSE OF REPRESENTATIVES Mr. Speaker, while there are a number of NIAL ANNIVERSARY OF THE 4-H initiatives already in place aimed at combating CLUB Thursday, December 20, 2001 invasive species, there is a void in existing Mr. JONES of North Carolina. Mr. Speaker, statute as no current law is designed to di- HON. BILL SHUSTER in the aftermath of the September 11 terrorist rectly protect and conserve our native species attacks, many of our financial institutions have from harmful non-native species at the federal OF PENNSYLVANIA IN THE HOUSE OF REPRESENTATIVES gone the extra mile to be of assistance to or any other level. There are laws directly ad- those affected by the incidents and their after- dressing harmful nonnative species, but main- Thursday, December 20, 2001 math. ly through prevention. These include the Non- Mr. SHUSTER. Mr. Speaker, I rise today to I rise today to pay particular tribute to the indigenous Aquatic Nuisance Prevention and honor the centennial anniversary of one of CEOs and volunteer board members of North Control Act, the Alien Species Prevention and America’s foremost youth organizations, the Carolina credit unions. Enforcement Act, the Federal Plant Pest Act, 4ÐH Club. In February, the 4ÐH Club will cele- Representatives of those credit unions, and the Plant Protection Act, and the Federal Nox- brate their centennial by holding a ‘‘National of the North Carolina Credit Union League and ious Weed Act. Conversation on Youth Development in the CUNA, recently made the trip to Washington In the development of this legislation, we 21st Century,’’ the results of which will be re- to visit my office not long after September 11. have worked with a number of organizations ported to the President and Congress. While they had thought of canceling the trip including the Wildlife Management Institute, Since its founding in 1902, the National 4Ð out of respect for the larger issues stemming the National Wildlife Federation, Defenders of H Club has helped in the education and devel- from the tragedy, they instead came to offer Wildlife, the National Audubon Society, the opment of our nation’s youth. While 4ÐH start- their support to this Congress. They also Aldo Leopold Foundation, the National Wildlife ed agricultural in nature, it has since evolved pledged that their credit unions will remain Refuge Association, the Izaak Walton League, to include a variety of different educational committed to serving the changing financial the Wildlife Society, the American Fisheries programs for children in rural as well as urban needs of their members and the citizens of Society and Trout Unlimited. Also consulted areas, ranging from environmental preserva- North Carolina during this period of economic were the National Fish and Wildlife Founda- tion to career exploration and workforce prep- uncertainty. tion, the National Invasive Species Council, aration. For example, Mr. Speaker, the 3rd District the Northeast Midwest Institute, the Inter- I congratulate the 4ÐH Clubs of Pennsyl- of North Carolina is home to three major mili- national Association of Fish and Wildlife Agen- vania on their commitment to our nation’s tary bases—Camp Lejuene, Cherry Point Ma- cies, The Nature Conservancy, the Natural leaders of tomorrow. The past 100 years have rine Corps Air Station, and Seymour Johnson Resources Defense Council, the American proven the necessity for the 4ÐH Club and Air Force Base—all of which are served by a Birding Association and the Wildlife Conserva- other similar educational organizations, and I credit union. These credit union employees tion Society. wish for their continued success for many help military personnel and their families with I look forward to working with all interested years to come. the money challenges that they face during parties as well as the members of the Re- f these difficult times, and have committed to sources Committee to facilitate the enactment safeguarding the financial well being of our of this bill. TRIBUTE TO DAN RAMIREZ service men and women deployed overseas. f For instance, the staff of First Flight Federal HONORING REVEREND WILLIAM H. HON. SUE WILKINS MYRICK Credit Union in Havelock, NC, has been work- HARGRAVE OF NORTH CAROLINA ing with the base legal department at the Ma- IN THE HOUSE OF REPRESENTATIVES rine Corps Air Station at Cherry Point to en- HON. STEVEN R. ROTHMAN sure that family members have the appropriate Thursday, December 20, 2001 authority to conduct financial transactions on OF NEW JERSEY Mrs. MYRICK. Mr. Speaker, there are a lot behalf of the service member while they are IN THE HOUSE OF REPRESENTATIVES of good things going On in our communities deployed. Thursday, December 20, 2001 that you don’t necessarily hear about in the Another example is the Seymour Johnson Mr. ROTHMAN. Mr. Speaker, I rise today to news. Recently, a friend in Charlotte, Dan Ra- Federal Credit Union in Goldsboro, NC, which pay tribute to a remarkable friend and spiritual mirez, went above and beyond the call of duty has established a call center hotline to provide

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00054 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.084 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2393 support and answer questions from family A farewell. But not a goodbye. been delivered in the patient’s home. In addi- members whose spouses have been de- And for those in Belle Harbor, not even tion, the ADC would be required, with that one ployed. that. payment, to provide a full day of care to the And then . . . And then tragedy. Mr. Speaker, time does not permit me to list patient at no additional cost to the Medicare all the great things that these credit unions are Close to 300 individuals, some as families, some as couples, some as friends, some alone. program. That care would include the home doing to assist their members—both military Gone. health benefit as well as transportation, meals, and civilian during these difficult economic Tragedy, finality, shock and tears. medication management, and a program of times. But their efforts deserve our praise and How do we cope? How can we cope? So supervised activities. our thanks. much sadness. So much grief. So many ques- The ADC is capable of providing these addi- I urge my colleagues to speak with the cred- tions. So few answers. So much emptiness. tional services at the same payment rate as it unions and other financial institutions in their In the second chapter of the Book of Lam- home health care because there are additional own districts to learn about all the ways they entations, Eicha, we read: ‘‘Horidi chanachal dim’a yomam valayla.’’ Shed tears like a inherent cost savings in the ADC setting. In are helping their customers during this time of the home care arena, a skilled nurse, a phys- need. Through the efforts these financial insti- river, day and night. What binds us together today, as what has ical therapist, or any home health provider tutions, and others, we will not only weather bound us together at the Ramada, at the must travel from home to home providing this storm but we will be economically stronger Javits Center, and while even at home, are services to one patient per site. There are sig- for it. the tears. A river of tears, day and night. nificant transportation costs and time costs as- f Tears are not shed in English. Tears are sociated with that method of care. In an ADC, not shed in Spanish. Tears are not shed in the patients are brought to the providers so REMARKS BY RABBI MICHAEL Hebrew. The tears themselves are a common MILLER language. Crying itself is a language of grief. that a provider can see a larger number of pa- We shed rivers of tears for the children tients in a shorter period of time. HON. ANTHONY D. WEINER whose lives had been so fresh, whose promise It is important to note that this bill is not an OF NEW YORK had been so abounding, whose future had expansion of the home health benefit. It would been so bright. IN THE HOUSE OF REPRESENTATIVES not make any new people eligible for the We shed rivers of tears for the mothers and Medicare home health benefit. Nor would it Thursday, December 20, 2001 fathers, wives and husbands, who had longed expand the definition of what qualifies for re- Mr. WEINER. Mr. Speaker, this past month, to watch their children grow, who had imbursement by Medicare for home health the Queens community of Belle Harbor was worked so hard to make a better life, who had given so much love to each other and to services. shaken by the crash of American Airlines flight so many. To be eligible for this new ADC option, a 587. As many of you know, this neighborhood We shed rivers of tears for brothers and sis- patient would still need to qualify for Medicare had already been hit particularly hard by the ters, friends and lovers whose companionship home health benefits just like they do today. attacks of September 11, as dozens of Belle had been torn away so suddenly. They would need to be homebound and they Harbor residents lost their lives to the attacks, We shed rivers of tears, day and night, for would need to have a certification from a doc- many of them firefighters. A number of us never having the opportunity to share a last tor for skilled therapy in the home. have struggled to find the appropriate words to hug, a kiss, a smile; to say goodbye; I’m This legislation simply recognizes that adult sorry; I love you. articulate our emotions during these times of day care facilities can provide the same health unfathomable loss. At the memorial service for We shed rivers of tears, day and night, and we pray. services with the added benefits of social flight 587 the Sunday after the crash, Rabbi As the liturgy for the closing Ne’ilah pray- interaction, activities, meals, and a therapeutic Michael Miller managed to find those words. I ers of the Jewish Day of Atonement, Yom environment, in which a group of trained pro- wanted to share his eloquence with my col- Kippur, reads: ‘‘Yehi ratzon milfanecha fessionals can treat, monitor and support leagues, and that is why I ask unanimous con- shomaiya kol bechiyot shetasim dimoteinu Medicare beneficiaries who would otherwise sent that these remarks be inserted into the benodcha l’hiyot.’’ May it be Your will, You be monitored at home by a single caregiver. RECORD. I hope that my colleagues will find who hears the sound of weeping, That You Rehabilitation is enhanced by such com- them as comforting as inspiring as I have. place our tears in Your flask for safe keep- ing. prehensive care. REMARKS AT A PRAYER SERVICE FOR THE VIC- And we pray, O Lord, that the waters of Not only does ADC aid in the rehabilitation TIMS OF THE CRASH OF AMERICAN AIRLINES our tears, like the incoming tide, draw the of the patient, it provides an added benefit to #587, SUNDAY, NOVEMBER 18, 2001, 2:00 PM, souls of these innocents close to You. the family caregiver. When a beneficiary re- RIIS PARK, QUEENS, NY Lord, protect them, guard them, watch ceives the Medicare home health benefit in In our Jewish tradition it is proper to ex- over them, and bless them—now and for eter- the home, the provider does not remain there press appreciation to one’s hosts. And it is nity. ‘‘V’yanuchu b’shalom al mishkavam.’’ all day. They provide the service they are paid within that spirit that I thank Mayor May their repose be peace. for and leave to treat their next patient. Giuliani for convening this service, and for And let us say—-Amen. his determined and compassionate leader- Because many frail seniors cannot be left ship, along with Governor Pataki, Senators f alone for long periods of time, this prevents Schumer and Clinton, and Congressman An- the caregiver from having a respite or being INTRODUCTION OF THE MEDICARE thony Weiner during these difficult times. able to maintain employment outside of the SUBSTITUTE ADULT DAY CARE [PSALM 121] home. If the senior could utilize ADC services, SERVICES ACT Last Monday morning, hundreds of people, they would receive supervised care for the men, women and children, the young and the whole day and the caregiver would have the old, woke up before dawn and rose from their HON. GERALD D. KLECZKA flexibility to maintain a job and/or be able to beds. A trip was to be taken to the Domini- OF WISCONSIN can Republic. leave the home for longer periods of time. In apartments, houses and hotel rooms last IN THE HOUSE OF REPRESENTATIVES Adult day care centers are proving to be ef- Monday morning, there was the predictable Thursday, December 20, 2001 fective, and often preferable, altematives to last minute rush. The checklist of things to complete confinement in the home. I urge my take. Packing that extra shirt, a pair of Mr. KLECZKA. Mr. Speaker, today Mr. colleagues to cosponsor and support this im- stockings, a gift for family in Santo Do- STARK from California and I are introducing portant legislation. mingo . . . the Medicare Substitute Adult Day Care Serv- f And, no doubt, last Monday morning, there ices Act. This critical legislation would expand was the presence of that anxiety which ac- home health rehabilitation options for Medi- PROTECTING OUR COMMUNITIES companies travel. Tickets. Passports. Would the car service come on time? Will we get to care beneficiaries while simultaneously assist- FROM PREDATORY LENDING the airport with minutes to spare? Do we ing family caregivers with the very real difficul- PRACTICES ACT have too much baggage? Too little? ties in caring for a homebound family member. Inevitably, last Monday morning, or Specifically, this bill would update the Medi- HON. MAXINE WATERS maybe it was last Sunday night, there was care home health benefit by allowing bene- the farewell. Fathers, mothers; wives, hus- OF CALIFORNIA ficiaries the option of substituting some, or all, IN THE HOUSE OF REPRESENTATIVES bands; sons, daughters; sisters, brothers; of their Medicare home health services for grandmothers, grandfathers; friends, lovers. Thursday, December 20, 2001 The farewell: a kiss; an embrace, A shake care in an adult day care center (ADC). of the hand, or a wave. A ‘‘so long’’ over the The ADC would be paid the same rate that Ms. WATERS. Mr. Speaker, today I rise to phone, ‘‘have a good trip.’’ would have been paid for the service had it introduce the ‘‘Protecting Our Communities

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00055 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.088 pfrm07 PsN: E20PT1 E2394 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 From Predatory Lending Act,’’ much needed This problem is getting worse, not better. also been extremely active in Rotary Inter- legislation to prevent predatory lending. This According to an ACORN study, Separate and national and will serve as district governor for year, my home state of California became the Unequal 2001: Predatory Lending in America, 2002Ð2003. third state in the nation to pass a law regu- which was released last month, African-Amer- But, Mr. Speaker, when I worked with Ross lating predatory lending practices. Reverse ican homeowners who refinanced in the Los Childs, I wasn’t working with a resume or a list redlining or predatory lending encompasses a Angeles area were 2.5 times more likely to re- of titles. I worked with a dedicated public serv- number of lending practices that target minor- ceive a subprime loan than white homeowners ant, a man who was a consumate advocate ity communities, employing interest rates and were and Latinos were 1.5 times more likely to for his Grand Traverse County, whether he service fee charges that are significantly high- receive a subprime refinance loan. And this is was laboring on behalf of an individual or for er than those prevailing in white communities. not merely a function of income: Upper-in- the county’s largest employer, Munson Such predatory lending practices are prevalent come African-Americans and middle-income Healthcare. in many areas across the country and federal African-Americans were more likely to receive I have worked with Ross on numerous action in this area is long overdue. a subprime loan than low-income white home- issues, including funding for a new airport ter- Home equity loans have historically been owners when refinancing. Middle-income minal at Cherry Capital Airport, funding for the privilege of the middle class and wealthy, Latinos were also more likely to receive a roads in the county, and projects at the Coast who generally have high credit ratings, in- subprime refinance loan than low-income Guard air station in Traverse City. In between come, and home equity. However, beginning whites. dealing with major projects or problems, I al- in the 1980s, non-depository finance compa- We must continue to scrutinize predatory ways knew that when the National Association nies—lending institutions other than commer- lending practices and protect American con- of Counties met in Washington, D.C., Ross cial banks, thrifts, and credit unions—began to sumers who are easy targets for the predatory would arrive with a list of county issues for me provide home-equity loans to lower-income lending industry. Congress and federal agen- to work on. communities, which were not served by main- cies must recommit our efforts to ensure that Ross and his wife Helen have two daugh- stream lenders. greater opportunity to credit access means an ters, Mary and Susan. As a change from our Persons in low-income communities typically increase in quality of life, not an increase in usual meetings in Washington, it was a pleas- have little disposable income, but may have predatory lending and foreclosure. I will con- ure for my staff and me to be able to show substantial home equity as a result of paying tinue fighting on the federal level until preda- Ross, Helen and Susan some of the sights of down their mortgages or through the apprecia- tory lending is eliminated and the term will this great city when they came here on a fam- tion of their property values. This equity can only have relevance in history books. I encour- ily visit. secure sizable loans. While offering loans to age my colleagues to support my legislation That doesn’t mean we haven’t had our dif- low-income and minority communities can and look forward to working with you to elimi- ferences, Mr. Speaker. I ask you to recall that benefit these communities, predatory lending nating this blight from our communities. Ross in an alumni of the University of Michi- practices, which oftentimes use the borrowers’ gan, a school he not only attended but rep- home as collateral, have milked the last drops f resented on the hockey rink. Waving those of wealth from many of these neighborhoods, TRIBUTE TO K. ROSS CHILDS ON Michigan school colors of maize and blue in leading to increased poverty and public de- THE OCCASION OF HIS RETIRE- front of a Michigan State supporter like me is pendence. MENT AS COUNTY ADMINIS- My bill adds important protections to the law like waving the proverbial red flag in front of TRATOR FOR GRAND TRAVERSE a bull. that will save many people from losing their COUNTY, MICHIGAN homes. My legislation would prohibit the in- Mr. Speaker, let me add a personal note of dustry from making false, deceptive or mis- appreciation. Ross and Helen lost their son leading statements or engaging in unfair or HON. BART STUPAK Scott, a hockey player like his father, in an deceptive acts or practices, and prohibit blank OF MICHIGAN auto accident some years ago. When my own terms in credit agreements that are filled in IN THE HOUSE OF REPRESENTATIVES son BJ died last year, Ross was there at the after the consumer has signed. In addition, it Thursday, December 20, 2001 funeral to lend his support. We share a pro- would prohibit prepayment penalties and the found loss that never quite heals, and I will al- Mr. STUPAK. Mr. Speaker, I rise tonight to ways remember and appreciate his true ex- financing of credit insurance. pay tribute to a dedicated public servant, K. My bill will prohibit the ‘‘flipping’’ of con- pression of sympathy and genuine concern. Ross Childs, who is retiring after serving as sumer loans, in which the borrower refinances So, Mr. Speaker, K. Ross Childs is giving County Administrator for Grand Traverse an existing loan when the new loan does not up the reins of power in Grand Traverse County, Michigan, since 1976. Ross will be have a reasonable, tangible benefit to the con- County, and in one of his final acts as admin- honored on January 5 at a special celebration sumer. This practice of flipping often costs the istrator he has helped hire and mentor Dennis in Traverse City by the many friends and col- consumer thousands of dollars in fees and fre- Aloia, who comes from Marquette in the Upper leagues he has touched in his long career. quently leads to foreclosure. My bill will elimi- Peninsula of Michigan. As a U.P. resident my- A review of Ross’ professional resume re- nate the practice of charging fees for services self, I am pleased to see that Ross has veals an individual who acquired a broad base or products not actually provided. It will also learned what a great value and resource the of skills that ably suited him for the job of prevent collusion between lenders and ap- U.P. can be for Grand Traverse County. county administrator. A Canadian citizen by praisers or home improvement contractors by While Ross may be leaving his post as prohibiting direct payments to home improve- birth, he did his undergraduate studies in the county administrator, he will remain active in ment contractors without a consumer cosigna- community of Owen Sound, Ontario. He came northern Michigan as regional governor of Ro- ture and prohibits creditors from influencing to the U.S. in 1955 to earn an engineering de- tary, a organization to which he has been ex- the judgement of an appraiser. gree at the University of Michigan, and his tremely dedicated for many years. My legislation will remove the shroud of se- postgraduate studies included courses in engi- I ask you, Mr. Speaker, and our House col- crecy that currently surrounds the application neering, business administration and public leagues to join me in congratulating this public process by requiring that a consumer receive administration at U. of M. and Detroit’s Wayne servant on a job well done and in wishing disclosure of his or her credit score and an ex- State University. Ross and Helen Childs the best in their retire- planation of the methodology used to calculate This resume also reveals an administrator ment years. the credit score, if one is used by the lender. who recognized that being in charge of a di- f My legislation will impose restrictions on late verse and growing county required close co- payments and apply additional safeguards by ordination with local public and private organi- CONGRATULATIONS TO MR. AND lowering the threshold for high cost mort- zations. At various times Ross has served as MRS. FLORENIO BACA gages. a member or officer of, among others, the Finally, my legislation will prohibit steering Michigan Leadership Institute, the Grand Tra- HON. JOE BACA consumers into loans with higher risk grades verse Commons Redevelopment Corporation, OF CALIFORNIA than the consumer would qualify for under Leadership Grand Traverse, the Traverse Bay IN THE HOUSE OF REPRESENTATIVES prudent underwriting standards. This is merely Economic Development Authority, the Tra- the latest in a long line of practices that have verse City Convention and Visitors Bureau, Thursday, December 20, 2001 targeted minorities and low and moderate in- the Traverse City Area Chamber of Com- Mr. BACA. Mr. Speaker, it is my privilege to come families, shutting them out of the Amer- merce, National City Bank, Blue Cross Blue announce to you and to the rest of my es- ican Dream of homeownership. Shield, and Munson Medical Center. Ross has teemed colleagues, that on January 5, 2002,

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00056 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.092 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2395 Flornio and Escolastica Baca will celebrate tive effect upon her local community, Dr. they were helping someone in need deserve their 50th wedding anniversary. The couple Davis’ leadership has been instrumental in protection from these scam artists,’’ Mr. will renew their wedding vows in a ceremony strengthening the bonds between the cities of O’Neill said at the White House. The Treas- ury also announced action against the Al at Mt. Saint Joseph’s Catholic Church in Bar- Corona and Norco, along with their business Aqsa Bank and the Belt al Mal Holdings stow, California. and educational communities. Company, a bank that it described as ‘‘direct Florenio and Escolastica were both born in Dr. Brenda Davis holds a Doctor of Edu- arms of Hamas.’’ New Mexico. Florenio was one of thirteen chil- cation degree in Curriculum and Teaching, a I ask that the full text of the article follow my dren born to Seledon and Isabeleta Baca, Master of Education Degree in Psychiatric— remarks. while Escolastica was only one of two children Mental Health Nursing and Bachelor of It seems clear that the Holy Land Founda- born to her parents, Rafael and Eufelia Gar- Science in Nursing all from Teachers College, tion for Relief and Development is an organi- cia. Eufelia, now 89 years old, is the couple’s Columbia University in New York. Dr. Davis is zation that serves as the fundraising arm of only surviving parent. recognized as a very effective administrator Hamas, which is responsible for hundreds, if Florenio and Escolastica married on Janu- and has held several administrative positions not thousands, of terrorist deaths in Israel over ary 28, 1951 in La Joya, New Mexico, and at Riverside Community College, including Di- the years, with a recent surge of murder of in- shortly afterwards the pair moved to Barstow, rector, Department Chairperson of Nursing; nocent young people in Jerusalem, Tel Aviv California. Florenio worked for the Santa Fe Dean, Nursing Education; Dean, Grant and and Haifa. Railway and later went to work for a civil serv- Contract Services. I do not believe that the American people, ice position only to return to the Santa Fe Brenda’s tireless, engaged action have pro- especially American Muslims, are intentionally Railway until his retirement. A hardworking pelled the City of Corona forward in a positive giving money to support terror. In fact, I am couple, Florenio and Escolastica were pio- and progressive manner. Her work to promote sure that the vast majority of contributors to neers of the dual income family as Escolastica the businesses, schools and community orga- this organization believed that their money worked a variety of jobs until her retirement nizations of the City of Corona make me was going to support the legitimate humani- from a civil service position in Nebo, Cali- proud to call her a fellow community member, tarian concerns that Americans have about the fornia. All the while, Florenio and Escolastica American and friend. I know that all of Corona situation in the Middle East. raised a loving family. is grateful for her contribution to the better- The facts, however, indicate that these con- The couple was blessed with three children, ment of the community and salute her as she tributions were being used to finance bombs Gilbert, Sally and Evelyn. Today their children departs. I look forward to continuing to work targeted at innocent civilians. Mr. Speaker, Americans trust the IRS to de- are grown and married. Florenio and with her for the good of our community in the termine what is and what is not a charity. If Escolastica’s family now includes Gilbert’s future. there is an organization that is designated by wife, Tracy Marcum, Sally’s husband, Scott f the IRS to allow contributions to be tax de- Stapp, and Evelyn’s husband, Joe Bensie. ductible, almost all of our citizens would auto- Their children have given the Baca’s eight ON INTRODUCING THE ANTI-TER- matically assume that the group was legiti- grandchildren, Lindsay, Courtney, Brandy, RORISM CHARITY PROTECTION ACT mate. The IRS does an excellent job applying Larry, Erica, Adrian, Ryan and Mathew, and its regulations very stringently. Unfortunately, one great-grandchild, Brooklyn. according to the IRS, the Holy Land Founda- I commend Florenio and Escolastica for HON. STEVE ISRAEL tion did receive these benefits. demonstrating their commitment to marriage OF NEW YORK Currently, the IRS by internal regulation de- and family. The couple has provided love and IN THE HOUSE OF REPRESENTATIVES nies charities affiliated with terrorism a tax de- ongoing support to their children, grand- Thursday, December 20, 2001 duction. This is all well and good, but the fact children and great-grandchild playing an active is that this could be challenged in court. I be- role in all of their raising. Mr. ISRAEL. Mr. Speaker, I rise today to in- lieve that the IRS needs a stronger tool. I be- Today the Baca’s spend most of their time troduce the Anti-Terrorism Charity Protection lieve that this restriction must be in the law. relaxing at home and visiting their family. Act, a bill that will not only ensure that organi- Finally, Mr. Speaker, during consideration of Escolastica remains very active at Mt. Saint zations supporting terrorism are denied the the Financial Anti-Terrorism Act, I introduced Joseph’s Catholic Church. benefits of an American tax deduction, but will an amendment on this issue that Chairman Mr. Speaker, on behalf of the United States protect innocent citizens from donating well-in- OXLEY, Mr. LAFALCE, and the Committee on Congress and the people of Califomia, I ex- tentioned contributions to organizations that Financial Services were gracious enough to tend our sincere congratulations to Mr. and misappropriate funds to support terrorism. accept, though it did not make it through con- Mrs. Florenio Baca. Mr. Speaker, since September 11th, we ference. The amendment asked that Treasury f have learned a great deal about Osama bin study how terrorist organizations may use Laden and the al Qaeda terrorist network. Bin charities to fund their operations. I am gratified TRIBUTE TO DR. BRENDA DAVIS, Laden apparently is rich, with a personal for- to see that the Department of the Treasury OUTGOING PRESIDENT, CORONA tune of over $300 million. In addition, a com- and Secretary O’Neill seem to be focusing on CHAMBER OF COMMERCE plex global financial network exists to supple- this issue and would encourage them to con- ment his personal fortune. Alarmingly, evi- tinue doing so. HON. KEN CALVERT dence suggests that organizations in the Mr. Speaker, if we are going to win the War OF CALIFORNIA United States and abroad have cloaked them- on Terrorism, we must fight the war on every IN THE HOUSE OF REPRESENTATIVES selves as charitable groups to help funnel front. The financial front is one important bat- Thursday, December 20, 2001 funds to al Qaeda. tleground and we must do everything we can The President has already frozen the assets to ensure that our soldiers—not only in Af- Mr. CALVERT. Mr. Speaker, I rise today to of the Wafa Humanitarian Organization, the Al ghanistan behind rifles but here in America in honor and pay tribute to an individual whose Rashid Trust, the Makhtab al-Khidamat and front of computer screens—have the weapons dedication to the community and to the overall the Society of Islamic Cooperation. These they need to defend America. well-being of my hometown of Corona, CA, is were groups that were supposedly charitable [From the New York Times, Dec. 10, 2001] exceptional. The City of Corona has been for- organizations, but were mere conduits for rais- BUSH FREEZES ASSETS OF BIGGEST U.S. MUS- tunate to have dynamic and dedicated busi- ing money for the treacherous acts of Sep- LIM CHARITY, CALLING ITADEADLY TERROR ness and community leaders who willingly and tember 11 and other acts of terrorism around GROUP unselfishly give time and talent to making their the world. (By David E. Sanger and Judith Miller) communities a better place to live and work. On December 3rd, the Administration froze WASHINGTON, DEC. 4—President Bush sig- Dr. Brenda Davis is one of these individuals. the assets of the Holy Land Foundation for nificantly broadened his counterattack on On January 5, 2002, Dr. Davis will be hon- Relief and Development, a foundation based terrorist groups today, freezing the assets of ored as the outgoing 2001 President of the in Richardstown, Texas. According to a De- the largest Muslim charity in the United States. Mr. Bush accused the charity of sup- Corona Chamber of Commerce. Currently Pro- cember 5th article in The New York Times: vost of the Norco Campus at Riverside Com- porting Hamas, the Palestinian militant Mr. Bush and Treasury Secretary Paul group that took responsibility for three sui- munity College, Brenda provides great leader- O’Neill said today that they believe many cide bombings in Israel over the weekend. ship, administration and supervision over her Muslims who contributed to the Holy Land Mr. Bush’s announcement was a strong faculty and students. A person with passion Foundation did not know where their money demonstration of solidarity with Prime Min- and principles, who has strived to have a posi- was going. ‘‘Innocent donors who thought ister Ariel Sharon of Israel, who has urged

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00057 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.095 pfrm07 PsN: E20PT1 E2396 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 that Hamas be treated with the same sever- items such as file cabinets, office furniture Act, which will help provide relief from student ity as Al Qaeda’s terrorist network. and computers in accordance with President loan deadlines and administrative require- White House officials said they had Bush’s order. ments to victims and their families of the Sep- planned to move against the charity and two Movers using a tractor-trailer arrived with banks that helped finance Hamas later this the seizure notice at about 8 a.m. and tember 11 terrorist attacks, and for members month, but sped up the action after the worked into the night. of the military who are called up for active bombings, which killed 25 people and wound- Steven Emerson, an expert in Islamic ter- duty in response to those attacks. S. 1793 ed almost 200, many of them teenagers. ror networks, said that the United States provides the Secretary of Education with the Treasury officials said the charity, the knew as early as 1993 that Hamas leaders authority to waive specific aspects of the stu- Holy Land Foundation for Relief and Devel- were ‘‘meeting in America and using Holy dent aid programs to make sure that these opment, based in Richardson, Tex., had been Land Foundation as a conduit to raise people are not adversely affected financially under investigation since 1993. money for terrorism, recruit support, and by being victims of these attacks or being on In a statement the charity denied allega- undermine the U.S.-sponsored peace proc- tions that it provides financial support to ess.’’ active duty. terrorists. It said ‘‘the decision by the U.S. S. 1793 is similar to H.R. 3086, which government to seize the charitable donations f passed the House in October by a vote of of Muslims during the holy month of Rama- RECOGNIZING THE ACHIEVEMENTS 415Ð0. The authority granted by the HEROS dan is an affront to millions of Muslim OF MESA Act is similar to authority granted during Americans.’’ Desert Storm, and expires on September 30th, A senior official said the administration 2003. The HEROS Act addresses issues of had delayed acting for fear of harming the HON. HILDA L. SOLIS F.B.I. investigation of the charity. Search loan repayment for individuals directly affected OF CALIFORNIA warrants were executed today when federal by the attacks, and the student aid eligibility officials seized documents at the charity IN THE HOUSE OF REPRESENTATIVES for these individuals, while ensuring the integ- headquarters and other offices. Thursday, December 20, 2001 rity of the student loan programs. The Sec- International political considerations were retary may help such individuals by reducing also in play, other administration officials Ms. SOLIS. Mr. Speaker, I rise today to or delaying monthly student loan payments, or said. The White House debated whether mov- congratulate Mathematics, Engineering, by lifting obligations for repayment by military ing against Arab extremist groups could Science Achievement (MESA) of the Univer- students, or other actions that help such bor- weaken the coalition Mr. Bush has assem- sity of California for being selected as one of bled in the war on Afghanistan. ‘‘The bomb- rowers avoid inadvertent technical violations or the five most innovative public programs in the defaults. ings changed the politics of this consider- country by Innovations in American Govern- ably,’’ a senior administration official said. The HEROS Act would also allow the Sec- Speaking in the Rose Garden this morning, ment, a project of the John F. Kennedy School retary to help institutions and organizations Mr. Bush appeared to side with Mr. Sharon of Government at Harvard University, the Ford participating in the Federal student aid pro- in his characterization of Hamas. ‘‘Hamas is Foundation, and the Council for Excellence in grams that are affected by the attacks so that one of the deadliest terror organizations in Government. they may receive temporary relief from certain the world today,’’ he said, adding that it I have long supported MESA, which helps ‘‘has obtained much of the money it pays for administrative requirements. For such institu- educationally disadvantaged students to excel tions, some administrative requirements may murder abroad right here in the United in math and science. MESA encourages stu- States.’’ be rendered unreasonable to meet as a result The statement was something of a turn- dents to develop an academic path to college of the September 11 attacks. around for the administration. Its first list and attain baccalaureate degrees in math and Congress will also have the opportunity to of terrorist groups subject to American ac- science fields. Parents are encouraged to be- learn about the effectiveness of these waivers, tion, released days after the Sept. 11 attacks, come involved and learn that college can be as the Secretary will be required to report on made no reference to Hamas. A second list a reality for their children. In addition, MESA the waivers granted and make recommenda- released in October called Hamas and some brings in industry representatives in science 20 other militant groups terrorist organiza- tions for any statutory or regulatory changes fields to introduce the students to science- that may help provide these students relief in tions, but said few had assets in the United based career options. States. the future. It is difficult to assess how effective the Eighty-five percent of MESA’s graduating As we all know, September 11 had a dev- administration’s new campaign will be in high school seniors go on to college, com- astating impact on our Nation and our econ- slowing Hamas. Officials said the group re- pared to only fifty percent of California’s grad- omy. The HEROS Act will provide crucial relief lied on American charities that solicit funds uating high school seniors overall. Seven to those students who were victims of this hor- in many mosques around the country for other states have established programs based rible event, and will also protect the eligibility tens of millions of dollars each year. Hamas on California’s MESA model. Today, more of students serving in the military. By helping has long said that the money goes to social than twelve percent of the nation’s historically causes, easing the suffering of Palestinians. military students remain eligible for student The Treasury and F.B.I. say they have evi- underrepresented students who attain bacca- aid, we can help ensure that our next genera- dence the money is siphoned to the organiza- laureate degrees in engineering are MESA tion of leaders is properly prepared to face an tion’s terrorist arm. students. increasingly interconnected global environ- The State Department says that Hamas The Innovations in American Government ment, and can help rebuild our nation and pro- also receives some funding from Iran, but program identifies outstanding problem-solving tect against future attacks. The HEROS Act even more from wealthy patrons in Saudi and creativity in public sector programs. This Arabia and Palestinian expatriates in the thus is looking to the future, while helping year 1,200 programs were nominated for the those burdened by our recent past and I sup- gulf. The success of the Bush administra- award. These programs underwent an ex- tion’s crackdown will depend largely on its port S. 1793. tremely rigorous assessment process before ability to persuade those countries to follow f suit. Innovations determined its winners. Mr. Bush and Treasury Secretary Paul I applaud MESA on its accomplishments REGARDING MONITORING OF O’Neill said today that they believe many and wish the program continued success in WEAPONS DEVELOPMENT IN IRAQ Muslims who contributed to the Holy Land helping California students succeed. Foundation did not know where their money SPEECH OF f was going. ‘‘Innocent donors who thought they were helping someone in need deserve HIGHER EDUCATION RELIEF OP- HON. BARBARA LEE protection from these scam artists,’’ Mr. PORTUNITIES FOR STUDENTS OF CALIFORNIA O’Neill said at the White House. The Treas- ACT OF 2001 IN THE HOUSE OF REPRESENTATIVES ury also announced action against the Al Aqsa Bank and the Beit al Mal Holdings Wednesday, December 19, 2001 SPEECH OF Company, a bank that it described as ‘‘direct Ms. LEE. Mr. Speaker, I rise today in oppo- arms of Hamas.’’ HON. PATSY T. MINK sition to this resolution. So far, a half dozen banks in the United OF HAWAII I want to be very clear: I strongly support in- States have frozen $1.9 million of the Holy spection of Iraqi weapons facilities. This reso- Land Foundation’s assets, Treasury officials IN THE HOUSE OF REPRESENTATIVES lution, however, is not the best way to accom- said today. Wednesday, December 19, 2001 In Richardson, F.B.I. agents and local po- plish that goal. lice officers stood guard outside the Holy Mrs. MINK of Hawaii. Mr. Speaker, I want to We clearly stand at a moment in history Land Foundation offices as movers removed express my support for S. 1793, the HEROS when we must reinvent our foreign policy to

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00058 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.099 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2397 meet new challenges. Renewed arms inspec- impede the extradition of criminals to U.S. ju- tap laws and included on the list of Federal tions of Iraq should be part of that new matrix, risdiction. The administration acknowledges crimes of terrorism. but smarter sanctions and humanitarian en- that capital punishment is not required to im- Mr. Speaker, I fully support prompt ratifica- gagement must also be undertaken. plement the Conventions. Yet, even while ad- tion and implementation of the International Engagement is crucial. We should work with mitting that the provision is unnecessary to im- Conventions for the Suppression of Terrorist our allies to forge a policy that strengthens the plement the Convention, the administration Bombings and the Suppression of the Financ- cause of peace and stability in the Middle justifies the inclusion of this new death penalty ing of Terrorism. However, I am concerned East. provision by claiming that it simply tracks cur- that H.R. 3275 includes controversial changes There are some who call for an invasion of rent law. to U.S. domestic law that go well beyond Iraq. I am strongly opposed to such a step. This justification is without merit. Under U.S. those changes required to bring our laws into Opposition to a United States assault on law, the death penalty is justified for its deter- conformity with the requirements of those Iraq is found not only in the capitals of the rent effect. Surely in this case there is no pu- agreements. Middle East but throughout much of the rest of nitive or deterrent basis for the death penalty. Specifically, we must avoid the redundancy the world as well. In this instance, those that the Conventions of ancillary provisions relating to the death International leaders such as United Nations target are willing to commit suicide for their penalty, wiretapping, money laundering, and Secretary General Kofi Annan and former criminal causes. In this instance, it cannot be RICO predicates. To this end, during the re- South African President Nelson Mandela have argued in good faith that fear of the death cent Judiciary Committee markup of this I strongly voiced their opposition to such an at- penalty will prevent terrorists from carrying out joined my colleagues, Mr. SCOTT and Mr. tack, arguing that the only lasting solutions lie acts of terrorism. DELAHUNT in their opposition to certain ancil- in collective international efforts. f lary provisions of this bill in relation to treaty As Kofi Annan said earlier this month, ‘‘Any approval. attempt or any decision to attack Iraq today TERRORIST BOMBINGS CONVEN- While I fully support the efforts of our law will be unwise and could lead to a major esca- TION IMPLEMENTATION ACT OF enforcement professionals in light of the re- lation in the region.’’ President Mandela 2001 cent attacks against this Nation, I am con- warned that bombing Iraq would be a disaster cerned that prosecutors should be limited in SPEECH OF that would inject ‘‘chaos into international af- the extent to which they can cast the widest fairs.’’ HON. SHEILA JACKSON-LEE possible net, often to the great detriment of Therefore, I must oppose this resolution not OF TEXAS those who were not initially target by Con- because I oppose inspections but because I IN THE HOUSE OF REPRESENTATIVES gress when the legislation was enacted. believe it is too inflammatory and will make in- Many of these provisions have already been Wednesday, December 19, 2001 spections less likely, not more likely. included in the anti-terrorist bill which has This is the wrong resolution at the wrong Ms. JACKSON-LEE of Texas. Mr. Speaker, since been passed into law on October 26, time. At this moment we face a crisis in the the International Convention for the Suppres- 2001. Therefore, to include the same provi- Middle East as the Israeli-Palestinian conflict sion of Terrorist Bombings was initiated by the sions in H.R. 3275 would be redundant and threatens to spin out of control. That must be United States in the wake of the 1996 bomb- would serve no purpose. As a matter of fact, the epicenter of our concern right now. Yes, ing of Khobar Towers in Saudi Arabia. It re- Mr. Chertoff of the Department of Justice stat- we want inspections, but this is not the best quires signatories to criminalize terrorist bomb- ed recently that these provisions are not even way to achieve them. ings aimed at public, governmental, or infra- required in order to implement the treaties. f structure facilities and to prosecute or extra- Moreover, most party states to the Conven- dite those responsible. The United States has tions do not tolerate the death penalty, but are TERRORIST BOMBINGS CONVEN- not yet ratified the convention, which went into still in compliance with the treaty. This could TIONS IMPLEMENTATION ACT force in May of this year. The legislation be- have a profound effect on extradition and re- fore us, H.R. 3275, implements the Inter- sult in an inordinate burden on our criminal SPEECH OF national Convention for the Suppression of justice system. HON. CAROLYN C. KILPATRICK Terrorist Bombings, These necessary changes could have easily OF MICHIGAN Specifically, H.R. 3275 makes it a Federal have been facilitated on the floor by allowing IN THE HOUSE OF REPRESENTATIVES crime to unlawfully deliver, place, discharge or amendments, and I regret that we were not al- detonate an explosive device, or to conspire Wednesday, December 19, 2001 lowed to address these issues due to the sus- or to attempt to do so, in a public place, public pensions calendar. Ms. KILPATRICK. Mr. Speaker, while I sup- transportation system, or in a State or Federal Despite these concerns, it is in our best in- port the ratification and implementation of the facility. It provides penalties of up to life in terest, as well as in the interest of the inter- International Conventions for the Suppression prison, or death for perpetrators if the bombing national community, that we comply with the of Terrorist Bombings and the Suppression of resulted in fatalities, and also provides for the treaty. Our message that we will not tolerate the Financing of Terrorism in H.R. 3275, I can- prosecution or extradition of perpetrators who terrorism in any way, shape, or form, must be not support the overall bill. I am concerned commit crimes outside of the United States, strong and clear. that bill includes controversial language that but who are subsequently apprehended in this I believe that this bill fulfills this obligation. will jeopardize future enforcement of these country. f Conventions. Additionally, H.R. 3275 implements the I believe that the provision in title I that au- International Convention for the Suppression CONFERENCE REPORT ON H.R. 3061, thorizes the imposition of the death penalty for of the Financing of Terrorism, which requires DEPARTMENT OF LABOR, the offenses set forth in section 102.2 is su- signatories to prosecute or extradite people HEALTH AND HUMAN SERVICES, perfluous and unnecessary. Our experience who contribute to, or collect money for, ter- AND EDUCATION, AND RELATED with other nations, as it pertains to the U.S. rorist groups. AGENCIES APPROPRIATIONS death penalty, should guide our actions on the It also makes it a Federal crime to directly ACT, 2002 floor today. Courts in Canada and France or indirectly provide or collect funds to carry have refused to extradite criminals to the out , in full or in part, specific acts of terrorism. SPEECH OF United States, citing our continued insistence It also makes it a crime for any U.S. national HON. KEN BENTSEN on the imposition of the death penalty. A or entity, both inside and outside the country, OF TEXAS South African Constitutional Court ruled that a to conceal or disguise the nature, location or IN THE HOUSE OF REPRESENTATIVES suspect on trial in Manhattan in connection source of any funds provided or collected to with the bombing of the American Embassy in carry out terrorist acts. It also provides for the Wednesday, December 19, 2001 Tanzania should not have been turned over to prosecution or extradition of perpetrators who Mr. BENTSEN. Mr. Speaker, I rise in strong United States authorities without assurances commit these crimes outside of the United support of H.R. 3061, the Fiscal Year 2001 that he would not face the death penalty. States, but who are subsequently appre- Labor, Health and Human Services, and Edu- At a time when we are seeking the coopera- hended in this country. cation Appropriations bill. This legislation tion of nations to bring international criminals Finally, provisions in the bill make the would provide $395 billion for the Departments to justice, it makes no sense to authorize this crimes of terrorist bombings and terrorist fi- of Labor, Health and Human Services, and death penalty provision, which may, in fact, nancing ‘‘predicate offenses’’ under U.S. wire- Education, and related agencies. This $395

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00059 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.103 pfrm07 PsN: E20PT1 E2398 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 billion funding level represents an 11 percent this legislation provides $23.3 billion for the CONFERENCE REPORT ON H.R. 3061, increase above last year’s budget. I am espe- National Institutes of Health (NIH), an increase DEPARTMENTS OF LABOR, cially pleased that this legislation would pro- of 15 percent or $3 billion more than last HEALTH AND HUMAN SERVICES, vide a 15 percent increase for education fund- year’s budget. This $23.3 billion NIH budget is AND EDUCATION, AND RELATED ing and 15 percent increase or $23.3 billion for our fourth payment to double the NIH’s budget AGENCIES APPROPRIATIONS biomedical research conducted through the over five years. Earlier this year, I organized ACT, 2002 National Institutes of Health (NIH). two bipartisan letters in support of a $3.4 bil- With regard to education, I am pleased that lion increase for the NIH. I am a strong sup- SPEECH OF this bill would dramatically increase funding, porter of maximizing federal funding for bio- HON. NITA M. LOWEY for education programs by providing $6.8 bil- medical research through the NIH. I believe OF NEW YORK lion or 15 percent over FY 2001 levels and that investing in biomedical research is fiscally IN THE HOUSE OF REPRESENTATIVES $3.9 billion above the President’s request. responsible. Today, only one in three meri- Wednesday, December 19, 2001 Over the last five years, the average annual torious, peer-reviewed grants which have been rate of new educational investment has been judged to be scientifically significant will be Mrs. LOWEY. Mr. Speaker, I rise today in 13 percent. This legislation would increase the funded by the NIH. This higher budget will strong support of the conference report and I education investment to 17 percent—the high- help save lives and provide new treatments for urge its adoption. I want to thank the Ranking est in a decade. While the bill does not in- such diseases as cancer, heart disease, dia- Member, Mr. OBEY, for yielding me this time clude separate funding for the class-size re- betes, Alzheimer’s, and AIDS. Much of this and for his strong and forceful leadership not duction initiative, I am pleased that the pro- NIH-directed research will be conducted at the only on this bill, but also for the American peo- gram was redirected into teacher quality state teaching hospitals at the Texas Medical Cen- ple. grants. Under this legislation, these state I want to recognize the Chairman of our ter. In 2000, the Texas Medical Center re- grants will receive a $2.9 billion increase to Subcommittee, Mr. REGULA. He has been an ceived $289 million in grants from the NIH. help schools reduce class size and provide absolute pleasure to work with and has gone professional development for teachers and In addition, I support the $4.3 billion budget out of his way to ensure that the bill was craft- other school employees. Additionally, the com- for the Centers for Disease Control, a $431 ed in a bipartisan manner and that the con- mittee’s inclusion of $975 million for the Presi- million increase above last year’s budget. The cerns of Members on both sides of the aisle dent’s Reading First initiation will enable CDC is critically important to monitoring our were considered. schools to bring proven, research-based read- public health and fighting disease. Of this $4.3 Mr. Speaker, this conference report provides ing programs to students in the critical early billion CDC budget, $ 1.1 billion will be pro- tremendous increases for health, education learning years. The $1 billion increase for 21st vided to address HIV/AIDS programs and to and worker safety and training. We’ve been Century After School Centers will provide stu- combat tuberculosis. This CDC budget also able to follow up on the promises we made on dents with a quality after school programs. provides $627 million to provide immunizations this floor last week when we passed the ESEA And for students continuing on to higher edu- to low-income children. In Texas, there are conference report in this bill. Increases in Title cation, the increase in the Pell Grant max- many children who are not currently receiving I funding will ensure that our most disadvan- imum grant to $4,000 will enable low-income the immunizations that they need to stay taged children have access to a quality edu- students to meet today’s ever-increasing edu- healthy. This CDC program will help to mon- cation. Pell Grants will reach a maximum of cational costs. Additionally, the bill wisely re- itor and encourage low-income families to get $4,000 per student, giving low-income stu- jects proposed enrollment cuts to Head Start, the immunizations that will save children’s dents a helping hand in paying for college. preventing possible cuts for as many as 2,500 lives and reduce health care costs. Investing Overall, the bill boosts education funding by children from this critically important program. in our children is a goal which we all share. over $1 billion, to its highest level ever. I am also pleased that the committee in- I also want to highlight that this agreement In health programs, the bill continues to pro- cluded a 18 percent increase in the federal provides $285 million for pediatric graduate vide an unprecedented level of funding for share of special education costs. This agree- medical education (GME) programs. As the medical research. We are in an age of tre- ment provides $8.7 billion for educating chil- representative for Texas Children’s Hospital mendous discovery in medical research, and dren with disabilities, $1.3 billion more than (TCH), which is one of the nation’s inde- the resources provided to NIH will help find this year’s funding. In 1975, Congress passed pendent pediatric training facilities, I am treatments and cures for many diseases. Public Law 94Ð142, the Individuals with Dis- pleased that this bill fully funds this critically There are increases for mental health re- abilities Education Act (IDEA), which com- important program. This $285 budget is $50 search and treatment, HIV/AIDS programs, mitted the federal government to fund up to 40 million more than last year’s budget and is the and programs for the elderly. And, we address percent of the educational costs for children same level which has been authorized for this the growing threat of bioterrorism by giving the with disabilities. However, the federal govern- program. Under current law, independent chil- CDC, our leader in this fight, greater re- ment’s contribution has never exceeded 15 dren’s hospitals such as TCH can only receive sources to help keep our nation secure. percent, a shortfall that has caused financial Medicare GME funding for those patients Even with these vast increases for so many hardships and difficult curriculum choices in which they treat who are Medicare bene- programs, we know that next year will be very local school districts. According to the Depart- ficiaries. Since many of TCH’s patients are not different. The surpluses we’ve enjoyed have ment of Education, educating a child with a Medicare eligible, current GME programs fall disappeared. And, the President’s tax cuts will disability costs an average of $15,000 each to help to pay for the cost of training our na- take up more and more of the federal budget as we go forward. We’re just beginning to fund year. However, the federal government only tion’s pediatricians. Last year, TCH received education and healthcare at the levels they provides schools with an average of just $833. approximately $8 million from this program, deserve. I am concerned, as are many of my While I believe the funding increase in this which is more than half of the cost of training colleagues, that we will not be able to provide legislation represents a step in the right direc- physicians, residents and fellows at TCH. This this same level of funding next year. tion, I believe we must abide by our commit- bill is an important step in the right direction to ment to fund 40 percent of IDEA costs, and I I want to mention one area of critical impor- ensure that all hospitals receive assistance to tance—the need to combat obesity in this am hopeful that we will consider greater fund- help defray the cost of training physicians. ing increases in the next fiscal year. country. The Surgeon General reported last While the overall bill is a good one, there I am also pleased that this agreement in- week that two out of three American adults are many important programs that were level- cludes funding for several projects which I are overweight. In fact, he estimates that obe- funded or eliminated under this legislation. To have spearheaded. This bill provides $440,000 sity will cause more deaths than smoking in that end, I look forward to working with my for the Center for Research on Minority Health the coming years. Reducing the rate of obesity colleagues to continue funding for these pro- (CRMH) at the University of Texas M.D. An- can prevent unnecessary illness and death. grams at adequate levels, or in the case of derson Cancer Center. This $440,000 budget We’ve been so successful in convincing peo- school modernization, to work for its reinstate- is the third installment in my effort to examine ple to quit smoking, and this should be the ment. In total, though, this bill makes impor- cancer rates among minority and underserved next big fight for public health. tant investments in education, and will provide populations. The CRMH is a comprehensive I know that Chairman REGULA and Mr. OBEY America’s children with the resources they cancer control program to address minority will be very interested in that effort, and I want need to succeed and be productive members and medically underserved populations. to again thank the Chairman and Ranking of our society. I urge my colleagues to support this legisla- Member for their tireless efforts in putting this As a Co-Chair of the Congressional Bio- tion and vote for this important health, edu- bill together. I urge adoption of the conference medical Research Caucus, I am pleased that cation and labor funding measure. report.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00060 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.106 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2399 LIVING AMERICAN HERO H.R. 3487 is a step in the right direction. It more than President Bush originally re- APPRECIATION ACT will provide for funding public service an- quested. However, as Chair of the Congres- nouncements to recruit nurses, loan repay- sional Children’s Caucus, I am disappointed SPEECH OF ment programs, and scholarship programs. It that funding for elementary and secondary HON. LANE EVANS also requires the GAO to report to Congress education programs fell short of the levels in OF ILLINOIS on several key issues in the nursing arena— the reauthorization of the Elementary and Sec- IN THE HOUSE OF REPRESENTATIVES including nursing faculty shortages and dis- ondary Education Act (ESEA; H.R. 1) which Wednesday, December 19, 2001 parities among hiring practices of nurses be- would authorize $26.5 billion for elementary tween not for profit and for profit entities. and secondary education programs, and which Mr. EVANS. Madam Speaker, the remarks Again, I thank my colleagues for their sup- awaits the President’s signature. that I made in support of H.R. 2561 were port of this very important piece of legislation. I am also disappointed that the conferees made in the context of the measure as it was f failed to keep in the bill $925 for elementary originally introduced by my colleague, the gen- and secondary school renovation, particularly tleman from Pennsylvania, CURT WELDON. The CONFERENCE REPORT ON H.R. 3061, in light of the current state of disrepair that we measure passed by the House under suspen- DEPARTMENTS OF LABOR, find our schools in. sion of the rules, however, was an amended HEALTH AND HUMAN SERVICES, I am pleased with the large increase to $7.5 version of H.R. 2561. As amended, H.R. 2561 AND EDUCATION AND RELATED billion in special education funding, raising did not embody certain provisions that had AGENCIES APPROPRIATIONS spending roughly 19 percent higher than the been included in the original bill. ACT, 2002 $6.8 billion in fiscal 2001. I am also pleased With regard to H.R. 2561 as amended, I with the increases in spending for Pell Grants SPEECH OF want to express my strong support for this leg- to $10.3 billion from roughly $8.8 billion in fis- islation that demonstrates our continued com- HON. SHEILA JACKSON-LEE cal 2001, raising grants from $3,750 to mitment to recipients of the Medal of Honor. In OF TEXAS $4,000. the name of the Congress, the President pre- IN THE HOUSE OF REPRESENTATIVES Americans will also be well-served by the sents the Medal of Honor. It is the highest other increases such as: the 18% increase to Wednesday, December 19, 2001 honor that can be bestowed upon any Amer- $1 billion for after school centers, the $1.6 bil- ican citizen. Only 3,455 Americans have been Ms. JACKSON-LEE. Mr. Speaker, I am lion (18%) increase to $10.35 billion for Title 1 awarded Medals of Honor, and today only 149 pleased with the bipartisan bill passed out of grants, the 45% increase to $665 million for of them are living. the House LaborÐHHSÐEducation sub- Bilingual Education, the 31% increase to $2.85 As the Ranking Democrat on the Veterans’ committee and brought to the floor by unani- billion for Teacher Quality grants, and the 15% Affairs Committee, as a senior member of the mous consent. The bill generally makes sure increase to $1.1 billion for Impact Aid. Armed Services Committee, and as a United that we continue our commitment to education This appropriation also increases funding to States Marine, I feel strongly that these he- and health care, preserves our most important the Department of Labor by 3%, or about $12 roes deserve special recognition and consider- worker protection programs, and includes the billion, rather than cut by 3% as proposed by ation. Their valiant contributions must be hon- largest increase in new educational investment the President. This is a $310 million increase ored and supported by all Americans. in a decade. This is good news for the Amer- over fiscal 2001 spending and provides growth Accordingly, I am pleased that H.R. 2561 ican people. in the major employment, training and worker would increase from $600 to $1,000 the However, I am extremely disappointed that protection programs. It also targets $54.2 bil- monthly amount paid to recipients of the this $123.8 billion appropriation does not in- lion to the Department of Health and Human Medal of Honor and provide for retroactive, clude a greatly needed provision to expand in- Services, increasing $5 billion over fiscal 2001 lump-sum payments to such recipients to re- surance coverage for mental illness. This pro- and $2.5 billion over the President’s initial re- flect this increase. In addition, the bill would vision, known as ‘‘mental health parity’’ would quest. provide an additional medal for use in display have required group health plans offering However, much more should have been or exhibits to those recipients who desire one, mental health coverage to make that coverage done to help displaced workers, particularly in and increase the criminal penalties associated available at the same level as insurance cov- light of those recently displaced by the Sep- with the unauthorized purchase or possession erage for physical illness. tember 11 attacks on America , including more of a Medal, or with the false representation of This was a crucial social issues issue that than 100,000 airline employees have lost their its awarding. was included in the Senate version of the jobs. These attacks radically altered the pros- Madam Speaker, I am proud to be an origi- spending bill (H.R. 3061) that should have pects of workers and business in every com- nal cosponsor of H.R. 2561 and I strongly been adopted by the conferees. The adoption munity in America. urge my colleagues to join me in supporting by the conferees of an amendment offered by Unfortunately, by all indicators, the reces- our Medal of Honor recipients. Representative RANDY ‘‘DUKE’’ CUNNINGHAM sion is upon us and it seems clear that we f that would keep the Wellstone-Domenici Men- have not yet hit bottom. So while hard working NURSE REINVESTMENT ACT tal Health Parity Act of 1996 (P.L. 104Ð204) in Americans continue to loose their jobs through effect for another year is notable, but should no fault of their own, we must do all that we SPEECH OF not replace the responsibility of the conferees can to provide them with the benefits and HON. MARK FOLEY to address this important issue to protect all safety net that they need and deserve. Americans from disparities in insurance cov- That’s why I was proud to join Representa- OF FLORIDA erage. tive HASTINGS and over 150 other members of IN THE HOUSE OF REPRESENTATIVES According to the Wall Street Journal, the the House in co-sponsoring H.R. 2946, the Wednesday, December 19, 2001 cost to American businesses of untreated Displaced Workers Relief Act of 2001. This bill Mr. FOLEY. Mr. Speaker, I want to thank all mental illnesses is $70 billion per year, and served as the companion bill to S. 1454, the members of this chamber for passing H.R. the National Institute of Mental Health esti- which was introduced in the Senate by Sen- 3487, the Nurse Reinvestment Act. This bill mates that the cost to society is $300 billion ator JEAN CARNAHAN of Missouri. It would have will provide immediate relief to a sector of the per year. These costs are reflective of the provided those who lost their jobs in the wake healthcare industry in desperate need of our 23% unemployment rate among American of the attacks of September 11 with the ability support. The nursing shortage is approaching adults who suffer from depression, and the to pay rent, put food on their table, buy school critical levels and it is clearly affecting patients fact that four of the ten leading causes of dis- books for their children, while trying to get by throughout our Nation. ability in America are mental disorders. in these difficult times. These men and women who work on the The mental health parity provision would Specifically, the bill extended unemployment front lines of our healthcare system everyday have addressed these issues while increasing benefits from 26 to 78 weeks, provided 26 face tremendous hurdles. I have met with the levels of productivity in the American work- weeks of unemployment insurance benefits for nurses and their representatives who have force. It is a seriously missed opportunity that workers who would not otherwise qualify, ex- thoroughly explained the problems with man- this provision was not included in this appro- tended Job Training Benefits from 52 to 78 datory overtime, the need for staffing stand- priation. weeks, provided up to 78 weeks of federally ards, and protection for those employees who Having said that, I am pleased that this ap- subsidized COBRA premiums, and provided report unsafe conditions or practices in the fa- propriation includes $48.9 billion for the De- temporary Medicaid coverage for up to eight- cilities in which they work. partment of Education, roughly $4.4 billion een months to those workers without COBRA

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00061 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.108 pfrm07 PsN: E20PT1 E2400 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 coverage. Many of these benefits would have breast or cervical cancer in the United States alike, as well as student financial aid adminis- served Americans well had they been included despite the fact that early detection and treat- trators. We have received letters of support in this Conference Report. ment of these diseases could substantially de- from the United States Student Association, I am, however, pleased with the large in- crease this mortality. While passage of last the State Public Interest Research Groups, the crease to the National Institutes of Health by year’s bill made significant strides to address National Association of Student Financial Aid targeting $23.3 billion, which helps meet our this problem, it failed to do so for Native Administrators, the American Council on Edu- pledge to double fiscal 1998 spending on NIH American women and that is why we are here cation, the Consumer Bankers of America, by fiscal 2003. today. and the Education Finance Council. The bill addresses the new threats that the Mr. Speaker, I want to thank my colleagues, Passage of S. 1762 is crucial for ensuring nation faces by increasing the Centers for Dis- especially Representatives WATTS, SHERROD the availability of funds for qualified students ease Control (CDC) by increasing funding BROWN, WAXMAN, CAMP, and HAYWORTH for to go to college. As we know, more and more 11% above last year. Also, it maintains the working with me to bringing S. 1741 to the students are going to college these days, and Low-Income Home Energy Assistance Pro- floor today. I especially want to thank Jack more are doing so with the help of student gram (LIHEAP) at the FY 2001 level, an in- Horner of Representative J.C. WATT’s Repub- loans. S. 1762 will mean that more students crease of $300 million over the President’s re- lican Conference staff, Tim Westmoreland of can go on to college and will be more able to quest. Finally, it rejects proposed enrollment HENRY WAXMAN’s office, Katie Porter of participate in the 21st century. cuts to Head Start, preventing potential cuts of SHERROD BROWN’s office, and Tony Martinez I urge a ‘‘yes’’ vote for S. 1762. as many as 2,500 children from the program. and Mike Collins of my office for their vigilant f Finally, the support I received for Houston in and diligent work to ensure that this legislation fighting prostate and breast cancer—with did not fall victim to the end-of-the-year ECONOMIC SECURITY AND $290,000 for minority testing centers and crunch. WORKER ASSISTANCE ACT OF 2001 $150,000 for Sisters Network—will help save Mr. Speaker, I urge all my colleagues to SPEECH OF lives. support this bi-partisan and important legisla- Overall, this bill, while not perfect, address- tion so that we may send it to the President HON. WILLIAM J. COYNE es many of the problems that we currently for his signature to ensure that Native Amer- OF PENNSYLVANIA ican and Native Alaskan women are not de- face and fulfills our obligations to the Amer- IN THE HOUSE OF REPRESENTATIVES nied life-saving breast and cervical cancer ican people. I support it, and I urge my col- Wednesday, December 19, 2001 leagues to also support it. treatment. f f Mr. COYNE. Mr. Speaker, I rise today in op- position to this second deeply flawed eco- ESTABLISHING FIXED INTEREST THE NATIVE AMERICAN BREAST nomic stimulus bill. RATES FOR STUDENT AND PAR- AND CERVICAL CANCER TREAT- The measure before us today represents a ENT BORROWERS MENT TECHNICAL AMENDMENT modest improvement over the first stimulus ACT OF 2001 SPEECH OF bill, but it is still inadequate. While the bill would extend unemployment benefits for an SPEECH OF HON. PATSY T. MINK additional 13 weeks, it does nothing to help OF HAWAII part-time and low-wage workers. HON. TOM UDALL IN THE HOUSE OF REPRESENTATIVES OF NEW MEXICO And while this version of the Republicans’ Wednesday, December 19, 2001 IN THE HOUSE OF REPRESENTATIVES partisan stimulus bill appears to provide more Mrs. MINK of Hawaii. Mr. Speaker, I want to assistance to laid-off workers so that they can Wednesday, December 19, 2001 express my support for S. 1762, which will keep their health insurance, it would, in fact, Mr. UDALL of New Mexico. Mr. Speaker, let provide students with low interest rates on provide them and their families with little help. me begin by thanking Chairman TAUZIN for al- Federal student loans, while preserving the Serious concerns have been raised about the lowing S. 1741, introduced by my good friend health of the student loan industry by ensuring administration of the proposed 60 percent re- Senator JEFF BINGAMAN, to be considered by the current and future participation of lenders fundable tax credit for health insurance pre- the House. I have appreciated working with in this market. By helping lenders stay in the miums, but even if such assistance could be him to bring S. 1741 to the floor and know that student loan markets, we are making sure that smoothly administered, it would in many cases the issue of early detection and prevention qualified students will have access to a higher not provide enough help to many families— holds a personal closeness to the both of us education, regardless of their financial back- who would still be unable to afford to pay their and to other members of this body. ground. health insurance premiums. Such premiums On April 3, 2001, I introduced H.R. 1383, S. 1762 represents a carefully brokered cost, on average, about $220 a month for an the companion to S. 1741, along with Rep- compromise between those representing the individual and $580 a month for a family. resentatives WATTS, HAYWORTH, SHERROD needs and interests of students, and those Moreover, concerns have been raised that en- BROWN, CAMP, DELAURO, KENNEDY, KILDEE representing the lending industry. This com- actment of such a credit could undermine our and over one hundred bi-partisan co-sponsors. promise essentially fixes a problem that would country’s existing system of predominantly The consideration of this legislation today have arisen in 2003 in the student loan inter- employer-provided health insurance. represents the diligent and bi-partisan work est rate formula that, according to the lending In addition, the legislation before us still pro- over the last month and within the past few community, would have dried up resources for vides an inadequate level of funding to States weeks and hours, by several Members of students needing funds for college by poten- to help them deal with the crisis. The National Congress and their staffs. The work of these tially reducing returns for such loans below the Governors’ Association estimates that the individuals ensures that a simple but very im- cost of issuing such loans. The fix that was combined budget shortfall for all 50 States portant technical correction to the Breast and worked out preserves the current interest rate could exceed $50 billion in 2002. Some provi- Cervical Cancer Treatment and Prevention Act formula that determines how much lenders re- sions in the bill before us would actually exac- of 2000 (P.L. 106Ð354) will allow coverage of ceive from the Federal government, while erbate the fiscal challenge facing many breast and cervical cancer treatment to Native locking in today’s very low interest rates for states—the proposal to allow larger tax write- American women. students. offs for purchases of new equipment, for ex- Mr. Speaker because of a technical defini- The formula will change in 2006 so that the ample, which has been estimated to reduce tion in P.L. 106Ð345, American Indian and Na- interest rate students pay will be fixed at 6.8 state revenues by more than $5 billion next tive Alaskan women were and currently are percent, which is an historically low interest year alone. excluded from this law’s eligibility for treat- rate for students, and will eliminate confusion Finally, this latest bill still allocates much of ment. And, as states determine whether to ex- among borrowers of student loans regarding its ‘‘economic stimulus’’ to tax cuts for cor- pand their Medicaid programs to provide changing interest rates and formulas. With the porations and upper-income households. breast and cervical cancer treatment as an op- changes in S. 1762, students benefit by get- While this Republican stimulus bill would not tional benefit, passage of this legislation will ting guaranteed low interest rates, and by hav- repeal the corporate alternative minimum tax, ensure Native American and Alaskan Women ing the availability of funds for loans, and the it would effectively eviscerate it. This latest are included to receive treatment. stability of the student loan industry ensured. stimulus bill would also speed up the phase- It is estimated that during 2001, almost As I mentioned, S. 1762 is supported by down of marginal tax rates for taxpayers in the 50,000 women are expected to die from groups representing students and lenders upper tax brackets—just like the first stimulus

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00062 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.112 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2401 bill. Moreover, while the argument for these a boy from Pakistan who was sold into bond- and World Trade Center victim, Jeffrey L. Fox tax cuts is that we need to spur additional in- ed labor and killed when he protested with a poem written by his thirteen year old vestment in businesses and factories, this ar- against the treatment of children in his daughter, Jessica. Jessica asked that I share country. When Kielburger, now 18, completed gument rings hollow given that businesses are his speech, he also received an ovation. her poem with the world and I am honored to currently struggling to eliminate the excess ca- Bursts of affection and admiration flashed do so: pacity that exists in many industries. I believe around that enormous room in wave after A PLACE OF MEMORIES wave. When the two young leaders expressed that the most effective stimulus the federal The gleaming towers stood in the sky, government can provide at this time is to ex- their confidence in humanity’s future, it was evident that their experiences had increased Majestic looking and up so high. pand demand for goods and services—and The sun shines down on towers so great, that the most effective way to expand that de- their awareness of the goodness and gen- erosity existing in so many members of the No one knowing about their awful fate. mand is to make up some of the lost income human species. They had a glow of love and Without a warning a plane hit hard. in households that have been hit by recent respect around them. New York would be forever scarred. lay-offs. There were hundreds of students in that Minutes later, another plane crashed, In short, I believe that, like the first eco- huge room, students from high school and Leaving the second tower extremely nomic stimulus bill rammed through the House colleges, students with a wide range of gifts smashed. by the Republican leadership in October, this and ambitions, students from many ethnic The towers crumbled down to Earth legislation is both unfair and unwise. It does backgrounds. Their faces were shining with Because two planes crashed in their berth. excitement. They were clearly inspired by People beneath the towers ran. too little to help the people who have been the two young leaders who were being ac- laid off and too Much to help the people who Now the towers no longer stand. claimed. The rescue workers worked non-stop, are well off. Moreover, it does too little to stim- I was among the hundreds of older persons Searching the rubble bottom to top. ulate the economy in the coming year and who participated in that gathering of glo- People pulled out became less and less rious beings. I lived through four wars and I loses too much revenue in subsequent years. And using their strength became a test. I urge my colleagues to vote against this poor- had witnessed terrible sufferings. Yet I also The gleaming towers stood in the sky, ly crafted legislation. witnessed noble acts in many places. In spire of wars and other calamities, in spite of ter- Majestic looking and up so high. f rorism and all the threats that existed, I was Where the twin towers used to be Is now a place of memory. HUMANITY’S GREATNESS IN A sure that human beings would go from TIME OF PERIL height to height, achieving more in each At this time in our Nation’s history, when we generation. struggle to find solace and draw lessons from The celebration on Nov. 9 convinced me again that Thomas Merton was right when acts of terror against us, we gain strength and HON. LOIS CAPPS perspective from those families these atro- OF CALIFORNIA he asserted in one of his books that it is ‘‘a glorious destiny to be a human being.’’ I saw cious acts left behind. We find strength in the IN THE HOUSE OF REPRESENTATIVES the light of that glory in the faces of the memory of Jeffrey Fox and in the words of his Thursday, December 20, 2001 young and the old when they leaped to their brave and courageous daughter. Mrs. CAPPS. Mr. Speaker, I rise to bring to feet to respond to a Nigerian woman and a Mr. Speaker, again, I rise to honor the Fox the attention to my colleagues, a thoughtful ar- Canadian man. family and I ask my colleagues to join me in I was grateful for the privilege of being in recognizing their legacy to our community and ticle by Frank Kelly that appeared in the Santa that room on that marvelous night. I was Barbara News-Press, entitled ‘‘Humanity’s grateful for the work of the Nuclear Age New Jersey. Greatness in a Time of Peril’’ on November Peace Foundation in bringing so many won- f 25, 2000. derful persons together. I was grateful for Mr. Frank K. Kelly has been a journalist, a the fact that I had participated in founding HONORING THE HARD WORK AND speechwriter for President Truman, Assistant it and supporting it for 20 years. PATRIOTISM OF THE CITIZENS to the Senate Majority Leader, Vice President I felt an exultance, which reminded me of OF VIDALIA, TOOMBS COUNTY, the surge of joy I had felt when I took part GA of the Center for the Study of Democratic In- in the liberation of Paris in August of 1944. I stitutions, and Vice President of the Nuclear had never expected to ride into that city as Age Peace Foundation. a member of a victorious army. I had never HON. JACK KINGSTON Mr. Speaker, I submit the following article: expected to be embraced by so many people, OF GEORGIA [From the Santa Barbara News-Press, Nov. to be hailed as a liberator. It was an ecstasy IN THE HOUSE OF REPRESENTATIVES 25, 2001] I had not earned. It was one of many gifts showered upon me in a fortunate life. Thursday, December 20, 2001 VOICES—HUMANITY’S GREATNESS IN A TIME OF On the night of Nov. 9, I felt the exaltation Mr. KINGSTON. Mr. Speaker, in response PERIL that comes when many people are cele- (By Frank K. Kelly) brating the mystery and the wonder of being to the terrorist attacks on September 11th, the In a time of trouble and sorrow, with fears human. We rejoiced together, we felt the people of Vidalia, GA took it upon themselves of terrorism shadowing the future, 500 endless possibilities for greatness that can to undertake a project to show their support human beings gathered in Santa Barbara on occur when people acknowledge their unity for America. The town of 10,000 did not have Nov. 9 to honor two young leaders who have in the spirit of love. We became fully aware an American flag that stood in the middle of shown courage and compassion in lives of that hatred and cruelty can be overcome, town, and they were driven to raise over high achievement. The gathering was de- and there can be peace and justice in this $3,000 to erect a flag pole which will perma- scribed as ‘‘An Evening for Peace,’’ but it world for all. I strongly believe that every one who was nently display the American flag in the center was far more than that. It was a celebration, of town. a tremendous manifestation, of the creative in that room that night will carry the powers of humanity. starburst of that celebration in their lives SPECIAL ORDER FOR VIDALIA FLAG POLE Two Peace Leadership Awards were pre- through all the pains and problems of the Mr. Speaker, I rise today to share with you sented that evening by the Nuclear Age coming years. I thrill to the hope that a tre- the dedication and hard work of some remark- Peace Foundation. One went to Hafsat mendous Age of Fulfillment is dawning for able Americans; the citizens of Vidalia, GA. the whole human family. Abiola, founder of the Kudirat Initiative for September 11th, 2001 affected every single Democracy, a dauntless advocate for human f one of us, and the 3 month anniversary of this rights throughout the African continent. A beautiful young woman with a delicate face, CENTRAL NEW JERSEY HONORS tragedy served to remind us of that infamous she spoke of the struggles she had endured WORLD TRADE CENTER VICTIM day. All over the country people from different and the triumphs that had been achieved. MR. FOX WITH A POEM WRITTEN states, neighborhoods, and backgrounds have When she finished, the people in the banquet BY HIS DAUGHTER JESSICA come together under a common bond as room rose to their feet in a spontaneous ova- Americans. It has been no different in my tion. home state of Georgia, and I would like to The second Peace Leadership Award was HON. RUSH D. HOLT share with you today, Mr. Speaker, the dedi- given to Craig Kielburger, founder of the OF NEW JERSEY cation and patriotism of the good people of Free the Children organization, who initi- IN THE HOUSE OF REPRESENTATIVES Vidalia. Vidalia is not a very large city having ated a movement that led to the release of Thursday, December 20, 2001 thousands of children from conditions of a population of 10,000. Yet many people may labor enslavement. He created it when he Mr. HOLT. Mr. Speaker, I rise to honor and have heard of a particular crop that comes was 12 years old, stirred by the tragic fate of recognize Plainsboro, New Jersey resident from Vidalia, the famous, sweet Vidalia Onion.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00063 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.115 pfrm07 PsN: E20PT1 E2402 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 However, Mr. Speaker, it is time that these gently to see the event culminate on such a Michael Slater’s commitment to environ- fine folks be known for more than just their special day, Mrs. Reid named organizations mental issues ultimately defined his career onion. and others who have played a role. and his life. As President of the Friends of the ‘‘We really appreciate our young people for In the aftermath of September 11th, the their assistance,’’ she said. ‘‘Dr. Tim Smith Earth Foundation he had the opportunity to people of Vidalia took it upon themselves, to was very receptive to the idea.’’ In his ab- work on those environmental issues closest to erect and commemorate a flag pole and sence, students represented the local school his heart. Following his tenure as President, American flag to fly over their town. Under the system and included Victoria Waring and he continued his activism on environmental direction of Mrs. Lynette Reid and the local John Carroll, J.D. Dickerson Primary issues. Daughters of the American Revolution, the School; Tiffany Fowler, Sally D. Meadows Michael Slater graduated from Stanford Uni- people of Toombs’ county seat went out and Elementary School; Regan Morgan and versity. He began his career as an investor, raised money from local citizens and compa- Evander Baker, J.R. Trippe Middle School; but felt deeply connected to those issues and Matt Stanley, Student Government As- nies to make this dream a reality. As a result sociation, and Blake Tillery, Senior Class which affect our Earth. He believed, correctly, of the hard work of its citizens, the city of President, Vidalia Comprehensive High that those issues which affect the earth affect Vidalia, GA now has an American flag that School. all of us. Therefore, he devoted himself to flies 24 hours a day, and is illuminated at Gifts from organizations included Amer- working to make the Earth a better, safer and night. It serves as a constant reminder of what ican Legion Post #97, Mr. Hershel C. Connell, healthier place for us all to live. For this rea- we believe in and who we are. It is my honor Commander, American Legion Post #97 Aux- son, he has been cited by many as not only to acknowledge them here today, and com- iliary, Ms. Denise Pitman, President; Down- an environmentalist, but a humanitarian; a fit- mend them for their quick work. town Vidalia Association, Mrs. Linda Clarke, ting label for someone so committed to valuing President; Vidalia Lions Club, Mr. Joel Gar- Mr. Speaker, it is actions like these that rett, President; and Vidalia Women’s Club, and preserving humanity. make me proud of our nation. Stories like Mrs. Joe Brice, President. He shared his love of the environment and these have occurred all across the country, Mrs. Reid further admonished the in-kind commitment to environmental issues with his and I want to thank each and every one who services of Harry Moses, Harry Moses Con- wife of 34 years, Teri. Along with her work on have been a part of America’s response. I struction Company, Ron Lambert of Georgia environmental issues she has worked tire- would especially like to thank the people of Power Company and Jerry Fields of Vidalia- lessly as a preservationist to save precious Vidalia, GA. The patriotism, devotion, and de- Lyons Concrete Company, all of whom landmarks and to ensure that important pieces termination that they have demonstrated em- worked together to erect the staff. One other company, who elected to remain anonymous, of our history are maintained. A day rarely bodies some of the best American qualities. as a local electrician and Vietnam veteran went by in which the two of them did not take I am also pleased, Mr. Speaker, in closing who donated the equipment and installing in the beauty of flowers, plants and other nat- to submit some articles from the Vidalia Ad- the lighting necessary to keep the flag lit at ural wonders. They passed their appreciation vance-Progress about this patriotic project. night. and passion for the environment on to their [From the Advance-Progress, Nov. 14, 2001] A bronze plaque will be embedded at the two sons, Eric and Edward. Michael and Teri base of the flag staff. The plaque will be in- FLAG STAFF DEDICATED IN DOWNTOWN PARK would often travel to wilderness locations to- scribed in dedication to the ‘‘victims and he- gether. (By Kathy D. Bradford, Staff Reporter) roes of September 11, 2001,’’ and designated It may be considered by some as nothing that it was dedicated on November 11, 2001. Michael Slater believed it was his obliga- short of a miracle. Congressman Jack Kingston was unable to tion—and the obligation of all of us who are A special ceremony was held Sunday after- attend the ceremony. In absentia, he for- here today—to ensure that what we have noon in the Meadows Street Park to dedicate warded the following to Mrs. Reid: today will be here for the next generation to a 35-ft. illuminated flag staff and an Amer- ‘‘Dear Friends: It is with great pleasure that enjoy tomorrow. These are the words Michael ican flag. An impressive gathering of citizens I send my warmest greetings to you. Let me be Slater lived by. witnessed the patriotic event. the first to congratulate you on your initiative Mr. Speaker, I salute Michael Wylie Slater The desire to erect the flag staff originated and patriotism during these days following Sep- in the October 3 meeting of the Vidalia Chap- tember 11th. I am very proud of all that you today and I ask my fellow Members of Con- ter Daughters of the American Revolution. have accomplished and I commend your hard gress to join me in honoring the life and leg- Less than two months after actually solic- work. acy of this member of the community who will iting community support, the idea came to The money that you all have helped raise is a be so deeply missed. fruition. standing tribute to our country, and I can think f ‘‘This program is designed to dedicate this of no better way to show this pride than the flag flag staff and flag to the heroes of September pole which you are dedicating today. I wish to INTRODUCTION OF LEGISLATION 11,’’ said Mrs. R. Hugh Reid, coordinator of thank each and every one of you for making TO EXPAND THE EARNED IN- the event. this communitywide event possible and again COME TAX CREDIT ‘‘Remember, this is the 11th day, of the want to express my gratitude to everyone in the 11th month,’’ she said. ‘‘This Veterans Day 1st District. We have all been affected by Sep- also coincides with the second month anni- tember 11th, but we also have become a stronger HON. WILLIAM J. COYNE versary of the tragedy currently facing our nation. May God bless you, and may God bless OF PENNSYLVANIA nation.’’ America.’’ IN THE HOUSE OF REPRESENTATIVES Mrs. William F. Ledford, Past Regent of The ceremony concluded with everyone at- Vidalia DAR Chapter, and John Kea of the tending signing ‘‘God Bless America.’’ Thursday, December 20, 2001 Downtown Vidalia Association, opened the The eight-by-twelve foot flag will be flown Mr. COYNE. Mr. Speaker, since its incep- ceremony with 11 tolls of the bell in the ga- day and night to display the patriotism and tion in 1975, the Earned Income Tax Credit, or love of the United States as made evident by zebo in the park, followed by the Color EITC, has been an important part of the Fed- Guard of American Legion Post 97 presenting the rapid response of local citizens in mak- the flag of the United States of America. ing the project a reality. eral Government’s ‘‘safety net’’ of programs All stood at attention as the flag was un- for Americans living in poverty. Its effect on f furled, raised to the top of the staff, lowered children is especially significant. Over the to half-staff and then raised again. As if on IN RECOGNITION OF MICHAEL years, the EITC has succeeded in lifting more cue, the wind began to pick up and the flag, WYLIE SLATER children out of poverty than any other govern- with all its glory, began to color the sky ment program. with red, white and blue. The EITC was conceived as a ‘‘work bonus’’ Involving the youth of the area, Girl Scout HON. CAROLYN B. MALONEY Troop #355, Mrs. John Tyson, Troop Leader, OF NEW YORK alternative to a proposal to provide cash wel- led the Pledge of Allegiance, and the local IN THE HOUSE OF REPRESENTATIVES fare to low-income two-parent families. It was Boy Scout Troop, Mr. Allen Rice, Scout Mas- also seen as a way to lighten the burden of ter, responded with the American’s Creed. Thursday, December 20, 2001 Social Security taxes on low-income workers. A unison of voices filled the air as Mr. and Mrs. MALONEY of New York. Mr. Speaker, Over the years, the credit has been expanded Mrs. Jerome Toole led ‘‘The National An- I rise to pay tribute to Michael Wylie Slater, a and increased. This program demonstrates the them’’ accompanied by the Vidalia Com- beloved environmentalist and activist, who way in which government can improve the prehensive High School band under the direc- passed away on December 8, 2001. Michael lives of its citizens in a meaningful way. tion of Mr. Tim Quigley. And then it came time for special recogni- Slater was a compassionate, dedicated and However, notable pockets of poverty remain tion of the men and women who helped cre- active member of his community, located in in our country. For instance, 29 percent of all ate the minor miracle. Noting the contribu- the 14th Congressional District, which I rep- children in families having three or more chil- tions of local citizens who have worked dili- resent. His passing is truly a loss to us all. dren subsist at incomes below the poverty

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00064 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.119 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2403 level. This is more than double the poverty than full-time. They suggest that extending the A PROCLAMATION IN MEMORY OF rate among children in smaller families. Nearly maximum creditable earnings to the level cor- JEREMY W. KIDD three of every five poor children in this country responding with a full-time, minumum-wage live in families with three or more children. salary would be in keeping with the EITC pro- HON. ROBERT W. NEY Recently the General Accounting Office gram’s goal of ‘‘making work pay.’’ In other OF OHIO (GAO) determined that 4.3 million eligible words, workers could be expected to work IN THE HOUSE OF REPRESENTATIVES households did not claim the EITC in 1999, forgoing $2.6 billion in credits. The preponder- more hours if the income eligibility range for Thursday, December 20, 2001 the EITC were extended or if the credit earned ance (about 81 percent) of the $2.6 billion in Mr. NEY. Mr. Speaker, Whereas, Jeremy W. unclaimed credits would have gone to house- were increased. For childless workers, the Kidd is lovingly remembered by his parents, holds with three or more children. Households maximum creditable earnings will rise to family and friends; with no eligible children would have received $6,000, approximately 60 percent of those Whereas, Jeremy made each day of his life most of the remainder. The non-participation wages. full of excitement and goodness; rates for these two groups, 37 percent for Taken together, in 2002, these changes Whereas, Jeremy always had a smile on his households with three or more children and 55 would provide the following maximum EITC face and brought smiles to the faces of all percent for childless households (as compared amounts: Household with no qualifying chil- those he came in contact with; and to roughly 95 percent for all other house- Whereas, Jeremy’s kindness and consider- dren $918 (an increase of $542); household holds), are convincing evidence that more ation to others will always be remembered by needs to be done to expand and simplify the with 1 child $3,641 (an increase of $1,135); all whose lives he touched; EITC program. household with 2 children $4,284 (an increase Therefore, I invite my colleagues to join with The current structure of the EITC fails to of $144); household with 3 or more children me and the citizens of Ohio in mourning the help larger families, with three or more chil- $4,820 (an increase of $680). loss of Jeremy W. Kidd, yet celebrating his life dren, since the highest level of credit is given In order to balance program costs, my bill and his memory. to families with two or more children. Com- f bining these larger families with families hav- increases the phaseout rates for all categories ing two children ignores the unique needs of to allow benefits to phase out at the same in- PERSONAL EXPLANATION large families, which have experienced more come level as is the case under current law. difficulty in moving from welfare to work due to Finally my bill makes two important changes HON. JOHN N. HOSTETTLER increased family expenditures such as child to the administration of the EITC—it eliminates OF INDIANA care costs. the investment income disqualification test and Today I am introducing legislation to remedy IN THE HOUSE OF REPRESENTATIVES it simplifies the rules for an abandoned spouse this problem by creating a new EITC benefit Thursday, December 20, 2001 to qualify for the credit. level for families with three or more children. Mr. HOSTETTLER. Mr. Speaker, I was un- This new level, with a credit percentage of 45 At at time when our country is undergoing avoidably absent from the House of Rep- percent, will provide a higher benefit for these so much change, we must not forget that our resentatives on December 5 through Decem- families than what they currently receive under low-income families continue to remain at the ber 13, 2001, due to the illness and subse- the ‘‘two or more children’’ category (which margins of our economy and could be the first quent death of my dear mother. Although I re- has a 40 percent credit rate). to suffer the effects of the current economic ceived the appropriate leave of absence from My bill also will double the credit percentage downturn. Their needs existed before the trag- the House, I would like my constituents in the for workers with no qualifying children from ic events of September 11 and probably have 8th District of Indiana to know how I would 7.65 percent to 15.3 percent. This change rec- only worsened since then. have voted if I were present on Roll Call votes ognizes the fact that there is virtually no safety #469 through #498. For the record, I would net for people in this category, who face high I believe that the creation of the additional have voted in the following ways: federal tax burdens. The 15.3 percent credit EITC category involving three or more children Hostettler Vote percentage is the amount needed to offset the will benefit approximately 3.2 million house- full amount of the payroll tax, including the holds, thereby further reducing poverty among Rollcall Nos.: 498 Yea; 497 No; 496 Yea; employer’s share. In his paper, ‘‘should the larger families. In addition to helping larger 495 Yea; 494 Yea; 493 Yea; 492 Yea; 491 EITC for Workers Without children be Abol- families to make ends meet, this new benefit Yea; 490 Yea; 489 No; 488 No; 487 Yea; 486 ished, Maintained, or Expanded?’’ Robert Yea; 485 Yea; 484 Yea; 483 Yea; 482 Yea; level will provide these families with funds for Greenstein, of the Center on Budget and Pol- 481 No; 480 No; 479 Yea; 478 Yea; 477 Yea; icy Priorities, notes that single workers are the upward mobility and asset building capabili- 476 Yea; 475 Yea; 474 Yea; 473 Yea; 472 only group in the United States who begin to ties. Even a moderate increase in income will Yea; 471 No; 470 Yea; 469 Yea. owe federal income tax before their income assist these families to improve their cir- f reaches the poverty line; the federal income cumstances and work toward escaping pov- tax codes taxes them somewhat more deeply erty. IN RECOGNITION OF KEN MILLS into poverty. Besides offsetting the full amount AND NIKI STERN OF THE LEX- This bill also will benefit the U.S. economy INGTON DEMOCRATIC CLUB of the payroll tax (which most economists be- by providing additional incentives for more lieve is borne by workers in the form of lower people, especially low-income women, to join wages), Mr. Greenstein states that expanding HON. CAROLYN B. MALONEY the work force. The economic stimulus func- the credit might also serve two other beneficial OF NEW YORK tion of my bill cannot be overlooked, especially purposes—it might draw more single workers IN THE HOUSE OF REPRESENTATIVES into the labor force and it should raise the in- at a time when we are providing inducements Thursday, December 20, 2001 comes of some poor, non-custodial fathers, for corporations and higher income earners. thereby increasing their ability to pay child The Center on Budget and Policy Priorities Mrs. MALONEY of New York. Mr. Speaker, support. supports this legislation as a ‘‘bill that would I rise to pay tribute to Ken Mills and Niki In addition, the bill will increase EITC bene- Stern, leaders of the Lexington Democratic better reward and encourage work, reduce fits for all family categories by raising the max- Club in New York City. The Lexington Demo- imum creditable earnings used to calculate the poverty among the working poor, and simplify cratic Club has been such a vibrant part of the credit. For all eligible individuals with children, the EITC.’’ They further state ‘‘This is one of community in which I live and represent. It is this amount for the year 2002 will be $10,710, the most worthy initiatives policymakers could a pleasure to pay tribute to two of its most il- the annual wages of a full-time worker earning pursue.’’ lustrious leaders. the minimum wage. Isabel Sawhill and Adam I urge my colleagues to join me in this effort After graduating Phi Beta Kappa and Magna Thomas, of the Brookings Institution, in their to further enhance the highly successful EITC Cum Laude from Princeton University, Ken paper ‘‘A Hand Up for the Bottom Third: to- by supporting this legislation, and, in doing so, Mills went on to make his mark in the field of ward a New Agenda for Low-Income Working communications. After working for many years by supporting a respectable income level for Families,’’ note that those who work full-time in the private sector, including a tenure as those Americans who are, and have been, left at a low wage job do not necessarily qualify Vice-president and Director of Promotion and for more benefits than do those who work less behind. Communications for The Katz Agency, in 1978

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00065 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.122 pfrm07 PsN: E20PT1 E2404 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 he was appointed Director of Communications named Katharine Lee Bates penned what has till all success be nobleness for the New York City Office of Economic De- become the theme song for this extraordinary And every gain divine! velopment by Mayor Ed Koch. In 1981, he unity. On a trip to Colorado, Bates ascended O beautiful for patriot dream was appointed Director of Public Information Pike’s Peak and basked in the wonder of the That sees beyond the years for the New York State Banking Department. ‘‘purple mountain majesties’’ and ‘‘spacious Thine alabaster cities gleam Undimmed by human tears! He was then named Vice-president and Direc- skies’’ she saw. This scene inspired her to America! America! tor of Media Relations for The Chase Manhat- write ‘‘America the Beautiful.’’ God shed his grace on thee tan Bank. In 1994 he founded Ken Mills Com- Returning to Wellesley, Bates sent the four And crown thy good with brotherhood munications which he continues to operate stanzas of ‘‘America the Beautiful’’ to the Con- From sea to shining sea! today. gregationalist, where they first appeared in Ken Mills first joined the Lexington Demo- print, appropriately, on July 4th, 1895. The f cratic Club during John F. Kennedy’s 1960 hymn garnered immediate popularity and was DEPARTMENT OF VETERANS AF- campaign for President. After serving on the initially set to music by Silas G. Pratt. FAIRS HEALTH CARE PROGRAMS Club’s Executive Committee he was elected But the attention Bates’ hymn drew prompt- ENHANCEMENT ACT OF 2001 its president. He then went on to become a ed her to rewrite it in 1904, making it more District Leader, serving in that position until simple and direct. After a few more changes SPEECH OF 1978. In 1995 he began another tenure as over the next several years, the final version, Lexington Democratic Club President, a posi- the one so many Americans know today, was HON. CHRISTOPHER H. SMITH tion he held until early this year. Ken, who finished in 1913 and set to the tune of Samuel OF NEW JERSEY also serves on Manhattan Community Board 8 A. Ward’s ‘‘Materna.’’ In true American spirit, IN THE HOUSE OF REPRESENTATIVES is not only an effective leader, but one who Bates gave countless hundreds of free permis- Tuesday, December 11, 2001 has earned the respect and admiration of pro- sions for the use of ‘‘America the Beautiful.’’ fessional and political colleagues. In recogni- Today we turn to Bates’ timeless words for Mr. SMITH of New Jersey. Mr. Speaker, the tion of his many outstanding achievements, comfort and for a reminder of our nation’s ‘‘Department of Veterans Affairs Health Care we pay tribute to Ken Mills today. strength. These words remind us of the her- Programs Enhancement Act of 2001’’ reflects Niki Stern has long demonstrated a commit- oism of the firefighters and policemen who re- a compromise agreement that the Senate and ment to social and political causes. A long sponded to the attacks on the World Trade House of Representatives Committees on Vet- time community activist, she worked exten- Center and the Pentagon; of the soldiers, sail- erans’ Affairs reached on certain provisions of sively on behalf of the Peace Movement in ors and flyers fighting the war on terrorism; a number of bills considered by the House Westchester County, New York in the 1960’s. and of the cavalcade of heroes who have and Senate during the 107th Congress, includ- She remained actively involved upon moving fought over the years for civil rights, voting ing: H.R. 2792, a bill to make service dogs to New York City and in 1979 began working rights, and workers’ rights—those ‘‘heroes available to disabled veterans and to make as a Community Liaison for Assemblyman prov’d/In liberating strife/Who more than self various other improvements in health care Mark Alan Siegel and for New York City their country loved.’’ They remind us that the benefits provided by the Department of Vet- Comptroller Harrison J. Goldin. She was also ‘‘thoroughfare of freedom’’ we so often take for erans Affairs, and for other purposes, by the appointed to Community Board 8. granted has been blazed by pioneering pil- House Committee on Veterans’ Affairs on Oc- She also joined the Lexington Democratic grims working even up to today. They remind tober 16, 2001, and passed by the House on Club where she was elected to many offices, us of the incredible resolve of New York, one October 23, 2001 [hereinafter, ‘‘House Bill’’]; culminating in her 1993 election as president. of the ‘‘albaster cities’’ that ‘‘gleam/Undimmed S. 1188, a bill to enhance the authority of the Working with Ken Mills, since 1995, as Execu- by human tears.’’ But most of all, Bates’ words Secretary of Veterans’ Affairs to recruit and re- tive Vice-president, she initiated the Club’s an- remind us of the indomitable American spirit tain qualified nurses for the Veterans Health nual mid-winter receptions and dinners and that stretches high and proud, ‘‘from sea to Administration, and for other purposes, re- many other innovations which helped restore shining sea.’’ ported by the Senate Committee on Veterans’ the Lexington Democratic Club to its position Perhaps the most expressive theme of Affairs on October 10, 2001, as proposed to as the largest political organization on Manhat- ‘‘America the Beautiful’’ is that we Americans be amended by a manager’s amendment tan’s East Side. They have made the Lex- constantly seek to be uplifted—that we invoke [hereinafter, ‘‘Senate Bill’’]; S. 1576, a bill to ington Democratic Club an invaluable part of divine help to mend our ‘‘ev’ry flaw,’’ that we amend section 1710 of title 38, United States the political landscape of New York City. know even our ‘‘golden’’ characteristics can be Code, to extend the eligibility for health care of Mr. Speaker, I salute Ken Mills and Niki further refined. That is a sign of far greater veterans who served in Southwest Asia during Stern and I ask my fellow Members of Con- strength than simply waving a flag and chant- the Persian Gulf War; and, S. 1598, a bill to gress to join me in recognizing the great con- ing ‘‘U-S-A!’’ amend section 1706 of title 38, United States tributions of both of these tremendously dedi- Mr. Speaker, in a testament to our national Code, to enhance the management of the pro- cated community leaders. unity, I ask unanimous consent that the com- vision by the Department of Veterans Affairs of specialized treatment and rehabilitation for f plete lyrics of ‘‘America the Beautiful’’ be en- tered into the RECORD. disabled veterans, and for other purposes, in- AMERICA THE BEAUTIFUL troduced on October 21, 2001. AMERICA THE BEAUTIFUL The House and Senate Committees on Vet- HON. RUSH D. HOLT (By Katharine Lee Bates) erans’ Affairs have prepared the following ex- O beautiful for spacious skies, OF NEW JERSEY planation of the compromise bill, H.R. 3447 For amber waves of grain, IN THE HOUSE OF REPRESENTATIVES (hereinafter referred to as the ‘‘Compromise For purple mountain majesties Agreement’’). Differences between the provi- Thursday, December 20, 2001 Above the fruited plain! America! America! sions contained in the Compromise Agree- Mr. HOLT. Mr. Speaker, I’m sure everyone God shed his grace on thee ment and the related provisions in the bills list- agrees that we now live in troubled times— And crown thy good with brotherhood ed above are noted in this document, except times of anxiety, of uncertainty, of struggle. From sea to shining sea! for clerical corrections and conforming But we also live in a time of incomparable na- O beautiful for pilgrim feet changes made necessary by the Compromise tional unity. You could look around the country Whose stern, impassioned stress Agreement, and minor drafting, technical, and and easily spot superficial signs of unity, such A thoroughfare for freedom beat clarifying changes. Across the wilderness! as the plethora of American flags displayed TITLE I—ENHANCEMENT OF NURSE RE- America! America! outside homes and businesses or a crowd at CRUITMENT AND RETENTION AU- god mend thine every flaw, a sports game chanting ‘‘U-S-A!’’ but the real THORITIES Confirm thy soul in self-control, truth is that the river of our national spirit runs Thy liberty in law! Subtitle A—Nurse Recruitment Authorities much deeper than flag-waving could ever O beautiful for heroes proved in liberating Current Law show. And in the fight against the evil that strife. Several VA programs under existing law now confronts us, the American people are Who more than self the country loved are designed to aid the Department in re- united like never before. And mercy more than life! cruiting qualified health care professionals More than a century ago, an English Lit- America! America! in fields where scarcity and high demand erature Professor from Wellesley College May God thy gold refine produce competition with the private sector.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00066 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.127 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2405 The Department is authorized to operate the ever, licensed vocational nurses and certain At a time of looming crisis in achieving Employee Incentive Scholarship Program health care support personnel, whose em- adequacy of basic clinical staffing of VA fa- (hereafter EISP) under section 7671 of title ployment status is grounded in employment cilities, the Committees express concern 38, United States Code. Under the EISP, VA authorities in title 5 and title 38, United over whether such a policy guiding nurse may award scholarship funds, up to $10,000 States Code, are eligible for premium pay on qualifications may work against VA’s inter- per year per participant in full-time study, regularly scheduled tours of duty that in- ests and responsibilities to protect the safety for up to 3 years. These scholarships require clude Sundays. Saturday premium pay for of its patients by creating unintended short- eligible participants to reciprocate with pe- these employees is a discretionary decision ages of scarce health personnel. The Com- riods of obligated service to the Department. at individual medical facilities. mittees urge the Secretary to consider the Currently, enrollment in the scholarship pro- At retirement, VA registered nurses en- implications of continuing such a policy in gram is limited to employees with 2 or more rolled in the Civil Service Retirement Sys- the face of future shortages of nursing per- antecedent years of VA employment. Statu- tem receive annuity credit for unused sick sonnel. The American Association of Com- tory authority for this program terminates leave. This credit is unavailable, however, munity Colleges has reported that, each December 31, 2001. for registered nurses who retire under the year, more than 60 percent of new US reg- The Department is authorized to operate Federal Employee Retirement System. istered nurses are produced in two-year asso- the Education Debt Reduction Program Senate Bill ciate degree programs. The Department’s (hereafter EDRP) under section 7681 of title Section 121 would mandate that VA pro- current qualification standard for registered 38, United States Code. Under the EDRP, the vide Saturday premium pay to employees nurses may dissuade these fully licensed Department may repay education-related specified in Section 7454(b). health care professionals from considering loans incurred by recently hired VA clinical Section 122 would extend authority for the VA employment. professionals in high demand positions. Stat- Department to provide VA nurses enrolled in Subtitle C—Other Authorities utory authority for this program, a program the Federal Employee Retirement System Current Law not yet implemented by the Department, the equivalent sick-leave credit in their re- terminates on December 31, 2001. If imple- tirement annuity calculations that is pro- Section 7306(a)(5) of title 38, United States mented, the program would authorize VA to vided to other VA nurses who are enrolled in Code, requires that the Office of the Under repay $6,000, $8,000, and $10,000 per year, re- the Civil Service Retirement System. Secretary for Health include a Director of spectively, over a 3-year period, in combined Section 123 would require the Department Nursing Service, responsible to the Under principal and interest on educational loans to evaluate nurse-managed clinics, including Secretary for Health. obtained by scarce VA professionals. those providing primary and geriatric care Section 7426 of title 38, United States Code, Under sections 8344 and 8468 of title 5, to veterans. Several nurse-managed clinics provides retirement rights for, among oth- United States Code, the Department is au- are in operation throughout the VA health ers, nurses, physician assistants and ex- thorized to request waivers of the pay reduc- care system, with a preponderance of clinics panded-function dental auxiliaries with part- tion otherwise required by law for re-em- operating in the Upper Midwest Health Care time appointments. These employees’ retire- ployed Federal annuitants who are recruited Network. The evaluation would include in- ment annuities are calculated in a way that to the Department in order to meet staffing formation on patient satisfaction, provider produces an unfair loss of annuity for them needs in scarce health care specialties. experiences, cost, access and other matters. compared to other Federal employees. Con- Senate Bill The Secretary would be required to report gress has made a number of efforts since 1980 Section 111 would permanently authorize results from this evaluation to the Commit- to provide equity for this group, many mem- the EISP; reduce the minimum period of em- tees on Veterans’ Affairs 18 months after en- bers of whom are now retired. These individ- ployment for eligibility in the program from actment. uals, appointed to their part-time VA posi- 2 years to 1 year; remove the award limit for Section 124 would require the Department tions prior to April 6, 1986, under the employ- education pursued during a particular school to develop a nationwide clinical staffing ment authority of title 38, United States year by a participant, as long as the partici- standards policy to ensure that veterans are Code, have been penalized with lower annu- pant had not exceeded the overall limitation provided with safe and high quality care. ities by subsequent Acts of Congress that ad- of the equivalent of 3 years of full-time edu- Section 8110 of title 38, United States Code, dressed retirement annuity calculation rules cation; and, extend authority to increase the sets forth the manner in which medical fa- for other part-time Federal employees ap- award amounts based on Federal national cilities shall be operated, but does not in- pointed under the authority of title 5, United comparability increases in pay. clude reference to staffing levels for such op- States Code. Section 112 would permanently authorize eration. Section 7251 of title 38, United States Code, the EDRP; expand the list of eligible occupa- Section 125 would require the Secretary to authorizes the directors of VA health care tions furnishing direct patient care services submit annual reports on exceptions ap- facilities to request adjustments to the min- and services incident to such care to vet- proved by the Secretary to VA’s nurse quali- imum rates of basic pay for nurses based on erans; extend the number of years to 5 that fication standards. Such reports would in- local variations in the labor market. a Departmental employee may participate in clude the number of waivers requested and Senate Bill granted to permit promotion of nurses who the EDRP, and increase the gross award Section 131 would amend section 7306(a)(5) do not have baccalaureate degrees in nurs- limit to any participant to $44,000, with the of title 38, United States Code, to elevate the ing, and other pertinent information. award payments for the fourth and fifth office of the VA Nurse Executive by requir- Section 126 would require the Department years to a participant limited to $10,000 in ing that official to report directly to the VA to report facility-specific use of mandatory each; and provide limited authority (until Under Secretary for Health. overtime for professional nursing staff and June 30, 2002) for the Secretary to waive the Section 132 would amend section 7426 of eligibility requirement limiting EDRP par- nursing assistants during 2001. The Depart- ment has no nationwide policy on the use of title 38, United States Code, to exempt reg- ticipation to recently appointed employees istered nurses, physician assistants, and ex- on a case-by-case basis for individuals ap- mandatory overtime. This report would be required within 180 days of enactment. The panded-function dental auxiliaries from the pointed on or after January 1, 1999, through requirement that part-time service per- December 30, 2001. report would include information on the amount of mandatory overtime paid by VA formed prior to April 7, 1986, be prorated Section 113 would require the Department when calculating retirement annuities. to report to Congress its use of the authority health care facilities, mechanisms employed Section 133 would modify the nurse local- in title 5, United States Code, to request to monitor overtime use, assessment of any ity-pay authorities and reporting require- waivers of pay reduction normally required ill effects on patient care, and recommenda- ments. The section would clarify and sim- from re-employed Federal annuitants, when tions on preventing or minimizing its use. plify a VA medical center’s use of Bureau of such requests are used to meet its nurse House Bill Labor Statistics (BLS) information to facili- staffing requirements. The House bill has no comparable provi- tate locality-pay decisions for VA nurses. House Bill sions. Additionally, section 133 would clarify the The House bill has no comparable provi- Compromise Agreement Committees’ intent on steps VA facilities sions. Sections 121, 122, 123, 124, 125, and 126 are would take when certain BLS data were un- Compromise Agreement identical to the provisions in the Senate bill. available, thus serving as a trigger for the use of third-party survey information, and Sections 101, 102, and 103 follow the Senate The Committees are concerned about VA’s thereby reducing current restrictions on the language. current national policy requiring VA nurses to achieve baccalaureate degrees as one use of such surveys. Subtitle B—Nurse Retention Authorities means of quality assurance. VA has issued House Bill Current Law directive 5012.1, a directive that requires The House bill contains no comparable pro- Section 7453(c) of title 38, United States VA’s registered nurses to obtain bacca- visions. Code, guarantees premium pay (at 25 percent laureate degrees in nursing as a precondition over the basic pay rate) to VA registered to advancement beyond entry level, and to Compromise Agreement nurses who work regularly scheduled tours do so by 2005. This policy is effective imme- Sections 131, 132, and 133 follow the Senate of duty during Saturdays and Sundays. How- diately for newly employed nurses. bill.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00067 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.131 pfrm07 PsN: E20PT1 E2406 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 Subtitle D—National Commission on VA Department to provide service dogs to vet- HUD income index in determining eligibility Nursing erans suffering from spinal cord injury or for treatment as a low-income family based Current Law dysfunction, other diseases causing physical upon the veteran’s permanent residence. The None. immobility, or hearing loss (or other types of current national threshold would remain in disabilities susceptible to improvement or place as the base figure if the HUD formula House Bill enhanced functioning) for which use of serv- determines the low-income rate for a par- Section 301 would establish a 12-member ice dogs is likely to improve or enhance their ticular area is actually less than that National Commission on VA Nursing. The ability to perform activities of daily living amount. The effective date of this change Secretary would appoint eleven members, or other skills of independent living. Under would be January 1, 2002, and would apply to and the Nurse Executive of the Department the provision, a veteran would be required to all means tests after December 31, 2001, using would serve as the twelfth, ex officio, mem- be enrolled in VA care under section 1705 of data from the HUD index at the time the ber. Members would include three recognized title 38, United States Code, as a prerequisite means test is given. representatives of employees of the Depart- to eligibility. Service dogs would be provided Compromise Agreement ment; three representatives of professional in accordance with existing priorities for VA Section 202 retains the current-law income associations of nurses or similar organiza- health care enrollment. threshold, but would significantly reduce co- tions affiliated with the Department’s health Senate Bill care practitioners; two representatives of payments from veterans near the threshold trade associations representing the nursing Section 201 would authorize the Secretary of poverty for acute VA hospital inpatient profession; two would be nurses from nursing to provide service dogs to service-connected care. The HUD low-income limits would be schools affiliated with the Department; and veterans with hearing impairments and with used to establish a family income determina- one member would represent veterans. The spinal cord injuries. tion within the priority 7 group. Those vet- Secretary would designate one member to Compromise Agreement erans with family incomes above the HUD serve as Chair of the Commission. Section 201 follows the House provision. income limits for their primary residences Section 302 would authorize the Commis- Any travel expenses of the veteran in ad- would pay the co-payments as otherwise re- sion to assess legislative and organizational justing to the service dog would be reimburs- quired by law. Veterans whose family in- policy changes to enhance the recruitment able on the same basis as such expenses are comes fall between the current income and retention of nurses by the Department reimbursed under Section 111, title 38, threshold level under section 1722, title 38, and the future of the nursing profession United States Code, for blind veterans ad- United States Code, and the HUD income within the Department. This section would justing to a guide dog. limits level for the standard metropolitan also provide for Commission recommenda- MANAGEMENT OF HEALTH CARE FOR CERTAIN statistical area of their primary residences, tions on legislation and policy changes to en- LOW-INCOME VETERANS would be required to pay co-payments for in- hance recruitment and retention of nurses Current Law patient care that are reduced by 80 percent by the Department. Section 1722(a) of title 38, United States from co-payments required of veterans with Section 303 would require the Commission Code, places veterans whose incomes are higher incomes. The effective date for this to submit to Congress and the Secretary a below a specified level—in calendar year change would be October 1, 2002. report on its findings and conclusions. The MAINTENANCE OF CAPACITY FOR SPECIALIZED report would be due not later than 2 years 2001, $23,688 for an individual without de- TREATMENT AND REHABILITATIVE NEEDS OF after the date of the first meeting of the pendents—within the definition of a person DISABLED VETERANS Commission. The Secretary would be re- who is ‘‘unable to defray’’ the cost of health quired to promptly consider the Commis- care. The section includes two other such in- Current Law sion’s report and submit to Congress the De- dicators of inability to defray: evidence of Section 1706 of title 38, United States Code, partment’s views on the Commission’s find- eligibility for Medicaid, and receipt of VA requires VA to maintain nationwide capacity ings and conclusions, including actions, if nonservice-connected pension. Veterans in to provide for specialized treatment and re- any, that the Department would take to im- these circumstances are adjudged equally habilitative needs of disabled veterans, in- plement the recommendations. unable to defray the costs of health care; as cluding those with amputations, spinal cord Sections 304 and 305 would delineate the such, they are eligible to receive comprehen- injury or dysfunction, traumatic brain in- powers afforded to the Commission, includ- sive VA health care without agreeing to jury, and severe, chronic, disabling mental ing powers to conduct hearings and meet- make co-payments required from veterans illnesses. To validate VA’s compliance with ings, take testimony and obtain information whose incomes are higher. Under current capacity maintenance, section 1706 includes from external sources, employ staff, author- law, a single-income threshold (with adjust- a requirement for an annual report to Con- ize rates of pay, detail other Federal employ- ments only for dependents) is the standard gress. The reporting requirement expired on ees to the Commission staff, and address used. April 1, 2001. other administrative matters. House Bill House Bill Section 306 would terminate the Commis- Section 103 would amend section 1722(a) of Section 102 would modify the mandate for sion 90 days after the date of the submission title 38, United States Code, to establish geo- VA to maintain capacity in specialized med- of its report to Congress. graphically adjusted income thresholds for ical programs for veterans by requiring the Senate Bill determining a non-service-connected vet- Department and each of its Veterans Inte- The Senate bill has no comparable provi- eran’s priority for VA care, and therefore, grated Service Networks to maintain capac- sions. whether the veteran must agree to make co- ity in certain specialized health care pro- Compromise Agreement payments in order to receive VA care. The grams for veterans (those with serious men- Sections 141, 142, 143, 144, 145 and 146 follow section’s purpose would be to address local tal illness, substance-use disorders, spinal the House bill, with certain modifications to variations in cost of care, cost-of-living or cord injuries and dysfunction, the brain in- the membership of the Commission. other variables that, beyond gross income, jured and blinded, and those who need pros- The Committees expect the National Com- impinge on a veteran’s relative economic thetics and sensory aids); and, would extend mission on VA Nursing to concern itself with status and ability to defray the cost of care. the capacity reporting requirement for 3 the full spectrum of occupations involved in In section 103, low-income limits adminis- years. tered by the Department of Housing and nursing care of veterans in the Veterans Senate Bill Health Administration, with specific ref- Urban Development (HUD) for its subsidized housing programs would establish an ad- S. 1598 similarly would modify current law erence to registered professional and li- with regard to VA’s capacity for specialized censed vocational nurses, clinical nurse spe- justed poverty-income threshold to be used services, but would require that medical cen- cialists, nurse practitioners, nurse managers in the ability-to-defray determination. The ters maintain capacity, in addition to geo- and executives, nursing assistants, and other actual threshold for determining an indi- graphic service areas; require that VA utilize technical and ancillary personnel of the De- vidual veteran’s ability to pay would be the uniform standards in the documentation of partment involved in direct health care de- greater of the current-law income threshold patient care workload used to construct re- livery to the nation’s veterans. In addition in section 1722 of title 38, United States ports under the authority; require the In- to statutory requirements, the Committees Code, or the local low-income limits set by spector General on an annual basis to audit expect the Secretary to appoint members to HUD. each geographic service area and each med- the Commission to reflect the wide variety Section 103 also would include a 5-year lim- ical center in the Veterans Health Adminis- of occupations and disciplines that con- itation on the effects of adoption of the HUD stitute the nursing profession within the De- low-income limits policy on system resource tration to ensure compliance with capacity partment. allocation within the Veterans Health Ad- limitations; and, prohibit VA from sub- ministration. Such allocations would not be stituting health care outcome data to satisfy TITLE II—OTHER MATTERS increased or decreased during the period by the requirement for maintenance of capac- PROVISION OF SERVICE DOGS more than 5 percent due to this provision. ity. Current Law The provision would take effect on October 1, Compromise Agreement None. 2002. Section 203 is derived substantially from House Bill Senate Bill the House bill, with addition of provisions Section 101 would amend section 1714 of Section 202 would amend section 1722 of from the Senate bill, including a require- title 38, United States Code, to authorize the title 38, United States Code, to include the ment that VA utilize uniform standards in

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00068 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.135 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2407 the documentation of workload; a clarifica- tential conflicts of interest, that funding for Section 105 would create a new Subchapter tion that ‘‘mental illness’’ be defined to in- ORCA field offices should be statutorily sep- VIII in Chapter 17 of title 38, United States clude post-traumatic stress disorder (PTSD), arated from the Medical and Prosthetic Re- Code, to incorporate provisions concerning substance-use disorder, and seriously and search Appropriation and associated with bereavement-counseling services for family chronically mentally ill services; a prohibi- the Medical Care Appropriation. ORCA ad- members of certain veterans and active duty tion from substituting outcome data to sat- vises the Under Secretary for Health on mat- personnel. A new section 1782 would provide isfy the requirement to maintain capacity; ters affecting the integrity of research, the counseling, training, and mental health serv- and, a requirement that the IG audit and safety of human-subjects research and re- ices for immediate family members. certify to Congress as to the accuracy of search personnel, and the welfare of labora- Section 105 would place in the new sub- VA’s required reports. tory animals used in VA biomedical research chapter the current dependent health care authorities known as ‘‘Civilian Health and PROGRAM FOR THE PROVISION OF CHIROPRACTIC and development. ORCA field offices inves- Medical Programs—Veterans Affairs’’ CARE AND SERVICES TO VETERANS tigate allegations of research impropriety, lack of compliance with rules for protection (CHAMPVA), transferred from current sec- Current Law of research participants and scientific mis- tion 1713 to the new section 1781. A new pro- Public Law 106–117 requires the VA to es- conduct. The ORCA chief officer reports to vision would specify that a dependent or sur- tablish a Veterans Health Administration- the Under Secretary for Health. vivor receiving such VA-sponsored care wide policy regarding chiropractic care. Vet- would be eligible for bereavement and other erans Health Administration Directive 2000– MAJOR MEDICAL FACILITY CONSTRUCTION counseling and training and mental health 014, dated May 5, 2000, established such a pol- Current Law services otherwise available to family mem- icy. None. bers under the subchapter. House Bill Senate Bill The existing authority to provide hospital care or medical services as a humanitarian Fiscal year 2002 appropriations are avail- Title II would establish a national VA service in emergency cases would be moved able for an emergency repair project at the chiropractic services program, implemented to this new subchapter from its current loca- VA Medical Center, Miami, Florida. Section over a 5-year period; authorize VA to employ tion in section 1711(b). chiropractors as federal employees and ob- 205 of the Senate Bill authorizes $28.3 million Section 105 would also make various tech- tain chiropractic services through contracts; for this project, in accordance with section nical changes to accommodate the sub- establish an advisory committee on chiro- 8104 of title 38, United States Code. chapter reorganization. These changes would practic care; authorize chiropractors to func- House Bill recodify the existing provisions, and consoli- tion as VA primary care providers; authorize The House bill has no comparable provi- date and clarify the existing statutory au- the appointment of a director of chiropractic sion. thority to provide care to non-veterans. service reporting to the Secretary with the Senate Bill same authority as other service directors in Compromise Agreement the VA health care system; and provide for Section 206 follows the Senate bill. The Senate bill has no comparable provi- sions. training and materials relating to chiro- SENSE OF CONGRESS ON SPECIAL TELEPHONE practic services to Department health care SERVICES FOR VETERANS Compromise Agreement providers. Current Law Section 208 follows the House bill. Senate Bill None. EXTENSION OF EXPIRING COLLECTIONS AUTHORITIES Section 204 of the Senate Bill would estab- House Bill lish a VA chiropractic services program in Current Law Section 104 would require the Secretary to VA health care facilities and clinics in not Section 1710(f)(2)(B) of title 38, United assess special telephone services for veterans less than 25 states. The chiropractic care and States Code, authorizes VA until September (such as help lines and ‘‘hotlines’’) provided services would be for neuro-musculoskeletal 30, 2002, to collect nursing home, hospital, by the Department. The assessment would conditions, including subluxation complex. and outpatient co-payments from certain include the geographic coverage, avail- The VA would carry out the program veterans. Section 1729(a)(2)(E) of title 38, ability, utilization, effectiveness, manage- through personal service contracts and ap- United States Code, authorizes VA until Oc- ment, coordination, staffing, and cost of pointments of licensed chiropractors. Train- tober 1, 2002, to collect third-party payments those services. It would require the assess- ing and materials would be provided to VA for the treatment of the nonservice-con- ment to include a survey of veterans to health care providers for the purpose of fa- nected disabilities of veterans with service- measure satisfaction with current special miliarizing them with the benefits of chiro- connected disabilities. telephone services, as well as the demand for practic care and services. House Bill additional services. The Secretary would be Compromise Agreement required to submit a report to Congress on Section 106 would extend until 2007 VA’s Section 204 would follow the Senate bill the assessment within 1 year of enactment. authority to collect means test co-payments and to collect third-party payments. but would replace its reference to 25 states Senate Bill with a reference to VA’s 22 Veterans Inte- Senate Bill The Senate bill contains no comparable grated Service Networks (referred to as ‘‘ge- The Senate bill contains no comparable provision. ographic service areas’’ in the section). Also, provision. Compromise Agreement the agreement would include an advisory Compromise Agreement committee to assist the Secretary of Vet- Section 207 contains a Sense of the Con- Section 209 follows the House bill. erans Affairs in implementation of the chiro- gress Resolution on the Department’s need PERSONAL EMERGENCY RESPONSE SYSTEM FOR practic program. Under the agreement, the to assess and report on special telephone VETERANS WITH SERVICE-CONNECTED DISABIL- advisory committee would expire 3 years services for veterans. ITIES from enactment. RECODIFICATION OF BEREAVEMENT COUNSELING Current Law FUNDS FOR FIELD OFFICES OF THE OFFICE OF AUTHORITY AND CERTAIN OTHER HEALTH-RE- None. RESEARCH COMPLIANCE AND ASSURANCE (ORCA) LATED AUTHORITIES House Bill Current Law Current Law Section 107 of the House bill would require The Under Secretary for Health has pro- Chapter 17 of title 38, United States Code, the Secretary to carry out an evaluation and vided funding for ORCA field offices from contains various legal authorities under study of the feasibility and desirability of funds appropriated for Medical and Pros- which VA provides services to non-veterans. providing a specialized personal emergency thetic Research. These provisions, that authorize bereave- response system for veterans with service- Senate Bill ment and mental health counseling, care for connected disabilities. It would require a re- research subjects, care for dependents and Since field offices of ORCA directly protect port to Congress on the results of this eval- survivors of permanently and totally dis- patient safety, section 205 would authorize uation. abled veterans, and emergency humanitarian VA to fund them from the Medical Care ap- care, are intermingled with authorities for Senate Bill propriation. the care of veterans in various sections of The Senate bill contains no comparable House Bill chapter 17. provision. The House bill has no comparable provi- House Bill Compromise Agreement sion. Section 210 follows the House bill. Section 105 of the House bill would in a Compromise Agreement new subchapter consolidate and reorganize HEALTH CARE FOR PERSIAN GULF WAR Section 205 follows the Senate bill. without substantive change all of the legal VETERANS The Committees are concerned about the authorities under which VA provides services Current Law need for ORCA to maintain independence to non-veterans. It would reorganize section Section 1710 of title 38, United States Code, from the Office of Research and Develop- 1701 of title 38, United States Code, by trans- defines eligible veterans for whom the Sec- ment. The Committees have concluded, on ferring one provision (pertaining to sensori- retary is required to furnish hospital, nurs- the strength of hearings and reports on po- neural aids) to section 1707. ing home, and domiciliary care. Section

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00069 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.140 pfrm07 PsN: E20PT1 E2408 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 1710(e)(1)(C) of title 38 authorizes the Sec- its duties under the law. Also, I’d like to As I see it, the emergency steel loan guar- retary to provide health care services on a stress to everyone here the devastating ef- antee is the next step in helping to save LTV priority basis to veterans who served in the fect a permanent shutdown of LTV Steel Steel and our jobs and health care benefits. Southwest Asia Theater of operations during would have not only upon our steelworkers, The Steelworkers union has actually already the Persian Gulf War. Section 1710(e)(3)(B) of but also all of our retirees. It seems the only taken the first step in cooperation with the title 38 specifies that this eligibility expires growth industry in this country is health company’s unsecured creditors by developing on December 31, 2001. care. Prices for health care, including pre- a plan which includes work rule concessions Senate Bill scription drugs, far exceed any increase in by the steelworkers. Our members work hard every day. Many, The Senate Bill would amend section 1710 wages or benefits. If LTV permanently shuts like myself, have devoted years to making of title 38, United States Code, to extend down, not only will our retirees get reduced pensions from the PBGC and become a bur- LTV Steel succeed. Unfortunately, over the health care eligibility for veterans who den on the government, they will also be past five years, we have witnessed a literal served in Southwest Asia during the Gulf forced to bear this great additional cost on flood of foreign-made steel coming into the War, to December 31, 2011. their fixed incomes. U.S. market. This has depressed steel prices House Bill Growing up in this country, I was always here in the U.S. and is largely responsible for The House Bill contains no comparable taught to respect and care for my elders. It the circumstances which have forced LTV provision. would seem that some in our government Steel and 29 other U.S. steel companies into Compromise Agreement have forgotten this basic lesson. To allow bankruptcy. Section 211 follows the Senate bill but ex- those that invested so much of their blood, Congress created the Emergency Steel tends the health care eligibility to December sweat, and tears in an industry and a com- Loan Guarantee Board for precisely this sit- 31, 2002. pany to make this country strong to be uation; to help a domestic American com- thrown to the wolves would make them vic- pany that has been ravaged by cheap foreign f tims to the policies of their own government. steel to get back on its feet and survive. We With the current economic situation in this have seen in the news where the IMF and the STEELWORKERS’ APPEAL country, the devastating effects a permanent World Bank have allowed loans to foreign shutdown of LTV would have would only countries, including China, so that they can HON. DENNIS J. KUCINICH make it harder on America to pull out of the build up their own steel industries. Our own OF OHIO current recession. It will only create a bigger government has backed these loans. Yet IN THE HOUSE OF REPRESENTATIVES burden on city, state, and Federal govern- when we are pleading for our survival, we are ments. Worse than that is the loss of self-re- kept waiting and wondering whether we will Thursday, December 20, 2001 spect of the people who helped to make this have jobs. Mr. KUCINICH. Mr. Speaker, on December a great nation. I urge you not to wait any longer. Please contact the Emergency Loan Guarantee 12th, hundreds of Americans came to the My brothers and sisters and I are not ask- ing for riches. We are not sports stars or Board and ask them to approve the $250 mil- Capitol to implore their elected representatives movie stars. We are only asking to have the lion loan guarantee for LTV Steel. We need to help them. They are steelworkers, living in right to earn decent wages and benefits this guarantee to save our jobs and to save Ohio, Indiana, Illinois, Minnesota and Pennsyl- through the sweat of our labor so that we our families. vania. They work for LTV Steel Company, can buy a house, educate our children, and Thank you. which is in bankruptcy after enduring years of some day retire in dignity. The people here unfair competition from foreign imports. in Congress and in this administration have STATEMENT OF RICHARD DOWDELL, LTV The steelworkers testified before a hearing the ability to make that happen. STEELWORKER, UNITED STEELWORKERS OF Do not let the American dream die from AMERICA, LOCAL 1011, INDIANA HARBOR, IN- of the Congressional Steel Caucus. They neglect. I urge you in the strongest possible spoke poignantly and eloquently. They ex- DIANA terms to get the Emergency Steel Loan Thank you for the opportunity to appear pressed the key principles upon which our Re- Board to approve the $250 million loan guar- public was founded: liberty and justice for all. before you today to speak about the crisis antee to LTV Steel. facing myself and over 8,000 other employees Thank you. They have made the reasonable demand that of LTV Steel. we, their elected representatives, uphold those My name is Richard Dowdell. I serve as a principles in a global economy. STATEMENT OF BOB RANKIN, LTV STEEL- Unit Co-chairperson of the Chicago coke I am entering into the RECORD the testimony WORKER, UNITED STEELWORKERS OF AMER- plant. I began working at LTV Steel in from that hearing, so that all of my colleagues ICA, LOCAL 188, CLEVELAND, OHIO March, 1964 as a stove tender. I joined the may hear their appeal. Thank you for the privilege of appearing mechanical apprenticeship program and be- today to speak about the future of LTV Steel came a millwright in 1966. I am married and STATEMENT OF TONY PANZA, LTV STEEL- and the future of steelworkers like myself have two children. WORKER, UNITED STEELWORKERS OF AMER- and thousands of others. LTV has arbitrarily decided it is better for ICA, LOCAL 1157, CLEVELAND, OHIO My name is Bob Rankin. I worked as a pro- the employees working in its steel mills to Hello. My name is Tony Panza. I’m 36 duction worker at LTV’s mill in Cleveland, no longer have a job. They actually told the years old and have been employed by LTV Ohio. I have worked for LTV since 1978. My bankruptcy court judge that it is better for Steel Company in Cleveland, Ohio since 1988. job was to inspect steel products being man- us to have finality in this matter and to get During my first ten years, I worked in the ufactured on the line. on with our lives. But I have invested 37 power house of the mill. I later joined the ap- I have a 10-year old son born with a brain years of my life working for LTV Steel and prenticeship program and became a mill- injury. When he was two years old, the doc- I am not willing to go without fighting to wright in 1998. I had a good job and expected tors told us that he probably would not be save my company and my job. The Steel- to work in this job until I retired some day. able to speak or communicate with other workers union and the unsecured creditors I am a third generation steelworker. I am people. We found a hospital in Philadelphia have put forward a modified labor agreement married and my wife and I have two daugh- called the Institute for Child Development. that can and should be accepted. The sac- ters, Isabel, age four, and Rosalie, age 10. He was put in 12 to 14 hours a day of therapy. rifices being offered by our steelworkers will In late 2000 when LTV first declared bank- Our insurance paid for 85 to 90 percent of the give us at least a fighting chance to save ruptcy after suffering from the surge of for- costs. The cost for one week of care is ap- LTV Steel if they are approved by the bank- eign dumped steel, I joined the SOS (Save proximately $18,000. Our son was in this pro- ruptcy court. Our Steel) Committee to try to get Congress gram for three years and he has achieved re- The termination of our contract would to stop illegally-dumped foreign steel before markable success during that time. He is mean that thousands of steelworkers and re- it destroyed any more American steel com- now walking and talking and going to a reg- tirees could lose their health insurance. My panies. Unfortunately, we have been unsuc- ular school. Without our insurance, this wife has an existing medical condition where cessful up to this point. Some 29 American would never have happened. she has a microvalve in her heart which re- steel companies, including LTV, have been He still receives physical therapy today quires expensive medication. If we were to forced into bankruptcy. Several of those which helps him to have a better quality of lose our health insurance, I do not know how companies have been forced to shut down life. If it were not for my insurance, the cost we would be able to afford her medication. completely. One of the reasons is the snail’s of his care in a public hospital setting would There are some 69,000 LTV retirees, many of pace of the process in getting a loan from the have been enormously more expensive and whom are in similar circumstances and are Emergency Steel Loan Guarantee Board. It probably would not have improved his med- relying on the company providing their is my understanding that this program was ical condition. health insurance. if we were to lose our established for circumstances just like what My wife and I are not unique in wanting health insurance, there may not be anywhere we face at LTV. The system seems to be the best life possible and the best medical for us to go, especially for those like my wife working against us. By the time we can get care for our child. There are many other who have serious, pre-existing medical con- help, it may be too late. workers at LTV who face similar challenges ditions that require expensive medication. I urge the Steel Caucus to do whatever you in providing health care for their loved ones, LTV’s asset protection plan does not pro- can in order to see that this program fulfills whether it is a spouse or children. tect two of their most important assets: the

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00070 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.145 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2409 company’s two coke plants, one in Chicago Ohio and in America in the form of taxes to assist U.S. steel makers in gaining resources and the other in Warren, Ohio. These facili- pay for unemployment insurance, food that would be used for reinvestment, retool- ties may be worth $300 million. Instead, the stamps, health care, job training and place- ing and restructuring. company has chosen to permanently shut ment, and other services. These additional down these facilities. These facilities, unlike costs to our city and to state government STATEMENT OF BRUCE SIMON, COUNSEL TO the hot mills, are not subject to the court’s will come at the very moment when we are UNITED STEELWORKERS OF AMERICA recent December 5th order providing for hot in a recession and state and local tax reve- Good afternoon. idle shutdown. The coke facilities are sub- nues are plummeting. My name is Bruce Simon. I am a partner in ject to being permanently closed now unless The environmental cleanup which would be the firm of Cohen, Weiss and Simon, and we the judge modifies his order. necessary if this plant closes down would are Counsel to the United Steelworkers of The steelworkers and retirees of LTV Steel also create a tremendous burden for the City ask you to do all that you can to ensure that America in the LTV Steel matter. of Cleveland. The vendors who serve LTV I’d like to start with a brief review of one the Emergency Steel Loan Board moves Steel and the company’s customers would of the key findings of the Emergency Steel quickly to approve the $250 million loan to also be negatively impacted by the loss of Loan Guaranty Act of 1999; an overview of save LTV Steel. Please act now before it is jobs in a shutdown of LTV Steel. employment in the steel industry; an update too late. LTV, like all other American steel manu- Thank you. on LTV itself, including the status of the facturers, has become a victim of unfair and bankruptcy proceeding, and then deal with unbalanced trade policies which have per- the loan application now pending before the STATEMENT OF COUNCILMAN ROOSEVELT mitted a flood of foreign steel, much of it Emergency Steel Loan Guaranty Board. I COATS, CITY OF CLEVELAND, OHIO ‘‘dumped’’ illegally, into the U.S. market. will conclude with a suggestion about what Thank you Mr. Chairman and members of This flood of foreign steel has depressed the Steel Caucus, and the United States Con- the U.S. House of Representatives Steel Cau- prices so severely that no one can make gress can do about it. cus for receiving my testimony today con- money in this industry in America. With 29 First, a little congressional history: cerning the future of LTV Steel. My name is companies, including LTV Steel, in bank- 1. [Sec. 101(b)(6)] of the Emergency Steel Roosevelt Coats and I am a member of the ruptcy we know that time is running out. We Loan Guaranty Act of 1999, provides: ‘‘Con- City Council from Ward 10 in the city of do not want to see LTV join the ranks of gress finds that (6) a strong steel industry is Cleveland, Ohio. I have served on the City those steelmakers who have shut down per- necessary to the adequate defense prepared- Council since 1987. Prior to that time, I was manently. ness of the United States in order to have a Union Representative for the United Steel- On behalf of the workers and retirees of sufficient steel available to build the ships, workers of America. LTV Steel Company, I implore you in the tanks, planes and armaments necessary for I share the concerns of Congressman Den- Congress and the Administration to do all the national defense’’. And that was before nis Kucinich, Congresswoman Stephanie that you can to save LTV Steel. September 11, 2001. Tubbs-Jones, the people of Cleveland, and Thank you. 2. Congress’s findings in the 1999 law also many in this room about the future of LTV recited the loss of 10,000 steelworkers jobs in Steel Company. 1998, and 3 medium-sized steel bankruptcies PROPOSED RESOLUTION NO. 2002–24 The research done by the City of Cleveland (ACME, LaClede, Geneva). PRESERVATION OF U.S. STEEL INDUSTRY about the possible loss of LTV Steel is dev- Since then, literally tens of thousands astating to our city and to the lives of tens Whereas, the United States steel industry more steelworkers have lost their jobs. Just of thousands of people who live in our city. is in the midst of a serious crisis that im- last Friday, the Bureau of Labor Statistics The loss of LTV Steel would mean the loss of pacts not only steel producing states, but reported that in the last 12 months alone, 3200 steelworkers’ jobs in the City of Cleve- the security and economic well-being of the 17,600 Steelworkers lost their jobs—not in- land. It would also result in the loss of an- entire nation; and cluding the 6,000 so far at LTV. other 7500 steelworkers’ jobs in the states of Whereas, since the United States is experi- And, of course, we now have 28 steel com- Ohio, Indiana, Illinois, Michigan, and Min- encing a recession and, as a result of the panies in bankruptcy, including two of the nesota. 40,000 additional jobs would be af- tragedy of September 11, 2001, is embroiled in very largest, LTV and Bethlehem. fected nationally, and 69,000 families nation- international military action, the loss of the SNAPSHOT OF LTV capability to produce steel domestically will wide would have pensions and health care 1. 6,800 employees, + 2000 at LTV Tubular pose a threat to national security and the benefits either reduced and/or eliminated. 2. 70,00 Retirees, surviving spouses and de- The prospect of losing your health insur- nation’s ability to retain a manufacturing pendents on Retiree Health ance, especially if you are an older person base; and 3. Legacy costs $1.5B who is retired, living on a fixed income, and Whereas, America’s crumbling infrastruc- 4. Pension underfunding—$1/2 B ture needs to be rebuilt and domestically facing mounting costs for health care and LEGAL STATUS prescription drugs is nothing short of fright- produced steel could be used to assist in the ening. Where can an 80-year old retiree with rebuilding of our cities and towns; and Last week, on December 5, the Bankruptcy preexisting medical conditions go to get Whereas, suppliers of raw materials from Court in Youngstown, Ohio issued an order health insurance if they lose their insur- areas such as Minnesota, Michigan, West which carried out an agreement made in ance? How can current workers afford health Virginia and Pennsylvania, and consumers Chambers—between the Company, its se- insurance for their children, their spouse, such as automobile manufacturers in Michi- cured lenders, its noteholders, the Creditors and themselves if they lose their insurance? gan and aerospace manufacturers in Wash- Committee and the Steelworkers. I should These are the key questions which trouble ington would be severely impacted if the do- note that Members Kucinich and Latourette thousands of my constituents today. mestic steel industry is permitted to erode; were very effective witnesses on behalf of Needless to say, the loss of 3200 jobs would and Steelworkers. The Court’s Order, in effect, have a tremendous impact upon the City of Whereas, by way of example, 3,200 steel in- put LTV on a limited life support system, on Cleveland, mainly because of the city losing dustry-related jobs would be lost in Cleve- a respirator, in the intensive care unit. The the tax revenue from these family-sup- land, 7,500 jobs would be eliminated in Ohio, Order provides: portive jobs. LTV also pays millions of dol- Illinois and Indiana, 40,000 additional jobs (a) the Company’s integrated steel units lars a year in property taxes to the City of would be affected nationally and 50,000 fami- are to be maintained in a form of hot idle Cleveland. This is revenue to our city which lies nation-wide would have pension and until the President issues Section 201 rem- is vital in paying for police, fire, education, health benefits reduced; and edies by March, 2002 (b) the coke plants in Warren, Ohio and public health, and other vital functions of Whereas, foreign steel imports have spiked Chicago are to be held alive for 3 weeks our local government. Such a significant loss to 40 percent of the U.S. market, up from 20 (c) the Company is to support and cooper- of local tax revenue would necessarily lead percent just two years ago, by selling steel ate in continuing efforts to secure the Byrd to either cutbacks in city services, layoffs of at prices that are significantly below the loan, and to report back to the Court on De- public personnel, or increases in taxes to cost of production; and cember 19—next Wednesday maintain services, or perhaps a combination Whereas, the U.S. Trade Commission has Where do we stand with the Emergency of all three options. It would also lead to an determined that illegal dumping of foreign- Loan Board? erosion of our city’s infrastructure as we made steel has occurred and the administra- Let me start with a conclusion, and work know it today. There is no doubt that the tion is currently considering an appropriate backwards from there. loss of LTV will lead to a diminished quality remedy for this practice; The power to save LTV, and the power to of life for people in Cleveland. We saw what Now, therefore, be it resolved, That the bury LTV rests in one place—the Emergency happened twenty years ago when the steel National League of Cities urges the Presi- Steel Loan Guaranty Board. industry was in crisis, how entire commu- dent to consider action under international Now, the question for the day is—what can nities in Pennsylvania, Ohio, Indiana, Min- trade law to determine whether there has the Steel Caucus do, what can the Congress nesota, and elsewhere were devastated when been dumping of foreign-made steel in the of the United States do, to move the Loan steel mills shut down and workers were sud- U.S. Board to exercise its power to let LTV live— denly displaced. Be it further resolved, That the National and not exercise its power to pull the plug? The cost of allowing LTV Steel to go under League of Cities urges Congress and the Ad- There has been a considerable amount of will ultimately fall upon every taxpayer in ministration to consider federal programs to finger-pointing and blame assessment over

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00071 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.148 pfrm07 PsN: E20PT1 E2410 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 the past few months—and there are many, component who dies in the line of duty while gard; instead, the Agency is only to provide many candidates for the role of accessory-be- on active or inactive duty training. To me as information once to community water sys- fore-the-fact. But with all due respect, the a layperson, active duty for training and inac- tems (by March 1, 2002) regarding what kinds United Steelworkers of America believes this of terrorist attacks are probable threats. not the time to pin the tail on the donkey tive duty training is a distinction without a dif- EPA is to coordinate its efforts with other for the closing of LTV. ference. agencies and departments of government This is the time, perhaps the last time, Either way, a life was given to protect the who have expertise in this area, to compile that something can be done to avoid the cat- freedoms of all the rest of us. information readily available or already de- astrophic consequences of the closing of LTV Earlier this year, a military plane crashed in veloped, and to promptly distribute this in- that you have just heard about from the Georgia. On board were Guardsmen returning formation. The statute does not provide a steelworker members of this panel. home from active duty for training. All on continuing duty for EPA in this area past the date specified in the legislation. I’m going to spend a few minutes to sup- board died. Yet none was eligible for burial at port my conclusion—that the focus now is on In this regard, vulnerability assessments the Loan Board—and then propose a course Arlington because they were on training status are defined in statute only to the extent that of action—immediate action—for the Steel as opposed to mobilized status. they include a review of certain specified Caucus to take. Their military classification at the time of items. These items are those which make up Here’s where we are today. death made no difference to the widows and the physical structure of a public water sys- There is pending on the desk of the Emer- children left without a husband and father. The tem (as defined in section 1401 of the Safe gency Steel Loan Guaranty Board an appli- fact of the matter is that these soldiers died in Drinking Water Act (SDWA)), electronic, computer or other automated systems, phys- cation by the National City Bank, and Key the line of duty. Bank, on behalf of LTV, for a $250 million ical barriers, the use, storage, or handling of loan guaranty. Madam Speaker, this bill is yet another tes- various chemicals and the operation and The application is supported by an analysis tament to Chairman SMITH’s commitment to maintenance of a drinking water system. by the big 5 Accounting Firm of Deloitte our servicemembers, veterans, and their sur- Title IV recognizes that there are many dif- Touche, for the Official Creditors Committee vivors. ferent types and sizes of community water of LTV, appointed by the Bankruptcy Court, In the wake of the September 11 attacks on systems (CWS) and gives CWS wide discre- which states that the second, historic, labor Americans, I thank Chairman SMITH for taking tion to devise and conduct a vulnerability agreement negotiated between LTV’s credi- the initiative to introduce and bring this bill to assessment. EPA is not given any rule- making or other authority to define further tors and the Steelworkers provides the fol- the floor before we adjourn for the year. lowing—and I quote: (1) ‘‘the Company is what is or is not a vulnerability assessment able to fully repay the Byrd Loan by the end I urge my colleagues to support H.R. 3423. meeting the requirements of section 1433. of 2005,’’ (2) ‘‘the Company is projected to f Nor does Title IV require that a community maintain positive liquidity over the five water system utilize any particular vulner- year period with a low point of $35M in 2002’’. PUBLIC HEALTH SECURITY AND ability assessment tool, or conduct any spe- Thus, the Loan Board has been told by one BIOTERRORISM RESPONSE ACT cific type of analysis. Community water sys- of the most highly respected Accounting OF 2001 tems are not required to determine the con- firms, one of the ‘‘big 5’’, that its primary sequences of intentional acts or terrorist concerns have been met—that, if the $250M acts, analyze their use of specific chemicals, loan is made, it will be paid back as the law HON. PAUL E. GILLMOR including chlorine, as opposed to other requires; and the Company will have the li- OF OHIO chemicals, or to characterize the risk of any quidity, the cash on hand, to carry on its IN THE HOUSE OF REPRESENTATIVES offsite impacts. Further, the term ‘‘physical business. barriers’’ does not necessarily include ‘‘buff- Until now, there has been buck passing. Thursday, December 20, 2001 er zones’’ or any other area around physical From Management of LTV to its banks; from Mr. GILLMOR. Mr. Speaker, as Chairman of structures. the Byrd Bill banks to the DIP lenders; then the Environment and Hazardous Materials Title IV does not contain any requirement to the Union. And back and forth. Now, buck that the EPA or any other governmental Subcommittee of the House Energy and Com- body receive for review vulnerability assess- passing is over, and there is one—and only merce Committee, which has jurisdiction over one, focus. The Loan Board has the power to ments conducted by water systems. Nor does keep LTV alive, so that efforts already under the Safe Drinking Water Act, I am taking this Title IV contain any requirement that com- way to help the entire industry (by address- opportunity to elaborate on and clarify the pro- munity water systems provide such informa- ing the illegal dumping, by addressing legacy visions of the legislative text of Title IV of H.R. tion to EPA or to any other person or gov- costs) have a chance to click in. If the Board 3448, the Public Health Security and Bioter- ernmental entity. It only requires that com- fails to act, it will have pulled the plug be- rorism Response Act of 2001. Because this munity water systems certify that they have fore the doctor has had a chance to operate. completed an assessment. Community water legislation was considered under suspension systems are to coordinate with local emer- Finally, what must be done? The Steel of the Rules and without the filing of a report Caucus, and the other members of Congress, gency planning committees (LEPCs) in the must convey to the members of the Emer- by the House Energy and Commerce Com- preparation or revision of emergency re- gency Steel Loan Guaranty Board, that the mittee, I want to provide and more detailed ex- sponse plans for the purpose of avoiding du- will and intent of Congress in the Emergency planation of Title IV for the RECORD. plication of effort and taking advantage of previous information developed by the Steel Loan Guaranty Act of 1999 was that in- SECTION 401: AMENDMENT TO SAFE DRINKING LEPCs for first responders and local govern- stances like LTV are precisely the instances WATER ACT where guaranty should be issued. The Board ment response. There is no requirement that Title IV of the Public Health Security and must be told, forcefully, that the time to act community water systems disclose any of Bioterrorism Response Act of 2001 requires is now, and that the Guaranty should be the information developed by the vulner- community water systems serving over 3,300 issued forthwith. ability assessments to the LEPCs. individuals to conduct vulnerability assess- Vulnerability assessments could contain f ments and to prepare or revise emergency re- very sensitive information about a drinking sponse plans which incorporate the results of water system which would be of assistance ELIGIBILITY OF CERTAIN PER- the vulnerability assessment. The legisla- to a terrorist or an individual contemplating SONS FOR BURIAL IN ARLING- tion, however, also recognizes that many an attack. Therefore, Title IV was explicitly TON NATIONAL CEMETERY community water systems have conducted or and intentionally drafted to avoid triggering will be in the process of conducting vulner- any requirement under the Freedom of Infor- SPEECH OF ability assessments at the time of enact- mation Act (FOIA) (Section 552 of Title 5, ment. Title IV is thus explicitly drafted not United States Code) to disclose any informa- HON. MICHAEL K. SIMPSON to create a regulatory program which could tion developed in connection with a vulner- OF IDAHO slow down ongoing efforts or to require sys- ability assessment. The President should IN THE HOUSE OF REPRESENTATIVES tems that have completed vulnerability as- carefully consider whether assessments and sessments to undertake another such assess- related materials should be exempted from Wednesday, December 19, 2001 ment. The title only requires that systems the FOIA by executive order. Mr. SIMPSON. Madam Speaker, I rise today certify that an assessment has been com- The legislation authorizes EPA to provide in support of H.R. 3423, which extends burial pleted by a specific date, not that the assess- financial assistance to CWS for several speci- eligibility at Arlington National Cemetery to ment was initiated and/or completed before fied purposes. EPA may provide assistance or after the date of enactment. for vulnerability assessments, for developing those reservists who retire before age 60—the Title IV does not create a regulatory role or revising emergency response plans and for age at which they become eligible for retired for the Environmental Protection Agency expenses and contracts designed to address pay. (EPA) in defining what is or is not an ‘‘ac- basic security enhancements of critical im- H.R. 3423 also makes eligible for in-ground ceptable’’ vulnerability assessment. EPA is portance and significant threats to public burial at Arlington a member of a reserve provided no regulatory authority in this re- health. Title IV does not define either ‘‘basic

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00072 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.152 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2411 security enhancements of critical impor- Security and Bioterrorism Response Act of dance of love and philanthropy and support tance’’ or ‘‘significant threats to public 2001, H.R. 3448. As you know, this bill con- causes for young people and the elderly. health.’’ However, existing SDWA programs tains a provision related to matters in the Bishop Madison’s ministry promotes higher which provide assistance to water systems jurisdiction of the Committee on Transpor- have not provided assistance for continuing tation and Infrasturcture. Specifically, Sec- education, exercises business acumen, im- expenses such as operations and mainte- tion 135 of the bill amends the Stafford Act proves the spiritual fiber of society and main- nance or personnel expenses. This legislation (42 U.S.C. §§ 5121, et seq.), which is under the tains the United House of Prayer as a beacon does not change this long-established public jurisdiction of the Committee on Transpor- of light for those who need inspiration and a policy. tation and Infrastructure. safe haven from the harsh realities of life. Finally, Title IV clarifies that EPA has In the interest of expediting consideration It is my pleasure to stand before the House discretion to act under Part D, Emergency of the bill, the Committee will not seek a re- Powers, of the Safe Drinking Water Act to pay tribute to Bishop S.C. Madison as he ferral of this legislation and will support marks 61 years in the ministry and 10 years (SDWA) when the Agency has received infor- your request to schedule floor action on the mation about a specific threatened terrorist bill. This action should not, however, be con- of service as the outstanding role model and attack or when the Agency has received in- strued as waiving the Committee’s jurisdic- leader of the United House of Prayer for all formation concerning a potential terrorist tion over future legislation of a similar na- people. attack (but not necessarily a specific, identi- ture. f fied threat) at a drinking water facility. In Thank you for your cooperation on this exercising this discretion, the EPA should matter. DEBT-FOR-NATURE AGENDA OF only rely upon substantial, credible informa- Sincerely, BANK REGULATORS AT THE tion. EPA should not interpret ‘‘potential DON YOUNG, FDIC AND OTS terrorist attack’’ to mean that there is Chairman. merely some possibility or statistical prob- ability of a terrorist attack. Neither should f HON. JOHN T. DOOLITTLE EPA interpret a general warning, general an- OF CALIFORNIA nouncement or general condition to be suffi- TRIBUTE TO BISHOP SAMUEL C. cient information of a threatened or poten- MADISON ON THE 75TH ANNIVER- IN THE HOUSE OF REPRESENTATIVES tial terrorist attack. Specific, credible infor- SARY OF THE UNITED HOUSE OF Thursday, December 20, 2001 mation is required, and all other elements of PRAYER FOR ALL PEOPLE’S Mr. DOOLITTLE. Mr. Speaker, in the 106th section 1431 must be met, including the ex- CONVOCATION, HIS 61ST ANNI- Congress, I chaired a Task Force formed by istence of an imminent and substantial VERSARY AS MINISTER, AND endangerment to the health of persons, that then-Chairman DON YOUNG to examine wheth- 10TH ANNIVERSARY AS BISHOP appropriate State and local authorities have er bank regulators at the FDIC and OTS used AND CHURCH LEADER not acted to protect the health of persons their powers to leverage privately owned red- served by the drinking water system, and wood trees, known as the Headwaters Forest that the EPA Administrator has consulted HON. MELVIN L. WATT in California, from an individual. with State and local authorities regarding OF NORTH CAROLINA the correctness of the information regarding The task force, which included Representa- IN THE HOUSE OF REPRESENTATIVES both the specific threat and the actions tives POMBO, THORNBERRY, BRADY, and which the State or local authorities have Thursday, December 20, 2001 RADANOVICH, undertook an 8 month review of taken. The authority granted to EPA in sec- Mr. WATT of North Carolina. Mr. Speaker, I the debt-for-redwoods matter. We held one tion 1431 is a limited, case-by-case, contin- rise today to honor an exemplary leader, terribly long hearing on the subject on Decem- gent emergency power. Bishop S.C. Madison, who is celebrating the ber 12, 2000. 75th anniversary of the United House of Pray- In the 107th Congress, Chairman HANSEN HOUSE OF REPRESENTATIVES, er for All People’s Convocation, his 61st anni- continued work on the subject and dedicated COMMITTEE ON ENERGY AND COMMERCE, versary as minister and his 10th anniversary staff to draft a staff report to summarize the Washington, DC, December 11, 2001. evidence of the FDIC and OTS redwoods Hon. DON YOUNG, as bishop of the United House of Prayer. Chairman, Committee on Transportation and Bishop Madison is an exceptional leader who debt-for-nature scheme and conclusions Infrastructure, Rayburn House Office has championed the causes of eliminating drawn from the oversight work. The report ex- Building, Washington, DC. poverty, inadequate and unaffordable housing, poses how banking regulators took on an un- DEAR MR. CHAIRMAN: The Committee on unemployment, illiteracy, economic disparities authorized, political agenda of leveraging red- Energy and Commerce has requested that and spiritual depravation. The magnitude, wood trees. the House take up the Public Health Secu- A member of the Task Force, Representa- rity and Bioterrorism Response Act of 2001, depth and substance of his contributions to tive POMBO, inserted the text of the staff report H.R. 3448. While the bill primarily contains improve human welfare and social reform provisions related to the matters in the ju- have brought him national acclaim. into the RECORD on June 14, 2001. Just as risdiction of the Committee on Energy and The leadership of Bishop C.M. Grace, important as the report itself, is the collection Commerce, I recognize that section 135, Bishop W. McCollough and Bishop S.C. Madi- of evidence and documents, appended to the which amends the Stafford Act (42 U.S.C. son has had a positive impact on the growth report. Those documents validate the accu- §§ 5121, et seq.), to require release of emer- of the United House of Prayer since its earliest racy of information presented in the report. gency plans, falls under the jurisdiction of existence in tents and storefront locations. Today, for the benefit of my colleagues, I have the Committee on Transportation and Infra- put those appendices into the RECORD. The structure. Currently, under the leadership of Bishop Allowing this bill to move forward in no Madison, there has been expansion to 135 Financial Services Committee should review way impairs your jurisdiction over that pro- congregations in 26 states. The church’s mas- this information as they deal with re-author- vision, and I would be pleased to place this sive, nationwide building program has resulted izing the FDIC and the OTS. These entities letter and any response you may have in the in construction of over 800 units of low and are clearly out of control, and I want to sum- Congressional Record when the bill is consid- moderate income housing. These housing marize why this is so. ered on the floor. In addition, if a conference complexes are located in New Haven, CT; Bank regulators at the FDIC and OTS have is necessary on this bill, I recognize your very specific statutory charges. They are to re- right to request that the Committee on Washington, DC; Norfolk, VA; Charlotte, NC; Transportation and Infrastructure be rep- Augusta, GA; Savannah, GA; and Los Ange- cover money from the owners of banks and resented on the conference with respect to les, CA. More than 100 units have been devel- thrifts when the institutions fail. This system the provision amending the Stafford Act. oped for senior citizens. keeps depositors whole through federally- Sincerely, The extraordinary success of Bishop Madi- backed insurance funds and collects money W.J. ‘‘BILLY’’ TAUZIN, son has led to numerous honors and awards from the banks’ owners if they failed to prop- Chairman. from national, state, and local organizations. erly manage the bank. I emphasize, bank reg- Academic institutions have presented honorary ulators are to recover money. U.S. HOUSE OF REPRESENTATIVES, degrees to him acknowledging his outstanding We found boxes of evidence that clearly COMMITTEE ON TRANSPORTATION AND achievements in helping to overcome deplor- showed that the bank regulators at the FDIC INFRASTRUCTURE, able conditions that plagued people and cities. and OTS deviated from their statutory charge Washington, DC, December 11, 2001. He has received Doctor of Humane Letters and actually concocted a scheme, in concert Hon. W.J. BILLY TAUZIN, Chairman, Committee on Energy and Commerce, from the Saturday College of Washington, DC with the Office of the Secretary of the Interior, Washington, DC. and Bowie State University of Bowie, MD. to obtain redwood trees from an owner of the DEAR MR. CHAIRMAN: Thank you for your Bishop Madison continues to demonstrate failed bank. The scheme was initiated, pro- recent letter regarding The Public Health outstanding leadership, dispense an abun- moted, and lobbied by radical EarthFirst!

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00073 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.155 pfrm07 PsN: E20PT1 E2412 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 ecoterrorists. It was embraced by FDIC law- The bank regulators were thick into red- hired by the FDIC to pursue a parallel ad- yers and facilitated by FDIC’s outside counsel, woods early in the process. They hired outside ministrative action against Mr. Hurwitz. The and it was sanctioned at the highest levels of counsel based on the supposed expertise to coordinated purpose of that strategy was to provide more leverage to get ‘‘the trees,’’ ac- the agency. handle a ‘‘unique’’ settlement involving the cording to the notes of the FDIC lawyers. The cornerstone of the scheme was to bring redwoods. Their outside counsel even acted The intense lobbying campaign by environ- legal and administrative actions that the regu- as a conduit between FDIC lawyers and the mental groups, including Earth First!, di- lators believed and knew would fail against environmental groups that lobbied for the red- rected at the FDIC, its outside counsel, the Mr. Charles Hurwitz, a 24-percent owner of a woods. OTS, the Administration, the Department of failed bank called United Savings of Texas. There is so much evidence detailed in the the Interior, the White House, and Members The bank regulators own written analysis of of Congress was why ordinary internal oper- staff report, which is why I am grateful that my ating procedures that would have closed out their claims said if the redwoods were not in- colleague, Representative RICHARD POMBO, the case against Mr. Hurwitz were not fol- volved, their lawyers would have ‘‘closed out’’ put the text of the report into the RECORD on lowed. the case. That means they would have Thursday, June 14, 2001. I want my col- The scheme to obtain redwoods overrode dropped the case, period. leagues to know that copies of the appendices the initial internal conclusion that the Instead, the bank regulators and their law- to the report are also public record. The Task claims against Mr. Hurwitz were losers for yers synthesized the redwood for bank claims Force made them public at the close of its the bank regulators and should not have scheme with politicians in Congress and with been bought under the written policy of the hearing on December 12, 2000. By my mo- agency. In fact, the FDIC met with the top outside environmental groups. They then met, tion, they were released: staff from the Office of the Secretary of the at a critical juncture, with the Office of the Mr. DOOLITTLE.... We’ve gone now for 5 Department of the Interior to discuss the Secretary of the Department of the Interior hours. We haven’t had a lunch break, and scheme just a few days prior to the stunning where the shocking and incredible realization we’re not going to have time to get into reversal of the internal staff recommenda- was noted by one participant in the meeting: some of the other details. But I think there’s tion not to sue Mr. Hurwitz. The FDIC notes if we drop the suit we ‘‘undercut everything.’’ enough revealed here that’s very troubling, from the meeting say, ‘‘If we drop suit, [it] Even before this startling evidence was un- and it needs further examination, and there- will undercut everything.’’ Of course ‘‘every- covered by the task force, a U.S. District Court fore, I make the following motion: I move thing’’ was the just-discussed scheme to le- that all the documents we utilized in today’s verage redwoods from Mr. Hurwitz. judge, the Honorable Lynn Hughes compared hearing be included in the hearing record The FDIC (and its agent, the OTS) were in- the tactics of the FDIC and OTS to that of the and that all of the documents produced by deed an integral part of the redwoods debt- mafia. the Department of the Interior be included for-nature scheme. They willingly injected Since the time when the report was placed as part of today’s hearing record; and I fur- themselves into the issue through actions in the RECORD by Mr. POMBO, the OTS admin- thermore move that any documents not in- such as meetings with politicians and debt- istrative proceeding has been decided by the cluded in the above categories that are nec- for-nature advocates, internal analysis of essary to document a staff report or analysis debt-for-nature urgings by environmental OTS administrative judge. In a 200 plus page advocates, and meetings with Department of opinion after reviewing 29,000 pages of tran- of the situation be released with such staff report. Hearing no objection.... So or- the Interior officials promoting a redwoods scripts and 2,400 pages of exhibits for over dered. debt-for-nature scheme. They did these seven years, the OTS judge ruled against the things well before their claims were author- agency on every single claim. Now that they are in the RECORD, my col- ized to be filed by the FDIC board, and it be- This ruling validates the inescapable conclu- leagues can see them in the context of the came clearer and clearer to the bank regu- sion that the bank regulators at the OTS and staff report. lators that there would be no ‘‘debt’’ and the FDIC still fail to acknowledge: their claims CONGRESS OF THE UNITED STATES, therefore no redwoods nature swap, if the claims were not brought or at least threat- totally lack of merit and were brought for the WASHINGTON, DC, JUNE 6, 2001. Hon. JAMES V. HANSEN, ened. political reason of obtaining ‘‘the trees’’—the Chairman, Committee on Resources, House of The evidence of the FDIC’s participation in redwoods—at no cost to the government. The Representatives. the debt-for-nature scheme is overwhelming staff report sets out the evidence supporting DEAR MR. CHAIRMAN: Transmitted with and contradicts the testimony offered by the this conclusion. this letter is the Staff Report entitled Red- witnesses at the December 12, 2000, hearing This is an atrocious abuse of governmental woods Debt-For-Nature Agenda of the Fed- of the Committee Task Force that reviewed power, and one that my colleagues and the eral Deposit Insurance Corporation and the the matter. That testimony was that bank- Office of Thrift Supervision to Acquire the ing claims or the threat of banking claims agency should understand. For that reason, I against Mr. Hurwitz involving USAT were have placed the evidence we collected—in its Headwaters Forest that you and Chairman Young requested. not brought as leverage in a broader plan to raw form—into the RECORD today. The report composed of evidence, testi- get the groves of redwoods from Mr. Hurwitz. I am doubly disturbed about what the bank mony, documents, records, and other mate- The weight of the documentation does not regulators did, because the Committee on Re- rial reviewed and analyzed by staff of the buttress that conclusion at all; it con- sources and the Congress have the legal au- Committee on Resources during the 106th tradicts it. Indeed, these actions of the bank regu- thority to decide what land is acquired and and 107th Congress. It follows the work of lators, in particular the FDIC and by exten- the Committee Task Force that reviewed the what the conditions of the acquisition should sion (then directly) the OTS, are an alarming matter through December 2000. be, not banking regulators. Bank regulators display of how ‘‘independent’’ government The analysis concludes that there was a clearly brought their claims for the environ- agencies are not necessarily independent, redwoods debt-for-nature scheme pursued by mentalists, for the Department of the Interior, have agendas, and do engage in politics when the bank regulators at the FDIC and the OTS and for the White House, not in furtherance of not controlled. What staff of such agencies beginning in at least February 1994. The often seem to forget is that the only author- banking laws. Their decision was political and scheme used almost meritless banking the disposition by the OTS judge again proves ity they have is that which Congress gives to claims against Mr. Charles Hurwitz (stem- them by law. What staff of these agencies ei- the point. These documents are even further ming from his minority ownership of a failed ther did not know or forgot is that there is validation. savings and loan) as leverage for the federal not authority in law for them to pursue the When we asked the bank regulators at our government to obtain a large grove of red- redwoods debt-for-nature scheme that they hearing if their banking claims had anything to wood trees owned by the Pacific Lumber pursued. These agencies seemed to realize do with redwoods, they said, ‘‘No.’’ The staff Company, a separate entity that Mr. Hurwitz this well after the pursuit began and their report documents just how the bank regulators owned and controlled. claims were polluted with the illegitimate It is clear that the scheme evolved as the were deeply involved in the redwoods agen- redwoods agenda. FDIC grew to understand the importance of The cost of this improper, illegal engage- da—and how they cooperated to get ‘‘the its (and the OTS’) potential claims as the le- ment—on a loser claim that would have been trees.’’ The report shows how they switched verage for the redwoods during an unprece- ‘‘closed out’’ if it were the normal situa- their recommendation after meeting with the dented meeting it held in early 1994 with a tion—is upwards of $40 million to Mr. Department of the Interior. Right before they Member of Congress. At that meeting, the Hurwitz. If the federal government can con- were to decide whether to pursue the claims, investigation of the claims against Mr. spire and get away with doing this to some- they obviously understood, ‘‘If we drop [our] Hurwitz and the redwoods debt-for-nature one with the capacity and resources to de- suit, [it] will undercut everything.’’ Those are scheme were discussed in detail, a highly in- fend himself, then imagine what the federal appropriate action that launched the bank government can do this to a person who does words are from the notes of a meeting be- regulators into a hot political issue. not have the means or capacity to defend tween the FDIC and the Department of the In- Immediately after the meeting, the goal of himself or herself. terior. Those words put the bank regulators obtaining the redwoods was shared by the The U.S. District Court Judge, The Honor- squarely inside the redwoods agenda. FDIC with the OTS, and the OTS was then able Lynn Hughes, who was assigned the

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00074 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.160 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2413 FDIC case, after learning of just a fraction of I move that all the documents we utilized committees of task forces by its definition of what the FDIC and OTS had done to strong- in today’s hearing be included in the hearing ‘‘subcommittee’’ to include ‘‘a panel . . ., arm Mr. Hurwitz, concluded that the agen- record and that all of the documents pro- task force, special subcommittee, or other cies used tools equivalent to the cosa nostra duced by the Department of the Interior be subunit of a standing committee. . .’’ (essentially a mafia tactic). Judge Hughes included as part of today’s hearing record; But even without such a rule, the ordinary was absolutely correct, and the documenta- and I furthermore move that any documents procedures by which chairmen commerce in- tion in this report provides additional basis not included in the above categories that are quiries—through inquiry letters, scheduling that validates Judge Hughes conclusion. No necessary to document a staff report or anal- of hearings, or staff studies and interviews— one—whether he or she is a millionaire in- ysis of the situation be released with such are proper without committee votes in ad- dustrialist or a laborer in a factory—should staff report.’’ vance or minority party participation in be subject to the unchecked tools of an out On June 6, 2001, a staff report on the Task their formulation or conduct. In furtherance of control ‘‘independent’’ agency like the Force’s inquiry was transmitted to the cur- of the responsibility to engage in continuous FDIC or the OTS, not in our republic. rent chairman of the Resource Committee, oversight under Rule X.2(b)(1), it has been The report makes the following conclusion: Mr. James V. Hansen, and to members of the traditionally proper for the chairman of ‘‘The Directors of the FDIC and OTS should Task Force. Mr. Richard W. Pombo, a mem- committees and subcommittees to initiate take corrective action and withdraw the au- ber of the Task Force, requested and re- preliminary reviews and studies, i.e., inquir- thorization for the FDIC lawsuit and OTS ceived permission of Chairman Hansen to ies which in a general sense may be termed administrative action against Mr. Hurwitz publish the staff report in the CONGRES- ‘‘preliminary investigations’’ to be under- for matters involving USAT. The integrity of SIONAL RECORD, which occurred on June 14, taken by the committee and subject to the the bank regulatory system demands noth- 2001. See 147 Cong. Rec. E 1123–E1136. ultimate control and direction of the com- ing less.’’ We will respond to your questions in the mittee. It is seen as essential, for example, I hope that the information in this staff re- order submitted. Where questions appeared that a chairman’s preliminary inquiry be port assists the Committee. to be closely related, they are answered to- able to minimize the possibility of the de- Sincerely, gether. struction of documents pending their formal DUANE R. GIBSON, 1. Was the creation of a task force a valid incorporation as committee files. In this re- COUNSEL. exercise of Committee Rule 7 authority? House rules have vested broad powers in gard, the courts have held that the legal ob- committees and their chairs to conduct over- ligation to surrender documents requested CONGRESSIONAL RESEARCH SERVICE, sight and investigative proceedings without by the chairman of a congressional com- June 29, 2001. telling them how they are to do so. House mittee arises at the time of the official re- MEMORANDUM Rule X.2(b)(1) directs that ‘‘Each standing quest, and have agreed in construing 18 To: Hon. DON YOUNG. committee . . . shall review and study, on a U.S.C. 1505, a statute proscribing the ob- From: Morton Rosenberg, Specialist in continuing basis, the application, adminis- struction of congressional proceedings, that American Public Law, American Law Di- tration, and effectiveness of those laws, or the statute is broad enough to cover obstruc- vision. parts of laws, the subject matter of which is tive acts in anticipation of a subpoena. See, Subject: Propriety of the Establishment of within the jurisdiction of that Committee e.g., United States v. Mitchell, 877 F.2d 297, an Investigative Task Force by a Com- . . . in order to determine whether such laws 300–01 (9th Cir. 1979); United States v. mittee Chairman and the Release and and the programs thereunder are being im- Tallant, 407 F. Supp. 878, 888 (D.N.D Ga. 1975). Publication in the Congressional Record plemented and carried out in accordance The Mitchell ruling is particularly perti- of a Staff Report and Documents Gath- with the intent of the Congress and whether nent to the question under consideration ered by the Task Force, and Related such programs should be continued, cur- here. In that case the appeals court upheld a Questions. tailed, or eliminated’’. House Rule XI.1(b) conviction for obstructing an investigation by the House Committee on Small Business. You have submitted seven questions that provides that ‘‘Each committee is authorized inquire as to the legal propriety or basis for at any time to conduct such investigations The court said of the obstruction statute the establishment by the House Resources and studies as it may consider necessary and that ‘‘[t]o give section 1505 the protective Committee of a task force and certain ac- appropriate in the exercise of its responsibil- force it was intended, corrupt endeavors to tions taken by that task force and its mem- ities under Rule X’’. The various House com- influence congressional investigations must bers. Our response is based on the following mittees and subcommittees have their own be proscribed even when they occur prior to facts and circumstances which you have pro- rules, procedures and practices. Different in- formal committee authorization.’’ 877 F.2d at vided, which may be briefly summarized. quiries by different committees may follow 301 (emphasis supplied). The court explained On August 15, 2000, as Chairman of the their own individual paths. Committees may the factual background as follows: House Committee on Resources and acting decide among themselves, by precedent or Applying these principles to the case at through the authority vested in you by Rule newly devised procedures, how to conduct hand, all of the circumstances surrounding 7 of the Committee’s rules, you established any particular inquiry. A committee can this investigation point to the conclusion the Task Force on the Headwaters Forest even adopt rules requiring committee votes the appellants’ corrupt endeavor was di- and Related Issues, which had a termination before initiating major inquiries, as the rected towards a legitimate House investiga- date of no later than December 31, 2000. The House Un-American Activities Committee tion. The investigation was instigated by the purpose of the Task Force was to review and (HUAC) did in the 1960’s, and the House Per- chair of a House Committee that unquestion- study actions by the Federal Deposit Insur- manent Select Committee on Intelligence ably has jurisdiction over the subject matter ance Corporation (FDIC) and the Office of has done in recent years. If such a rule is of the inquiry. The letter from Congressman Thrift Supervision (OTS) which were alleged adopted, ‘‘it must be strictly observed’’. Mitchell to the SHA expressly said that to have been undertaken by those agencies Gojack v. United States, 384 U.S. 702, 708 ‘‘[t]his Committee is presently conducting to improperly exert pressure on private par- (1966). Both committees had special reasons an investigation’’ and referred to the Small ties so that the federal government could ob- for adopting such a rule—HUAC’s stemming Business Act for its authority to do so. Fur- tain parcels of land in northern California from the controversial nature of its inves- thermore, the investigation was handled by containing groves of redwood trees adjacent tigations, the Intelligence Committee be- the chief investigator of the Small Business to the Headwaters Forest. Those parcels be- cause of the sensitivity of its inquiries—but Committee on a continuing basis for several longed to the Pacific Lumber Company the vast majority of committees have not months. * * * [T]his was a congressional inves- which was owned by Mr. Charles Hurwitz. perceived a need to adopt such a rule. tigation. Accordingly, we hold that the inves- Mr. Hurwitz was a minority owner of a failed In the instant situation, Rule 7 of the Re- tigation instigated by Congressman Mitchell was Texas savings and loan bank against whom a sources Committee’s rules authorizes the an investigation by the Small Business Com- civil suit (by the FDIC) and an administra- Chairman, after consultation with the Rank- mittee of the House that was protected by tive action (by the OTS) were brought alleg- ing Minority Member, ‘‘to appoint Task § 1505]’’. Id. (emphasis supplied). ing professional liability bonding claims. Forces, or special or select Subcommittees, The appeals court quite clearly was ap- The legal actions were said to have been to carry out the duties and functions of the proving the notion that a chairman can ini- brought as leverage to persuade Mr. Hurwitz Committee.’’ The Chairman’s August 15, 2000 tiate a proper committee investigation and to swap the redwood parcels for a settlement charter of the Task Force vested it with au- identifying two classic indicia of a chair- of these proceedings. thority ‘‘to carry out the oversight and in- man-initiated investigation: the writing of a Following a period of preliminary inves- vestigative duties and functions of the Com- letter and the handling of the investigation tigation, which included requests for produc- mittee’’ regarding the Headwaters Forest by a committee staffer (the ‘‘chief investi- tion of documents by FDIC, OTS, and the De- matter initiated by the Chairman’s letter of gator of the Small Business Committee’’). partment of Interior and private parties, and June 16, 2000. The Task Force’s duration was See also, United States v. North, 708 F. Supp. the issuance of subpoenas for withheld docu- limited to less than six months so that as- 372, 374 notes 3 and 4 (D.D.C. 1988). United ments, the Task Force held a hearing on De- signment to the Task Force would not count States v. North, 708 F. Supp. 380, 381–82 cember 12, 2000. At the conclusion of the against the limitation on Subcommittee (D.D.C. 1988). hearing the chairman of the Task Force, Mr. service under House Rule X.5(b)(2)(c). This In sum, the Chairman’s creation of the Doolittle, made the following motion, which section of the House Rules also recognizes Task Force is well founded in Committee was adopted by unanimous consent: and contemplates the creation by standing and House rules and congressional practice.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00075 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.164 pfrm07 PsN: E20PT1 E2414 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 2. Can a Committee on Resources task to buttress the analysis and the release of report? If documents that are compelled to force generally have the powers and duties of those documents upon the release of the staff be produced are produced under a subpoena a subcommittee? report. to a federal entity and such documents are 3. Did the task force have the power and Public release of documents gathered in used in hearings or staff reports, is a judicial authority under its charter and the applica- the course of a legitimate committee inves- privilege generally waived by the federal en- ble rules to discharge the duties and func- tigation, including those introduced at a tity? tions of the committee—such as holding hearing, is well supported by the House The Staff Report indicates that FDIC and hearings, receiving testimony, compiling rules, committee practice and relevant judi- OTS have suggested that public release of staff reports and analyses, and releasing cial precedent. Under House Rule XI, 2, ‘‘all certain documents may jeopardize the agen- records and documents (into hearing records committee hearings, records, data, charts, cies’ pending civil and administrative pro- and publicly to document staff reports)? and files . . . shall be the property of the ceedings and would also waive judicial litiga- A congressional committee is a creation of House and all Members of the House shall tion privileges that may be available. Nei- its parent House and only has the power to have access thereto.’’ There is no restriction ther contention is likely to be upheld by a inquire into matters within the scope of the on the use of evidentiary material, gathered reviewing court. authority that has been delegated to it by by a committee and presented in a hearing, With respect to effect of pending civil or that body. Thus, the enabling rule or resolu- unless that ‘‘evidence’’ is taken in executive criminal litigation on the ability of a con- tion which gives the committee life is the session. In those circumstances the evidence gressional committee to conduct an over- charter which defines the grant and limita- may not be ‘‘used in public sessions without sight investigation of an agency, the Su- tions of the committee’s power. In con- the consent of the committee.’’ Rule XI, preme Court has long held that refusals to struing the scope of a committee’s author- 2(k)(7). We are advised that the subject ma- provide testimony or evidence based on an izing charter, courts will look to the words terial was not received in executive session. ongoing or potential litigation would not be of the rule or resolution itself, and then, if A Committee has a right to utilize the doc- recognized. In Sinclair v. United States, 279 necessary to the usual sources of legislative uments it has received in any manner that U.S. 263 (1929), the Court upheld the con- history such as floor debate, legislative re- enables it to perform its legitimate legisla- tempt of Congress conviction of a witness in ports, past committee practice and interpre- tive functions. In the absence of a counter- the face of such a contention, holding that tations. Jurisdictional authority for a ‘‘spe- vailing constitutional privilege or a self-im- neither the laws directing such lawsuits be cial’’ investigation may be given to a stand- posed statutory restriction upon its author- instituted, nor the lawsuit themselves ‘‘oper- ing committee, a joint committee of both ity, Congress and its committees have vir- ated to divest the Senate, or the Committee, houses, or a special subcommittee of a stand- tually plenary power to compel information of power further to investigate the actual ad- ing committee, among other vehicles. needed to discharge their legislative func- ministration of the laws.’’ 279 U.S. at 295. As indicated in the above discussion, House tion from executive agencies, private per- The Court further explained: ‘‘It may be con- Rules X and X1 clearly vest oversight au- sons, and organizations, McGrain V. ceded that Congress is without authority to thority, including the holding of hearings Daugherty, 272 U.S. 135, 177 (1927); Watkins v. compel disclosures for the purpose of aiding and the issuance of subpoenas, in its stand- United States, 354 U.S. 178, 187 (1957); the prosecution of pending suits; but the au- ing committees and their subcommittees, Barenblatt v. United States, 360 U.S. 109, 111 thority of that body, directly or through its and the creation by standing committees of (1959); Eastland v. United States Service- committees, to require pertinent disclosures subunits, such as task forces, that would men’s Fund, 421 U.S. 491, 504 n. 15 (1975), and in aid of its own constitutional power is not carry out particularized oversight tasks. The with certain constraints, the information so abridged because the information sought to Headwaters Forest Task Force was formally obtained or maybe made public, Doe v. Mc- be elicited may also be of use in such suites.’ established pursuant to Committee Rule 7 Millan, 412 U.S. 706, 313 (1973); Doe v. McMil- Id. In other words, those persons having evi- and the Task Force’s authority was particu- lan, 556 F. 2d 713–16 (D.C. Cir. 1977), cert. de- dence in their possession, including officers larly defined in its charter of August 15, 2000: nied 435 U.S. 969 (1978). and employees of executive agencies, can not ‘‘[T]o carry out the oversight and investiga- Thus, for example, where a statutory con- lawfully assert that because lawsuits are tive duties and function of the Committee fidentiality or non-disclosure provision bar- pending involving the government, ‘‘the au- regarding the oversight review specified in ring public disclosure of information is not thority of the [the congress], directly or the June 16, 2000 letter (attached hereto)’’ explicitly applicable to the Congress, the though its committees, to require pertinent and to ‘‘hold hearings on matters within its courts have consistently held that agencies disclosures’’ is somehow ‘‘abridged.’’ Id. jurisdiction’’ which are expressly delineated and private parties may not deny Congress The courts have recognized that disclo- in the charter. Such hearings are made access to such information on the basis of sures at congressional hearings may have ‘‘[s]subject to the Rules of the House of Rep- such provisions. FTC v. Owen-Corning Fiber- the effect of jeopardizing the successful pros- resentatives and the Rules of the Committee glass Corp., 626 F2d 966, 970 (D.C. Cir. 1980); ecution of civil and criminal cases, but in no on Resources’’ and had to be approved by the Exxon Corp. v. FTC, 589 F.2d 582, 589 (D.C. instance has any court suggested that this chairman prior to their announcement. Cir. 1978), cert. denied, 441 U.S. 943 (1979); provides a constitutional or legal limitation In light of this, it is likely that viewing Ashland Oil Corp. v. FTC, 548 F.2d 977, 979 on Congress’ right to conduct an investiga- court would find that the Task Force was (D.C. Cir. 1976); Moon v. CIA, 514 F. Supp. 836, tion. See, e.g., Delaney v. United States, 195 properly constituted and could validly exer- 849–51 (SDNY) 1981). Nor may a court block F. 2d 107, 114 (1st Cir. 1952). Commenting on cise all the powers of a subcommittee includ- congressional disclosure of information ob- Congress’ power in this regard, Independent ing holding hearings, receiving testimony tained from an agency or private party, at Counsel Lawrence E. Walsh, who saw suc- and documents and making such documents least when disclosure would serve a valid leg- cessful prosecutions judicially overturned part of the hearing record, directing the islative purpose. Doe v. McMillan, 412 U.S. because of public testimony at congressional preparation of staff reports and analyses, 306, 312 (1973); FTC v. Owens-Corning Fiber- hearings, observed that ‘‘[t]he legislative and authorizing the release of such staff re- glass, supra, 626 F.2d at 970. branch has the power to decide whether it is ports together with supporting documentary Since none of the documents in question more important perhaps even to destroy a evidence gathered by the Task Force. were received in an executive session of the prosecution rather than to hold back testi- 4. Regarding the unanimous consent re- Task Force, no vote of the Task Force or the mony they need. They make that decision. It quest by Chairman Doolittle on December 12, full Committee was necessary to release is not a judicial decision or a legal decision 2000, is it, coupled with the permission of them, and all the documents and records of but a political decision of the highest impor- Chairman Hansen, valid authority to release the Task Force were available for inspection tance.’’ See Walsh, ‘‘The Independent Coun- of the report? by any member of the House. Chairman Han- sel and the Separation of Powers,’’ 25 Hous. 5. Does the unanimous consent request, sen’s authorization to Mr. Pombo was suffi- L. Rev. 1,9 (1998). See also ‘‘Investigative coupled with the release of the report into cient (although probably not necessary) to Oversight: An Introduction to the Law, Prac- the Congressional Record also cover the re- permit him to insert the entire staff report tice and Procedure of Congressional Inquiry, lease of the records contained in the appen- in the Congressional Record. 4, 23–29, CRS Report No. 95–464A, April 7, 1995 dices to the report? Generally, is a vote of 6. Please review the section in the report (CRS Report). the Full committee required in order to re- entitled ‘‘Use of Records and Documents’’ Similarly, precedents of the House of Rep- lease such subpoenaed documents and and comment on whether it is accurate and resentatives and the Senate, which are records? Was it in this situation? whether it is correct with respect to utiliza- founded on Congress’ inherent constitutional Task Force Chairman Doolittle’s unani- tion of allegedly privileged documents by a prerogative to investigate, establish that ac- mous consent request adopted at the conclu- committee in a staff report under the cir- ceptance of common law testimonial privi- sion of the December 12, 2000 hearing had the cumstances contained in this memo. leges, such as attorney-client or work prod- effect of making two categories of docu- 7. Do litigation privileges apply to con- uct privileges, rests in the sound discretion ments—documents utilized during the hear- strain release of records in such a staff re- of a congressional committee regardless of ing and those produced by the Department of port by the Task Force or the Committee on whether a court would uphold the claim in Interior—part of the record of the hearing. It Resources in the House? If records are used the context of litigation. See, CRS Report a also authorized the use of documents re- in a staff report under the circumstances ex- pp. 43–56. Indeed, Resources Committee Rule ceived by the Task Force which are not with- plained in this memo and the use impacts 4(i) specifically provides that: ‘‘Claims of in those two categories to be utilized in the litigation, is there any bar to the utilization common-law privilege made by witnesses at preparation of a staff report where necessary or release of records that document a staff hearings, or by interviewees or deponents in

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00076 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.168 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2415 investigations or inquiries, are applicable tives v. Dept. of Commerce, 961 F. 2d 941, 946 lative process and protected by the Clause. only at the discretion of the Chairman, sub- (11th Cir. 1992); Murphy v. Department of the Indeed, since Gravel and the revelation of ject to appeal to the Committee.’’ Army, 613 F. 2d 1151, 1155 (D.C. Cir. 1979). the classified Pentagon Papers on the floor Next, we turn to the question whether pub- As we understand it, documents about of the Senate by Senator Gravel, the disclo- lication of the documents received during which FDIC and OTS have raised concerns sure of less sensitive proprietary matter in the course of your investigation will have are ones that were withheld and had to be legislative forums such as the floor or in the effect of waiving any privileges that subpoenaed. On the basis of the above-delin- hearings is unlikely to be successfully chal- might otherwise be asserted in any pending eated precedents, the agencies could make a lenged. A review of ethics proceedings in the or future litigation. Our review of the appli- plausible arguments that they raised suffi- House since 1978 conducted by the House cable case law, and the constitutional prin- cient resistence to demonstrate that the dis- Committee on standards of official conduct ciples underlying congressional oversight closure was involuntary and thus not a waiv- indicates that there have been only two in- and investigations, lead us to conclude that er or privilege. stances involving matter inserted in the a reviewing court is not likely to find that Finally, it may be noted that publication Congressional Record. In one, Rep. Thomas disclosure by your Committee, under the cir- of the staff report and attached documents is L. Blanton (TX) was censured on October 22, cumstances now obtaining, would effect a ultimately protected by the Speech or De- 1921 for publishing a document in the Con- waiver of any privileges that might be as- bate Clause of the Constitution, Art I, sec. 6, gressional Record that contained ‘‘indecent serted in a related court proceeding. cl. 1, and that such publication, since it does and obscene language.’’ In 1977 a compliant More particularly, once documents are in not contain classified material, is unlikely against Rep. Michael J. Harrington (MA) for congressional hands, the courts have held to be sanctioned under the ethics rules of the leaking classified information in the Record that they must presume that the committees House. was dismissed upon finding that the informa- of Congress will exercise their powers re- The purpose of the Speech or Debate tion had not been properly classified. See sponsibly and with due regard for the rights Clause, which provides that ‘‘for any Speech Committee on Standards of official conduct, of effected parties. FTC v. Owens-Corning Fi- or Debate in either House, (Members} shall ‘‘Historical Summary of Conduct Cases in berglass Corp., 626 F. 2d 966, 90 (D.C. Cir. not be questioned in any other place,’’ is to the House of Representatives,’’ April 1992. 1980); Exxon Corp. v. FTC, 589F. 2d 582, 589 assure the independence of Congress in the (D.C. Cir. 1978), cert denied, 441 U.S. 943 exercise of its legislative functions and to re- United States House of Representatives (1979); Ashland Oil Corp. v. FTC, 458 F. 2d 977, inforce the separation of powers established Committee on Resources Staff Report 979 (D.C. Cir. 1976). Nor may a court block in the Constitution. Eastland v. United REDWOODS DEBT-FOR-NATURE AGENDA OF THE congressional disclosure of information ob- States Servicemen’s Fund, supra, 421 U.S. at FEDERAL DEPOSIT INSURANCE CORPORATION tained from an agency or private party, at 502–03 (1975). The Supreme Court has read the AND THE OFFICE OF THRIFT SUPERVISION TO least where disclosure would serve a valid clause broadly to effectuate its purposes. ACQUIRE THE HEADWATERS FOREST, JUNE 6, legislative purpose. Doe v. McMillan, 412 U.S. Eastland supra; see also, United States v. 2001 Swindall, 971 F.2d 1531, 1534 (11th Cir. 1992). 306 (1973); FTC v. Owings-Corning Fiberglass The records, documents, and analysis in The clause protects ‘‘purely legislative ac- Crop., supra, 626 F. 2d at 970. this report are provided for the information It is also well established that when the tivities’’, including those inherent in the leg- of Members of the Committee on Resources production of privileged communications is islative process. Chastain v. Sundquist, 833 pursuant to Rule X 2.(a) and (b) of the Rules judicially compelled, compliance with the F.2d 311, 314 (D.C. Cir. 1987) (quoting U.S. of the House of Representatives, so that order does not waive the applicable privilege Brewster, 408 U.S. 501, 512), cert. denied, 487 Members may discharge their legislative and in another litigation, as long as it is dem- U.S. 1240 (1988). The protection of this clause oversight responsibilities under such rules. onstrated that the compulsion was resisted. is not limited to words spoken in debate. This report has not been officially adopted See, e.g., U.S. v. De La Jara, 973 F. 2d 746, ‘‘Committee reports, resolutions, and the act by the Committee on Resources and may not 749–50 (9th Cir. 1992) (‘‘In determining wheth- of voting are equally covered, as are things therefore reflect the views of its members. er the privilege should be deemed waived, generally done in a session of the House by the circumstances surrounding the disclo- one of its members in relation to the busi- PREFACE sure are to be considered. Transamerica ness before it.’’ Powell v. McCormack, 395 Documentation References Computer, 573 F. 2d at 650.’’) Westinghouse U.S. 486, 502 (1969). Thus, so long as legisla- Documentation is referenced in Electric Corp. v. Republic of the Philippines, tors are ‘‘acting in the sphere of legitimate parentheticals throughout the text of this 951 F. 2d 1414, 1427, 1427 n. 14 (3d Cir. 1991) legislative activity,’’ they are ‘‘protected not report. References to ‘‘Document A’’ are ref- (‘‘We consider Westinghouse’s disclosure to only from the consequences of litigation’s erences to documents that were incorporated the DOJ to be voluntary even those it was results but also from the burden of defending into the hearing record by unanimous con- prompted by a grand jury subpoena, Al- themselves.’’ Tenney v. Brandhove, 341 U.S. sent by the Task Force on Headwaters For- though Westinghouse originally moved to 367, 376–377 (1951). The clause has been held to est and Related Matters on December 12, quash the subpoena, it later withdrew the encompass such activities integral to the 2000. These documents are contained in the motion and produced the documents pursu- lawmaking process as circulation of informa- files of the Committee and those that are re- ant to the confidentially agreement. Had tion to other Members, Doe v. McMillan, 412 ferred to are reproduced in Appendix 1. Docu- Westinghouse continued to object to the sub- U.S. 306, 311–312 (1973); Gravel v. United mentation referenced as ‘‘Record 1,’’ ‘‘Record poena and produced the documents only after States, 408 U.S. 606, 625 (1972), and participa- 2’’ etc. is documentation found in Appendix being ordered to do so, we could not consider tion in committee investigative proceedings, 2. Much of this documentation was not intro- the disclosure to do so to be voluntary’’) (em- and reports. DOE v. McMillan, supra; U.S. duced as part of the hearing record, and it is phasis supplied); Jobin v. Bank of Boulder Servicemen’s Fund v. Eastland, supra; provided for reference to substantiate key (In re M&L Business Machines Co.), 167 B.R. Dombrowski v. Eastland, 387 U.S. 82 (1967); facts referenced in this report. References to 631 (D. Colo. 1994) (‘‘Production of documents Tenney v. Brandhove, supra. ‘‘Document DOI A,’’ ‘‘Document DOI B,’’ etc. under a grand jury subpoena does not auto- But the clause does not protect activities are references to documents that were incor- matically ciliate the attorney-client privi- only casually or incidentally related to leg- porated into the hearing record by unani- lege, much less in an unrelated civil pro- islative affairs. Thus newsletters or press re- mous consent of the Task Force on Decem- ceeding brought by a non-governmental enti- leases circulated by a Member to the public ber 12, 2000. These documents were produced ty. This is especially true in a case such as are not shielded because they are ‘‘primarily to the Committee from the Department of this, where the record demonstrates that the means of informing those outside the legisla- the Interior. Appendix 4 contains the cor- Bank has consistently sought to protect its tive forum.’’ Hutchinson v. Proxmire, 443 respondence between the Committee and the privilege.’’). Some courts have even refused U.S. 111 (1979). The key consideration in such bank regulators. to find waiver when the client’s production, cases is the act presented for examination, All documentation referenced in this re- although not compelled, is pressured by the not the actor. Activities integral to the leg- port and attached in an appendix is nec- court. Transamerica Computer Corp. v. IBM, islative process may not be examined, but essary to contextually verify the informa- 576 F. 2d 646, 651 (9th Cir. 1978). Similarly an- peripheral activities not closely connected tion and conclusions reached in this report other court found that a client’s voluntary to the business of legislating do not get the on subjects within and related to the juris- production of privileged documents during protection of the clause. Walker v. Jones, 733 diction of the Committee on Resources. The discovery did not effect a waiver because it F.2d 927, 929 (D.C. Cir. 1984). Thus, dissemina- records, documents, and analysis in this re- was done at the encouragement of the pre- tion directly to the press of the documents port are provided for the information of siding judge. Duplan Corp. v. Deering themselves or of staff reports that contain Members pursuant to Rule X 2.(a) and (b) of Milliken, Inc., 979 F. supp. 1146, 1163 (S.D.S.C information that describes or quotes from the Rules of the House of Representatives, so 1974) (finding no waiver ‘‘where voluntary the documents, may not come under the pro- that Members may discharge their respon- waiver of some communications was made tection of the Clause. But dissemination of sibilities under such rules. upon the suggestion of the court during the staff reports to Members of the Committee Role of the Committee on Resources: The Head- course of the in camera proceedings.’’). and their staff, or the inclusion of such re- waters Forest Purchase and Management Moreover, at least two federal circuits ports, or the documents themselves, in the Ordinarily, one would think that the Com- have held that disclosures to congressional record of public sessions of the hearings, or mittee on Resources does not regularly committees do not waiver claims of privilege the Congressional Record, are functions that interact or have jurisdiction over bank regu- elsewhere. See, Florida House of Representa- are likely to be held ‘‘integral’’ to the legis- lators. It is important to understand that

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00077 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.171 pfrm07 PsN: E20PT1 E2416 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 the Committee on Resources has jurisdiction Committee staff has redacted sensitive in- that Mr. Hurwitz somehow raised the issue over the underlying law that initially au- formation (for example information unre- first, but they can point to no document thorized the purchase of the Headwaters For- lated to redwoods or debt-for-nature and in- written evidence prior to September 6, 1995, est by the United States and management of formation involving legal strategy) of cer- when Mr. Hurwitz finally submitted and the land by the Bureau of Land Management. tain records and documents to preserve the broached the possibility of swapping red- That law was enacted in November 1997 and integrity of the judicial and administrative woods for bank claims. is P.L. 105–83, Title V, 111 Stat. 1610. That proceedings. It is expected that the FDIC and After an intense banking regulator effort legislation was incorporated in an appropria- OTS may erroneously say that disclosure of to get the redwoods that lasted from 1993 tions bill that funded the Department of the certain documents and records will undercut through 1998, the federal government and the Interior. their litigation position. While many of the State of California switched the plan and Several conditions constrained the Head- documents and records disclosed may be purchased the redwood land owned by Mr. waters authorization. One of those condi- quite embarrassing to the bank regulators, Hurwitz’s company. They did so as author- tions was that any ‘‘funds appropriated by embarrassment is no basis for keeping the ized by Congress (P.L. 105–83, Title V, 111 the Federal Government to acquire lands or information about the unauthorized red- Stat. 1610). interests in lands that enlarge the Head- woods debt for nature scheme secret. Some After the federal purchase, the residue was: waters Forest by more than five acres per sunshine will expose the unauthorized red- (1) fatally flawed banking claims that lacked each acquisition shall be subject to specific woods agenda of the bank regulators in this merit; (2) bank regulators standing alone authorization enacted subsequent to this case and sanitize the system in the future. having been used politically by the White Act.’’ This clause in the authorizing statute House and Department of the Interior; (3) a Background and Summary is commonly referred to as the ‘‘no more’’ group of environmentalists still screaming clause, because it prohibits federal money On December 12, 2000, the Task Force on ‘‘debt-for-more-nature;’’ (4) a federal judge from being used to expand the Headwaters Headwaters Forest and Related Matters held who compared the tactics of the bank regu- Forest after the initial federal acquisition. a hearing that exposed an evolving redwoods lators to those of hired governments and the This was part of the agreement between the ‘‘debt-for-nature’’ scheme undertaken by ‘‘Cosa Nostra’’ (the mafia); and (5) Mr. Administration and the Congress when funds bank regulators—the Federal Deposit Insur- Hurwitz who was required to spend upwards were authorized and appropriated for the ance Corporation (FDIC) and the Office of of $40 million to fight the scheme. In short, purchase of the Headwaters Forest. The fed- Thrift Supervision (OTS). Presented at that the residue was a big mess. eral acquisition actually took place on hearing was substantial documentation and However, not until the oversight review March 1, 1999, the final day of the authoriza- testimony showing how federal banking reg- and December 12, 2000, hearing of the Task tion, at which time all federal activity to ac- ulators, swayed by an intensive environ- Force did the banking regulators’ redwoods quire additional Headwaters Forest should mentalist lobbying campaign, willingly be- ‘‘debt-for-nature’’ motivation, which have been dropped. Thus, the FDIC’s lawsuit came integral to a ‘‘debt-for-nature’’ scheme stumped their own negative evaluation of and the OTS’s administrative action should to obtain redwood trees. the merits of their case, become more fully be dropped. In short, banking regulators provided the understood. It was clear after the hearing This statute, including the ‘‘no more’’ otherwise unavailable leverage for a federal that the ‘‘professional liability’’ claims clause, is part of the Committee’s basis to plan to extort privately owned redwood would have been administratively closed— compel bank regulators to provide docu- trees. The leverage used was the threat of never even brought to the FDIC board by ments and testimony about subjects related ‘‘professional liability’’ banking claims FDIC staff for action—had Mr. Hurwitz not to the Headwaters Forest, debt-for-nature, against Mr. Charles Hurwitz, a minority owned Pacific Lumber Company and the redwoods, and related subjects. The sheer owner of United Savings Association of Headwaters Forest redwood trees. volume of material possessed by the banking Texas (USAT), a failed Texas savings and Instead, intense political pressure, intense regulators on subjects related to the Head- loan. environmental lobbying, and White House waters Forest, possible acquisition of Head- Mr. Hurwitz was a favorite target of cer- pressure to pursue the banking claims as le- waters Forest, and redwoods debt-for-nature tain environmental activists who wished to verage for redwoods outweighed the standard schemes provide more than adequate basis obtain the large grove of redwood trees in operating procedure to administratively for the Committee’s jurisdiction over these northern California, redwoods that belonged close the USAT case, because there was no agencies about these subjects. Additionally, to a company, the Pacific Lumber Company, USAT case. Two sets of banking regulators— the banking regulators have submitted also owned by Hurwitz. The environmental the FDIC and the OTS—became willing in- themselves, properly, to the jurisdiction of interests pressured Congress, the Adminis- struments and partners in the debt-for-na- the Committee. tration, and the banking regulators to bring ture scheme as they violated their own test Use of Records and Documents the banking actions against Mr. Hurwitz and for bringing ‘‘professional liability’’ claims. Bank regulators brought the claims against The FDIC and the OTS will undoubtedly USAT. The idea was that the actions or Mr. Hurwitz even though they were more complain that use of some of the records and threat of actions would lever or even force likely than not to fail and were not cost ef- documents disclosed in this report will jeop- Mr. Hurwitz into transferring redwood trees fective. ardize their case against Mr. Hurwitz, and to the federal government. The FDIC suit (Federal Deposit Insurance The banking regulators’ own assessment that certain litigation privileges or a court was that their action would have a 70% like- seal apply to the documents; however, as Corporation, as manager of the FSLIC Reso- lution Fund v. Charles Hurwitz, Civil Action lihood of failure on statute of limitation stressed above, all documentation in this re- grounds alone. Even if the claims survive the No. H–95–3956) and the OTS administrative port and attached in an appendix is nec- statute of limitation challenges, their own action (In the Matter of United Savings As- essary to contextually verify the informa- cerebral assessment put less than a 50% like- sociation of Texas and United Financial tion and conclusions reached in this report. lihood of success on the merits of their Group, No. WA 94–01) against Mr. Hurwitz ac- The documentation directly bears on sub- claims. These are not the conclusions of the tually became what the environmentalists jects within and related to the jurisdiction of Task Force, although some Members may and political forces sought: the legal actions the Committee on Resources. well agree with them; they are the conclu- The records, documents, and analysis in were the leverage for redwoods. sions of the bank regulators themselves. this report are provided for the information The bank regulators knew that their ac- Moreover, the bank regulators (OTS and of Members. Informing Members has legal tions would be the leverage for such a debt- FDIC) held numerous meetings about the basis in Article I of the Constitution and is for-nature transaction. Between late 1993 and redwoods debt-for-nature scheme, and at a implied because Members of Congress need when the actions were initiated, the bank critical juncture right before they reversed accurate information to legislate. Indeed, regulators became more and more enmeshed their recommendation to the FDIC board, the Committee has legislated on the Head- with the environmental groups, the Depart- they met with DOI. The bank regulators waters Forest. Informing members also has ment of the Interior, and the White House in walked away from that meeting knowing legal basis under rule X 2.(a) and (b) of the the redwoods debt-for-nature scheme. In the that [i]f we drop [our] suit, [it] will undercut Rules of the House of Representatives. Mem- end, they ignored every prior internal anal- everything.’’ (Record 21). This is the meeting bers will be better able to discharge their re- ysis indicating that they would lose the that most likely ensured that the leverage sponsibilities under such rules after review- USAT suit, so them teamed up and brought for the redwoods desired by the DOI and the ing the infomation in this report. it administratively and in the courts. Clinton Administration would become real Some may believe that litigation privi- Ultimately, the FDIC suit and their hiring through filing legal and administrative ac- leges might prohibit use of the records not of OTS to bring the separate administrative tions. already part of the Task Force hearing action forced Mr. Hurwitz to the negotiation These contacts were far outside of normal records. However, litigation privileges do not table. The bank regulators, in concert with operating practice for banking regulator and generally apply to Congress. They are cre- the Department of the Interior and the were described by the former Chairman of ated by the judicial branch of government White House, actually baited Mr. Hurwitz the FDIC as ‘‘shocking’’ and ‘‘highly inap- for use in that forum. Assertions of any liti- into raising the redwoods issue first, so it propriate’’ (Hearing Transcript, 43–44). gation privileges by the FDIC or the OTS or would not appear that the bank regulators In addition, the former FDIC Chairman Mr. Hurwitz related to documents that are were seeking redwood trees. Indeed the bank told the Task Force that environmental ref- disclosed in this report may still be made in regulators still try to propogate the fiction erence to redwoods does not have ‘‘any rel- the judicial forum. evance whatsoever [on] whether or not you

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00078 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.175 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2417 [the FDIC] sue[s] Charles Hurwitz and redwoods agenda. The OTS was present dur- ‘‘focus[es] on preventing further problems.’’ Maxxam over the failure of United Savings. ing some of those meetings and was report- The USAT case is an exception to these stat- Whether they own redwood trees or not is ab- edly ‘‘amenable’’ to the redwoods debt-for- ed policies of federal institutions. solutely, totally irrelevant.’’ (Hearing Tran- nature strategy. Nowhere in the statutes authorizing the script, page 45). This stinging rebuke from a Even after the outright federal acquisition, OTS or the FDIC is there authority to pursue past FDIC Chairman is a fitting assessment which was by purchase, the call became ‘‘professional liability’’ claims or other of the actions of an agency caught up in a ‘‘debt for more nature,’’ through a continued claims for purposes of obtaining redwood debt-for-nature agenda that was too big, too use of the bank regulators leverage of suits trees or ‘‘debt-for-nature’’ schemes. The sole political, and too unrelated to its statutorily that were in process already. The claims con- purpose of such actions with respect to failed authorized purpose. tinued to be used by the federal government institutions is to recover funds or cash—not While there were many factors that nudged to lever Mr. Hurwitz for more nature, at that trees and not nature. the FDIC, and by association the OTS, into juncture arguably in violation of the author- The mission of recovering cash was ac- the debt-for-nature scheme—its own outside izing statute. knowledged by the OTS and FDIC. See, Hear- counsel, the law firm of Hopkins & Sutter— What remained at the end of the day were ing Transcript, page 63, 64, Ms. Seidman provided early and direct links into the envi- filed claims that would not have been (OTS) answered: ‘‘Our restitution claim is ronmental advocates who lobbied and advo- brought under ordinary circumstances had brought for cash.’’ Ms. Tanoue (FDIC) an- cated for federal acquisition of the Head- Mr. Hurwitz not owned redwoods. The bank swered: ‘‘[T]he FDIC considered all options waters Forest through a debt-for-nature bureaucracy, with its reason for bringing the to settle claims at the encouragement of Mr. scheme. In fact, they were selected over as claims in the first place having evaporated, Hurwitz and his representative agency, outside counsel other firms because of their continued the fiction: they continued propa- looked at trees, but the preference has al- environmental connections and ability to gating the false notion that redwoods and ways been for cash.’’) Indeed, this may be handle a redwoods debt-for-nature swap. debt-for-nature had nothing to do with their why the FDIC and the OTS have consistently In addition, the predisposition of the legal bringing the USAT claims. Mr. Hurwitz maintained that Mr. Hurwitz was the first to staff of the FDIC and OTS, the strong desires raised it first, they said, even as the FDIC bring the notion of redwood trees to them. It of Department of the Interior and the White told Department of the Interior that they is the only position they can take that is House, the creative lobbying of the Rose needed an ‘‘exit strategy’’ from the redwoods consistent with their underlying authority. Foundation and the radical Earth First! pro- issue. If redwoods had nothing to do with This being the case, there should have been testers (whose effect was felt and noted in bringing or pursuing the claims in the first few, if any, records concerning redwoods pro- the FDIC Board Meeting discussions during place, then there would be no need for an duced to the Committee. To the contrary, consideration of the USAT matter) all al- ‘‘exit’’ strategy from the redwoods issue. the records produced were voluminous—and lowed the redwoods debt-for-nature scheme The documentation discovered by Chair- redwoods were even a topic discussed by the to pollute FDIC and OTS decision-making man Young and Task Force Chairman Doo- FDIC board when it reviewed whether to about the potential claims over USAT’s fail- little, which is explained in this report, dis- bring suit regarding USAT. ure. Very little if any documentation pro- pels the notion that Mr. Hurwitz raised the vided to the Task Force justified, on a sub- Chronological Facts and Analysis Regarding the redwoods debt-for-nature first. To the con- FDIC and OTS Pursuit of USAT Claims stantive basis, the decision to proceed with trary, the federal government, bank regu- the banking actions against Mr. Hurwitz and lators included, actually baited Mr. Hurwitz 1986: Mr. Hurwitz Buys Pacific Lumber Com- the other USAT officers and directors. into raising it, and they became uncomfort- pany and Its Redwood Groves Redwoods and ‘‘debt-for-nature’’ were not able when he had not raised it nearly a year Mr. Charles Hurwitz owns Pacific Lumber part of banking regulators decision-making after the FDIC suit was filed and months Company. He acquired it in a hostile take- or thought process early in the investigation after the OTS suit was brought. over on February 26, 1986, using high yield of possible USAT banking claims—from De- This report synthesizes records and infor- bonds. Pacific Lumber Company owned the cember 1988 through about August 1993. The mation about the redwoods ‘‘debt-for-na- Headwaters Forest, a grove of about 6,000 notion was first introduced to the FDIC in ture’’ scheme of banking regulators, the in- acres of old redwood trees. That property be- November 1993, when the redwoods debt-for- formation subpoenaed from the FDIC and came desired by environmental groups be- nature proposal sent to them by Earth First! OTS, and the information collected at the cause of the redwood trees. was ‘‘reviewed’’ by FDIC lawyers. The first December 12, 2000, hearing of the task force. After Mr. Hurwitz bought Pacific Lumber Congressional lobbying of bank regulators Ordinary Role of the FDIC and OTS; Regulate Company, he and the company became a tar- promoting redwoods debt-for-nature oc- Banks and Recover Money get of several environmental groups when curred by letter on November 19, 1993. The the company increased harvest rates on its As a starting point, it is helpful to under- first known in-person lobbying of bank regu- land. Harvests were still well within sustain- stand the ordinary and authorized role of lators by a Member of Congress about poten- able levels authorized under the company’s bank regulators when financial institutions tial claims of bank regulators being swapped state forest plan, but harvest rates were gen- fail. The FDIC is the independent govern- for redwoods occurred in February 1994. The erally greater than prior Pacific Lumber ment agency created by Congress in 1933 to tainting of any possible legitimate banking Company management undertook. maintain stability and public confidence in claims began with the occurrence of that Environmentalist publicly framed the the nation’s banking system by insuring de- very unusual meeting. Hurwitz takeover of Pacific Lumber Com- posits. The FDIC administers two deposit in- The documents and records show how the pany, as that by a ‘‘corporate raider’’ who surance funds, the Bank Insurance Fund for redwoods debt-for-nature notion ultimately floated ‘‘junk bonds’’ to finance a ‘‘hostile commercial banks and other insured finan- permeated bank regulators decisions while takeover’’ of the company to simply cut cial institutions and the Savings Association they developed and brought their claims down more old redwood trees. It is unclear Insurance Fund for thrifts. against Mr. Hurwitz. As the claims were whether framing this issue in such a way had Other than its deposit insurance function, kept active during fourteen tolling agree- more to do with intense fundraising motiva- the FDIC is the primary regulator for banks. ments between bank regulators and Mr. tions aligned with certain environmental It supervises, monitors, and audits the ac- Hurwitz as the leverage against him for red- groups described in the recent Sacramento tivities of federally insured commercial woods using those claims was applied. And Bee series about financing the environ- banks and other financial institutions. The when the claims were authorized and then mental movement (www.sacbee.com/ FDIC is also responsible for managing and filed on August 2, 1995, the claims became news.projects/environment/20010422.html) or disposing of assets of failed banking and more leverage. more to do with ensuring that trees are not thrift institutions, which is what it did con- In the end, the evidence is clear that, but cut. cerning USAT, 24 percent of which was for the environmentalists pressure to get At this juncture, Mr. Hurwitz and Pacific owned by Mr. Charles Hurwitz. In connection redwoods through debt-for-nature and, but Lumber Company were targets of environ- with its duties associated with failed banks, for Congressional pressure to get leverage on mentalists, but his opponents had little le- the FDIC manages the Federal Savings and Mr. Hurwitz to submit and give up his red- verage to stop the redwood logging on the Loan Insurance Corporation Resolution woods to the government, the banking company’s land other than the traditional Fund, which includes the assets and liabil- claims would not even have been brought. Endangered Species Act or State Forest Interestingly, it was unknown early in ities of the former FSLIC and Resolution Practices Act mechanism. that process whether a settlement for poten- Trust Corporation. tial USAT claims would be viable at all or The OTS is the government agency that 1988: Hurwitz’s 24% Investment in Texas Sav- include redwoods, or whether the govern- performs a similar functions to that of the ings and Loan is Lost ment would possibly purchase the redwoods. FDIC for thrifts insured through a different Mr. Hurwitz also owned 24% of USAT, a In any case, the threat of and actual FDIC insurance fund. The OTS is the primary reg- failed Texas-based thrift bank. The bank and OTS claims brought Mr. Hurwitz to the ulator for thrifts. The responsibilities of the failed on December 30, 1988, just like 557 negotiating table. Prior to the claims being FDIC and OTS overlap in certain instances. banks and 302 thrifts failed in Texas between filed, the FDIC conspired with the White The OTS has explained how the two agencies 1985 and 1995 resulting from the broad-based House and the Department of the Interior divide those shared responsibilities: the collapse of the Texas real estate market. As about the importance and role of the bank- FDIC ‘‘seek[s] restitution from wrongdoers a result of the failure, the banking regu- ing claims to advance the debt-for-nature associated with failed thrifts’’ and the OTS lators say they paid out $1.6 billion from the

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00079 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.180 pfrm07 PsN: E20PT1 E2418 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 insurance fund to keep the bank solvent and Hurwitz made numerous agreements begin- lays out the scheme: ‘‘Coincidently, Hurwitz secure another owner. That number has ning November 22, 1991, expiring July 31, is asking for more than $500 million for the never been substantiated by documentation. 1995, to toll the statute of limitations. This Headwaters Forest redwoods. So if your Because Hurwitz owned less than 25% of gave the bank regulators more time to inves- agency can secure the money for his failed the bank, and because he did not execute tigate while they withheld filing of a claim. S&L, we the people will have the funds to what is known as a ‘‘net worth maintenance These agreements are fairly routine in com- buy Headwaters Forest. Debt-for-nature. agreement,’’ he was not obligated to con- plex cases like USAT. Right here in the U.S. That’s where you tribute funds to keep the bank solvent when Beginning in August 1993 while the statute come in. Go get Hurwitz.’’ (Document E) it failed. Such agreements (or obligations was still tolled, several actions to attempt to The FDIC apparently took Earth First! se- when a person owns 25 percent or more of an acquire the Headwaters Forest were taken in riously. Within one month, the FDIC lawyers institution) are enforced through what is Congress and urged by environmental reported to the acting chairman in a memo known as a ‘‘professional liability’’ action groups. For example, on August 4, 1993, Rep. that they were ‘‘reviewing a suggestion by brought by bank regulators. Hamburg introduced a bill to purchase 44,000 ‘Earth First’ that the FDIC trade its claims In certain cases, the FDIC and OTS are au- acres (20 percent) of the Pacific Lumber against Hurwitz for 3000 acres of redwood for- thorized by law to bring to recover money is Company’s land and make it into a federal ests owned by Pacific Lumber, a subsidiary of for the ‘‘professional liability’’ against offi- Headwaters Forest. In August 1993, the first Maxxam,’’ (emphasis supplied) (Document G, cers, directors, and owners of failed banks. contact between the Rose Foundation (the December 21, 1993, Memorandum to Andrew The idea is to recover restitution—money—it primary environmental proponent of advanc- Hove, Acting Chairman, From Jack D. took to make failed institutions solvent. ing USAT claims against Hurwitz to obtain Smith, Deputy General Counsel). The hand- This type of claim was brought against Mr. Pacific Lumber redwoods) and attorneys for written note on the top of the page indicates Hurwitz by the bank regulators at OTS after the FDIC was made. that the acting chairman Hove was orally they were hired to do so by the FDIC. The As early as November 30, 1993, FDIC attor- briefed about the USAT situation prior to nature of ‘‘professional liability’’ claims are neys were aware of the Hamburg Headwaters the memo. explained well in bank regulator’s publica- bill and ‘‘materials from Chuck Fulton re: Thus, well before Mr. Hurwitz raised the tion as follows: ‘‘Professional Liability [PL] net worth maintenance obligation’’ (Record issue of redwoods and debt-for-nature di- activities are closely related to important 3A). The handwritten FDIC memo from Jack rectly with the FDIC in August or Sep- matters of corporate governance and public Smith to Pat Bak notes that the professional tember 1996 with the bank regulators, its confidence. . . . [They] strengthen the per- liability section ‘‘is supposed to pursue that lawyers had received written proposals from ception and reality that directors, officers, claim.’’ It reminds her not to ‘‘let it fall the radical group Earth First!, and the FDIC and other professionals at financial institu- through the crack!’’ And if the claim is not was undertaking a review of the proposals. tions are held accountable for wrongful con- viable, the banking regulators ‘‘need to have These were proposals making the connection duct. To this end, the complex collection a reliable analysis that will withstand sub- between Hurwitz, the redwoods, and USAT process for PL claims is conducted in as con- stantial scrutiny.’’ (Record 3A). bank claims. sistent and fair a manner possible. Potential Pressure to advance claims against Then in the close of 1993, a press inquiry claims are investigated carefully after every Hurwitz in connection with the redwoods in report to Chairman Hove on debt-for-nature bank and savings and loan failure and are a debt-for-nature swap came in a variety of and the redwoods was received and docu- subjected to a multi-layered review by the forms to the FDIC. It first came from Con- mented from the Los Angeles Times. The press question was whether FDIC lawyers FDIC’s attorneys and investigators before a gress on November 19, 1993, in a letter to the have considered whether ‘‘we could legally final decision is rendered on whether to pro- FDIC Chairman from Rep. Henry B. Gon- swap a potential claim of $548 million ceed. . . .’’ (Managing the Crisis: The FDIC zalez, Chairman of the House Committee on against Charles Hurwitz (stemming from the and the RTC Experience 1980–94, published by Banking (Record 2). Numerous written Con- failure of United Savings Association of FDIC, August 1998, page 266) gressional contacts with the banking regu- Indeed, the bank regulators at the FDIC lators, most urging FDIC or OTS to bring Texax) for 44,000 acres of redwood forest undertook an investigation of USAT begin- claims against Hurwitz occurred in late 1993 owned by a Hurwitz controlled company.’’ ning when USAT failed on December 31, 1988, when the debt-for-nature scheme was framed (Record 3B) The redwoods debt-for-nature scheme had to determine what claims they might have and subsequently over the years. been introduced via these various venues against USAT officers, directors, and owners. On the same day, Bob DeHenzel, an FDIC lawyer, got an e mail about a ‘‘strange call’’ during 1993. At the same time FDIC’s own 1989-September 1991: Investigation Continues regarding USAT (Record 1). It was received analysis had shown absolutely no basis for a The investigation of USAT proceeded, and by Mary Saltzman from a Bob Close, who banking claim lawsuit involving USAT. How- interim reports were issued by law firms in- claimed to be ‘‘working with some environ- ever, it was not until early 1994 when the vestigating potential USAT claims for the mental groups’’ and wished to talk to who- FDIC and their agent, the OTS, adopted the FDIC. Environmentalists initiated various ever was investigating the USAT matter. He redwoods debt-for-nature scheme, and it be- non-banking campaigns to block redwoods had detailed knowledge about the $532 mil- came inextricably intertwined in its USAT timber activities of Pacific Lumber Com- lion claim related to USAT and Charles bank claims. Ironically, it was political pany on their Headwaters land. Hurwitz. He made the comment that ‘‘people forces that inticed the bank regulators, who October 1991-November 1993: Bank Regulators like Hurwitz must be stopped.’’ He said he are supposed to act on bank claims without Find No Fraud, No Gross Negligence, No Pat- was working with an environmental group political influence, into wholesale and will- tern of Self-Dealing called EPIC in Northern California. Paul ing adoption of the redwoods debt-for-nature By October 1991, the bank regulators deter- Springfield, an FDIC investigator, docu- scheme. mined that there was no ‘‘intentional fraud, mented a conversation he had with DeHenzel 1994: Undisclosed Congressional Meetings Lob- gross negligence, or pattern of self-dealing’’ that day (Friday, November 19, 1993) about bying on the Redwoods ‘‘Debt-For-Nature’’ related to officer, director or other profes- the call from Bob Close. Mr. Springfield Plan sional liability issues related to the failure verified that the FDIC lawyer, Mr. DeHenzel, By February 2, 1994, the FDIC attorneys of USAT (Document B, page 7). They also de- was familiar with a Hurwitz connection to knew the weakness of several of its net termined that there was ‘‘no direct evidence forest property: ‘‘He [DeHenzel] had some worth maintenance claims and it acknowl- of insider trading, stock manipulation, or knowledge of the nature of the inquiry [by edged that it ‘‘can point to no evidence theft of corporate opportunity by the officers Mr. Close] as well as the attorney Bill showing that either UFG or Hurwitz signed a and directors of USAT.’’ (Document B, page Bertain disclosed by Close. DeHenzel stated net worth maintenance agreement’’ (Record 7). They also determined that there was ‘‘no that this group was involved in fighting a 5, page 6). They acknowledged the weakness direct evidence of insider trading, stock ma- takeover action of some company by Hurwitz in a status memo (Record 5). nipulation, or theft of corporate opportunity involving forest property in the north- As a result, the FDIC teamed up with the by the officers and directors of USAT.’’ (Doc- western United States. Apparently they are OTS to have OTS attempt to construct an ument B, page 14). Bank regulators said that trying to obtain information to utilize in ‘‘administrative’’ net worth maintenance the USAT ‘‘directors’ motivation was main- their efforts.’’ (Record 1). claim against Mr. Hurwitz and his company tenance of the institution in compliance Then on November 24, 1993, Mr. DeHenzel, that owned the redwoods. They believed (but with the capitalization requirements and not faxed a November 22, 1993, memo he received offered no proof that) ‘‘the actual operating self gain or violation of their duty of loy- on November 22, 1993, from the radical group control of [MCO, FDC, and UFG] was exer- alty.’’ (Document B, page 17). There being no Earth First! to another FDIC staff member. cised by Charles Hurwitz.’’ (Record 5, page 9). wrongful conduct, bank regulators concluded That memo laid out the ‘‘direct connection In short, FDIC did not have a claim, but the that they had no valid basis to pursue bank- between the Savings and Loans, the FDIC OTS may be able to bring an action in an ad- ing claims against the owners of USAT to re- and the clearcutting of California’s ancient ministrative forum that was much more con- cover money for its failure. redwoods.’’ (Document E). The memo intro- ductive to bank regulators, so the FDIC In spite of the determination that there duced the concept that the USAT ‘‘debt’’ would hire the OTS. was no basis to file a claim regarding USAT, (which were only potential claims that FDIC The net worth maintenance claim was im- a determination that was unknown to Mr. internal analysis had already concluded had portant because if it could be established on Hurwitz or the other potential defendants at no basis) should be traded for Pacific Lumber the facts (i.e., if Mr. Hurwitz owned 25 per- the time, the banking regulators and Company redwoods. An excerpt of the memo cent of USAT or he was somehow in control

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00080 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.183 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2419 of USAT) it could mean he would be liable to enforce this, [referring to the net worth for-nature scheme well before Mr. Hurwitz for that percentage of the USAT loss, which maintenance agreement.’’ Thomas then said, raised redwoods with bank regulators. totaled $1.6 billion. In that way the bank ‘‘we can’t find signed agreement [between] The contents of the meeting shows irre- regulators could conceivably get into Mr. FSLIC [and USAT/Hurwitz]. We never found sponsible ends-driven government, from al- Hurwitz’s assets, including his holding com- the agreement.’’ (Record 2A) Thomas was ab- most any perspective. Mr. Smith was not pany assets which included the redwoods. solutely correct—because there never was a even talking about investigating and bring- However, in written correspondence and at net worth maintenance agreement signed by ing valid legitimate bank claims. He was the Task Force hearing on December 12, Mr. Hurwitz. only talking about ‘‘convincing’’ Mr. 2000—the FDIC and the OTS denied that the Besides the highly irregular nature of any Hurwitz that ‘‘we have claims.’’ This may litigation concerning USAT and Mr. Hurwitz communication between the FDIC and any- even be unethical, because he implied that had anything to do with redwoods. They also one about a case under investigation this an invalid, unviable claims (the net worth denied that their discovery tactics were im- communication is incredible for two reasons. maintenance claim) may be used as leverage proper or for the purpose of ‘‘harassment.’’ First, it shows the willful manner in which to get redwoods from Mr. Hurwitz. One exchange at the hearing between Mr. FDIC volunteered to get involved in a polit- The FDIC is supposed to be an ‘‘inde- Kroener, the FDIC’s General Counsel and ical issue and mix potential claims with the pendent agency,’’ that is, it is supposed to Chairman Doolittle, however, typifies the re- redwoods issue. The meeting notes prove insulate itself from political pressure and sponse to the question of whether the bank that the FDIC lawyers actually secretly disputes. FDIC legal staff suddenly injected regulators’ litigation had anything to do briefed a Congressman about the specifics of themselves into a political issue of emerging with redwoods or leveraging redwoods: an ongoing investigation that would become national prominence (redwood trees and mixed with a political issue. debt-for-nature using banking claims), an Mr. DOOLITTLE. . . . Did this litigation Second, the timing of the Congressional issue beyond the normalcy of banking recov- or discovery tactic [harassment through dis- strategy session was eighteen months before ery actions. The meeting notes show that covery] have anything to do with redwoods the FDIC board had not even approved filing the FDIC attorneys engaged to promote the or the desire to create a legal claim to lever- a claim against Mr. Hurwitz—and its lawyers issue of a debt-for-nature swap, and that the age redwoods? were then discussing the specifics their in- design was to merely ‘‘convince the other Mr. KROENER. It did not. . . . vestigation of a potential claim in the con- side’’ that the FDIC had claims worth $400 (Hearing Transcript, page 99) text of the scheme that would use the poten- million that the agency knew it did not While they have publicly denied any link- tial claim to obtain redwood trees. The high- have. This is a sad, sad statement from an age, their own written words show the oppo- ly irregular nature of this early meeting in- ‘‘independent’’ government agency, and it is site. There was indeed a scheme involving jected a political dynamic to a case still only the early part of the slide for the FDIC. politicizing bank claims against Mr. under investigation. This was obvious to Buttress what the FDIC lawyers said in the Hurwitz. Mr. Kroener’s answer and the re- former FDIC Chairman Bill Isaac. He testi- February 1994 meeting to Rep. Hamburg peated denials of a linkage is purely wrong. fied to the Task Force that the—‘‘discus- about trees and claims, against what Mr. A superb example of just how wrong Mr. sions that occurred between FDIC staff and Kroener and the other bank regulators told Kroener’s answer was is contained in the pre- people outside the Agency prior to and dur- the Task Force in sworn testimony. viously unreleased meeting notes from a ing litigation were inappropriate. The fact Mr. POMBO. Ms. Seidman and Ms. Tanoue, February 3, 1994, meeting between FDIC that those discussions occurred exposes the the FDIC and the OTS have repeatedly said legal and Congressional staff and a U.S. Con- FDIC and the OTS to the charge that the to the public and the Congress, including gressman. The redwoods debt-for-nature motivation for their litigation was to pres- this morning, that what the agency wanted linkage was the point of the meeting. sure Charles Hurwitz and Maxxam to give up from USAT claims was cash, is that correct? The high ranking FDIC lawyers working their private property, the redwood trees Ms. SEIDMAN. Yes. Our restitution claim on the redwoods case—Mr. Jack Smith, FDIC owned by Pacific Lumber.... [T]heir re- is brought for cash. As to any further discus- Deputy General Counsel, and Mr. John peated contacts with parties with whom they sions both relating to the decision to bring Thomas—and a Rep. Dan Hamburg met on have no business discussing this litigation, the claim that way and subsequent settle- February 3, 1994, to discuss to potential congressional and administrative officials ment discussions, none of which I took part banking claims targeting Mr. Hurwitz. and environmental groups, leaves them open in, I would defer to Ms. Buck. (Record 2A). to whatever negative conclusions one might Ms. TANOUE. I will also say that the FDIC The fact that the meeting occurred at all— care to draw.’’ (Hearing Transcript, pages 15– considered all options to settle claims, at the especially that it occurred eighteen months 16). encouragement of Mr. Hurwitz and his rep- prior to the USAT claim being authorized or Mr. Isaac noted the impropriety later resentative agency, looked at trees, but the filed—and the notes from the meeting evince again in the hearing. ‘‘—that really would preference has always been for cash.... that leverage for redwoods was promoted by have shocked me as chairman to see the At a minimum, Ms. Tanoue is misleading. FDIC lawyers. The notes also show that the FDIC staff having meetings with people out- Eighteen months prior to even having a FDIC knew claims targeting Hurwitz were side the Agency about the redwood trees, and claim to settle or having a claim authorized invalid and probably could not be used as le- . . . congressional officials about a possible or having a claim filed, her agency’s top law- verage (Record 2A). Highlights of the litigation we’re thinking about bringing in- yers were sitting in a Congressional office Spittler (Record 2A, page ES 0509) meeting volving redwood trees; you know, somehow talking about ‘‘convincing the other side’’ notes are as follows: tying these redwood trees into it, and get- that ‘‘we have claims worth $400 million’’ Rep. Hamburg had ‘‘an immediate interest ting that mixed up in our decision as to and getting ‘‘hook’’ into a holding company in the case,’’ probably because he had a bill whether to bring a suit over the failure of a that owns redwoods. pending to purchase the Headwaters, and the bank.’’ (Hearing Transcript, page 44–45). Mr. POMBO. At what point did you start proposal from environmentalists in his dis- The content of the meeting between Ham- looking at the other options, and you men- trict to swap the Hurwitz banking claim burg, Smith (as opposed to the fact that the tion trees? ‘‘debt’’ for redwoods had been generally meeting even occurred), is even more appall- Ms. TANOUE. Much of this discussion oc- floated. (Record 8A, The Humboldt Beacon, ing considering Jack Smith’s next comment. curred before my tenure. I turn to Mr. Thursday, August 26, 1993, Earth First! According to Spittler’s notes, he said ‘‘If we Kroener for elaboration on that point. Wants 98,000; 4,500 Acres Tops, PL Says.) can convince the other side [Hurwitz] that Mr. KROENER. . . . We were first offered According to Spittler’s notes, which are we have claim[s] worth $400 million & they trees or natural resources assets by rep- (Record 2A), Rep. Hamburg said he was ‘‘in- want to settle, could be a hook into the hold- resentatives of Mr. Hurwitz indirectly in terested enough over potential filing of the ing company.’’ Of course, the ‘‘convincing’’ July of 1995. complaint to ask what is about to proceed.’’ about valid claims was the leverage, and the There had obviously been a huge public de- And Hamburg [r]ealized that this possible ‘‘hook’’ into the holding company was get- bate going on regarding this forest. We were avenue would be lost.’’ The ‘‘avenue’’ he was ting company assets, including redwood not part of that but we had lots of commu- referring to was applying leverage against trees. This was redwoods debt-for-nature. nications, other got lots of communications, Mr. Hurwitz for a redwoods debt-for nature FDIC was part of the redwoods scheme. . . . [and our chairman and general counsel] swap, and Jack Smith obviously understood Not only does this show that the idea had responded to inquiries of Congress that this. According to Spittler’s notes, Smith re- about debt-for-nature was real to the FDIC were mindful that trees could come into play plied, it is ‘‘very difficult to do a swap for lawyers, it shows when they promoted it at in our claims, but our claims didn’t involve trees,’’ which means Smith knew that the a congressional meeting in February 1994, trees; they involved cash. (Hearing Tran- authority of the FDIC to recover restitution more than 18 months before the FDIC law- script, pages 63–65) in trees was difficult or impossible. suit against Hurwitz was even authorized by Obviously their claims involved cash, be- Smith then told Hamburg about the USAT the board and 17 months before, according to cause by law their mission is to replenish the investigation: ‘‘The investigation has looked Mr. Kroener’s testimony, Mr. Hurwitz ‘‘indi- insurance fund with money. Mr. Kroener was at several areas. [One c]laim [is] on the net rectly’’ raised the debt-for-nature swap with wrong when he said their claims did not in- worth maintenance agreements.’’ (Record the FDIC through the Department of the In- volve trees, and trees certainly came into 2A) The other FDIC attorney present, Mr. terior. Contrary to Mr. Kroener’s representa- play as evidenced by the February 1994 the e John Thomas, acknowledged the fatal flaw of tions to the Task Force, the FDIC legal staff Rep. Hamburg-Smith-Thomas meeting. In- FDIC’s claim: ‘‘[There] have been attempts was deeply ensconced in the redwoods debt- deed trees were the motivating force that led

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00081 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.187 pfrm07 PsN: E20PT1 E2420 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 the FDIC to promote net worth maintenance that the FDIC knew its claim was weak and was about the selection of an outside law claims to the OTS. it led almost immediately to the FDIC hiring firm to act as counsel on the USAT matter: The clear implications of Ms. Tanoue’s an- the OTS to promote the net worth mainte- ‘‘Jack, I thought about over conversation swer is that Mr. Hurwitz was the first to nance claim against Mr. Hurwitz. yesterday. My advice from a political per- bring the redwoods into a possible settle- This letter was sent three months prior to spective is that the ‘‘C’’ firm [Cravath] is ment, but we know that FDIC lawyers were FDIC hiring OTS to pursue the net worth still politically risky. We would catch less scheming in February 1994 with a Member of maintenance claim that FDIC knew it did political heat from another firm, perhaps one Congress to get a banking claim ‘‘hook’’ into not have. Importantly, it was sent imme- with some environmental connections. Other- the redwoods holding company owned by Mr. diately after the Rep. Hamburg meeting—the wise, they might not criticize the deal but Hurwitz. Mr. Hurwitz was not the one who meeting that tied Mr. Hurwitz’s holding they might argue that the firm [Cravath] al- first brought the redwoods into banking company’s redwood trees to the USAT net ready got $100 million and we should spread claim issue—the environmental groups, worth maintenance claim against Mr. it around more.’’ (emphasis supplied) (Docu- FDIC lawyers, and certain Members of Con- Hurwitz. The FDIC prompted and then paid ment I) gress had already done so by that point. the OTS to pursue this claim by supposedly Indeed, ‘‘environmental connections’’ were Perhaps Mr. Kroener did not read the using its independent statutory authority. a factor in selection of the outside counsel meeting notes that he provided to the Task In effect, the FDIC scheme beginning at for the USAT matter. A February 14, 1994, Force about the February 1994 meeting be- least in February 1994, polluted the OTS ac- memo about ‘‘Retention of Outside Counsel’’ tween FDIC lawyers and Rep. Hamburg when tion. What was a ‘‘hook’’ into the ‘‘holding for the USAT matter (Record 15) from var- he told the Task Force that FDIC claims did company’’ that owned the redwoods for ious FDIC lawyers to Douglas Jones, FDIC’s not involve trees until July 1995 when Mr. FDIC, was a ‘‘hook’’ into the holding com- acting General Counsel, trumpets the ability Hurwitz raised the redwoods to the FDIC in- pany for the OTS. In fact, without the FDIC of the firm ultimately selected, Hopkins & directly through the Department of the Inte- money (which by 1995 totaled $529,452 and by Sutter, to handle a redwood debt-for-nature rior. The claims did involve trees—con- 2000 totaled $3,002,825), OTS’s five lawyers settlement: ‘‘The firm [Hopkins & Sutter] vincing the ‘‘other side’’ that there is a $400 and six paralegals advancing the claims has a proven record handling high profile million claim and they may ‘‘want to set- against Mr. Hurwitz would have been un- litigation on behalf of the [FDIC] and, draw- tle,’’ which gets the FDIC into the Hurwitz funded—and probably not advanced the ing on its extensive representation of the holding company that has the redwood trees. claim. And without the net worth mainte- lumber industry, will be able to cover all as- As to Ms. Seidman, she stated a fact—that nance claim—by far the largest claim—there pects of any potentially unique debt for red- the OTS claim was for cash, which is tech- would be no hook into Mr. Hurwitz, therefore woods settlement arrangements.’’ (Record 15, nically all that it could be for. What she no hook into his redwoods. page 8). omits is that the FDIC had imparted the red- It is helpful to understand why Mr. Smith The FDIC was clearly planning—even in woods debt-for-nature agenda directly to the told Rep. Hamburg that it is ‘‘very difficult February 1994 with the selection of an out- OTS on the heals of the February 3, 1994, to do a swap for trees.’’ It was very difficult side counsel—for a redwoods debt-for-nature meeting between FDIC and Rep. Hamburg— for two reasons. First, the claims would not swap as part of a settlement! This was before and the FDIC did so because its claims were ordinarily be brought because they would they even knew if their potential claims too weak and too small to provide enough le- fail on the merits, so it would be difficult to were really claims, and before the FDIC verage for the redwoods (See, Record 33, exchange a claim that would not have been Board had authorized filing of any claims. Record 35 and accompanying discussion ordinarily brought. The bank regulators From the FDIC’s perspective, an outside infra). manual explains their policies from 1980 counsel law firm with ‘‘environmental con- It took less than 24 hours following the through 1994 for bringing claims as follows: nections’’ that can ‘‘cover all aspects of any FDIC-Rep. Hamburg meeting for the FDIC ‘‘No claim is pursued by the FDIC unless if potentially unique debt for redwoods settle- Deputy General Counsel, Jack Smith, to write to Carolyn Lieberman (now Carolyn meets both requirements of a two-part test. ment’’ is the only choice. (Record 15). So in February 1994, the FDIC—which de- Buck), the top lawyer at OTS. (Record 6). First, the claim must be sound on its merits, nies to this day its litigation against Mr. The letter (1) forwarded legal analysis of the and the receiver must be more than likely to Hurwitz has any linkage to a redwoods debt- net worth maintenance claim against the succeed in any litigation necessary to collect for-nature scheme—selected the outside Hurwitz’s holding company that owned the on the claim. Second, it must be probable counsel for the USAT matter because it redwoods; (2) admitted that FDIC had no net that any necessary litigation will be cost-ef- could handle a debt for redwoods settlement. worth maintenance claim; (3) prodded OTS fective, considering liability insurance cov- This firm was an ideal choice for a bank reg- to review whether it could administratively erage and personal assets held by defend- bring a net worth maintenance claim; and (4) ants.’’ (Managing the Crisis: The FDIC and ulator with an agenda to get a ‘‘hook’’ into in an incredible admission of purpose and in- the RTC Experience 1980–94, published by a holding company that has redwood tree as- tent, the letter notified OTS about the red- FDIC, August 1998, page 266) sets that might be traded for bank claims— woods debt-for-nature scheme. The last para- Second, the claims would be for restitu- if they can ‘‘convince’’ the other side that graph of the one page letter reads: ‘‘You tion, and the FDIC could not accept trees in they have valid claims. Mr. Hurwitz’s red- should be aware that this case has attracted settlement. The FDIC even admits that they wood trees were targeted a year and a half public attention because of the involvement would need ‘‘modest’’ legislation to accept before the bank claims were authorized to be of Charles Hurwitz, and environmental trees, which is an admission that their pur- filed and seventeen months before he sup- groups have suggested that possible claims pose in seeking redwoods is indeed unauthor- posedly raised the issue of redwoods ‘‘first’’ against Mr. Hurwitz should be traded for ized. with the FDIC. 44,000 acres of North West timber land owned However, it was political pressure, such as The FDIC, its lawyers and acting chairman by Pacific Lumber, a subsidiary of Maxxam. that applied by environmental groups in 1993 knew of the linkage between bank claims Chairman Gonzales has inquired about the and Rep. Hamburg beginning in 1994, that led and redwoods, as did their outside counsel, matter and we have advised him we would the willing FDIC (and ultimately its agent, Hopkins & Sutter, which even facilitated nu- make a decision by this May. After you have the OTS, after FDIC began paying OTS in merous contacts, information exchanges, reviewed these papers, please call me or Pat May 1994) into ignoring the mission of recov- strategy sessions, and meetings during the Bak (736–0664) to discuss the next step and to ering money on cost effective banking remainder of 1994 between the bank regu- arrange coordination with our professional claims. lators and environmentalist proponents of a liability claims.’’ (Record 6) Instead the FDIC adopted unauthorized Hurwitz debt-for-nature redwoods swap. Clearly, this action, immediately after the missions of providing leverage through law- But Ms. Tanoue and Mr. Kroener testified FDIC strategy meeting with Rep. Hamburg suits that are unsound on the merits and that redwoods had nothing to do with the constitutes direct engagement of the FDIC would ‘‘convince’’ (the word used by Mr. litigation, hardly an accurate proposition in to promote the claim that would become the Smith) Mr. Hurwitz that FDIC had a claim of light of the fact that the FDIC’s outside leverage for the redwood debt-for-nature ‘‘$400 milllion’’ so that they could get a counsel was selected because of their envi- scheme. ‘‘hook into the holding company’’ and settle ronmental connections and ability to handle It is worth stressing that the FDIC that the claim for redwood trees. This was exer- a ‘‘unique debt for redwoods settlement.’’ wrote this letter on the heals of the Rep. cise of leverage pure and simple. (Record 15) Hamburg meeting is the same FDIC that tes- February 2 through 4, 1994, were important Indeed, Hopkins & Sutter’s ‘‘environ- tified to the Task Force that their litigation redwoods debt-for-nature days for the FDIC’s mental connections’’ paid off—to the envi- did not have anything to do with trees. How legal team. There was the FDIC memo ad- ronmentalists advocating a redwoods debt- could it not when the FDIC told the OTS mitting that it had no net worth mainte- for-nature scheme. F. Thomas Hecht, the that it promised Rep. Gonzalez that the nance claim. Then there was the meeting lead partner at Hopkins & Sutter on the agency ‘‘would advise him of its decision’’ with Rep. Hamburg about the redwoods USAT matter, in a memo copied to FDIC at- about an environmental group suggestion scheme. Then there was an odd, but reveal- torney’s summarized the ‘‘intense lobbying ‘‘that possible claims against Mr. Hurwitz ing e mail sent by FDIC’s congressional liai- effort [beginning in about March 1994] by cer- should be traded for 44,000 acres of North son, Eric Spittler, to Jack Smith on Feb- tain environmental activists led by the Rose West timber land owned by Pacific Lumber.’’ ruary 4, 1994, about a conversation he had Foundation of Oakland, California[, whose] This is debt for nature. It was real in Feb- with Smith on February 3, 1994, the same day principal concern has been to conserve an ruary 1994. It ultimately overrode the fact as the Rep. Hamburg meeting. The message area of unprotected old-growth redwoods in

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00082 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.192 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2421 northern California known as the Head- DOI and the White House engaged with the minating candor, the handwritten memo ar- waters Forest.’’ (Document N, page 1) bank regulators. They swallowed the red- ticulates why the FDIC lawyers wanted to The memo (Document N, page 3–4) details woods debt-for-nature scheme—hook, line, hire the OTS and double team Mr. Hurwitz: the following contacts: and sinker (as the old saying goes)—begin- ‘‘Why? (1) Tactically, combining FDIC & ‘‘On June 17, 1994, Thomas Hecht met with ning in 1994 and continuing into 1995, even OTS’ claims—if they all stand scrutiny—is Jill Ratner of the Rose Foundation in San though their own analysis showed that their more likely to produce a large recovery/the Francisco for an initial meeting at which potential claims would not stand. trees than is a piecemeal approach.’’ (Record Ms. Ratner outlined her groups’ concerns. In spite of these facts, the FDIC has con- 10, bates number JT 000145) ‘‘On October 4, 1994, Hecht, Jeffrey Wil- sistently insisted since late 1993 that ‘‘there So, the senior FDIC lawyer, Mr. John liams, Robert DeHenzel and the Rose Foun- is no direct relationship between USAT and Thomas, contemporaneously wrote that dation and its lawyer participated in a tele- the Headwaters Forest currently owned by their strategy with OTS would be more like- conference at which the claims prepared by Pacific Lumber Company . . . [however], if ly to produce ‘‘the trees.’’ But their Chair- the Rose Foundation were presented in more such a swap became an option, the FDIC man, their General Counsel, and the OTS Di- detail. would consider it as one alternative . . . ’’ rector repeatedly told the committee that ‘‘On January 20, 1995, Dehenzel and Hecht (Record 28). Indeed, this is exactly what the the litigation had nothing to do with trees. met with Julia Levin of the Natural Heritage banking regulators have told the Committee Were the FDIC and OTS management and Foundation (‘‘NHF’’), a group closely associ- in writing: they have always been open to their board members so ill-informed about ated with the Rose Foundation. The NHF is the idea, but they prefer cash. The docu- what their attorneys were seeking to conducting much of the lobbying effort on mentation outlined above shows that the achieve? ‘‘The trees’’ is not cash, period. behalf of the Rose Foundation and other en- banking regulators actively pursued a red- The other very alarming notion is how in- vironmental activists on this issue. woods debt-for-nature agenda using their tegral OTS is to the strategy to ‘‘produce’’ ‘‘In addition to these more formal encoun- claims as urged by certain Members of Con- ‘‘the trees,’’ according to the FDIC attor- ters, Williams, DeHenzel and Hecht have gress and by environmental groups. However, neys. The strategy to ‘‘combine’’ FDIC’s each been contacted repeatedly by the Rose by this point, the Department of the Interior weak claims with possible OTS claims on net Foundation and its attorneys to explore the and the White House had yet to engage. That worth maintenance further explains the Feb- theories in more depth and to urge the FDIC changed in early of 1995. ruary 4, 1994, letter from FDIC’s lawyers to to take action. In each of these meetings and In February 1995, a host of environmental- OTS’s lawyers (Record 6). ists proposed an acquisition of the Head- in subsequent telephone conversations and It transmitted the net worth maintenance waters redwood trees to President Clinton, correspondence, the Rose Foundation and its claim to the OTS and introduced the notion and Leon Penetta (Chief of Staff) wrote back allies have urged three general approaches to that the FDIC was considering a redwoods to them saying that budget constraints the problem including: (a) the imposition of debt-for-nature swap scheme. The FDIC told would not permit outright acquisition a constructive trust over Pacific Lumber’s OTS that they were about to report to Rep. (Record 16A). He suggested that they push a redwoods, (b) the seizure of redwoods using Gonzalez about the potential for the swap. debt-for-nature swap or land exchange in- an unjust enrichment theory, and (c) obtain- The implication was that viable claims stead. That action served to lower expecta- ing rights to the forest or, at a minimum, an against Mr. Hurwitz (brought directly by the tions for appropriated funds for the red- environmental easement, as part of a nego- FDIC or indirectly through the OTS) would woods, and focused the proponents on con- tiated settlement. They have also urged Con- allow the FDIC to report back to Mr. Gon- tinuing to push the redwoods debt-for-nature gressional action, filed a Qui Tam proceeding zalez that they could help get ‘‘the trees’’ be- scheme. in the Northern District of California and cause a swap would be more viable. Without threatened the FDIC with proceedings under By April 3, 1995, FDIC lawyers were openly attempting to leverage Mr. Hurwitz into set- the OTS, the FDIC would not have enough the Endangered Species Act.’’ (Document N, leverage to produce ‘‘the trees,’’ because by page 3–4) tling claims that were still yet to be filed for redwood trees. The redwoods debt-for-nature its own analysis, the FDIC claims were los- This is just a sampling of the many in- ers. stances where the bank regulators own notes scheme was alive and active at the FDIC as indicated by the words in this e mail to Mr. The repeated intra-government lobbying of and memos show integration between what FDIC and OTS also pushed the bank regu- were still possible bank claims and the red- Jack Smith from Mr. Bob DeHenzel: ‘‘Jack: Just a note regarding our brief discussion on lators into the political redwoods debt-for- woods. All of these occurred beginning 18 nature acquisition scheme. This intra-gov- months before the USAT claims against Mr. Charles Hurwitz and exploring creative op- tions that may induce a settlement involv- ernment lobbying began indirectly by at Hurwitz were authorized or filed. Record 8 least May 19, 1995, and is first evidenced by contains several examples of outside con- ing the sequoia redwoods in the FDIC/OTS case: . . .’’ (Record 9) notes (Record 11) from a phone call by Ms. tacts between bank regulators and environ- Jill Ratner, who runs the Rose Foundation mental groups about different mechanisms In these words the FDIC’s attorneys were indeed leveraging redwoods by sing their to Mr. Robert DeHenzel. (Record 11 is a copy to leverage redwoods using potential bank- of Mr. DeHenzel’s notes from that conversa- ing claims. banking claims—at least three months be- fore FDIC says that Mr. Hurwitz raised the tion.) 1995: The Federal Government Is Defined— redwoods-debt-for nature idea through his The notes (Record 11) indicate that Ms. ‘‘High Profile Damages Case’’ In Which Red- ‘‘representative agency’’ (presumably the Ratner told Mr. DeHenzel about the Depart- woods Are ‘‘A Bargaining Chip’’ DOI), attorneys, four months before the ment of the Interior (DOI) players who are The relationship between the possible FDIC board authorized the suit against Mr. ‘‘very interested in debt-for-nature swap’’: banking claims and the redwoods is not just Hurwitz, and about five months before the Mr. Alan McReynolds, a Special Assistant to implied by the number of meetings or the ex- FDIC maintains Mr. Hurwitz raised the red- the Secretary of the DOI, Mr. Jeff Webb, tensive evaluations by bank regulators and woods swap idea directly with the bank regu- with DOI congressional relations, Mr. George their lawyers throughout 1994, it was di- lators. Frampton, the Assistant Secretary for Fish rectly stated in the March 1995 memo by F. Thus, well before the notion of the red- and Wildlife and Parks at DOI, and Mr. Jay Thomas Hecht, FDIC’s outside counsel: ‘‘As woods debt-for-nature deal was introduced to Ziegler, an assistant to Mr. Frampton were their theories have become subject to criti- the FDIC by Mr. Hurwitz (as the bank regu- all discussed as redwoods debt-for-nature ad- cisms, certain counsel for the Rose Founda- lators religiously maintain) the bank regu- vocates. And Record 11A illustrates that the tion have shifted (at least in part) from argu- lators were indeed targeting Mr. Hurwitz’s Rose Foundation had done substantial work ment compelling the seizure of the redwoods redwoods and using their potential claims as regarding various mechanisms to transfer to urging the development of an aggressive leverage to ‘‘induce’’ a settlement. The re- the redwoods to the federal government. and high profile damages case in which red- peated statements and the sworn testimony The notes indicate that Mr. McReynolds woods become a bargaining chip in negoti- of Ms. Seidman, Ms. Tanoue, and Mr. had flown over Headwaters during the week ating a resolution. This, indeed, may be the Kroener to the Task Force (the Mr. Hurwitz of May 8, 1995, with Ms. Ratner a primary ad- best option available to the environmental introduced the redwoods into settlement dis- vocate of various plans to acquire the Head- groups; its greatest strength is that it does cussions) is yet another example that di- waters forest. This was the first indication not depend on difficult seizure theories. This rectly contradicts what the FDIC lawyers that DOI was engaging on the redwoods debt- approach would require that both the FDIC were doing as evidenced by their own writ- for-nature scheme and probably Mr. and OTS undertake to make the redwoods ing. McReynolds’ first exposure to the concept part of any settlement package.’’ (footnote The notes of FDIC attorneys about what that bank claims could provide the leverage not in original) (Document N, page 8) they were seeking and why the FDIC and the for the redwoods scheme. There is no men- Thus, the FDIC’s outside counsel explained OTS were cooperating also contradict the tion in the notes that Mr. Hurwitz requested and evaluated the best course of action for testimony of the bank regulators when they DOI to raise the issue of a redwoods swap or the environmental groups (never mind the say that redwoods had nothing to do with look into it: ‘‘Interior is . . . discussions will FDIC or the government). The fact is that a the litigation against Mr. Hurwitz. Some- continue. Webb & Zeigler will continue doing high profile damage claim where redwoods time in mid-1994 (but before July 20, 1994), prelim[inary] work to explore whether debt- were leveraged from Mr. Hurwitz—the envi- FDIC wished to continue studying their for-nature would work.’’ (Record 11) ronmentalist’s best option—is exactly how claim and ‘‘a possible capital maintenance By the time that the DOI engaged in May the FDIC proceeded, particularly after the claim by OTS against Maxxam.’’ In illu- 1995, the FDIC lawyers were well aware of

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00083 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.196 pfrm07 PsN: E20PT1 E2422 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 the ‘‘ ‘debt-for-nature’ transaction that var- The following day, DeHenzel consulted If suit against Hurwitz—we sue only him ious environmental groups have been advo- about the McReynolds inquiry with ‘‘JVT,’’ and not others. cating to resolve the claims involving John V. Thomas, the same FDIC lawyer who Find out if Hurwitz will toll Hurwitz and USAT.’’ (Record 12) They were attended the Rep. Hamburg meeting in No- Write a memo on case status to GC 10 page also apparently intimidated by the environ- vember 1993. Mr. Thomas told him to talk to memo should do it! mentalists as shown by the two page FDIC Jack Smith and Alice Goodman. The notes continue tolling memo about a redwoods debt-for-nature let- say that ‘‘JVT’s reaction—Smith & Goodman sue or let them go ter to FDIC referencing the Oklahoma City should be there with us’’ (Record 16) for the If ordinary case, we do not believe there is bombing and a ‘‘call to defuse this situation’’ meeting with McReynolds. a 50% chance we will prevail therefore, we by doing a swap (Record 12). The following Then the unexpected occurred. On July 20, cannot recommend a lawsuit. excerpt of the memo shows detailed knowl- 1995, Mr. Hurwitz refused to extend the stat- McReynolds—handle same as the Hill pres- edge about the debt-for-nature scheme and a ute of limitations tolling agreement with the entation (Record 18) perceived threat of violence related to envi- FDIC (Record 17, See, footnote 1 on page 2). Clearly, the thinking coming out of the ronmentalists who had pushed the FDIC into He had last done so on March 27, 1995, and July 20, 1995, meeting was that the FDIC law- it: ‘‘As you know, the above-referenced in- that extension was to expire on July 31, 1995. yers were not ready to make a recommenda- vestigation has resulted in attracting the at- As a result, any lawsuit by FDIC regarding tion on the merits of the case. Continued tention of organizations and individuals that USAT claims against Mr. Hurwitz were re- tolling was not an option because Mr. have interests in environmental preserva- quired to be filed by August 2, 1995, just thir- Hurwitz refused to sign a tolling extension, tion. This has arisen as a result of Charles teen days later. It was just three days after so the options ‘‘sue or let them go’’ were the Hurwitz’s acquisition (through affiliates) of Mr. McReynolds contacted the FDIC for a only viable options. If it were an ordinary Pacific Lumber, a logging company in meeting about the potential FDIC and OTS case the preference at that point would be to Humbolt County, California, that owns the actions against Mr. Hurwitz that the FDIC close the case out—that is let them go. last stands of old growth, virgin redwoods. It was told that Mr. Hurwitz would not extend has been widely reported that the company FDIC lawyer, Mr. John Thomas’ later the tolling agreement. notes outlining some points for that memo has been harvesting the virgin redwoods in a The FDIC was unprepared for this action. to the General Counsel tell us why this was desperate attempt to raise cash to pay its They had enjoyed six years and eight months not the ‘‘ordinary’’ case: ‘‘[G]iven (a) visi- and its holding company’s Maxxam, Inc.’s of discovery during which they were lobbied bility—tree people, Congress & press . . . we substantial debt obligations. by outside groups and Members of Congress thought you—B[oard]d—should be advised of ‘‘The environmentalist’s issues are cen- on the completely unrelated issue of pur- tered on preserving the old growth redwoods suing the redwoods debt-for-nature swap. what we intend to do—and why—before it is through a mechanism of persuading Hurwitz However, the agency had failed to be it job too late.’’ (Record 22) to settle the government’s claims involving and cobble together enough evidence sup- What Mr. Thomas was saying is that the losses sustained on the USAT failure by, in porting a banking claim involving USAT and staff intends to close out the case, and if the part, transferring the redwood stands to the Mr. Hurwitz. They were not ready to file a FDIC board wants to do otherwise before the FDIC or other federal agency responsible for compliant or drop the case on their own voli- case is closed (administratively by the staff managing such forest lands. FDIC has re- tion, even though Mr. Hurwitz provided volu- or by virtue of the statute of limitations ceived thousands of letters urging FDIC to minous records to the agency in the dis- running), then the Board must intercede. pursue such a transaction.’’ covery process, records that defined the facts Importantly, the FDIC lawyers deviated ‘‘The environmental movement, like many and illuminated issues raised by the FDIC. from ordinary operating procedures because others, is not homogeneous and contains ex- As a result, the FDIC was facing two of the intense lobbying campaign for the red- treme elements that that have resorted to issue—the request for a meeting with the Of- woods debt-for-nature swap. Clearly, the in- civil disobedience and even criminal conduct fice of the Secretary of the DOI and the need tense lobbying effort by the environmental to further their goals. As a result of the re- to address the fact that they did not have groups, by their outside counsel, by the DOI, cent tragedy in Oklahoma City, everyone ap- the USAT case prepared after more than six by the White House, and by other federal en- pears more sensitive to the possibility that years of investigation. tities was effective! At that point the bank people can and do resort to desperate de- They addressed these issues internally in a regulators bought the redwoods scheme, but praved criminal acts. Accordingly, we take July 20, 1995, meeting between ‘‘Mr. Jack were unprepared then to totally disregard any references to such conduct, even ones Smith, JVT [John V. Thomas, FDIC lawyer], their what they knew they should do under that appear innocent, more seriously.’’ MA [Maryland Anderson, FDIC lawyer], JW their rules and guidelines, so the staff (Record 12) [Jeff Williams, FDIC lawyer], and Robert punted the issue to the board. This excerpt shows that FDIC attorneys DeHenzel.’’ (Record 18) The FDIC had already injected itself into a were (1) probably somewhat intimidated and It is clear from this meeting that the FDIC political issue. Their dilemma was summed (2) already well-versed in the debt-for-nature lawyers were not anxious to recommend a up by Mr. Thomas in notes preparing for a scheme when Ms. Ratner told Mr. DeHenzel lawsuit against Hurwitz. They did not have a discussion on the USAT claims with the who the DOI players supporting the redwoods case, because it did not meet their internal board apparently scribed a few days later: debt-for-nature scheme were. The FDIC was standards. Instead they preferred to hinge Dilemma (why they [the FDIC Board] get keen to the motivations and methods of their action on whether OTS brought the ad- those who fed the scheme to them. Perhaps paid the big bucks)—take: ministrative action, the action that they Hit for dismissed suit the intimate knowledge by the FDIC of the prompted and paid OTS to bring against interests and desires of the environmental Hit for walking based on staff analysis of Hurwitz. This is an odd trigger for an agency 70% loss of most/all on S of L [statute of lim- community came through the numerous that does admits it does not have a case, dis- pieces of correspondence and legal memos itations] avows it seeks redwoods, and is only inter- (Record 23) from the Rose Foundation to the FDIC ested in receiving ‘‘cash.’’ through Hopkins & Sutter. The material Thus, the FDIC lawyers’ behavior is some- The action by the FDIC of treating this showing the constant pummeling of FDIC by what schizophrenic—on the one hand they case differently than the ‘‘ordinary’’ case these advocates (and the willing acceptance know their internal policies will not let and the concerted manipulation of hiring the by the FDIC and its outside law firm with them bring a suit, but on the other had they OTS to pursue parallel claims to be used as ‘‘environmental connections’’) is too volumi- want to sue Mr. Hurwitz (and not other po- leverage sends the strong message: if some- nous to reproduce. It is contained in the tential defendants). They then begin con- one wants to influence bank regulators on an Committee’s files. structing the justification for doing so entirely collateral issue, and politically ma- With the FDIC primed, the Department of around the notion that the potential claims nipulate the bank regulators, they can suc- the Interior directly engaged with the FDIC. against Mr. Hurwitz are somehow special— cessfully do it. The first known direct contact was a 5:00 not ‘‘ordinary.’’ They also apparently talk of All that must be done to use the bank reg- p.m. call on July 17, 1995, from Alan telling Mr. McReynolds what they will do— ulators to achieve a collateral issue is to McReynolds to Robert DeHenzel. The notes evidence of further improper coordination pursue two year public relations campaign taken by DeHenzel (Record 16) indicate that with the DOI outside of normal FDIC oper- aimed at them, swamp the bank regulators McReynolds, a special assistant to the Sec- ating parameters. Mr. Thomas’ notes from with cards and letters about the collateral retary of the Interior, asked about the ‘‘sta- the internal FDIC meeting (Record 18) ex- issue, write and submit various legal briefs tus of our [FDIC] potential claims and how plain: for them that link the collateral issue, meet OTS is organized, etc.’’ He needed ‘‘someone Re: McReynolds—Kosmetsky-Hurwitz-Toll- with the bank regulators about the collat- to describe our [FDIC] claims and FDIC/OTS ing eral issue, organize congressional letters ad- roles.’’ He said that the DOI is receiving Jack [Smith]—we will not go forward if vocating the collateral issue, hold secret ‘‘calls almost daily from members of Con- OTS files a case meetings with Members of Congress bout the gress and private citizens.’’ McReynolds —if OTS does not file suit, we still have to collateral issue, hold ‘‘protest’’ rallies out- pressed for a meeting that week (the week of decide our case on the merits before tolling side of their meetings, and do whatever else July 17, 1995) because of his vacation and expires it takes so that at the end of the day, bank travel schedule. At that juncture, DeHenzel’s *Memo to the GC [General Counsel] to regulators do not follow ordinary procedures. notes say that McReynolds had not spoken Chairman—update status of case & rec- Indeed, the redwoods debt-for-nature swap to Jack Smith yet. ommends that we let Kozmetsky out. became linked to USAT and Mr. Hurwitz just

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00084 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.200 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2423 as the environmental groups wished. This Alan Reynolds—Adm[inistration] want to Redwood Swap— was not the ordinary case—it was going to do deal Interior/Calif. the FDIC Board even though the FDIC ad- Gov. Wilson w/DOI had task force of 6 Forest—[military] base—FDIC/OTS mitted their case had a 70 percent chance of groups claim(?) being dismissed because of the statute of Told to find a way to make it happen (Record 22) CA will trade $100m in CA [California] tim- limitations, and was more likely than not of This outline reinforces the approach and ber falling on the merits if they were reached. dilemma described by FDIC lawyers in their Apparently, the FDIC legal staff was pre- Adm[inistration] might trade mil[itary] July 20, 1995, meeting. First, there was co- pared to tell McReynolds and ‘‘the Hill’’ base ordination with the OTS claims to get red- [Congress] the same thing—their course of Had call from atty. Appraisal on prop[erty] woods. That’s because FDIC’s possible claims action described in the July 20, 1995, meeting for $500m. Said they want to make a deal. notes (Record 18). This modified procedure Don’t know how much credence we have were losers on substantive and procedural still left the door open for the board to act from them about a claim. At same time tell- (statute of limitations) grounds. Second, or- against staff recommendations and authorize ing them to get rid of claim. He can’t cut dinary procedures to close out the matter the suit anyway—something that may not them down. were circumvented due to ‘‘visibility’’ from have been ideal from Mr. McReynolds per- If we drop suit, will undercut everything. the redwoods debt-for-nature campaign of spective, but would still leave open the possi- (emphasis supplied) (Record 21) the ‘‘tree people’’ (Earth First! and the Rose bility of the leverage that DOI desired So, the FDIC knew—according to the meet- Foundation), Congress, and the press. Third, against Mr. Hurwitz. ing notes—that if the FDIC dropped the suit the Department of the Interior’s ‘‘Redwood Then something else changed on July 21, by letting the statute of limitations run, ‘‘it Swap’’ was taking shape and FDIC lawyers 1995, which was the day following the inter- will undercut everything’’ related to the red- were beginning to coordinate with DOI staff. nal FDIC meeting on their potential claims woods scheme that was just discussed with All these factors combined to override the against Mr. Hurwitz. The change caused the McReynolds. In other words, letting the stat- normal course of action, which was to close entire approach of the FDIC lawyers to ue of limitations expire—the ‘‘ordinary’’ pro- out the case. Instead, the Board would get evolve again. What changed was not any new cedure and recommendation of the FDIC law- the decision. All of this confirmed in John information about the facts of the potential yers at the time—meant the leverage for the Thomas’ own handwritten outline (Record claims against Mr. Hurwitz related to USAT. redwoods debt-for-nature deal would evapo- 22), and all of it adding up to show that the What changed was not any favorable devel- rate, as would the scheme to get Hurwitz’s redwoods debt-for-nature scheme had a real opment in law that strengthened their po- redwoods. Thus, the notes confirm a red- impact on the approach of the FDIC’s law- tential claims against Mr. Hurwitz related to woods debt-for-nature scheme and that FDIC yers. It had yet to skew the FDIC’s final USAT. What changed was not any analysis did not really know whether Mr. Hurwitz be- judgment based on early versions of the about the nature or strength of the potential lieved that the FDIC had a valid claim—fur- memo to the Chairman (Document X), but claims against Mr. Hurwitz. All of these ther evidence of the fact that the claims the final version dated July 27, 1995, would things remained the same. were indeed weak substantively and proce- reflect skewed judgment. What changed was the realization by the durally. The memo was drafted, and a version re- FDIC lawyers, as communicated by a senior In this context—where the FDIC knew its flecting Mr. Thomas’ notes and all of the DOI official, that (1) the Clinton Administra- claims (and the claims it was paying OTS to prior internal staff discussions was produced tion and the DOI, had adopted and embraced pursue) were the essential leverage for the and dated July 24, 1995. The drafts are Docu- the redwoods debt-for-nature scheme and redwoods—the FDIC lawyers began drafting ment X, and the final before the reversal is they wanted the scheme to be successful, and the memo. Clearly, the agency was strug- Document X, pages ES 0490–0495. It contains (2) the FDIC’s potential banking claims were gling with the fact that dropping the claims an unsigned signature block. Highlights of critical to pulling off that redwoods debt-for- was inconsistent with what the DOI and the this memo are reproduced below and they nature scheme. The potential banking Administration needed to accomplish the tell exactly what the FDIC lawyers would claims—the same claims that the FDIC law- redwoods debt-for-nature swap. advise the FDIC Board: ‘‘We had hoped to yers would have dropped using ‘‘delegated The handwritten outline of Mr. John delay a final decision on this matter until authority’’—were the leverage that were Thomas (Record 22) reviewed the major after OTS decides whether to pursue claims critical to making the redwoods debt-for-na- points in the contemplated memo to the against Hurwitz, et al. However, we were ad- ture scheme work. Chairman. The outline reiterated the link- vised on July 12, 1995 that Hurwitz would not That realization occurred when the FDIC age between FDIC and OTS, and it reinforced extend our tolling agreement with him. Con- lawyers met with Mr. McReynolds on Friday, staff conclusion that the USAT claims sequently, if suit were to be brought it would July 21, 1995, at 11:00 a.m. (Record 19), just as against Mr. Hurwitz should be left to expire have to be filed by August 2, 1995. We are not he had requested on Monday, July 17, 1995. otherwise the court would dismiss them. Mr. recommending suit because there is a 70% Meeting notes indicate that background probability that most or all the FDIC cases about the redwoods and endangered species John Thomas’ outline clearly show that if this case were ‘‘ordinary’’ it would be closed. would be dismissed on statute of limitations issues associated with Mr. Hurwitz’s red- grounds. Under the circumstances the staff woods were initially discussed (Record 20). Pressure for redwoods was the justification for informing the Board of the staff’s intent would ordinarily close out the investigation Other background about Governor Wilson’s under delegated authority. However (evi- task force and the willingness of California to close out the case, and the option of pur- suing the case for purposes of leverage was denced by numerous letters from Congress- to participate in the deal were discussed, as men and environmental groups), we are ad- were Mr. Hurwitz’s valuations of the prop- therefore left open. Mr. Thomas’ outline, which appears to be composed for the 2:00 vising the Board in advance of our action in erty (Record 20). Apparently, McReynolds case there is a contrary view.’’ (emphasis laid out some of the basics about the red- p.m. briefing of the Chairman on July 26, 1995, (Record 22) is partially reproduced supplied) (Document X, page ES 0490) wood acreage. He was familiar with the issue And in discussing the merits, the memo from first hand experience because he had below— May recall briefed re OTS—[FDIC is] pay- again advised: ‘‘The effect of these recent ad- flown over the redwoods with Jill Ratner verse [court] decisions is that there is a very during the week of May 8, 1995 (See, Record ing [the OTS]—some months ago. OTS is making progress, but not ready. high probability that the FDIC’s claims will 11): ‘‘H[urwitz] values 8K [acres] at $500 m. not survive a motion to dismiss on statute of Interior wants to deal it down. H[urwitz] Thus, tolling again. OTS staff hopes to have draft notice of limitations grounds. We would also be at in- really wants $200m total. Calif. Deleg[ation] creased risks of dismissal on the merits. Be- is really putting pressure on.’’ Dallas/Ft charges to Hurwitz, et al. Aug./Sept. (Apologize for short fuse)—we thought we cause there is only a 30% chance that we can Worth—Base closure. avoid dismissal on statute of limitations The FDIC also told McReynolds about the would be able to put off a final decision until grounds, and because even if we survived a meeting that FDIC lawyers had set for the OTS acted. Hurwitz refused to toll. statute of limitations motion, victory on the following Wednesday, July 26, 1995, with the Normal matter, we would close out under OTS to discuss the USAT matter. They told delegated authority w/o [without] bringing it merits (especially on the claims most likely Mr. McReynolds about the fact that they to your Bd’s attention. to survive a statute of limitations motion) is were doing the memo to the Chairman (the However, given uncertain given the state of the law in (a) visibility—tree people, Congress & press 10 page memo they concluded they needed in Texas, we do not recommend suit on the (b) [OMITTED] their July 20, 1995, meeting amongst the FDIC’s potential claims.’’ (emphasis sup- we thought you-Bd-should be advised of plied) (Document X, page ES 0493–0494) FDIC lawyers, See Record 18). The entry re- what we intend to do—and why—before it is garding this in Record 20) is reproduced The memo then discusses the redwood for- too late. below: ‘‘Wed [July 26] 10:30 mtg w/OTS. est matter, an interesting notion given the Memo for Chairman.’’ (Record 20) *** fact that the FDIC has consistently main- Eric Spittler’s notes from the July 21, 1995, Bottom line: likely to lose on S of L [stat- tained that the redwoods were not at all con- meeting add helpful details, and they are re- ute of limitation]—let it go or have ct. dis- nected to their litigation: ‘‘The decision not produced below: miss it. to sue Hurwitz and former directors and offi- $400,000 expenses on OTS Continue to fund OTS cers of USAT is likely to attract media cov- Have not decided whether to bring case— We’d also write Congress re what & why erage and criticism from environmental won’t decide for months. rather than awaiting reaction groups and member of Congress. Hurwitz has

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00085 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.205 pfrm07 PsN: E20PT1 E2424 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 a reputation as a corporate raider, and his sion between FDIC lawyers and Mr. claim. They had spoken—they spoke to staff hostile takeover of Pacific Lumber attracted McReynolds on July 21, 1995. This puts the a few days ago about that and staff of the enormous publicity and litigation because of OTS squarely inside the redwoods debt-for- FDIC has indicated that we would be inter- his harvesting of California redwoods. Envi- nature scheme. ested in working with them to see whether ronmental interests have received consider- The notes are very helpful to show the de- something is possible. We believe that legis- able publicity in the last two years, sug- gree of coordination between the FDIC and lation would ultimately be required to gesting exchanging our D&O [director and of- OTS about redwoods and the linkage be- achieve that. But again, if it’s the Board’s ficer] claims for the redwood forest. Only tween the potential claims and redwoods. pleasure, we would at least try to find out July 21, we met with representatives of the They also show how the FDIC polluted the what’s happening and pursue that matter Department of the Interior, who informed us OTS decision-making with the same political and make sure that nothing goes on we’re that they are negotiating with Hurwitz dynamic it had been part of for more than a not aware of—we’re not part of. (Record 27, about the possibility of swapping various year. The FDIC staff summed up the situa- page 11–12) properties, plus the possibility the FDIC/OTS tion and briefed OTS about all of the impor- Later, Chairman Helfer raised the issue of claim, for the redwood forest. They stated tant redwoods developments related to Mr. whether bringing suit enhances the prospect that the Administration is seriously inter- Hurwitz: of settlement of non-banking issues, that is ested in pursuing such a settlement. This is J. Smith’ the redwoods: feasible with perhaps some new modest legis- Hurwitz won’t sign tolling agreement with lative authority . . . We plan to follow up on Chairman HELFER. . . . does the FDIC’s FDIC—need to file lawsuit by 8/12 authorization to sue enhance the prospect— these discussions with the OTS and Depart- J. Thomas-chances of success on stat. Lim- ment of [the] Interior in the coming weeks. the prospects for a settlement on a variety of itations is 30% or less issues associated with the case? . . . When the Hurwitz tolling agreement ex- will continue discussions with Helfer pires, we would recommend that we update Mr. THOMAS. It might have some mar- Pressure from California congressional del- ginal benefit, but I don’t think it would those Congressmen who have inquired about egation to proceed our investigation and make it clear that this make a large difference. I think the reality Dept. of Interior—Alan McReynolds is that the FDIC and OTS staff have worked does not end the matter of Hurwitz’s liabil- Administration interested in resolving ity for the failure of USAT because of the on- together, expect to continue to work to- case & getting Redwoods gether, and so, I don’t think it would have a going OTS investigation.’’ (Record X, pages Pete Wilson has put together a multi-agen- ES 0493–0494). major impact. It might make some dif- cy task group ference, but I think particularly any effort It is helpful to understand that there were Calif would put up $100 MM of Californai to resolve this with . . . a solution that in- four major versions of this memo drafted and timberland volves the redwoods would be extremely dif- revised. The drafts of this memo are all type- Hurwitz wants a military base between ficult. (Record 27, page 16) dated July 24, 1995, and they all reference Dallas & Fort Worth—Suitable for commer- discussions with the Department of the Inte- cial development These exchanges in the FDIC board meet- rior. These drafts are Document X, which Hurwitz also wants our cases settled as ing about the redwoods are troubling simply was made part of the Task Force hearing part of the deal because they occurred. They injected factors record by unanimous consent. Two weeks ago-Hurwitz lawyer called Teri that had nothing whatsoever to do with the However, one version of this memo con- Gordon at home & told him he should not be validity of banking claims against Mr. tains numerous handwritten changes, includ- turned off by the $500 MM appraisal Hurwitz. The advice and recommendations ing a date that was changed from July 24, What is OTS’ schedule? How comfortable is on July 27, 1995, deviated so widely from the 1995, to July 27, 1995 (Document X, pages PLS OTS w/ giving info to Interior? approach of staff that would have ordinarily 000192–000195). The changes amount to the (Record 26) taken to close the case administratively. complete and total reversal in approach to They deviated even more from the approach None of the records reviewed contains any the USAT claims related to Mr. Hurwitz. The they would have taken before the banking law rationale for the reversal in the July 27, 1995 version is the text that was in- McReynolds meeting on July 21, 1995, where staff recommendation July 24, 1995, (which corporated into the Authority to Sue (ATS) they came to understand that the Adminis- was to notify the board that they would cover Memorandum that was itself dated tration needed the leverage for the redwoods close out the potential claim against Mr. July 27, 1995. It, with the ATS memo (Docu- swap. Hurwitz by letting the statute of limitations ment L, EM 00123–00135), went to the FDIC The deviation is likely a result of that run) and the July 27, 1995, approach (which Board, and it recommended the suit against meeting, coupled with the OTS meeting on recommended a lawsuit against Mr. Mr. Hurwitz be brought. July 26, 1995, where they coordinated on the The July 27 final version rolled into the Hurwitz). The only explanation for the rever- claims they were paying the OTS to pursue ATS memo also discusses the ‘‘Pacific Lum- sal is the meeting with Mr. McReynolds and conspired about the need for leverage to ber-Redwood Forest Matter’’ (Document L, where the DOI and Administration’s desire get the redwood claims. The FDIC under- page EM 00129). Therein, it notes the July 21, for leverage was communicated and under- stood at that point that OTS’s claims may 1995, FDIC meeting with ‘‘representatives of stood by the FDIC coupled with the meeting not be brought for months (or perhaps at all) the Department of the Interior with OTS where bank regulators from both and they certainly knew that if ‘‘we drop our [McReynolds], who informed us [the FDIC] agencies discussed the Administration’s de- suit, [it] will undercut everything.’’ (Record that they are negotiating with Hurwitz sire for the redwoods debt-for-nature scheme 21) about the possibility of swapping various to succeed. At this juncture, the thinking The day following filing of the suit, FDIC properties, plus the possibility of the FDIC/ was that there would be no money for an ap- lawyers sent a memo to their communica- OTS claim, for the redwood forest.’’ (Docu- propriation for the Headwaters, so a swap of tions department reiterating the congres- ment L, page EM00129). The memo also says some sort was the only way to acquire the sional and environmental interest due to the that the ‘‘Administration is seriously inter- redwoods. redwoods issue. (Record 28) The memo ex- ested in pursuing such a settlement.’’ The FDIC board only saw the July 27, 1995, plained conspiracy with the Department of Note what the memo does not say. It does memo. In their meeting they discussed the the Interior and how the department had not say Mr. Hurwitz raised the issue of red- redwoods scheme when the discussed bring- been negotiating for the redwoods using the woods and linked them in any way to the ing the action against Mr. Hurwits (Record FDIC and OTS claims. The memo also indi- banking claims. It says that the Administra- 27). As part of his briefing, Mr. John Thomas cated that it was the Administration that tion is negotiating a swap of possible prop- elaborates on the redwood scheme to the was ‘‘seriously interested in pursuing such a erties, plus the banking claims. When the FDIC board: settlement.’’ (Record 28, page 2) In addition, bank regulators learned of this (probably Mr. THOMAS. This is, of course, a very as if the FDIC lawyers knew they were doing from Mr. McReynolds on July 21, 1995), the visible matter. It is visible for something something wrong, the memo emphasized that bank regulators should have been very un- having no direct relationship to this case, ‘‘All of our discussions with the DOI are comfortable. They had already voluntarily but having some indirect relationship. Mr. strictly confidential.’’ (Record 28, page 2) injected themselves into a political dynamic Hurwitz, through Maxxam, purchased Pacific Then the memo went on to suggest that with other government agencies—one of Lumber. Pacific Lumber owns the largest the FDIC should not disclose these discus- which had apparently taken their statutory stand of virgin redwoods in private hands in sions or deviate from the prior public state- obligation to recover cash by using claims the world, the Headwaters. That has been the ment about redwoods. Basically that state- that belonged to the FDIC and were not even subject of considering—considerable environ- ments was that if a redwood ‘‘swap became brought yet. At this juncture Mr. Hurwitz mental interest, including the picketing an option, the FDIC would consider its as had not raised the prospect of such a scheme downstairs of a year or so ago. It has been one alternative and would conscientiously with the FDIC. the subject of Congressional inquiry and strive to resolve any pertinent issued.’’ The only other intervening event between press inquiry. So we assume that whatever (Record 28, page 2) the July 24, 1995, memo draft and the July 27, we do will be visible. The work on a redwoods swap by the FDIC 1995, reversal is a meeting on July 26, 1995, at Interior, you should also be awar—aware, and the Department of Interior then grew as 10:30 a.m. between the FDIC and OTS. Record the Department of Interior is trying to put indicated by the volume of notes from meet- 26 is the only set of meeting notes from that together a deal to the headlines [sic] [Head- ings where other federal entities were drawn meeting, and the notes reiterate the discus- waters] trade property and perhaps our into the scheme. There was an August 2, 1995,

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00086 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.209 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2425 DOI Headwaters acquisition strategy paper his redwoods for the FDIC and OTS claims. run by us [FDIC and OTS] on everyone other drafted by Mr. McReynolds. It reports the They wanted to induce a settlement, and than Hurwitz. We have moved to stay our FDIC and the OTS ‘‘are amendable to [a debt their words say it. There meeting with the case in Houston, and are awaiting a rul- for nature swap] if the Administration sup- Vice President was an important meeting, ing....and there is question of whether a ports it.’’ (Document DOI B). This is blatant and the memo to Mr. Kroener to prepare for broad deal can be made with Pacific Lum- evidence of just how political the FDIC’s the meeting (Record 33) was remarkable can- ber.’’ (Record 36) July 27, 1995, reversal was. did: ‘‘FDIC has no direct claim against Pa- Shortly thereafter, on January 19, 1996, the There was the August 15, 1995, meeting be- cific Lumber through which it could success- fact that Mr. Hurwitz had not directly tween DOI, FDIC (Smith), and OTS (Renaldi fully obtain or seize the tree or to preserve brought the issue of the redwoods into set- and Sterns) (Document DOIC, page 2) where the Headwaters Forest.’’ tlement discussions became a problem. OTS it was reported that ‘‘FDIC and OTS are * * * * * apparently refused to join the meetings led wondering why DOI is not being more ag- by CEQ about Headwaters, and an FDIC law- ‘‘FDIC’s claims alone are not likely to be gressive with Hurwitz and is permitting yer reported the refusal to CEQ: ‘‘I advised sufficient to cause Hurwitz to offer the Head- [Governor] Wilson’s task force to take force Elizabeth Blaug about this yesterday after- waters Forest, because of their size relative to take the lead’’ (Document DOIC, page 2). noon. I said that if Hurwitz wanted to have to a recent Forest Service Appraisal of the This is a stunning indictment of the political global settlements with OTS and FDIC in- value of the Headwaters Forest ($600 mil- motivation of the FDIC and OTS staff. volved, he would have to ask for them.’’ lion); because of very substantial litigation There was coordination with Congressional (Record 36A) offices (Document DOID). risks including statute of limitations, Texas In other words, the ex parte agency discus- There was endorsement from the Assistant negligence—gross negligence business judg- sions (without Mr. Hurwitz) about FDIC and Secretary of DOI of using the FDIC and yet ment law, and Hurwitz role as a de factor di- OTS banking claims were at least improper, to be filed OTS claims in exchange for the rector, and the indirect connection noted and the impropriety was not realized; how- redwoods (Document DOIE). above, including the risk of Hurwitz facing ever, it was too late. There were multi-agency meetings that in- suit from Pacific Lumber securities holders By March 1996, the FDIC and OTS were cluded the White House OMB and CEQ (Docu- if its assets were disposed of without Pacific deeply involved with promoting the red- ment DOI F and H) Lumber being compensated by either out- The Vice President was lobbied by Jill woods debt-for-nature scheme, but they had siders, or Hurwitz or entities he controls.’’ still yet to receive any direct communica- Ratner for his support of the redwoods (record 33, page 3) (emphasis supplied) scheme as was the White House (Document tion from Mr. Hurwitz proposing a redwoods Two things are clear after reading this pas- swap for their claims. About March 3, 1996, DOI G), and bi-weekly conference calls were sage. First, FDIC staff intended the claim to occurring between the FDIC, the OTS, and the FDIC attorneys must have begun to real- operate as an inducement, along with the ize that the agency should not be involved in the DOI to coordinate on the redwoods OTS claim for trees. Second, that there is no scheme by September 1995. the redwoods scheme. He made the following other rational, after reading this evaluation, note on what appears to be a ‘‘to do’’ list: There was the October 1995, memo to the for the FDIC lawyers to have switched their General Counsel of FDIC about a scheduled recommendation between July 24 and July meeting that was to occur on October 20, 1995 27, 1995—except that they intended all along APPENDIX 1 with Vice President Gore about the FDIC to help the Administration by playing a part DOCUMENT A and OTS claims and their integral linkage to in inducing a settlement. leveraging redwoods. Mr. Kroener, testified United States District Court—Southern After reading this passage, one wonders District of Texas that the meeting never occurred, but the in- why the FDIC still attempts to propagate FEDERAL DEPOSIT INSURANCE CORPORATION formation in the memo is nonetheless illu- the obviously false notion that their claims AND OFFICE OF THRIFT SUPERVISION, PLAIN- minating, and it contradicts FDIC’s state- had nothing to do with redwoods. TIFFS. ments that they were not after redwood There was the October 22, 1995, meeting trees. that included a cast from DOI, OMB, FDIC, versus The memo verifies that Mr. Hurwitz was DOJ, and the Department of Treasury ‘‘at CHARLES P. HURWITZ, DEFENDANT. not interested and had not raised the notion which we [CEQ] initiated discussions on a po- IVIL CTION of a redwood swap for FDIC or OTS claims. C A H–95–3956 The memo says OTS met with Hurwitz’s law- tential debt-for-nature swap.’’ (Document OPINION ON DISMISSAL OF THE OFFICE OF yer and ‘‘no interest in settlement has been DOI H) That meeting led to FDIC attorney THRIFT SUPERVISION expressed to OTS.’’ (Record 33, page 2). The Jack Smith compiling a lengthy memo- 1. Introduction. memo says that FDIC ‘‘has had several meet- randum to Kathleen McGinty, the Chairman of CEQ. The memo reviews issues and an- The Federal Deposit Insurance Corporation ings and discussions with Hurwitz counsel sued Charles Hurwitz for improprieties as prior to the filing of the lawsuit. Hurwitz has swers about the feasibility of various legal mechanisms that might be used to facilitate corporate officer that led to the failure of a never, however, indicated directly to the bank Hurwitz’s corporation owned. While the FDIC a desire to negotiate a settlement of the redwoods debt-for-nature scheme. (Record 30). suit was in its preliminary stages, the FDIC the FDIC claims.’’ (Record 33, page 2). procured the Office of Thrift Supervision to This puts to rest the notion that Mr. Then in late 1995, Judge Hughes, the U.S. District Court judge who was assigned the use its powers to bring a parallel administra- Hurwitz was or had been interested (or had tive action against the officer. Over the raised) the notion of a redwoods swap for the FDIC’s lawsuit discovered what the FDIC and OTS had done to team up using overlap- OTS’s objection, this court joined the OTS as OTS or FDIC claim up to that point. Appar- an involuntary plaintiff in this suit since it ently, the FDIC relied on erroneous represen- ping authority to harass Mr. Hurwitz had decided to affect the outcome. Now, the tations of Mr. McReynolds to the contrary. (Record 37 and document A) and the banking FDIC has amended its pleadings to abandon Then, in an incredible self-indictment, the regulators’ redwood debt-for-nature scheme FDIC observes that it is ‘‘inappropriate to began to be exposed. its claims that duplicate those in the OTS’s include OTS’’ in the meeting to discuss pos- At the same time (November 28, 1995) FDIC action; although this is yet another manipu- sible settlement with Hurwitz because the lawyers met with Katie McGinty (CEQ), Eliz- lation of the court system by the FDIC, the OTS claim was not approved for filing, and abeth Blaug (CEQ), and John Girimundi OTS will be dismissed. discussions may be perceived as ‘‘an effort by (DOI) where it was decided that there would 2. Claims. the executive branch to influence OTS’s be ‘‘no formal contacts until OTS file,’’ Charles Hurwitz was a member of the independent evaluation of its investigation’’ (Record 38) and it was acknowledged that board of three different corporations that (Record 33, page 2). What exactly, then, did ‘‘after the administrative suit is filed is time had an interest in United Savings Associa- the FDIC think its February 1994 meeting for opening any discussions.’’ However, the tion of Texas. After United’s failure in 1988, with Rep. Hamburg would do to its inde- FDIC had already had several discussions the FDIC began investigating Hurwitz. Co- pendent judgment? What did the FDIC think with OTS about the redwoods swap, as had operating with the government, Hurwitz repeated contacts with environmental DOI staff beginning in July 1995, even before signed a succession of agreements to extend groups since 1993 would do? What did the the FDIC claim was filed. the deadline for the government to act. After FDIC think that its meetings with Mr. Rey- The notes from meetings between the FDIC eight years of investigation by the FDIC and nolds right before their staff recommenda- and/or the OTS and environmental groups, the OTS with no resolution in sight, Hurwitz tion changed in July 1995 would do? Why did government agencies, federal departments, declined to extend the statute of limitations the FDIC and the OTS meet and have phone the White House, from September 1995 again. The FDIC sued Hurwitz on a variety of briefings with DOI in July, August, Sep- through March 1996. (Record 31) claims arising from the operation of United. tember 1996. All of these contacts were just 1996: FDIC Lawyers Cannot Find Their Way When distilled, the claims are that as inappropriate then as they were when Out of the Forest—help, ‘‘we need an exit ∑ Hurwitz failed to maintain the net worth FDIC staff wrote the briefing memo for Vice strategy from the Redwood’’ of United, and President Gore’s meeting. Did the FDIC law- By January 6, 1996, the redwoods scheme ∑ Hurwitz mismanaged United’s mortgate- yers take an ethics class sometime between had come together as planned. John Thomas backed security portfolios. February 1994 and October 1995? reported to Jack Smith in a weekly update. Three months later, the OTS notified In fact, the FDIC intended to help the Ad- ‘‘United Savings. OTS has filed their notice Hurwitz that it intended to file an adminis- ministration force Mr. Hurwitz into trading of charges. The statute has been allowed to trative ‘‘notice of charges’’ on substantially

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00087 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.213 pfrm07 PsN: E20PT1 E2426 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 the same claims in addition to violations of tions. The same parties and the same actions a risk of duplicative proceedings. The FDIC banking regulations. The court joined the are involved. The money recouped by either has abandoned its principal case in this OTS to minimize duplicative and—as it turns agency will go to the FDIC. court. out—duplicitous proceedings and to avoid in- Hurwitz is not seeking to enjoin the OTS, Hired governments and systematic false- consistent findings about the same trans- directly or effectively, or to ‘‘affect by in- hood are the tools of cosa nostra not res actions. junction or otherwise’’ the administrative publica. 3. Joinder. proceedings. Furthermore, this is not Signed October 23, 1997, at Houston, Texas. LYNN N. HUGHES, The OTS was properly joined as a party. A Hurwitz’s suit. The FDIC initiated this ac- United States District Judge. party may be joined as an involuntary plain- tion, knowing that it had bought the initia- tiff when it claims an interest in the subject tive of the OTS. In January 1997, during a pre-hearing con- matter of the suit and its absence would DOCUMENT A2 ference with the hearing officer, the FDIC leave another party at risk of incurring mul- United States District Court—Southern and OTS stated ‘‘the bottom line’’ is that tiple or inconsistent obligations, Fed. R. District of Texas joining the OTS as a party to this suit ‘‘does Civ.P. 19(a)(2)(ii). FEDERAL DEPOSIT INSURANCE CORPORATION, The government argues that this court not affect [the administrative] proceeding.’’ The government has judicially admitted PLAINTIFF. may not join the OTS because it lacks juris- versus diction. It says that the statute creating the what it now seeks to contradict. The law does not support the government’s OTS specifically divested district courts of CHARLES E. HURWITZ, ET AL., DEFENDANT. position, and it has admitted that joining jurisdiction. The statute say that a district Civil Action H–95–3956 the OTS as a party in this case does not court may not issue an order that affects the OPINION ON PRODUCTION OF FEIC REPORT interfere with the administrative pro- administrative process. The government, 1. Introduction. ceeding. The statutory limitation, therefore, reading its protection from independent ex- does not apply to this case, and this court The Federal Deposit Insurance Corporation amination broadly, says that any action had jurisdiction to join the OTS as an invol- sued Charles Hurwitz for his acts as cor- taken by this court in this case will nec- untary plaintiff. See 12 U.S.C. § 1818. porate officer because a bank the corpora- essarily affect the OTS’s administrative pro- tion owned failed. In the pretrial discovery, 5. Amended Complaint. ceedings, making it barred. See 12 U.S.C. the agency has refused to disclose its docu- § 1818(I)(1). The FDIC has given up its case against ment authorizing the lawsuit, commonly The scope of the statutory prohibition of Hurwitz in this court and delivered it to the called an authority to sue letter. It asserts court intervention is limited to actions by OTS, getting an administrative forum in its privileges not to disclose attorney-client the court to impede the issuance or enforce- Washington and avoiding the public rigor of communications or attorney’s work pre- ment of a notice or order of the OTS; every a court of law. In all important respects, the paring the suit. The document must be dis- determination of law affects the OTS. FDIC’s original complaint and the OTS’s no- closed. The government claims more for its prece- tice of charges are the same. Both agencies 2. Background. dents than a reading of them will support. essentially make two complaints: (a) the de- Certainly, none of the cases indicates that a fendants failed to maintain the net worth of Hurwitz was a member of the board of federal court has no authority to join the a bank and (b) the bank’s mortgage-backed three different corporations with interests in OTS as an involuntary plaintiff. Compelling security portfolios were managed improp- United States Association of Texas. After the OTS to participate in a case is far dif- erly. The underlying facts of both com- United failed in 1988, the FDIC began inves- ferent from preventing it from continuing its plaints are the same. The legal determina- tigating Hurwitz. The agency asked Hurwitz own case. See Board of Governors of Federal tions in both would have been redundant. If to waive his protection under the statute of Reserve System v. MCorp Fin. Corp., 502 U.S. United stockholders owe no net worth main- limitation: he did for seven years. In 1995 he 31 (1992); Board of Governors of Federal Re- tenance obligation, Hurwitz owes the govern- declined to extend the time for the FDIC to serve System v. DLG Fin. Corp., 29 F.3d 993 ment no money regardless of the forum. Fur- bring its charges. The agency sued him in (5th Cir. 1994). RTC v. Ryan, 801 F. Supp. 1545 ther, if Hurwitz is found to have had no oper- district court in Texas. (S.D. Miss. 1992). Only when a court seeks to ational role in the bank’s mortgage-backed Hurwitz asked for access to the agency’s enjoin, not merely join, might the court ex- securities portfolios, Hurwitz would have no authority to sue letter since it is an adminis- ceed its jurisdiction. In fact, federal courts liability to a government agency. trative predicate for the lawyers’ acts and have exercised jurisdiction over the OTS In the amended complaint, the FDIC’s might reveal admissible evidence. The agen- when, as here, the relief sought does not pre- claims varnish. The FDIC drops its discus- cy refused. This court ordered it to disclose vent the OTS from pursuing its administra- sion of the connection between Hurwitz and the report after it excised the privileged tive proceedings. See, e.g., Far West Fed. Drexel—a public relations ploy—and its com- matter. Hurwitz asked for the full report be- Bank v. OTS, 930 F.2d 883, 886, 890–91 (Fed. plaints about the mismanagement of the cause even the limited disclosure revealed Cir. 1991). mortgage-backed securities, allegations oc- admissions against interest, including active material misrepresentations of fact to the 4. One Government. cupying two-thirds of its original complaint. The only claim remaining is a contingent court. The report was produced for court in- These two agencies insist that they serve one. The FDIC argues that, if the OTS deter- spection, after the FDIC moved to have an- different statutory purposes and should not mines Federated and Maxxam owed a duty to other judge read it and rule on the disclo- be compelled to work together. Despite the maintain the net worth of the bank, then sure. The court—having read the report, currently popular usage of the label ‘‘Inde- Hurwitz breached his fiduciary duty to the compared the deletions, considered the legal pendent agency,’’ no agent can be inde- bank by not compelling them to honor it. authorities, and reflected on the record—de- pendent; without a principal, there can be no The FDIC makes its claim not only contin- cides that disclosure is imperative. agent. Here two limited agents of the United gent on a favorable resolution in the OTS 3. The Report. States government claim to be wholly unre- proceeding but also contingent on the OTS’s lated. They are both parts of the executive As the expiration of the last waiver ap- lack of success in ‘‘collect(ing)’’ from Fed- branch. It is one entity, operating under a proached, the officers prepared a report to erated and Maxxam. The FDIC now abandons restrictive charter and for an ultimate prin- the board of directors. The report to the entirely the bulk of its claims and abates its cipal. board was written by two officers of the This bureaucratic shell game is aggravated remaining claim. Having hired the OTS so it FDIC—a deputy general counsel and an asso- by each sub-unit’s active misrepresentations had another forum, the FDIC is content to ciate director for operations. These officers, about the role each has played and the di- leave the resolution of liability to the ‘‘inde- signatures are supplemented by the concur- rect, total unity of financial interest. The pendent’’ regulatory process. rences of the general counsel and director. The OTS will be dismissed not because it government lawyers insisted that, although The report discussed the factual back- was improperly joined, for its joinder was the investigations were perhaps parallel, the ground, regulatory context, legal positions, clearly permissible, but because its presence two sub-units were acting completely inde- public interest, and agency policy, then it re- in this suit is no longer relevant. The OTS pendently from each other. That turns out quested permission to sue Hurwitz. It rec- was joined to prevent duplicative pro- not to be true. ommended a lawsuit and requested authority The FDIC has hired the OTS. The OTS de- ceedings, wasting precious judicial re- to sue. Technically the report covers numer- clined to use its resources to pursue these sources, harassing the respondent citizens, ous people and companies, but the principal claims, so the FDIC bought it by agreeing to and risking conflicting findings of fact and thrust is on Hurwitz individually and pay its costs. Instead of exercising regu- law. Now that the FDIC has dropped almost Maxxam Corporation, a holding company. latory judgment about America’s interest, its entire case, these risks are no longer For simplicity, Hurwitz is used as a synonym the OTS is hammering citizens at the direc- present. for all the defendants. tion of the FDIC. 7. Conclusion. 4. Attorneys, Clients and Privileges. Although the FDIC knew that an OTS ad- The OTS was properly joined. Its presence A communication is privileged from com- ministrative proceeding was imminent, it in this case would not have ‘‘affected by in- pulsory disclosure in litigation when: initiated this suit in federal court. The FDIC junction or otherwise’’ the ongoing adminis- The client asserts the privilege. and OTS worked in concert on the investiga- trative proceeding. The OTS will be dis- A lawyer acting as the client’s lawyer had tions, and the FDIC funded both investiga- missed as a party because there is no longer communicated to the client.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00088 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.217 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2427 The lawyer communicated legal advice. same the government of the United States in sion in this form, its practices made its staff The lawyer prepared a legal opinion in an- the case and in an action by the Office of legal advice into an operating document, to- ticipation of litigation. Thrift Supervision for the same act. Mo- tally unprivileged. The resolution is not a The communication had no unlawful pur- ments later, the FDIC argues that it is all client asking for legal advice nor an attor- pose. one government; it must make this argu- ney giving advice, rather it is the embodi- See Fed. R. Civ. P. 26(b)(1), (3); Fed. R. Evid. ment because it has disclosed its analysis ment of a governmental agency’s final deci- 501; e.g., Rhone-Poulenc Rorer, Inc. v. Home and strategy to the Office of Thrift Super- sion about public business. Indem Co., 32 F 3d 851 (3rd Cir. 1994). vision, which disclosure destroys the pre- An analogy: A report of advice from the general counsel of the senate foreign rela- 5. Operating Lawyers & Counseling Operators. tense of an attorney-client confidence. The Office of Thrift Supervision is a mid- tions committee to its chairman may be In traditional analysis, legal counsel is a level function within the Department of privileged, but if the committee adopts the staff function, but directing operations is an Treasury, it was created by federal law to su- report as its resolution, no privilege sur- operating function. In a governmental agen- pervise the operation of savings associa- vives. This report is like one that was writ- cy sometimes the entire operation looks like tions—a function parallel to the FDIC’s with ten jointly by the architect of the capitol staff, but when one of the functions of the banks. Among other things, the director of and committee counsel and then was adopted agency is collecting claims owned through the OTS has the responsibility to enforce by the public works committee. its defunct insureds, management of receiv- part of the Federal Deposit Insurance Cor- ables and referral to legal counsel are oper- poration Act. DOCUMENT B ating decisions. The policy decision whether Another federal statute created the Fed- it is in the public interest to use litigation is eral Deposit Insurance Corporation. The CONFIDENTIAL ATTORNEY/CLIENT PRIVILEGED ultimately an operating decision. FDIC insures deposits of banks and savings COMMUNICATIONS—REPORT AND LITIGATION The authors of this report were both the associations by charging premiums. Al- RECOMMENDATIONS ON DIRECTOR, OFFICER legal and operations departments. The ap- though it has a corporate name, it is merely AND PROFESSIONAL LIABILITY CLAIMS ARIS- provals were by both departments. Neither an agency of the federal government. The ING OUT OF THE UNITED SAVINGS ASSOCIA- the assistant director who co-authored the president appoints the five-member board of TION OF TEXAS RECEIVERSHIP recommendation and request nor the direc- directors of the FDIC. The director of OTS is [Prepared by: Brill, Sinex & Stephenson, a tor who concurred was acting as counsel to automatically a member of the FDIC board. Professional Corporation] the board. Rather, they were non-lawyers re- Because its insurance is mandatory under I. BACKGROUND OF INSTITUTION porting their findings to the board. federal statutes, the FDICs revenues are United Savings of Texas (‘‘USAT’’) was This report is not a lawyer’s opinion letter; undistinguishable from ordinary taxes. In closed on Friday, December 30, 1988, upon the it is an ordinary internal operating docu- court it maintained that it was separate determination by the Federal Home Loan ment. The subject of the report is claims and from the congressional appropriations proc- Bank Board that the institution was insol- regulatory action, litigation and probable re- ess, except for some tens of billions of dollars vent and had engaged in unsafe and unsound covery, but that does not make it advice of it used to pay its insurance losses in the lending practices. The institution failed as a counsel. Because the FDIC was not very good eighties. result of excessive growth, substandard un- at its underwriting-review or supervisory-as- 8. Manipulation of the Legal Process. derwriting practices and internal controls; sistance functions, it is now in the liquida- poor investment strategies and portfolio tion business. Everything about a failed The report furthers a misrepresentation to management regarding the mortgage-backed bank is about claims; the FDIC’s stock in the court. The FDIC has represented to the securities portfolio; the failure of USAT’s trade is debits and credits of uncertain value court that the Office of Thrift Supervision is holding company, United Financial Group, in a litigious society. proceeding entirely separately from this Inc., to maintain sufficient minimum regu- A client that obtains its advice in a mixed case. The FDIC never disclosed that it had latory capital in USAT; and the severe eco- form—twisting the roles—must be able to actually hired the OTS to front for it in at- nomic slump in the Houston/Galveston area. disentangle the two strands clearly and reli- tacking Hurwitz administratively. In November of 1996 the FDIC was telling USAT was a state chartered, federally in- ably, or it loses its privilege as it would with this court that the proceedings were entirely sured savings association located in Hous- any confusion or accession. The legal anal- separate, even to the point of trying not to ton, Texas. The association was a wholly ysis in the report was commingled with ev- admit that the director of the OTS sits on owned subsidiary of a savings and loan hold- erything from malicious gossip to historic the FDIC’s board. In August, the FDIC’s ing company called United Financial Group, data. chairman had reported to a congressman: Inc. (‘‘UFGI’’). UFGI’s principal shareholders 6. Exclusions. ‘‘We are coordinating the investigation and were corporations controlled by Charles In disclosing the part of the report that it our claims against Mr. Hurwitz with the Of- Hurwitz, who has a national reputation as a knew was not privileged, the FDIC excised fice of Thrift Supervision.’’ ‘‘corporate raider.’’ UFGI and USAT were the parts that it concluded were privileged Not disclosing the report at this juncture managed by virtually the same core group of as an attorney’s advice to his client. Having would be allowing the FDIC to attempt fraud individuals. read the whole document, the nature of the and, when it fails, to hide behind a privilege From 1983–1986, as the oil industry declined excisions demonstrates the agency’s bad earned by responsible conduct. and the value of real estate in the Houston faith. The FDIC asked this court to have another market slipped, USAT changed its income The agency cut a personal description of judge examine the report so that it would strategy from traditional real estate based Hurwitz as a ‘‘corporate raider.’’ not prejudice this court in the progress of lending to high profile investments in real The agency cut an admission that the this action. For eight years the FDIC has estate and different types of securities and FDIC had already paid $4 million to its out- been ‘‘studying’’ this complex transaction, venture capital projects. In addition, USAT side counsel and expects to pay another $6 and it would like a judge not familiar with it attempted to diversify its real estate port- million. at all to examine the report. That is a trans- folio into other areas of Texas (for example, The agency cut the admission that the sav- parent dodge. Will the contents of the FDIC San Antonio, Austin and Fort Worth). ings and loan was hopelessly insolvent when report bias the court? A conclusion reached At October 31, 1988, USAT reported nega- it was sold by the FDIC to Hurwitz’s com- on an impartial consideration of the facts is tive capital of $272,791,000. At September 30, pany. not prejudice. The FDIC—no less than other 1988, USAT reported assets of $4,646,240,000, The agency cut the OTS’s involvement in litigants—does not get the option to mis- and total liabilities of $4,849,373,000. An ini- discussions about ‘‘pursuing these claims.’’ behave until caught and then ask for a clean tial review indicates that since June 30, 1987, The agency cut the regulatory background slate elsewhere. A Freudian would say that there had been a market loss in the MBS and general history. the FDIC is projecting in its concern about portfolio of $213,000,000. In addition, the esti- The agency cut the discussion of the whol- tainted process. mated commercial real estate loan losses ex- ly unrelated matters about Maxxam’s indi- 9. The Board Resolves. ceeded $500,000,000. Demand was made by the rect holding of Pacific Coast redwood forests. supervisory agent upon UFGI to honor its After the report was presented to the board The agency cut the discussion of Hurwitz’s agreement to maintain the regulatory net of directors of the FDIC, the board adopted control of companies. These things have no worth of USAT; however, no new capital in- the report as its resolution. The board reso- relation to the legitimate categories of at- fusion was made. lution served to authorize this lawsuit. The torney-client confidences. There are some board could have authorized legal action Ownership of USAT exclusions that were estimates of success against Hurwitz by a separately written res- On the date it was closed, USAT was sole- and descriptions of defects in the claim, but olution; and that resolution would have ly-owned by UFGI. According to the UFGI the bulk of the exclusions were simply a lack needed to contain no attorney’s advice, but stock records, dated September 9, 1988, UFGI of candor. the board chose the expedient of adopting as was owned by: (1) Cede & Co. (42.3%); (2) 7. Estoppel & Unitary Government its resolution the whole text of the report, Hurwitz-controlled entities (23.29%); and (3) The FDIC says that it is fully independent making it a formal statement of public pol- Drexel (9.7%). The Hurwitz-controlled enti- from the rest of the government. It makes icy. ties consisted of Federated Development this argument to avoid the complaint from While the board may not have intended Company (‘‘Federated’’), MCO Holdings Hurwitz that he is being attacked by the that Hurwitz or the public know of its deci- (‘‘MCO’’) and Maxxam Group, Inc.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00089 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.219 pfrm07 PsN: E20PT1 E2428 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 (‘‘Maxxam’’). These three organizations, as By Bank Board Resolution 83–252, dated United, its subsidiaries, and its parent, well as Pacific Lumber, KaiserTech and April 29, 1983, approval was given to merge UFGI, were apparently run by a small core many others, comprised Hurwitz’s domain. First American Financial of Texas into group of individuals who participated in all The following are brief descriptions of the UFGI and merge their subsidiary savings as- activities. For example, it appears that the primary businesses. sociations into USAT. This approval was senior commercial loan staff was not in- MCO held a controlling interest of approxi- conditioned on UFGI stipulating to maintain cluded in the overall planning or direction of mately 45.7% of the outstanding voting stock the regulatory net worth of USAT. United. Once policy was made, the staff of Maxxam, according to its 10–K filing for Sale of Branches to Independent American merely presented for approval applications the year ended December 31, 1987. Maxxam In 1984, USAT sold several branches to that they felt had merit to the senior loan owned approximately 13.5% of the out- Independent American Savings. When Inde- committee and ultimately the board of di- standing Common Stock and approximately pendent American purchased the branches, it rectors. Senior lending employees did not ap- 93.5% of the outstanding Series D Convert- assumed liabilities of $1 billion in deposits. pear to have any real insight as to the over- ible Preferred Stock of UFGI. On March 21, In order for Independent American to do so, all direction of United or its serious finan- 1988, MCO stockholders approved the merger USAT issued cash flow bonds in five series, cial condition. However, the core group, in- of MCO with Maxxam. Maxxam is involved in labeled A–E, with coupon rates at 10%. Since cluding Berner, Gross, Crow and Hurwitz, forest products operations, real estate man- the market price was at a yield of 15%, the had knowledge of United’s serious financial agement and development, and aluminum spread between the two was a ‘‘paper gain’’ difficulties but continued to approve large products. in fair market value. Although the gain was commercial transactions in an attempt to Federated, a New York business trust, in paper, it had time value. The total ‘‘paper generate new income form riskier loans. owned approximately 9.8% of the out- gain’’ was $90 million. The bonds were United was in a relatively strong financial standing shares of UFGI. It is solely-owned collateralized by mortgages. As mortgages condition at the end of 1984. Total assets of by Hurwitz and certain members of his im- under the bond paid down, the proceeds of the association were $3.9 billion, most of mediate family and trusts for the benefit the collateral were paid to the bond. which consisted of single family residential thereof. Federated owned approximately Following the branch sale to Independent home loans and a portfolio of construction 28.2% of MCO’s Common Stock and 91.3% of American and the booking of the paper gain, and consumer loans of approximately $450 its Class A Preferred Stock. a $32 million dividend payment was made to million. Liabilities consisted of branch de- Acquisition of UFGI by Hurwitz and Creation of UFGI. The regulators approved a dividend posits of $2.3 billion and reverse repos of $59 USAT for a certain percent of the amount, if the in- million. Investment activities were confined USAT was chartered in 1937 as the Mutual stitution was profitable. The dividend was to treasuries and a small mortgage-backed Building and Loan Association, Fort Worth, maintained in an USAT certificate of de- securities (‘‘MBS’’) portfolio. At the time, in Texas. In 1946, it became the Mutual Savings posit. part because of real estate losses, emphasis and Loan Association. The association was Change in Real Estate Investment Strategy and shifted from real estate loans to securities acquired in 1970 by Southwestern Group Fi- Start-Up of Securities Trading Activity investments. The various securities activi- nancial, Inc., a wholly-owned subsidiary of It is apparent that United changed direc- ties included equity arbitrage, high-yield se- Kaneb Services, Inc. In 1978, five savings and tions in 1982 after it was acquired through a curities (‘‘junk bonds’’) and MBS. Each of loan subsidiaries of Southwestern Financial purchase of its holding company, UFGI, by the portfolios is discussed in more detail in Group, Inc. merged to form United Savings Charles Hurwitz and his related corpora- the following discussion. Association of Texas. In 1981, Southwestern tions. Prior to that time, United was a tradi- High Yield Securities Financial Group, Inc. changed its name to tional savings association making residen- Since its inception in 1985, the high yield United Financial Group, Inc. That same tial and commercial real estate loans, pri- securities area had four portfolio managers. year, Kaneb spun off UFGI by distributing marily in the Houston market. In an at- Originally the portfolio was managed by Joe its shares to the holders of its common tempt to remedy the problems caused by the Phillips and Ron Huebsch. Subsequently, the stock. Texas real estate depression and cope with program was managed by Terry Dorsey, then Hurwitz began his acquisition in 1982, as the pressures of deregulation and interest Eugene Stodart. Junk bonds were executed reflected by the Joint Proxy Statement and rate fluctuation, the association changed its in United’s account(s), with a small portfolio Prospectus, dated March 24, 1983. Federated lending policies and began investing in secu- of warrants held by United Financial Cor- Reinsurance Corporation, an insurance com- rities. In hindsight, it appears that United’s pany licensed under the laws of the State of poration (‘‘UFC’’). Commercial bonds are staff was not equipped for a transition from New York, and Federated Development Com- debt instruments and were carried as com- the lending activity of a traditional savings pany, a New York business trust, filed a joint mercial loans. Therefore, USAT could invest and loan under a regulated industry to a de- 13–D statement reporting ownership of more directly in junk bonds, but equity securities regulated industry, utilizing high profile than 5% of the outstanding shares of UFGI had to be held by its subsidiary, UFC. The commercial lending and securities invest- Common. On February 18, 1982, PennCorp portfolio was generally limited by policy to ments. (the previous parent of First American Fi- 11% of the total assets of United, 10% of David Graham and Gem Childress are ex- which were included in the commercial loan nancial of Texas) distributed 2.4 million amples of this situation. Both were highly shares of First American Common to its section. The portfolio was not hedged with respected by the United staff and the thrift options because 70%–75% were fixed assets. stockholders, in accordance with a special industry and had extensive experience in dividend. The remaining 20%, 603,448 shares, The USAT liquidity investments, which gen- commercial real estate lending. Each held erally consisted of government securities, was deposited by PennCorp in trust, in con- the position of executive vice-president in nection with a 10-year warrant to purchase were also handled by Stodart. charge of real estate lending at the time of Our review has indicated that the junk the common stock of PennCorp issued to their departure in July, 1987. A new lending Great American Insurance Company. The bond department carried a modest net profit policy was created in 1983 directed toward on the securities it traded. Because USAT Merger Agreement and the Modification high profile, glamorous commercial loan Agreement between the parties were exe- booked the bonds at cost, the actual value of transactions, together with sophisticated se- the bonds, which would vary from day to cuted on August 27, 1982. 13–D amendments curities investments. Some of the individ- filed by Federated, on December 10, 1982, day, was not reflected. The estimated unreal- uals who fit this high profile image were ized losses for 1987 were $47.9 million. Our state that it held approximately 53.8% of the Jenard Gross, Mel Blum and Stanley Rosen- MCO Holdings, Inc. total voting power. Fed- focus has been on the trading strategies, the berg. Employees like David Graham and Gem theft of corporate opportunities, and the pos- erated, MCO and ‘‘certain others’’ filed a 13– Childress who were oriented toward tradi- D amendment to increase their UFGI owner- sibility of insider trading and stock manipu- tional saving and loan real estate lending lation. ship to 19.25%. Approximately one week were eventually terminated. later, MCO and American Financial Corpora- While Jenard Gross was considered a part Equity Arbitrage tion executed a purchase and sale agreement of the high profile group, his knowledge of The equity arbitrage area was managed which set forth the purchase by MCO of commercial real estate and his reputation from inception in 1985 through January 6, 603,448 shares of First American from Amer- with United staff was very high. He was a 1989 by Ron Huebsch. The trading strategy ican Financial Corporation. The Merger real estate developer, but appeared to be well involved the purchase of stock in a corpora- Agreement and the Modification Agreement respected by all who came in contact with tion which was undergoing a merger, acquisi- were amended on January 10, 1983. him. tion, or tender offer. Profit or loss was based From November 23, 1982, until March 4, The high profile direction apparently led on the market movement or sale of the secu- 1983, MCO Holdings acquired 60,200 shares of United into lending or investment relation- rities. The portfolio consisted of 95%–97% First American Common on the open mar- ships with which it was unfamiliar and not cash and 3%–5% preferred securities, deben- ket. At the same time, American Financial qualified internally to deal with. This is true tures or debt securities. Our review has Corporation owned 20.18% of First American in regard to loans or investments outside the shown that equity arbitrage activities were Common. Ten days later, according to an Houston market. For example, United’s staff profitable for 1985 and 1986, 2.5% and 5.7% re- agreement of purchase and sale dated De- relied on contacts such as Stanley Rosen- spectively. Although equities profited in cember 27, 1982, MCO Holdings purchased berg, apparently a close friend of Charles 1987, the ‘‘market crash’’ in October resulted 603,448 shares of First American from Amer- Hurwitz, for development loans in San Anto- in a $75 million loss over a two day period. ican Financial Corporation. nio, Texas. Because of the profit prior to October, the

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00090 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.221 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2429 overall net profit or loss for the year was investigation. The preliminary conclusion various individuals in connection with that even. While the equity trading was profit- from the initial investigation as to officers’, investigation. In addition, we reviewed cer- able, our reconstruction of equity trans- directors’, and other professionals’ liability tain portions of PM&M’s work papers for actions in 1987 show an additional $26.5 mil- was that there did not appear to be any in- their audits of United Savings’ financial lion in unrealized losses. tentional fraud, gross negligence, or patterns statements for the periods December 31, 1983 Mortgage-Backed Securities of self-dealing. The most serious criticism of through December 31, 1986, as well as se- the officers and directors, in general, was lected audit plans of PM&M for those years. Aside from the small portfolio previously that they exercised poor business judgment We also obtained and reviewed an investiga- held, MBS activity was initiated approxi- and were negligent in the management of the tive report conducted by the trustee for mately in early 1985 by United. UMBS was institution. Couch Mortgage Company; and, to a lesser formed in 1987. The MBS portfolio had three After mid-1989, several investigations have extent, we reviewed certain work papers of managers since inception. Joe Phillips man- done forward on a case-by-case basis, and in the national accounting firm of Ernest & aged the portfolio originally and was re- some instances, litigation was initiated. The Whinney (‘‘E&W’’), the independent auditors placed by Sandra Laurenson around October separately-handled matters, which will not for Couch Mortgage Company. The results of 1986. Laurenson resigned prior to February be addressed in detail in his report, include: our investigation of the auditors are con- 1988 and was replaced by Dominic Bruno who the Chapel Creek Ranch litigation, on the in- tained in a report submitted to the FDIC on resigned in January 1989. vestigation of auditors and attorneys arising September 20, 1991. Our review to date indicates that two basic out of the Couch Mortgage transactions, liti- FDIC Drexel Task Force MBS phases occurred. The initial program gation relating to the executive employee was initiated in 1985. United purchased MBS bonus plans, the dispute regarding UFGI’s In the fall of 1989, we noted a pattern of ac- for use assets and borrowed the funds from obligation to maintain the regulatory net tivity in the investment area of USAT. This various broker/dealers (reverse repos) to fi- worth of USAT, and the inter-company re- pattern involved the potential use of USAT nance the securities using the same securi- ceivable due to USAT by UFGI on account of by Hurwitz and Milken/Drexel as part of a ties as collateral. The spread between the a tax refund. network. On December 19, 1989, we wrote to MBS and the reverse repos was approxi- The following is a summary of the work Thomas Loughran at Finkelstein, Thompson mately 200 basis points. The maturity of the done by H&G and BS&S in conducting the and Lewis and Marta Berkley regarding this short-term financing was extended through professional liability investigtin of USAT. matter. At that time, we provided Loughran interest rate swaps and ‘‘dollar rolls.’’ When In the initial investigation, we completed with various initial organizational docu- interest rates fell, the securities with higher the review of offices and the control of files ments including: (1) Pacific Lumber initial coupon rates were sold which resulted in a and documents of the association. In addi- debt securities purchasers; (2) high-yield se- profit. However, when the money realized tion, an initial review of criticized loan and curities portfolio review of unrealized losses from the sale of those securities was rein- investment transactions was completed. We as of September 19, 1988; (3) directors and of- vested, the new securities yielded a lower reviewed all relevant exam reports and su- ficers timeline; and (4) USAT chronology. rate while the cost of funds remained fixed. pervising or correspondence, including the In September, 1990, we were contacted by Thus, the spread was reduced or eliminated examination dated January 19, 1989 from the the FDIC Drexel Task Force regarding the dramatically. Regular accounting did not re- 10th District Examiners. We analyzed all securities activity at USAT. Our initial quire an adjustment of value of the securi- board, executive, loan, and investment com- meeting was with Frank Sulger, Gari Powder ties to market and the securities were car- mittee minutes. To the extent that other and Bill Carpenter of Thacher, Proffitt and ried on the books at cost. Therefore, unreal- committees were pertinent, those minutes Wood, Gary Maxwell of Kenneth Leventhal ized losses existed as the value of the securi- were reviewed. We interviewed all officers of and Company, and Jamey Basham of the ties fell. The unrealized loss at that time, the association down to the senior vice presi- FDIC. During the meeting we discussed the based on the market value of the MBS port- dent level and two of the directors. Because possible ponzi scheme, the daisy chain net- folio and hedges, was in excess of $200 mil- of the potential litigation with UFGI, other work, and the ‘‘grand conspiracy’’ pertaining lion. directors have not consented to an interview. to the use of financial institutions by the In early 1987, the second phase of trading We also interviewed the supervisory agent, corporate raiders. We also supplied the Task began, which was called risk control arbi- examiners, internal auditors and a variety of Force with the following: (1) expanded se- trage (‘‘RCA’’). RCA is a growth, leveraging other United Savings employees. In addition, lected names mention list; (2) Drexel strategy which consists of purchasing MBS we met with the former attorneys for the as- Burnham Lambert deal manager products and its derivatives financed by short-tern li- sociation. These firms, Mayor, Day & charts; (3) 1986 and 1987 securities portfolio abilities, unusually reverse repos or dollar Caldwell, and Schlanger, Cook, Cohn, Mills & reconstruction charts and the related securi- rolls. Since an interest rate risk exits be- Grossberg, were generally cooperative in all ties portfolio listings for 1986–1988; (4) pos- tween the long-term MBS and the short-term matters. sible quid pro quo analysis of Pacific Lumber financing, hedges in financial futures, finan- We inventoried over 400 lawsuits filed note purchasers; (5) high-yield securities cial options, interest rate swaps, caps, col- against United Savings and intervened on be- portfolio review of unrealized losses as of lars and repos are utilized. half of the FSLIC in lawsuits where appro- September 19, 1988; (6) high-yield securities When interest rates declined in the initial priate. Where actions were not filed in fed- purchase recommendation review; (7) inter- phase described above, the association real- eral court, we removed those cases. In each view recaps for Russell McCann, Eugene R. ized a profit on the assets over the cost of case, we prepared motions to dismiss and for Stodart and Mary Mims; (8) materials re- short-term funding. However, when interest summary judgment and have now achieved garding Transcontinental Services Group/ rates increased, the association did not real- dismissal in almost all those cases. We also TSG Holdings, Inc.; and (9) a memorandum ize the losses. In addition, the risk of the reviewed the allegations in the various law- regarding the credits chosen for sale in the lower coupon rate MBSs was not adequately suits to determine if any issues were raised autumn sales program. Subsequent to the hedged. Without discussing in detail each of that would reflect on professional liability. meeting, the following items were given to the securities and financing types and how We did not discover any issues that appeared Jamey Basham: UFGI ownership interests each related to the portfolio, the total unre- to have substantial factual support. breakdown and chart, directories of USAT alized loss at year-end for 1988 was in excess The association had a fidelity bond policy files, and a list of files removed from USAT of $300 million. issued by Victoria Insurance Company (‘‘Vic- by Berner. toria’’). However, the association did not In October, 1990, we were contacted by II. DESCRIPTION OF INVESTIGATION have an errors and omissions policy at the Cravath, Swaine and Moore. We discussed A. Scope of Investigation time of closing. As we have previously ad- with Julie North and Veronica Lewis the The investigation of USAT began on De- vised, the fidelity bond was subject to an in- same issues discussed in our earlier meeting cember 31, 1988 with Hutcheson & Grundy demnity agreement between the association in September. At this time, we provided pho- (‘‘H&G’’) and Brill, Sinex & Stephenson and Victoria secured by a letter of credit at tocopies of the exhibits to the USAT ‘‘S’’ (‘‘BS&S’’) acting as joint fee counsel on be- the Federal Home Loan Bank—Dallas. Thus, memorandum. We also sent Cravath photo- half of FSLIC. Brill, Sinex & Stephnson con- no third party coverage existed and we rec- copies of the original documents produced to ducted the investigation arising out of com- ommended the execution of a mutual release the Task Force in September. Additional mercial loan transactions, joint ventures and with Victoria. This release has been executed documents provided to the Task Force in- professional liability such as attorneys, ac- by the FSLIC and Victoria and the letter of clude: Art Berner biography; a memorandum countants and appraisers. H&G investigated credit at the Federal Home Loan Bank—Dal- to Connell and Crow regarding the reasons directors and officers liability issues arising las securing the indemnity agreement has for certain credits chosen for the autumn out of securities transactions, including expired. sales program; interview recaps for all of the mortgage-backed securities and junk bond We have investigated the outside auditor officers/directors interviewed; Charles acquisitions by USAT. for United Savings, the national accounting Hurwitz and related entities flow chart; re- The bulk of the investigation performed by firm of Peat, Marwick & Main (‘‘PM&M’’). view of certain UFGI shareholders; UFGI H&G and BS&S was conducted in the first PM&M, formerly known as Peat, Marwick & ownership interests; joint proxy statement— half of 1989. Thirty, sixty and ninety-day Mitchell, had audited United Savings’ finan- UFGI and First American Financial of snapshot reports were issued by H&G and cial statements from December 31, 1981 Texas, Inc.; UFGI proxy statement excerpts, BS&S updating FSLIC on the status of the through December 31, 1987. We interviewed dated March 31, 1987; MCO Holdings, Inc. 1986

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00091 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.223 pfrm07 PsN: E20PT1 E2430 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 10–K excerpts; chronology of UFGI—First regated time lines for United MBS Corpora- under the Texas Savings and Loan Act, Arti- American merger; several newspaper arti- tion, United Capital Management Corpora- cle 852a of the Texas Revised Civil Statutes, cles; interview recaps pertaining to the Jan- tion, United Financial Group Inc., United Fi- to limit the liability of directors. That stat- uary 12, 1989, interview of Brenda Bese, Mi- nancial Corporation and USAT; and memo- ute, Tex. Rev. Civ. Stat. Ann. art. 1302–7.06B chael Cline and Diane Buckshnis (FHLB–Se- randa, dated January 24, 1989 and March 7, (Vernon Supp. 1991), provides: attle); Leonard Lepedis report; consent 1989, from Ami Hohmann regarding utiliza- ‘‘The articles of incorporation of a corpora- agreement, dated November 7, 1988; tion of the time lines (sent to Gene Golman). tion may provide that a director of the cor- Caywood-Christian document evidencing the We have also been contacted by Sandra poration shall not be liable, or shall be liable establishment of a managed account; high- Northern at the FDIC in Washington who re- only to the extent provided in the articles of yield and MBS speed call lists; consultant quested and received copies of the following incorporation, to the corporation or its records pertaining to Walter Muller; MCO documents: UFGI ownership interests, shareholders or members for monetary dam- Holdings, Inc. and Maxxam Group, Inc. ex- Hurwitz-related entities flow-chart, Hurwitz ages for an act or omission in the director’s cerpts dated February 12, 1987; Drexel owner- asset search report, and excerpts from the capacity as a director, except that this arti- ship interests information; minutes of the Columbia Savings and Loan Complaint, cle does not authorize the elimination or meetings of the board of directors of USAT dated December 12, 1990, evidencing allega- limitation of the liability of a director to the for June 29, 1983, January 25, 1984, August 29, tions relating to Hurwitz and USAT. extent the director is found liable for: ‘‘(1) a breach of the director’s duty of loy- 1984, May 16, 1985, August 15, 1985 and Feb- B. Completion of the Investigation ruary 19, 1987; Securities Market Oversight alty to the corporation or its shareholders or In April 1991, the FDIC attorney-in-charge and Drexel Burnham hearings before The members; of the professional liability investigation, ‘‘(2) an act or omission not in good faith Subcommittee on Oversight and Investiga- Robert J. DeHenzel, Jr. requested that we that constitutes a breach of duty of the di- tions of the Committee on Energy and Com- complete the investigation and provide a rector to the corporation or an act or omis- merce, House of Representatives, April 27–28, written report and litigation recommenda- sion that involves intentional misconduct or 1988; summary of minutes of the meetings of tions. In completing the investigation, we a knowing violation of the law; the executive committee of UFGI 1987–1988; conducted several more interviews, including ‘‘(3) a transaction from which the director summary of minutes of the meetings of the the former Vice-President and General Coun- received an improper benefit, whether or not executive committee of the board of direc- sel of USAT and UFGI, Arthur Berner. We the benefit resulted from an action taken tors of USAT 1984–1988; summary of the min- also completed the analysis of the commer- within the scope of the director’s office; or utes of the meetings of the board of directors cial loan and joint venture transactions, ‘‘(4) and act or omission for which the li- of UFC 1983–1988; summary of the meetings most notably by obtaining title company ability of a director is expressly provided by of the board of directors of USAT 1983–1987; documents on the Park 410 loan transaction. an applicable statute.’’ summary of the minutes of the meetings of We then reviewed, analyzed and coordinated In February, 1988, USAT, a Texas chartered the board of directors of UFGI 1985–1987; Cor- all data obtained from the earlier investiga- savings and loan, amended its Articles of As- porate Takeovers, hearings before The Sub- tion to the present. Finally, H&G and BS&S sociation to track the statute in large part committee on Oversight and Investigations attorneys met to coordinate the results of and provide that: of The Committee on Energy and Commerce, ‘‘No director of this Association shall be their respective portions of the investigation House of Representatives, October 5, 1987; liable to the Association or its shareholders and to reach a consensus on conclusions and Maxxam’s answers to questions raised by or members for monetary damages for an act recommendations. The Subcommittee on Oversight and Inves- or omission in such director’s capacity as a tigations, appendix A; documents entered III. director except for the acts or omissions set into the record by The Subcommittee on A. Applicable Standards CLAIMS AGAINST forth below: Oversight and Investigations, appendix B; OFFICERS AND DIRECTORS ‘‘1. A breach of the director’s duty of loy- and possible quid pro quo and Drexel/Milken The standards applicable to the directors alty to the Association or its shareholders or connection analysis chart. of USAT require a showing of gross neg- members; FDIC Directors and Officers Investigation Unit- ligence or worse, a breach of fiduciary duty, ‘‘2. An act or omission not in good faith or Dallas violation of statutory duty, or the receipt of that involves intentional misconduct or a an unlawful benefit. The officers are held to knowing violation of the law; In May, 1990, we provided Floyd Robinson a ‘‘3. A transaction from which the director the ordinary corporate duty of care and loy- set of the original organizational charts per- received an improper benefit, whether or not alty. Section 212(k) of FIRREA (18 U.S.C. taining to the securities transactions at the benefit resulted from an action taken 1821(k)) provides that a director or officer of USAT. These documents included: selected within the scope of the director’s office; names mentioned list; materials involving an institution may be held personally liable ‘‘4. An act or omission for which the liabil- Transcontinental Services Group; possible for damages for ‘‘gross negligence, including ity of the director is expressly provided for quid pro quo analysis of Pacific Lumber note any similar conduct or conduct that dem- by statute; or purchasers; high-yield securities portfolio re- onstrates a greater disregard of a duty of ‘‘5. An act related to an unlawful stock re- view of unrealized losses as of September 19, care (than gross negligence), including inten- purchase or payment of a dividend. 1988; USAT and related entities securities tional tortuous conduct, as such terms are ‘‘If the Texas Miscellaneous Corporation transactions reconstructions; and Drexel defined and determined under applicable Laws Act or other applicable law (herein col- deal-manager products charts. State law. Nothing in this paragraph shall lectively referred to as the ‘‘Act’’), herein- In October, 1990, we were contacted by impair or affect any right of the Corporation after is amended to authorize the further Richard Boehme regarding the USAT D&O under other applicable law.’’ elimination or limitation of the liability of investigation being conducted at the FDIC in Under FIRREA, therefore, an officer or di- directors, then the liability of a director of Dallas. We produced to Mr. Boehme the same rector is liable for those standards imposed the Association, in addition to the limita- documents which were originally produced by the common law of the applicable juris- tion on personal liability provided herein, to the Drexel task force. In addition, we sent diction, or in the absence of a higher stand- shall be limited to the fullest extent per- the asset review reports, USAT snapshot in- ard, gross negligence or worse conduct as de- mitted by the Act as so amended. No amend- vestigation reports dated January 31, 1989, fined by state law. The Supreme Court of ment to or repeal of this Article EIGHTH March 17, 1989, and April 10, 1989, and cor- Texas defines gross negligence as ‘‘that en- shall apply to or have any effect on the li- respondence, dated September 19, 1989, to tire want of care which would raise the belief ability or alleged liability of any director of Thomas J. Loughran. that the act or omission complained of was the Association for or with respect to any The following documents have also been the result of a conscious indifference to the acts or omissions of such director occurring sent to the investigative unit at the FDIC: right or welfare of the person or persons to prior to such amendment or repeal.’’ possible quid pro quo and Drexel/Milken con- be affected by it.’’ Williams v. Steves Indus- We found no Texas case law addressing the nection analysis chart (sent to Richard tries, Inc., 699 S.W.2d 570, 572 (Tex. 1985), applicability of this statutory liability limi- Boehme); inventories of the original and quoting, Burk Royalty Co. v. Walls, 616 tation provision. However, the utilization of photocopied corporate USAT documents lo- S.W.2d 911 920 (Tex. 1981). the court went on the statute by directors who may be the tar- cated in our office and in off-site storage to say that gets of claims is clearly contemplated by the (sent to Bruce Dorsey); a revised expanded ‘‘[The] plaintiff may prove a defendant’s statute. In its original enactment, the 1987 selected names mentioned list (sent to Mike gross negligence by proving that the defend- statute stated that the limitation did not Wysocki); USAT snapshot investigation re- ant had actual subjective knowledge that his apply to acts or omissions occurring before ports dated January 31, 1989, and March 17, conduct created an extreme degree of risk. In the effective date of the Act. Accordingly, it 1989, correspondence, dated December 19, addition, a plaintiff may objectively prove a could be argued that the liability of the di- 1989, to Thomas Loughran, correspondence, defendant’s gross negligence by proving that rectors of USAT is not limited as to acts oc- dated December 19, 1989, to Marta Berkley, under the surrounding circumstances a rea- curring either before the effective date of the correspondence and report on potential audi- sonable person would have realized that his statute (August 31, 1987), or even before the tor’s claim arising out of the USAT receiver- conduct created an extreme degree of risk to date that USAT amended its Articles to in- ship, dated July 11, 1989, prepared by Brill, the safety of others.’’ Id. at 573. corporate the limitations (February 1988). Sinex and Hohmann, ‘‘S’’ memorandum rec- Effective August 31, 1987, Texas adopted a The standards applicable to officers con- ommendation, USAT/UFGI time line, seg- statute allowing an institution organized tinue to include good faith and prudence in

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00092 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.225 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2431 the performance of their duties which must ment of certain officers and key personnel by ments and the investment department, and be carried out with ordinary care and dili- USAT and UFGI or Hurwitz controlled enti- failed to hire and maintain employees with gence, First State Bank v. Metropolitan Cas- ties; requisite experience and knowledge to han- ualty Ins. Co., 79 S.W.2d 835, 839 (Tex. 1935), 6. the lack of control or supervision of the dle the complex and risky investments un- and which may not be delegated to strang- equity arbitrage transactions completed by dertaken by the institution. These failures ers. Brand v. Fernandez, 91 S.W.2d 932, 939 Ron Huebsch for the USAT subsidiary, are evidenced by: (Tex. Civ. App.—San Antonio 1935, writ United Financial Corporation, and for 1. The gains trading or profit taking activ- dism’d). Maxxam and other Hurwitz controlled enti- ity conducted without regard to ultimate ef- In summary, while officers are held to an ties; fect on investment portfolio; ordinary standard of reasonable care, it 7. the fact that the Investment Committee 2. Post execution approval of transactions could be argued that a claim against a direc- minutes were created after the fact and were and approval without sufficient information tor must allege at least gross negligence or not an accurate reflection of the delibera- as to beneficial owners or control persons; breach of fiduciary duty (duty of loyalty), tions or actions of that Committee; 3. Lack of control or supervision of trading self-dealing (receipt of improper benefit), or 8. the fact that the Investment Committee in equity arbitrage area, including daily re- violation of a statutory duty. was a joint USAT and UFGI committee; moval of files; The defenses commonly raised in actions 9. the Transcontinental Services Group 4. High turnover of employees in each secu- against directors and officers are application transaction. rities area; of the business judgment rule, reliance on To the extent it is acknowledged at all, the 5. Employment of inappropriate people counsel or consultants or management, lack officers and directors justify their willing- without thrift experience, such as Sandra of causation, contributory negligence, or ness to consult with Hurwitz on the basis of Laurenson, a trader from Solomon Brothers, failure to mitigate. The business judgment Hurwitz’s expertise in the securities area and to manage an investment portfolio; rule, a common-law principle recognized in his status as the ultimate controlling share- 6. Failure to investigate default rate on Texas, provides that an officer must dis- holder. While circumstantial evidence of this given bonds and adequately reserve for charge his duties with the care of an ordi- delegation is good, the testimony of the wit- losses; nary prudent man under similar cir- nesses will vary as to the extent of Hurwitz’s 7. Employment of advisors such as cumstances. Therefore, honest mistakes of influence. Given the actual or perceived ne- Caywood-Christian Capital Management, judgment are not actionable. cessity of turning from traditional invest- Walter Muller, and others; B. Securities Investment and Trading ments in real estate to the fast paced, more 8. Participating in risky mortgage backed The directors and senior officers of USAT complicated securities arena and the lack of securities or derivative transactions without were primarily people who understood the expertise on the part of the directors, the adequate capitalization or funding; savings and loan industry in Texas when it fact that Hurwitz, who was Chairman of the 9. Retaining poor investments because was based on the local real estate market. sole shareholder, was allowed to fill the gap sales would require disclosure of losses; After the collapse of the real estate market does not seem to pose an extreme degree of 10. Failure to recognize the effect on the and the refocus of the institution on the se- risk to the institution or its creditors. Nor market of the monopolies of Solomon Broth- curities markets, the directors and officers does the officers’ willingness to rely on ers in MBS and Drexel in junk bonds; were unprepared to meet the challenge of available expertise of a party they have 11. Investment by officers in companies in adequately directing and supervising invest- every reason to believe has no conflict with which USAT’s subsidiary, United Capital ments in the incredibly complex and sophis- the institution necessarily violate the pru- Ventures, also held interests. The proof indicates more than anything ticated securities available and marketed to dent man rule. Secondly, our review disclosed that the of- else that the directors and senior manage- the savings and loan industry. We focused ficers and directors approved transactions ment found themselves trying to keep the in- primarily on those senior officers and direc- designed to defeat or evade safety and sound- stitution afloat and play an entirety new tors who had ties to UFGI and Hurwitz, in- ness regulations. Our investigation disclosed ball game at the same time. While the profit cluding Gross, Berner, Crow, Heubsch and that the officers and directors of USAT au- taking strategy is well established, the di- Munitz. We also looked specifically for evi- thorized and directed a profit-taking strat- rectors’ motivation was maintenance of the dence of speculative trading, theft of cor- egy requiring significant speculative trad- institution in compliance with the capital- porate opportunity, insider trading, and ing, and allowed the accounting department ization requirements and not self gain or vio- stock manipulation. While we did find evi- to book the securities as investment ac- lation of their duty of loyalty. The business dence of speculative trading as outlined counts rather than trading accounts. Since judgment rule will be the primary defense to below, we found no direct evidence of insider the securities booked as investments were this cause of action. It will be difficult to trading, stock manipulation or theft of cor- carried at cost rather than market value, the show gross negligence on the part of the di- porate opportunity by the officers and direc- books of USAT failed to reflect the true rectors, and the efforts at control under- tors of USAT. We did find evidence that value of USAT’s assets. Perhaps more impor- taken by the officers may not be far from Charles Hurwitz may have used USAT in tantly, the officers and directors not only that which would have been undertaken by connection with insider trading or stock ma- authorized but demanded gains trading, i.e., reasonably prudent persons faced with the nipulation, and those findings have been the taking of profits in the portfolios and same volatile market. turned over to the appropriate task force in holding unrealized losses at cost, regardless Finally, we found some evidence of self Washington. Specifically, our review disclosed evidence of future income stream loss, to meet the dealing, or misappropriation of funds. Under of acts and omissions which could form the capital requirements at each quarter end. the Texas statute, the directors would be lia- basis of negligence, breach of fiduciary duty USAT’s outside auditors, Peat Marwick & ble only for transactions which resulted in or fraud claims, which are fully outlined in Mitchell raised concerns about the amount ‘‘improper benefits’’ to individual directors. the Interim Report on the Securities Investiga- of activity in the investment account, but Specific directors who benefitted from tion of United Savings Association of Texas eventually approved the USAT accounting questionable payments included Jenard dated April 29, 1991. First and foremost procedures. The officers and directors have Gross, Barry Munitz and Robert Kuhn. The among those possible claims is the apparent justified the trading activity on the basis of payments each have some ostensible purpose relinquishment of direction and control of the volatility of the market in which they and the totals for those payments we discov- the investment policy of USAT to Charles were investing. Investigation and recon- ered are small, amounting to approximately Hurwitz, evidenced by: struction of the trades indicate that as of $50,000. We do not feel this is a strong claim. 1. the statements of Mike Crow, Mike 1987, there were approximately $74.4 million There were also significant salary in- Canant, and Jeff Gray; in net unrealized losses in high-yield and eq- creases for officers between 1987 and 1988, as 2. the views of the financial world at the uity portfolios alone. Obviously, as of any well as unusually substantial bonus pack- time; particular date, there would be unrealized ages. These increases and bonuses have been 3. the fact that James Paulin, who estab- losses even in a properly managed invest- justified as necessary to retain the officers lished the investment department at USAT, ment portfolio carried at cost on the books. for the benefit of the institution and will be was not a USAT employee, but an employee Determination of actual damages will re- discussed later in this report. of Hurwitz controlled Federated, Inc.; quire the development of an economic model We also carefully reviewed the securities 4. the location of the securities trading by an economist to determine the proper in- transactions to determine if the relationship area as well as the offices of Mike Crow, Fi- vestment strategy had the institution not between USAT and Hurwitz and UFGI re- nancial Vice President, Bruce Williams and been taking profits to maintain capital re- sulted in the diversion of USAT opportuni- Jim Wolfe on the twenty-second floor of quirements. In view of the consultation and ties available to other Hurwitz entities. Al- MCO Plaza, the same floor which housed reliance on outside auditors, it will be hard though Heubsch traded equities for numer- Hurwitz, the corporate offices of Federated, to prove gross negligence or breach of duty ous Hurwitz entities and we believe Hurwitz Inc., and other Hurwitz controlled entities unless there was actual fraud and we have directed certain purchases to further his while other upper level management was lo- been unable to find such evidence. takeovers, we found no evidence of direct di- cated on the sixth floor of MCO and in Phoe- Third, the officers and directors failed to version of opportunities. Heubsch often nix Tower; establish and follow safe and sound invest- bought the same securities for several 5. the employment by USAT of Hurwitz ment policies, failed to properly institute Hurwitz companies and when there were dif- employees and associates, and dual employ- and monitor internal controls on invest- ferences, they were generally related to the

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00093 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.227 pfrm07 PsN: E20PT1 E2432 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 status of the other investments in the port- USAT. As such, Mr. Rosenberg should not United a 40% net profits interest. In Novem- folio. have received unearned fees or participated ber of 1988 United requested that FHLBB We found that several of the officers and in transactions in which he would have con- allow refinancing of the subject note since directors had invested in the same entities flicts of interest. cash-flow was below projected rates for Gate- as USAT’s venture capital arm, but there The Park 410 loan transaction had a num- way. The request was granted on December 8, was no evidence that the benefits would have ber of deficiencies. First the loan was ap- 1988, with the following terms: otherwise accrued to USAT. Our investiga- proved by the Senior Loan Committee of 1. Extension of note term to January 1, tion did not disclose a sufficient basis for a USAT even thought e appraisal did not sup- 1991; claim of theft of corporate opportunity. port the full $80 million loan amount. Sec- 2. Per annum interest under note to be We also reviewed the relationship between ond, the loan was secured by letters of cred- 10.5%; the traders and the securities industry to de- it. In addition, the letters of credit were re- 3. Effective December 1, 1988, through De- termine if there were payments, prizes or re- newable yearly but the note term was for cember 1, 1990, borrower pays only interest wards which could constitute commercial five years. Thus USAT ran the risk that the as it accrues; bribery, but the few items we found were in- letter of credit would not or could not be re- 4. Payment of monthly installment of ac- sufficient to support a claim. newed in the future. crued and unpaid interest in excess of 8.5% In summary, the best claims against the Third, Stanley Rosenberg received $400,000 per annum may be deferred until maturity; directors and officers involve their delega- directly from the USAT loan proceeds at and tion of their duty to manage and direct to closing as a fee for the ‘‘service’’ of securing 5. Borrower to provide operating state- Hurwitz, and the authorization of specula- the USAT loan. The fee was not disclosed in ments, rent rolls, year-end operating state- tive trading and accounting procedures the loan application made by the borrower’s ment and annual audited financial state- which did not reflect the true value of the in- agent, Gulf Management Resources, Inc. In ments. stitution. While it is extremely difficult to addition, the loan funds a quarterly man- We understand from USAT that there have evaluate these claims at this time, we be- agement fee ($75,000 per quarter for the first been no losses recognized on the Gateway lieve the likely percentage of success on li- three years of the loan, $50,000 per quarter in loan. ability issues is in the 40–60% range. the fourth year, and $37,500 per quarter in 3. Park 10. This loan, in the amount of $16,000,000.00 was made by way of a non-re- C. Compensation Arrangements the fifth year), payable to Gulf Management Resources, Inc., which in turn pays Stanley volving line of credit loan agreement dated We received the significant salary in- Rosenberg 25% of that fee, apparently for no December 17, 1986. The interest rate is Texas creases which the officers and directors pro- present or future services. All of these un- Commerce Bank’s prime rate plus 1.75% with vided to the officers as well as the substan- earned fees were paid to Mr. Rosenberg in interest payments to be made monthly. This tial bonus arrangements. These compensa- violation of 12 CFR § 4563.40, if Rosenberg is loan was primarily granted to provide funds tion arrangements are the subject of sepa- in fact an affiliated person. for the payment of interest of outside debts. rate lawsuits and are not addressed in this Fourth, disbursements made at closing The maker of the note was Park 10 Limited report except as evidence of other claims were not fully disclosed, as there was no rec- which is a Texas limited partnership. The which could be brought. onciliation of proceeds disbursed directly to general partner is Park 10 Corporation which D. Real Estate Transactions borrower and no discussion of disbursement is wholly owned by Neil C. Morgan. Morgan After investigating transactions which rep- to C.R. McClintock of funds paid directly to is also the limited partner of Park 10 Ltd. resent 85% of the value involved with sub- Alamo Savings Association by USAT. There Morgan executed a Continuing Limited standard loans, no clear trends have emerged was a very large sum of money which C.R. Guaranty which provides that he is person- to reveal any pattern of self-dealing with re- McClintock and/or Alamo Savings and Loan ally liable to a maximum of $3,000,000.00 spect to real estate lending and joint ven- made from selling the land to Park 410 West which is declining with each monthly inter- tures. Various federal regulations were given Joint Venture, which is difficult to tract. est repayment. As of this year, Morgan’s particular scrutiny; those regulations in- Also, the closing statement shows the guaranty has been exhausted. park 10 Ltd. clude: amount of $2,915 million was disbursed by was then placed in bankruptcy with a loan 12 U.S.C. § 84—Loans to a single borrower the title company to Park 410 West Joint balance due to USAT of in excess of $16 mil- in excess of 15% of capital; Venture, the borrower, for reimbursement of lion. However, it is our understanding from 12 U.S.C. § 375a—Limits on loans to execu- expenses, but it is unknown where these USAT that Morgan is making arrangements tive officers; funds then went. There are indications that to satisfy this debt. 12 U.S.C. § 375b—Prohibition on pref- Mr. Rosenberg may have gotten these funds Collateral on the loan is ‘‘Park 10 Develop- erential loans to directors of subsidiaries and since his own limited partnership agreement ment’’. The repayment of the loan is based holding companies. Limits on loans to execu- reflected that he had advanced $2.198 million solely on the sale of this collateral property. tive officers and shareholders of 10% or into the initial Park 410 Venture. The docu- There does not appear to be any evidence more; ments we reviewed at the title company and of payments which could be classified as 12 U.S.C. § 1828(j)—Prohibition on pref- Alamo Savings shed no further light on this fraudulent transfers, kickbacks, or forms of erential loans to officers and directors; situation. disguised compensation. The substandard 12 CFR § 563.9–3—Loans to one borrower; Finally, in addition to an extremely defi- classification of this loan was necessarily 12 CFR § 563.17—Safe and sound manage- cient file on the collateral and credit infor- based on the liberal structure of the loan, ment practices; mation on the loan, the appraisal prepared the declining limited personal guarantee of 12 CFR § 563.40—Prohibition on affiliated by Edward Schulz for USAT failed to provide the principal and the lack of a demonstrated person from receiving fees or other com- an appropriate analysis of values under the market for the collateral property as well as pensation with their procurement of a loan; three approaches, violating R41b(3). the uncertainty of the timing and source of 12 CFR § 563.41—Places restrictions on real The probability of success in respect to Mr. repayment. The the stock of Yellow Cab. The property transactions with affiliated person; Rosenberg being considered an affiliated per- transaction was apparently structured as a and son is good, but not necessarily without subordinated loan with warrants using a sec- 12 CFR § 571.7—Deals with conflicts of in- question. Mr. Rosenberg also has a large per- ond-tier subsidiary in order to allow USAT terests. sonal guaranty in respect to the Park 410 to avoid the equity risk investment and The following are summaries of our inves- transaction with USAT. A settlement pro- loans to affiliates rules contained in 12 tigations and recommendations: posal has been made by the borrowers to C.F.R. Sections 563.9–8 and 563.43. Yellow 1. Park 410. The transactions involving Mr. FDIC to work out the Park 410 loan. At this Cab, at its option, had the right to cause Stanley Rosenberg were strongly criticized time, it is not known how much the losses WMI to exercise its warrants in payment of by the FHLB examiners, particularly the will be on this loan, if any. the $2,200,000 loan. Park 410 transaction in San Antonio, Texas. 2. Gateway Joint Venture. This trans- The documentation does not support the Mr. Rosenberg is related to USAT because he action also involved Stanley Rosenberg but concept of a standard loan transaction. Yel- is a shareholder and director of MCO Hold- primarily as a Guarantor for the top 25% of low Cab did not have cash flow sufficient to ing, Inc. which owns the largest single share- this $920,000.00 obligation. The makers on the service the debt incurred in acquiring the holder interest (13.5%) in UFG, the parent note were E. John Justenia, Gordon A. Eagle stock, no payments are required or company of USAT. M. Rosenberg is a close Woods and Lee R. Sandoloski, Stanley even permitted on the $2,200,000 note prior to personal friend of Charles Hurwitz, who is Rosenberg’s son-in-law. 1990, and Yellow Cab has the option to cause also a shareholder and director of MCO Hold- The appraisal of the property which was WMI to convert the warrants to stock at ing, Inc. and a director of UFG. Mr. Rosen- the collateral used in this transaction ap- Yellow Cab’s option. berg can be considered an affiliated person pears to have been competently researched The interest rate on the $2,200,000 loan was for purposes of conflict of interests (12 CFR and prepared, although slightly optimistic. 15% per annum, and no due date is specified § 571.7), unearned transactions (12 CFR The structure of the loan provided for a on the note, despite a one-year term which is § 563.41). It is our preliminary opinion that rate 1.5% over prime with a 24 month term. specified in the Purchase Agreement. The Mr. Rosenberg would be an affiliated person United was granted a 15% net profits inter- stated purpose of the $2,200,000, according to who indirectly acting in concert with other est, and it was anticipated the loan would a memorandum in the file, was to allow WMI shareholders of UFG, the parent company of roll into a ‘‘mini-perm’’ with a five year ma- to make an equity investment in Equus USAT, controlled the election of directors of turity. The funding of the ‘‘mini-perm’’ gave Transportation, Inc., without violating the

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00094 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.230 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2433 equity risk investment and loans-to-affili- exchange for an assignment of units in the 10. The Market at Hunting Bayou. This ates rules. Equus was perceived as a can- condominium project and an assignment of a transaction involved two separate loans, ap- didate for an initial public offering of its $10 million promissory note payable to the proved in February 1985, one for $7,050,000, stock which would allow USAT the oppor- New Orleans Saints. Stanley Rosenberg was which was for the retail portion of the Mar- tunity to obtain a ‘‘significantly enhanced one of the guarantors of the $10 million note, ket at Hunting Bayou, and a $2 million loan return’’ on its investment. but we were unable to discover any other for an adjacent tract of land. Makers on the Almost from inception, Yellow Cab experi- connection Mr. Rosenberg had to the trans- note were Larry Schulgen and the Market at enced cash flow problems. In order to meet action. Hunting Bayou, Ltd. Guarantors were Larry additional cash flow requirements, WMI The $10 million promissory note was paid, Schulgen, Leo Womack, George Gilman and loaned Equus an additional $500,000, evi- however, USAT lost money on the sale of the Dan Sharp. The $7,050,000 loan was approved denced by a promissory note dated July 1987 condominium units. Concerns have been for the acquisition of 12.603 acres of land and and received warrants to purchase 400,000 ad- raised regarding the unusual method by to develop a shopping plaza. The $2 million ditional shares of Equus’ common or pre- which the units were marketed, involving a loan was approved for the acquisition of 13.41 ferred stock at a purchase price of $1.25 per sale and lease-back of the units by USAT. acres of land and 2.4973 acres of leasehold in- share. The interest rate on this $500,000 loan However, during the time period in which terest with the term of that lease being 99 was also 15% per annum, and again, no due the units were marketed, 1985–1986, Houston years. The land and leasehold interest which date was specified in the note. Equus has the had an extremely soft market for luxury were collateralizing the $2 million loan were right to roll over principal and accrued in- high-rise condominium units. contiguous to the 12.603 acres previously pur- terest on the first through fourth anniver- No wrongdoing or self-dealing was discov- chased for the development of the shopping sary dates and, on the fifth anniversary date ered in this transaction, but there were sev- plaza. to the extent that WMI’s exercise of the ad- eral violation of regulations, The approval of the total loan package of ditional warrants, if any, has not fully dis- including 12 C.F.R. § 563.17 (failure to ob- $9,050,000 was subject to an appraisal indi- charged the $500,000 note, Equus has the tain appraisals prior to making the loan). cating a maximum loan-to-value ratio of right to give WMI a five-year term note bear- 8. North Lake (f/k/a Westgate). This was a 80%. The original appraisal for USAT was ing interest at 15% per annum, principal and joint venture of USAT’s subsidiary, UFG, completed by Edward B. Schulz & Company interest of which are to be paid monthly. and was carried on the general ledger ac- on January 31, 1985. The appraiser, Lot USAT’s participation in the Yellow Cab counts. The date of the loan was August 1, Braley, issued an opinion based on the fair transaction appears to evidence poor busi- 1984, and the maker on the note was United market value of the land and the proposed ness judgment at best and possibly gross Financial Corporation. Principal was to be shopping complex. The appraised value of the negligence. USAT performed almost no un- repaid when land was sold. land and proposed shopping center was esti- The stated purpose of the joint venture derwriting or analysis on the loan and the mated to be $11,300,000. The appraiser’s re- was to develop tracts of land totalling 272.4 files do not even contain a loan application. port was issued to USAT; and, based on that acres located in the northeastern portion of USAT’s obligation to loan funds to WMI was report, USAT recommended a loan ratio of San Antonio, Texas. United Financial Cor- open-ended and USAT pledged its own assets 80%. The total loan package of $9,050,000 was poration was obligated to fund all principal as collateral for WMI’s obligation on the $4 proposed by the Senior Loan Committee of and interest in this transaction, which was million letter of credit. Corporate formali- USAT and accepted by the Market at Hunt- originally estimated to have run $7.5 million ties were not followed as all employees of ing Bayou, Ltd. The construction loan on top of $7.5 million needed to service the WMI were employed and paid by USAT. checklist makes reference to the compliance first, second and third liens against the sub- We did not uncover, however, any evidence with R. 41b, but this is the only notation of ject property. An appraisal was prepared by of any insider relationship to the transaction compliance with the Regulations. There was Love & Duggen, M.A.I., of San Antonio, or any self-dealing by officers and directors no other mention in any of the Senior Loan Texas, and indicates that the property had a with respect to the transaction. USAT has Committee reports about the accuracy and/ ‘‘developed’’ value of $17,800,000 and an ‘‘as- not yet provided us with loss figures for this or adequacy of the appraiser’s report and is’’ value of $14,840,000 as of January 13, 1987. transaction, and the losses may not yet be compliance with the standard set down in 12 No analysis of UFC’s credit was revealed in fully known. C.F.R. Section 563.17–1a. a search of the files and is unlikely to exist, 6. Jerald Turboff Transactions. Prior to At the time the Senior Loan Committee as UFC owns the property 100%. November 1985, Jerald Turboff had been in- was anticipating an amendment to the There is no collateral in the usual sense of volved in a number of loan transactions with the word, as UFC owns 100% of the property. project at the Market at Hunting Bayou, it United Savings Association of Texas which There have been no land sales and therefore requested an appraisal from Cushman & appear to have been made at arm’s length no repayment. Wakefield. The appraisal was completed by and did not result in any losses to USAT. In Stanley Rosenberg, who served on the Paul Smith. On October 18, 1985, he appraised November 1985, Turboff approached USAT board of UFC, is a partner in the law firm the property and improvements to be valued with a business proposal that resulted in that performed $9,500 worth of work on this at $9,820,000. Based on this reduced appraisal four distinct but related transactions. On its project; and he is also president of Blazers, value and the increasing softness of the gen- face, Turboff’s proposal appeared advan- Inc., the project’s managing partner. The eral retail market, the Senior Loan Com- tageous to both parties; however, because of structure of this transaction wherein UFC mittee approved the proposal submitted by declining property values and Turboff’s cash owns the property calls into play restric- L. Schulgen to develop the tract into sites flow problems, the transactions ultimately tions on real property transactions and loans for miscellaneous uses such as restaurant resulted in losses for USAT. to affiliated persons addressed in 12 C.F.R. pads, office, medical arts center, and to es- The Turboff transactions are described in Sections 563.41 and 43. tablish release prices based on an allocation detail in the BS&S Interim Report. We con- 9. Eagle Hollow. This loan was dated Sep- of the loan to these proposed sites. At the cluded there that the transactions appeared tember 16, 1982, and was in the principal time of the proposal, the borrowers were ne- to have a legitimate business purpose and amount of $9.7 million. The makers of the gotiating the sale of a 1.15-acre restaurant that no evidence of misconduct was uncov- note were Eagle Hollow Partners, Ltd., Wal- pad and had received interest in two addi- ered. USAT’s actual losses on these trans- ter B. Eeds, David C. Hetherington, and The tional sites. actions has not yet been determined because Greystone Group. The term of the note was After the Market at Hunting Bayou filed they all involved the sale of USAT REO eight years at an interest rate of 12.75% plus bankruptcy on August 7, 1986, the bank re- which it eventually got back. Because these 50% of cash flow and 50% of profits due at quested an investigation into the maker and were non-income producing properties, we do sale or time of refinancing. The stated pur- guarantor’s financial standing. This inves- not believe that the aggregated losses were pose of the loan was to provide a portion of tigation was conducted by Pinkerton Inves- that significant. Again, these transactions the funds necessary to refinance the acquisi- tigation Service. The report is dated Novem- are more easily criticized in hindsight as evi- tion of real property consisting of 10.003 ber 4, 1988. Prior to the financial problems of dencing poor business judgment. acres which was located 12 miles west of the Market at Hunting Bayou and in an at- 7. Warwick Towers Venture. The Warwick downtown Houston adjacent to Shell Oil tempt to keep the loans viable and to give Towers loans were originated in 1983. An Company’s facility at Dairy Ashford and the project a chance to succeed, USAT grant- $11,840,500 loan was made by Warwick Towers Interstate 10. There were to be 351 units in 21 ed a $180,000 loan on January 6, 1986, to pay Venture and guaranteed by the John W. separate buildings with 280,718 net rental delinquent interest on the $2 million loan Mecom Company. The Warwick Towers Ven- square feet. The loan was to be non-recourse and accepted a $20,000 promissory to pay the ture was also the maker on an additional except for $2.2 million that was to be guaran- origination fee on the $180,000 loan. After re- non-recourse loan for $16,995,000. The original teed by Walter B. Eeds and David C. peated demand letters for satisfaction of the loans were made with very poor under- Hetherington jointly and severally. An ap- debt and threatened foreclosure against the writing analysis and with very favorable praisal was conducted by Edward Schuly & properties and shopping center, USAT en- terms to the borrower. When the project did Company on two separate occasions. On Jan- tered into an agreement with the borrowers. not perform as expected, USAT entered into uary 16, 1981, the property appraised for $10 There continued to be problems with the a settlement agreement with the borrower million. An April 14, 1982, the property ap- loans, and letters continued to be exchanged and guarantor, again with little under- praised for $11,500,000. An appraisal was also between USAT and Schulgen. writing analysis. USAT released the obliga- ordered for May 1986 but was cancelled at the USAT files indicate that the Market at tions of the borrower and the guarantor in request of USAT. Hunting Bayou filed bankruptcy in the

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00095 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.232 pfrm07 PsN: E20PT1 E2434 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 Southern District Bankruptcy Division in Jacobson. However, it does not appear that the appraisal was made in accordance with Houston. The case number is 87–07584–H–11. the loan-to-one borrower rule would be vio- contemporary appraisal techniques that met The plan contemplates that certain pay- lated due to the size of USAT. the requirements in guideline R. 41b of the ments to other creditors will be made out of 13. Cinco Ranch. Cinco/Watson J.V. was Federal Home Loan Bank Board. the cash flow before distributing net reve- formed as a joint venture of United Savings The only credit history found in the files nues to United Savings. The plan is unclear Association of Texas and Dempsey Watson were financial statements submitted by the as to the amount of the debt that will be al- for the purpose of investing in real estate. Criswells and Isaac Stein. Bill and Sharon lowed to USAT. It does not appear from the Cinco/Watson purchased 22 commercial Criswell are principals in Criswell Develop- loan file that these loans were related to any tracts totalling 379.83 acres within Cinco ment Company, which in 1985 ranked among other loans or transactions held by USAT. Ranch for a purchase price of $33,345,434. the 25 largest diversified development com- 11. Woodcreek Apartments Phase II. The Twenty percent of the total purchase price panies. Isaac Stein was then serving as presi- date of this loan is shown as being June 5, was paid as a down payment, and a non-re- dent of Waverly Associates and managed its 1987, with the maker on the note being course note was executed in the amount of investment partnerships. Waverly Develop- Woodcreek on the Bayou Phase II Apart- $26,676,347. Makers on the note were Cinco/ ment Limited Partnership and Criswell De- ments Partnership. There were no guaran- Watson Joint Venture, and the payee was velopment Company had been successful in tors for the note, but the nominees are the Cinco Ranch Venture. Accrued interest was past ventures, including a majority equity general partners, Paul C. Jacobson, Allen P. to be paid on June 10 and December 10 of interest in the Dorchester Hotel in London. Jacobson, Gene P. Jacobson, and Evan K. each year, commencing on June 10, 1985, and The Remington Hotel opened in November Jacobson. The face amount of the non-re- continuing through and including June 10, 1982 and was built by Rosewood Hotels, Inc., course note was $1,665,000, and the due date 1990. The purpose of the transaction was to in conjunction with the Caroline Hunt Trust on the principal is June 15, 1997. The stated acquire approximately one-half of the com- Estate at a cost of $48 million. Cost for the purpose of the loan was the sale of REO. The mercial reserve tracts within Cinco Ranch. building and property totalled more than $65 Loan Workout Committee for REO sales ap- USAT was expecting a profit of $26,482,000 as million. Additional collateral securing the proved the sale and loan to the partnership it shared the joint venture’s profits. The note included a tract of land in Tarrant on May 7, 1987. The structure of the trans- joint venture proposed was to be between County, Texas, of 57.9374 acres and stock cer- action called for Woodcreek on the Bayou USAT or an affiliate and Dempsey Watson, tificates for 300 shares of National Tubular Phase II Apartments Partnership to pur- with 75% of income gain and loss attributed Systems, Inc., a privately held company con- chase the property by assuming a note with to USAT and 25% to Watson. Watson was to trolled by Crest Holdings, Inc., a Cayman Is- a remaining balance of $1,665,000 and placing be liable for his pro rata share up to a max- land corporation controlled by Isaac Stein. a second lien against the property for imum liability of $1 million. The memo- The loan performance history on this $203,000. The terms of repayment provided for randum detailing the joint venture also out- transaction was excellent until 1988 due to interest only in years 1 through 5 and prin- lined that Watson would manage the day-to- the fact that $9,083,251 were held in escrow by cipal and interest in years 6 through 10. Am- day affairs of the venture but that ulti- USAT on which to draw the interest pay- ortization was to be on a 30-year schedule mately all decisions in connection with the ments. Remington Partners, however, did with a balloon payment due at the end of the venture would be made by USAT. Dempsey not repay the principal in a timely manner. A lawsuit was filed and then settled out of tenth year. Interest was to be set for 3% in Watson’s annual management fee was to be court on December 21, 1988. Releases on the year 1 and increase by 1% in years 2 through $100,000, plus an additional 5% of profits gen- underlying promissory note and deed of trust 5. Then beginning in year 6, the interest rate erated by the venture. The interest rate on were executed by USAT on December 22, would go to 10% and remain at that rate the note was to be the prime interest rate, 1988. until final payment. plus 2% with a maximum interest rate of The property was appraised on June 23, 15%. E. Couch Mortgage 1986, by William L. Behas, M.A.I.—S.R.P.A. An appraisal dated March 17, 1986, appears The background of the Couch Mortgage of Behas & Associates. The land was valued in the files from Murphy, Kirby & Associ- transactions is described in detail in the at $912,235, and the improvements after reha- ates. The appraisal was for the market value BS&S Report of September 20, 1991 to the bilitation were appraised to be valued at of the fee simple title to 379.83 acres of va- FDIC. The September 20, 1991 Report focuses $1,462,765 for a fair market value of $2,375,000. cant land as of February 11, 1986, and a valu- only on the liability of third parties for the Rehabilitation of the improvements, how- ation was placed on the property of $40 mil- Couch Mortgage losses. A case could cer- ever, were expected to total $595,000, leaving lion. tainly be made that the officers and direc- a fair market value at the time of the ap- The loan in this transaction was a non-re- tors of USAT were negligent in entering into praisal of $1,780,000. The appraisal was done course loan. In a file at the MCO Plaza of- and monitoring the Couch transactions. In on behalf of United Savings Association of fices of USAT, it is noted that Dempsey Wat- the course of investigating the Couch trans- Texas. son is the son-in-law of Walter Mischer, who actions, we have found no evidence of wrong- 12. Northpoint Square. The date of the loan is president of the Mischer Corporation, doing or complicity on the part of any USAT is July 26, 1987, and the maker on the note is which was one of the joint venturers in Cinco officers, directors or employees. Northpoint Square Apartments Partnership, Ranch. No wrongdoing can be presumed from If the FDIC decides to pursue its claims Paul C. Jacobson, general partner. There these facts alone, but once again, it reflects against third parties for the Couch Mortgage were no guarantors for this transaction. The USAT’s continued involvement with ‘‘high losses, then it would seem to be counter- face amount of the note is $3,105,000 and the rollers’’ within the Houston economy. productive to at the same time allege that due date of the principal is June 26, 1997, the 14. Remington Partners. Remington Part- USAT officers and directors were negligent last payment being a balloon payment. The ners acquired the Remington Hotel from with regard to the transactions. In fact, it is loan was approved by the Loan Workout Rosewood Hotels, Inc., in 1985. Seventy per- highly likely that the third parties sued will Committee, and the transaction was struc- cent of the purchase money was borrowed attempt to raise as a defense the negligence tured so that Northpoint Square Apartments from United Savings Association of Texas, of USAT’s officers and directors. Partnership would purchase the property for which placed a first lien against the hotel. Because of the lack of evidence of affirma- $3,405,000, which included the partnership’s Makers on the note were Remington Part- tive wrongdoing and the much greater likeli- promissory note for $3,105,000. The terms of ners, a Texas joint venture, William T. hood that damages could be recovered from repayment provided for interest only in Criswell, IV, venturer, Waverly Development third parties, we do not recommend initi- years 1 through 5, and principal and interest Limited Partnership, a venturer, by I.S.R.P. ating litigation against officers and direc- in years 6 through 10. Amortization was to be Limited Partnership, by Isaac Stein, sole tors of USAT for the Couch losses. It is pos- on a 30-year schedule with a balloon pay- general partner. The promissory note is in sible that some of those individuals could be ment due at the end of the tenth year. Inter- the principal amount of $25,300,000 and was joined as third-party defendants if FDIC elects to sue others for the Couch losses. est was to be set for 3% in year 1, and in- for a term of three years at a fixed rate of crease by 1% in years 2 through 5. Then be- 14% interest. Interest payments were to be F. Authorization of Dividend to UFGI ginning in year 6, the interest would go to made the first day of every third month, be- In 1984, USAT sold several branches which 10% and remain at that rate until the final ginning August 1, 1985, with accrued interest resulted in significant increase in capital. payment. and the principal being due on May 13, 1988. According to Mary Mims (‘‘Mims’’), oper- The property was appraised on February To further assure that note payments were ations manager of the treasury department 18, 1987, by William Murphy, M.A.I., made, an escrow fund was established in the in 1984, the branches were sold because the S.R.P.A., of Murphy, Kirby & Associates and amount of $9,083,251. This amount rep- previous merger created a branch overlap- was valued at $2,500,000. An analysis of credit resented the interest payments due between ping situation. However, an October 1984 did not appear in the materials provided for May 13, 1985, and May 13, 1988. USAT was al- Texas Business article regarding Hurwitz our review; but shortly after the sale closed, lowed to draw upon the escrow fund when states ‘‘Hurwitz has devised an innovative the partnership fell behind in its payments each of the interest payments became due. plan to sell off up to 48 bank branches (in- and remained so until foreclosure in 1988. An appraisal of the Remington Hotel was cluding deposit liabilities and all branch USAT made loans to various entities which, conducted by Edward B. Schulz & Company. properties). If he pulls it off, the deal would like the borrower in this instance, were con- The purchase price of the Remington Hotel augment United’s net worth by about $150 trolled by Allan P. Jacobson, Gene P. was $32 million, and Schulz appraised the million, more than doubling equity in one Jacobson, Paul C. Jacobson, and Evan K. property at $33 million. Schulz stated that shot.’’

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00096 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.234 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2435 The branches were sold to Independent and the names mentioned list providing in- templated. We do not feel that we have American Savings. According to Crow, Inde- formation on every player in the network, as strong proof of misappropriation of USAT pendent American paid a ‘‘ridiculously high well as continual updates. It is our under- funds through payment of affiliates’ ex- price’’ for the USAT branches—15% pre- standing that these sorts of claims against penses. However, the outstanding amount mium. According to Wolfe, when Inde- Hurwitz will be handled by the task force should be recouped and we understand these pendent American purchased the branches, it and this report will make no recommenda- claims are being separately handled in nego- assumed liabilities of $1 billion in deposits. tion on those claims. tiations with UFGI. In order for Independent American to do so, B. Dividend to UFGI V. CLAIMS AGAINST THIRD PARTIES USAT provided it an asset of cash flow bonds It is our understanding that the claim A. Accountants with a coupon rate at 10%. Since the market against UFGI for payment of the dividend is price was at a yield of 15%, the spread be- An investigation of the potential liability being separately handled in negotiations of the auditor of USAT was conducted by tween the two was a ‘‘paper gain’’ in fair with UFGI. market value. Although the gain was in BS&S. The results of our investigation is in- paper, it had time value. The total ‘‘paper C. Tax Reform Claim cluded in a Report submitted to the FDIC on gain’’ was $90 million. USAT issued a cash We understand the tax refund claim is September 20, 1991. The Report focused on flow bond to Independent American Savings being separately handled in negotiations the liability of USAT’s auditor, Peat, which contained five series, labeled A–E, in with UFGI. Marwick & Mitchell (now known as KPMG the amount of the total customer balances. D. Lack of Capital Infusion Peat Marwick), for general auditing neg- As mortgages under the bond paid down, the MCO Holdings indicated in several SEC fil- ligence issues, as well as issues relating di- proceeds of the collateral were paid to the ings that it and Federated filed an applica- rectly to the Couch Mortgage transactions. bond. Crow stated that the objective of the tion with the Federal Home Loan Bank That Report also included our opinion on the sale was to build equity. Although the sale Board (‘‘FHLBB’’) on June 29, 1983, for ap- liability of Couch Mortgage’s auditor, Ernst did not result in any cash, it created a proval to acquire more than 25% of the out- & Whinney (now known as Ernst & Young), ‘‘paper gain’’ of approximately $90 million. standing shares of common stock in order to for its failure to disclose the ongoing fraud Following the branch sale to Independent become savings and loan holding companies. being committed by Couch. Please refer to American, a $32 million dividend payment The application was approved by the FHLBB the September 20, 1991 report for detailed was made to UFGI. The dividend payment on December 6, 1984, subject to a capital in- conclusions and litigation recommendations. was handled by C.E. Bentley, Jim Pledger fusion requirement. For as long as MCO and B. Lawyers and Gerald Williams. The regulators ap- Federated controlled USAT, both entities Potential professional liability claims proved a dividend for a certain percent of the were to contribute their pro rata share of against attorneys were considered in connec- amount, if the institution was profitable. Ac- any additional capital infusion required for tion with all of the other investigations cording to Crow, USAT was profitable in 1985 USAT to maintain its regulatory net worth. mentioned in this report. Attorney liability solely because of the branch sale. The If in excess of 50% of the voting shares of issues have been addressed in the September FHLBB was upset because it was not made UFGI were acquired by MCO and Federated, 20, 1991 report on Potential Professional Li- aware, at the time of the regulatory ap- they were required to contribute 100% of any ability Claims, as well as in the Chapel proval, of the utilization for the capital. additional capital. Subsequent to the appli- Creek Ranch litigation. In the course of in- Mims stated in her interview that the cation approval, MCO Holdings and Fed- vestigating real estate and loan trans- treasury department maintained the divi- erated held discussions with the FHLBB con- actions, securities activities, and other di- dend in an USAT certificate of deposit. She cerning the possible modification of the con- rector and officer liability issues, the possi- added that had the funds from the branch dition. bility of attorney negligence was explored. sale not been available, based on the cash The FHLBB granted MCO and Federated Other than what has been discussed in ear- flow at the time, UFGI would have been extensions in order to acquire additional lier reports, we did not discover any appar- bankrupt within one to two years after the shares of UFGI’s common stock. The exten- ent instances of attorney malpractice. USAT merger. The funds were utilized by UFGI to sion was granted so that MCO, Federated and utilized a number of different law firms for begin its equity arbitrage activities and to the FHLBB could continue discussions re- its legal work, the two who received most pay the PennCorp debt from the 1983 merger. garding the modification of the capital infu- work being the Houston firms of Mayor, Day Because this dividend payment was made sion guarantee. The last extension granted & Caldwell and Schlanger, Cook, Cohen, three years before the institution was closed by the FHLBB expired on December 22, 1987. Mills & Grossberg. No law firm seemed to act and because it was approved by the appro- The MCO 10K states that it had no intention as ‘‘general counsel’’ for the institution. It priate regulatory agency, we believe it will to infuse capital into UFGI at the time of appears from USAT’s records that Arthur be difficult to prove gross negligence on the the filing. Also, it acknowledges that UFGI Berner, in-house general counsel for USAT, part of the directors. It would be less dif- agreed to maintain USAT’s capital require- gave legal advice regarding the most strong- ficult to prove a lack of prudence on the part ments above the minimum level established ly criticized activities of the institution, in- of the officers, but we cannot estimate the by the FSLIC. However, it stated that UFGI cluding the golden parachute employment probability of success on the liability issues did not have sufficient assets to contribute agreements, the 1988 executive bonus plan, at greater than fifty percent (50%). We are capital to USAT in order to maintain its the inter-company receivable between USAT also unable to make an assessment of actual minimum capital requirement. and UFG, and the failure of UFG to infuse damage to the institution from payment of The Federal Home Loan Bank of Dallas additional capital into USAT. the dividend. Certainly, additional capital- (‘‘FHLB-Dallas’’) directed the UFGI Board of C. Appraisers ization may have allowed the institution to Directors, on May 13, 1988, to infuse capital slow its gains trading activity, but we can- into USAT. Although the directors acknowl- Other than the Chapel Creek Ranch litiga- not make an estimate of the possible dam- edged the receipt of the letter, capital was tion and the Couch Mortgage transactions, ages at this time. not infused and UFGI did not respond to the our investigation has not revealed any ap- IV. CLAIMS AGAINST HURWITZ AND UFGI letter. On December 8, 1988, the FHLB-Dallas parent problems relating to appraisers in- A. Corporate Raider Scheme again directed UFGI to infuse additional eq- volved in loan and real estate investment transactions. There were numerous instances The primary conclusion we have drawn uity capital into USAT. UFGI did not make of USAT failing to obtain appraisals in viola- from our investigation of the securities area such infusion. According to Connell, Hurwitz tion of the regulations, and a few instances is that Charles Hurwitz used USAT as a deep will assert that he infused approximately of appraisals that did not comply with Rule pocket or source of funds for favors to facili- $100 million of capital into USAT as a result 41b. However, these issues go more to the tate his own corporate raider activities. We of the Weingarten Realty transactions. negligence of officers and directors in ap- have outlined our theories and the available This claim is being pursued separately by proving transactions with insufficient or no documentation in prior recommendations, other fee counsel. appraisals. In summary, other than what has including the Interim Report of April 29, 1991. E. Advances by USAT for the Benefit of Affili- been previously reported, we did not find any In our investigation we were unable to find ates appraiser errors or omissions. evidence of securities transactions which di- We reviewed the payments made by USAT rectly benefitted Hurwitz, such as purchases on behalf of UFGI and other affiliates and D. Real Estate Brokers of Hurwitz entities’ junk bonds or equities. found evidence of: USAT entered into contracts with various We do believe, however, that Hurwitz, to- a. payment of salaries and bonuses by real estate brokers who were employed to gether with a group of corporate raiders, USAT when a substantial part of the em- dispose of real estate owned by USAT. These traded favors and participated in a scheme or ployee’s job included work for UFGI or other contracts were reviewed, as were the lists of conspiracy to manipulate the market and Hurwitz entities, such as Ron Heubsch; properties on which the realtors earned com- that USAT was used by Hurwitz in whatever b. advances of affiliates’ expenses which missions. No wrongdoing was discovered, al- way was necessary to make that scheme were carried on USAT’s books as receivables though it was noted that many of USAT’s work. We have been working with the Drexel but remained unpaid. deals seemed to be ‘‘broker-driven,’’ with the task force for over a year and have provided There is evidence that UFGI repaid these broker dictating the terms of the trans- them with substantial analyses and docu- advances late in 1988 and we were consist- action. Again, this reflects on the negligence mentation, such as the quid pro quo analyses ently told that repayment was always con- of the officers and directors in failing to

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00097 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.236 pfrm07 PsN: E20PT1 E2436 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 maintain and enforce prudent lending prac- which Hurwitz is currently clearcutting, a ging in the virgin groves, but the stays are tices. No litigation is recommended against process in which every living thing is cut only temporary. Unless there is a serious brokers. down. All to pay off a junk bond debt! It’s legislative effort to acquire this forest, E. Securities Industry great that we’re going to protect this land Hurwitz will assure that all the knowledge from Hurwitz, but we don’t want federal dol- and wonder inside this area will be lost for- Early in the investigation we thoroughly lars to go into his pocket while he owes the ever. reviewed the role of Solomon Brothers in the taxpayers $548 million. Coincidentally, sale of MBS products to USAT. Mortgage- Hurwitz is asking for more than $500 million backed securities were developed and per- EARTH FIRST!, for the Headwaters Forest redwoods. So if fected by Lew Ranieri at Solomon Brothers Garberville, CA. your agency can secure the money for his and the firm had a virtual monopoly on the failed S & L, we the people will have the Rally Today, Monday at FDIC in DC & NY to product until 1986 when other firms began to funds to buy Headwaters Forest. Debt for na- Demand that Redwood Raider Hurwitz Pay lure its traders away and develop their own ture. Right here in the U.S. That’s where you S & L Debt programs. come in. CHAIR OF HOUSE BANKING COMMITTEE SENDS Several people told us that the initial MBS Go get Hurwitz. He and people like him LETTER ASKING FDIC TO PURSUE HURWITZ portfolio was sold to United as a sure thing. have been traitors to this country, ripping Animals and activists from the redwood We were told there was inadequate expla- apart the very economic and environmental forest will rally outside the Headquarters of nation of the risk. Unfortunately, the writ- fabric of this country for personal gain. Now the Federal Deposit Insurance Corporation ten documents do not bear out this claim, our nation is on the verge of collapse, thanks (FDIC), 550 17th Street NW in Washington, and we were unable to find any evidence of to guys like Hurwitz. For five years your DC this Monday, November 22 at 1 pm to in- misrepresentations or misleading statements agency has had this $548 million dollar claim sist that an existing $548 million claim other than the self-serving statements of against Hurwitz’s United Financial Group, against redwood raider Charles Hurwitz’s Crow and others. In light of this and the fact the holding company for United Savings As- failed S & L be vigorously pursued before the that USAT had been sold to a Ranieri part- sociation of Texas. The statute of limita- statute of limitations runs out at year’s end. nership, in consultation with the FSLIC at- tions runs out at the end of 1993. He can ac- A companion rally will take place at the torney at the time, we did not pursue the in- tually get away with this robbery if your FDIC’s public relations department in New vestigation any further. agency doesn’t act soon. Justice delayed is York at 452 Fifth Avenue at 10 am. The ani- We also reviewed the relationship of USAT justice denied. After five years of waiting it’s mals will be delivering a memorandum to and Drexel Lambert and Bear Stearnes & Co. time to say: ‘‘Charley Hurwitz, your time is FDIC employees, including Chairman An- The Drexel relationship was referred to the up!’’ drew C. Hove, Jr., asking that the man who task force as described above and we found Here’s what you can do: Write and talk to has been hacking down their ancient red- no irregularities in the transactions with your policy makers at the FDIC, in par- wood homes be indicted for his treachery Bear Stearnes & Co. ticular your Chairman, Andrew C. Hove, Jr., against the American taxpayers. VI. SUMMARY AND PROBABILITIES OF SUCCESS and ask them to re-prioritize your case In a separate but related development, A. Claims Against Officers and Directors of against Hurwitz’s United Financial Group. Rep. Henry Gonzalez (D–San Antonio), Chair- USAT Talk amongst yourselves, too. Offer new, man of the House Banking Committee, faxed In summary, we believe the following creative strategies of protecting the econ- a letter last Friday to FDIC Chairman Hove, claims could be made against the directors omy and ecology of this precious land of calling on the agency to act on the claim and controlling officers of USAT: ours. Write to your Congressional Represent- against Hurwitz, which has languished for Gross negligence—failure to institute and ative and Senators in Washington, DC and five years without any criminal or civil ac- require compliance with prudent lending ask them to support the Headwaters Forest tion being pursued. Hurwitz, a junk bond practices; violation of federal regulations re- Act (HR2866). Lastly, we’d like to invite you raider who tripled the logging rate of the Pa- lating to lending and investment trans- to come out to the redwoods and see trees cific Lumber Company after his MAXXAM actions; failure to implement policies or su- taller than you office building and as wide Corporation took it over in 1985 and incurred pervise the securities investment depart- around as a room in your house. Give us a a $750 million debt, is also responsible for the ment of the institution; and allowing the in- call at 707/468–1660 in California. We’d love to failure of United Savings Association of stitution to.... show you around the magnificent redwood Texas (USAT). USAT cost the taxpayers $1.6 forest, as well as show you the appalling billion to bail out in 1988, making it Amer- clearcuts Hurwitz is performing. Don’t delay. ica’s fifth largest failed S & L according to DOCUMENT E The junk bond traitors must be brought to Fortune. The $548 million claim stands MEMORANDUM justice. Debt for Nature and Jail for Hurwitz. against USATs holding company, United Fi- To: All the good, hardworking employees of Thank you. nancial Group, and stems from the failure of the FDIC. Hurwitz to fulfill an agreement with the FDIC to maintain a minimum net worth of From: The people of the United States of NATIONAL AUDUBON SOCIETY, that amount in the bank. America. Washington, DC. This activity takes place in light of the Re: Redwood Forests and Failed S & L’s. The National Audubon Society strongly Headwaters Forest Act (HR 2866) moving Date: November 22, 1993. supports the Headwaters Forest Act, H.R. smoothly through the House of Representa- You may not be aware that there is a di- 2866, introduced by Dan Hamburg (D–CA) and tives. The bill, introduced by California Con- rect connection between the Savings and Pete Stark (D–CA), authorizing the purchase gressmen Dan Hamburg and Pete Stark, Loans, the FDIC and the clearcutting of of 44,000 acres of Redwood forest to be added along with over 90 co-sponsors, would au- California’s ancient redwoods, but there is to the Six Rivers National Forest in North- thorize the federal government to purchase and we’d like to fill you in and ask for your ern California. This legislation would ac- 44,000 acres of redwood forest. It has the help. It just so happens that a man named quire the largest unprotected ancient red- thumbs up from President Clinton. However, Charles Hurwitz, who took over the Pacific woods groves in the world. Home to a great Earth First! activists, who originated this Lumber redwoods in 1985 through a Drexel array of species, from mountain lion and issue in 1986 by hiking, mapping, naming and Burnham junk bond buyout, also was respon- black bear to giant salamanders and flying promoting the Headwaters Forest, are con- sible for the collapse of United Savings Asso- squirrels, the Headwaters Forest is composed cerned that Charles Hurwitz could receive ciation of Texas (USAT). In fact, Drexel- of gigantic trees up to 2000 years old. Also federal dollars for the ancient redwoods be- Burnham helped Hurwitz take over 200,000 found in its interior recesses are several fore he has paid back his S & L debt to the acres of magnificent redwood forest in ex- threatened and endangered species including American taxpayers. ‘‘We seek justice for change for Hurwitz’s United Savings buying spotted owls, marbled murrelets, goshawk the American people as well as justice for over billion dollars’ worth of Drexel’s junk and a host of salmon species. bonds. The bank later failed and the red- This land had been managed on a sustain- the forest animals,’’ said Darryl Cherney, a woods are still crashing. Your agency did able forestry basis by the Pacific Lumber Co. Northern California Earth First! organizer outstanding work in nailing Drexel’s Michael until a recent takeover by Charles Hurwitz, who has traveled to Washington to organize Milken on this very scam. The FDIC has CEO of Maxxam. In order to pay off junk this rally. ‘‘Hurwitz’s $500 million asking even gone so far as to state that Hurwitz’s bonds used to buy off the lands, Maxxam has price for Headwaters conveniently approxi- bank owes the taxpayers $548 million for more than doubled the cut of the ancient mates his S & L debt. With the legality of misappropriating depositors’ funds. But for redwoods. Over 40,000 acres have been liq- the PL takeover and the S & L failure in some reason, the FDIC hasn’t gotten around uidated already. HR 2866 provides for a res- question our . . . to issuing criminal or civil charges against toration program and gives full protection to The Failure of United Savings Association of Charles Hurwitz for his end of this devil’s the old growth and wilderness designation Texas (USAT): Fact Sheet bargain. for the 3,000 acre Headwater Grove. 1. The FDIC has an outstanding claim Meanwhile, back in Washington, DC, the Please write your representative today and against United Financial Group, holding U.S. Congress has been kind enough to intro- ask him/her to support HR 2866. Maxxam is company for the failed USAT, for $548 mil- duce a bill, the Headwaters Forest Act, beginning to log off this great tract of giant lion dollars. (United Financial Group 10–K which would protect 44,000 acres of redwoods redwoods; Court injunctions have halted log- Report, year ending Dec. 31, 1992, p. 1 and

VerDate 112000 06:25 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00098 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.238 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2437 Wall Street Journal, ‘‘United Financial with respect to 300,000 shares of the common ings with Charles Hurwitz, the Houston- Found Liable by FDIC,’’ May 22, 1992). stock of UFG. In the event MCO does not ex- based entrepreneur who controls Maxxam 2. Five years have passed since this claim ercise the option during a 30-day period com- Group, a conglomerate that’s into alu- was asserted in 1988, and while the FDIC has mencing July 1, 1988, MCO has agreed to minum, redwood and real estate. Although extended the statute of limitations through grant Drexel Burnham an option to sell such Kaiser Aluminum is Maxxam’s biggest hold- tolling agreements, the current statute of shares to MCO during a 30-day period com- ing, Hurwitz is best known for the 1986 take- limitations ends on December 31, 1993 (UFG, mencing August 1, 1988. The purchase price over of Pacific Lumber, the first major hos- 10–Q Report, Quarter ending June 30, 1993, p. in either event is $8.59 per share. MCO paid a tile takeover funded by junk bonds. 6). fee of $683,000 to Drexel Burnham for the pur- Hurwitz’s name is also immortalized in 3. When it was seized in 1988 by the FDIC, chase option. Two of UFG’s eight directors newspaper libraries because he’s constantly USAT was a wholly-owned subsidiary of are also directors of MCO. UFG is a savings attacked for allegedly devastating Pacific UFG, whose controlling shareholders at the and loan holding company and conducts Lumber’s redwood forests to pay off the time of the collapse were Charles Hurwitz- business primarily through its wholly-owned bonds. But today we’re talking about deposit run companies MAXXAM, MCO, and Fed- subsidiary, United Savings Association of insurance, not trees. erated Development Corp. Also, Drexel Texas (‘‘USAT’’). In addition, other subsidi- One part of the deposit insurance bureauc- Burnham Lambert was a 9% shareholder aries of UFG provide mortgage lending, rein- racy is hot to sell Maxxam some properties (Washington Post, ‘‘Thrift Regulations Slip- surance and venture capital services. The seized from dead savings and loan associa- ping . . .’’ by Allan Sloan, 4/16/91; MAXXAM carrying value of MCO’s investment in tions. Another part of the bureaucracy is Prospectus, 1988; and FDIC vs. Milken, 1/18/ UFG’s common stock and Series D Stock chasing United Financial Group, a company 91, pp. 82–84). was $12.7 million at September 30, 1987. The of which Hurwitz is the biggest stockholder 4. From 1985 to 1988, USAT purchased over closing price of UFG’s common stock on De- and the former chairman, to recovery part of $1.3 billion worth of Drexel-underwritten cember 31, 1987 was $7/16 per share. the $2 billion or so it cost to bail our deposi- junk bonds. During that same period of time, Federated owns approximately 28.2% of the tors of a United-owned S&L that failed in according to an FDIC lawsuit against Mi- MCO Common Stock and 91.3% of the MCO 1988. chael Milken, ‘‘the Milken group raised Class A Preferred Stock. On June 29, 1983, Let’s start with the Resolution Trust about $1.8 billion of financing for Hurwitz’s MCO and Federated filed an application with Corp., which liquidates dead S&Ls. The RTC, takeover ventures,’’ which included the 1985 the Federal Home Loan Bank Board (the which had bad loans for foreclosed properties takeover of Pacific Lumber Company, the ‘‘FHLBB’’) for approval to acquire more than up the kazoo, is doing something intelligent world’s largest private owner of old growth 25% of the outstanding shares of common by trying to sell them in bulk. Last month, redwood (FDIC vs. Milken, 1/18/91, pp 82–84). stock of UFG and thereby become savings the RTC announced that Maxxam had put in 5. The failure of USAT constituted the and loan holding companies. Such applica- the highest bid, $130.1 million in cash, for a fifth largest failed S & L Bailout, as of 1990, tion was approved by the FHLBB on Decem- batch of foreclosed properties and stinko costing the taxpayers $1.6 billion (Fortune, ber 6, 1984, subject to compliance with sev- loans. The deal is scheduled to close by June Sept. 10, 1990). eral conditions, including that so long as 16. 6. Hurwitz has been sued by the Securities MCO and Federated control USAT, they But at the same time that the TRC wants & Exchange Commission in 1971 for alleged shall contribute their pro-rate share (based to sell these things to one Hurwitz company, stock manipulation; charged by New York on their holdings of UFG) of any additional the Federal Deposit Insurance Corp., a sister State regulators in 1977 with looting Summit infusion of capital that may be necessary for agency run by the same board that controls Insurance Co.; sued by investors for alleged USAT to maintain its regulatory net worth. the RTC, is trying to collect damages from fraud in the takover of Pacific Lumber; sued In addition, if MCO and Federated acquire in the United Financial Group, owner of the by U.S. Labor Dept. and employees for in- the aggregate in excess of fifty percent of the failed United Savings Association of Texas. vesting PL’s pension fund with now failed- voting shares of UFG, they would be required Although Hurwitz didn’t technically control Executive Life Insurance in return for their to contribute one hundred percent of any ad- United Financial or its S&L, he was chair- junk-bond financing of the PL takeover; sued ditional capital that may be required to man of United Financial until 10 months be- by MAXXAM shareholders for a land swindle maintain the regulatory net worth of USAT. fore the S&L failed. He remains United Fi- in Rancho Mirage, CA; and sued (8 times) by Subsequent to the approval of the applica- nancial’s biggest shareholder, which means EPIC of Garberville, CA and Sierra Club for tion, MCO and Federated held discussions he had more than a little to say about how violations of California Forest Practices Act; with the FHLBB concerning the possible the place was run. etc., etc., etc. (Wall Street Journal, ‘‘For modification of the condition relating to the The FDIC wants United Financial to fork Takeover Baron, Redwood Forests Are Just maintenance of USAT’s regulatory net over some dough because, its says, United One More Deal,’’ August 6, 1993). worth. Financial agreed to keep the now-defunct The FHLBB originally granted MCO and United Savings Association of Texas ade- Federated 120 days from December 6, 1984 quately capitalized. United Financial denies MAXXAM GROUP INC. within which to consummate the acquisition that United Savings was closed at a stated Los Angeles, California, February 11, 1988. of additional shares of UFG’s common stock. cost to the deposit insurance fund of $1.37 Interest of MCO in MAXXAM This period was extended by the FHLBB in billion and an actual cost that’s probably MCO owns a controlling interest in order to provide sufficient time for MCO, much higher. MAXXAM. See ‘‘Information Concerning Federated and the FHLBB to continue dis- United offered the FDIC $6.25 million cash MAXXAM—Business of Maxxam.’’ cussions regarding the requested modifica- and a note that could produce $4 million more. The idea was to make the FDIC go Interest of MCO in United Financial Group, tion of net worth guarantees. The last exten- away, reorganize United Financial and use Inc. sion granted by the FHLBB expired on De- cember 22, 1987. Federated and MCO antici- the tax loss created by the seizure of United MCO owns 1,104,098 shares of UFG’s com- pated submitting a new application with up- Savings to shelter income from new and mon stock (approximately 13.5% of the out- dated financial information, while con- profitable acquisitions. The proposal settle- standing shares) which is acquired in 1982 tinuing to discuss with the FHLBB the pos- ment was canceled by the FDIC, according to and 1983. Federated owns 801,941 shares of sible modification of the condition relating United Financial. UFG’s common stock (approximately 9.8% of to the maintenance of USAT’s regulatory In a logical world, you try not to do busi- the outstanding shares). Pursuant to a rights net worth. Although the instruments gov- ness with people who have already cost you offering made by UFG to the holders of its erning MCO’s indebtedness do not prohibit or money. As they say. ‘‘Fool me once, shame common stock, MCO and Federated pur- restrict MCO from infusing capital into UFG, on you. Fool me twice, shame on me.’’ And chased 688,824 and 47,702 shares, respectively MCO has no intention of doing that at the in fact, the S&L bailout bill contains a pro- (approximately 91.2% and 6.3% respectively, present time. vision that seems to bar anyone who has of the outstanding shares), of UFG’s Series C UFG files periodic reports with the Com- stiffed deposit insurance funds for more than Convertible Preferred Stock (‘‘Series C mission and its common stock is traded in $50,000 from doing business with the agencies Stock’’) in 1984. Each share of Series C Stock the over-the-counter market and reported on administering the bailout. was convertible into two shares of UFG com- the NASDAQ reporting system. However, the law, as interpreted by RTC mon stock at any time after June 15, 1987. spokesman Stephen Katsanos, is that anyone Effective May 4, 1987, UFG entered into an who cost the deposit insurance agencies agreement with MCO and Federated whereby THRIFT REGULATORS SLIPPING AND TRIPPING $50,000 or more can’t be a contractor to the MCO and Federated exchanged their 736,526 OVER ONE ANOTHER’S FEET bailout folks, but it can buy property from shares of Series C Stock for an equal amount (By Allan Sloan) them. That apparently includes Hurwitz, of new Series D Convertible Preferred Stock There are days when you wonder whether ‘‘Absent his being charged with wrongdoing, (‘‘Series D Stock’’) issued by UFG. The Se- the federal government’s right hand knows his money is good,’’ Katsanos said. Katsanos ries D Stock has the same conversion and what its left hand is doing—or even whether said that the RTC knew about Hurwitz’s in- other rights as the Series C Stock, except the government has two left feet, which is volvement with United Financial, but that that it is convertible at any time after June why it keeps tripping over itself. was no reason not to take his money. 15, 1988. In December 1985, MCO entered into Consider, if you will, the federal deposit in- Maxxam spokesmen were more than a lit- an option agreement with Drexel Burnham surance bureaucracy’s schizophrenic deal- tle upset when they heard that I planned to

VerDate 112000 06:25 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00099 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.240 pfrm07 PsN: E20PT1 E2438 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 tie Hurwitz’s pending deal with the RTC to Hurwitz, (stemming from the failure of uals against whom we would expect to assert the failure of United Savings. One spokes- United Savings Assn. of Texas) for 44,000 claims. In addition to the claims asserted man stressed that Hurwitz owned only 23.3 acres of redwood forest owned by a Hurwitz- against the group of defendants, Hurwitz percent of United Financial and wasn’t an of- controlled company. We advised Parrish would be sued individually for failure to ficer of the failed S&L. Regulators couldn’t we’re not aware of any formal proposal of cause compliance with certain net worth possibly have been unhappy with Hurwitz, such a transaction. However, we noted that a maintenance (NWM) agreements. the spokesman said, because when United claim can be satisfied by relinquishing title Recommendation: That the FDIC, as re- Savings was failing, the regulators asked an- to assets, assuming there is agreement on ceiver of United Savings Association of other Hurwitz company—Maxxam—to put in their value. We didn’t go any further with Texas (USAT), Houston, (with assets of $4.6 a bid. (A competing bidder won.) Parrish, but Dough Jones notes that even if billion and loss to the FDIC of $1.6 billion) Maxxam spokesman said that the uncon- Hurwitz satisfied our claim by giving us the authorize suit for approximately $300 million ventional investments—among them junk redwoods, it wouldn’t result in what Earth in damages against the proposed defendants bonds and a part ownership in a Houston taxi First! (the folks who demonstrated in front identified on Exhibit A. company—that Hurwitz recommended made of the main building last month) apparently In our view, Hurwitz and the other pro- money for United Savings. He also said that is proposing, i.e., that we then deed the red- posed defendants were grossly negligent. the S&L failed not because of wrongdoing, woods property to the Interior Department. However, we also estimate a 70% probability but because many of its borrowers lost their That would require some extensive legal that most or all of the conventional claims jobs and couldn’t pay their mortgages. ‘‘This analysis and, since any claim we might as- that could be made in the FDIC’s case would is a human tragedy caused by economic con- sert against Hurwitz would be a FRF matter, be dismissed on statute of limitations ditions,’’ he said. would likely entail Treasury Department grounds. Hurwitz’s failure to cause compli- Interestingly enough, the RTC had a concurrence. ance with the NWM agreements has a better chance to take a $181.5 million Maxxam note probability on the statute of limitations containing escape clauses, but opted instead issue, but there are numerous obstacles to DOCUMENT G for $130.1 million cash. So, you see, deposit successful prosecution of that claim. None- insurance regulators are indeed uncoordi- Maxxam, Inc., is a publicly traded com- theless, we believe the litigation risks are nated. But I never said they were stupid. pany with market capitalization, as of No- worth taking because of the egregious char- vember 16, 1993, of $288 million and total as- acter of the underlying behavior in this case sets of $3.5 billion. We are also reviewing a which caused enormous losses, and to further DOCUMENT F suggestion by ‘‘Earth First’’ that the FDIC our ongoing efforts to shape the law evolving FEDERAL DEPOSIT trade its claims against Hurwitz for 3000 in this area. INSURANCE CORPORATION, acres of redwood forests owned by Pacific I. Background Washington, DC, December 3, 1993. Lumber, a subsidiary of Maxxam. USAT was placed into receivership on De- Memo to: Chairman Hove. cember 30, 1988. After a preliminary inves- From: Alan J. Whitney, Director. DOCUMENT I tigation into the massive losses at USAT, Subject: Significant Media Inquiries and Re- the FDIC negotiated tolling agreements with lated Activities, Week of 11–29–93. Jack, I thought about our conversation REGULATORY CONSOLIDATION: Several yesterday. My advice from a political per- UFG, controlling person Hurwitz and ten news organizatons have asked what the spective is that the ‘‘C’’ firm is still politi- other former directors and officers of USAT/ FDIC’s position is on the agency consolida- cally risky. We would catch less political UFG who were either senior officers or direc- tion proposal unveiled last week by Treas- heat for another firm, perhaps one with some tors that were perceived as having signifi- ury. They were told you believed that with environmental connections. Otherwise, they cant responsibility over the real estate and Board appointments imminent, it would be might not criticize the deal but they might investment functions at the institution. In May 1994, after a series of meetings with inappropriate to take an agency position argue that the firm already got $100 million the potential defendants and the exchange of until the full board is in place. and we should spread it around more. considerable documents and other informa- THRIFT CONVERSIONS: Crain’s New York Those are just my unsolicited thoughts. tion, we prepared draft authority to sue Business, Philadelphia Inquirer and American memorandum recommending that we pursue Banker newsletters inquire about the thrift DOCUMENT L claims against Hurwitz and certain USAT mutual-to-stock conversion policy that the ATTORNEY CLIENT PRIVILEGE former officers and directors for losses in ex- FDIC is currently developing, specifically ATTORNEY WORK PRODUCT cess of $200 million. The recommended when our position on this subject will be claims as then proposed involved significant published. The calls came after American Memorandum To: Board of Directors, Fed- litigation risk. Most notably, the principal Banker ran an article in the Nov. 26 edition eral Deposit Insurance Corporation loss causing events occurred more that two reporting on Rep. Gonzalez’ legislation to From: Jack D. Smith, Deputy General Coun- years prior to the date of receivership, and limit thrift management profits from the sel; Stephen N. Graham, Associate Direc- were therefore at risk of dismissal on statute conversions. We also received several inquir- tor (Operations) of limitations grounds. In light of the Fifth ies about our response to Cong. Neal’s letter Date: July 27, 1995 Circuit’s opinion in Dawson, a split of au- of November 22 to you on the same subject, Subject: Authority to Institute PLS Suit; In- thority in the federal trial courts in Texas to which we have not yet responded. stitution: United Savings Association of O’MELVENY & MYERS: On Monday, the Texas, Fin #1815; Proposed Defendants: on the level of culpability required to toll Supreme Court agreed to hear this case, in- Former directors and officers, de facto limitations and the Supreme Court’s refusal volving the FDIC’s ability to sue attorneys director and controlling person Charles to consider whether a federal rule should be who represented banks that failed. The deci- Hurwitz. adopted under which negligence by a major- sion to hear the case prompted a flurry of In addition to presenting the attached au- ity of the directors would toll the statute of press inquires about similar cases past and thority to sue memorandum for Board ac- limitations, our strategy at that time was to present. We provided some statistical data tion, this memorandum reports on the status assert that gross negligence was sufficient to and limited information about the Jones Day of the continuing investigation of the failure the toll the statute of limitations. After case, which is still active. of United Savings Association of Texas briefings with the Deputies to the Directors FIRST CITY BANCORPORATION: (‘‘USAT’’), the separate investigation of and further discussion with the potential de- Bloomberg Business News, Houston Bureau, USAT being conducted by the Office of fendants, we decided to defer an FDIC deci- called regarding possible settlement in the Thrift Supervision (OTS), current tolling sion on whether to assert our claims, in First City Bancorporation’s claims case. It agreements, and settlement negotiations order to further investigate the facts, give seems someone is talking, because the re- with United Financial Group, Inc. (UFG), time for the Texas law on adverse porter asked about a December 14 FDIC USAT’s first tier holding company. dominations to take more concrete shape Board meeting to discuss the settlement. We were advised on July 21, 1995 that and ascertain the views of OTS. Therefore, The reporter wanted to know: If the FDIC Charles Hurwitz would not extend our tolling the tolling agreements were continued. committee working on the agreement ap- agreement with him. Consequently, if suit is II. OTS’s Involvement proves the plan, does that mean the Board to be brought it must be filed by August 2, Prior to deferring a decision on the FDIC’s will ‘‘rubber stamp’’ it? We advised the 1995. We had hoped to delay a final decision cause of action, we had begun to discuss with Board does not rubber stamp anything. The on this matter until after OTS decides OTS the possibility of OTS pursuing these Houston Chronicle also made several inquiries whether to pursue claims against Hurwitz, et claims (plus a net worth maintenance agree- about a possible settlement in this case, all al. However, Hurwitz’s actions have pre- ment claim) through administrative enforce- of which we answered with the standard re- cluded that possibility. Thus the Board must ment proceedings. After several meetings sponse that we do not comment on ongoing now decide whether to authorize suit. While with senior staff of the OTS Office of En- litigation. we would only sue Hurwitz at this time, forcement, we entered into a formal agree- LOS ANGELES TIMES: Michael Parrish rather than dividing the memo and, possibly, ment with the OTS, who began an inde- asked whether FDIC lawyers have considered having to bring it back to deal with other in- pendent investigation into the activities of whether we could legally swap a potential dividuals at a later time, the attached ATS various directors and officers of USAT, claim of $548 million against Charles seeks authorization to sue all of the individ- Hurwitz, UFG, as well as USAT’s second tier

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00100 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.242 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2439 holding company Maxxam, Inc, a publicly volved, but nevertheless proceed in conscious Finally, the Park 410 loan, in which USAT traded company that is largely controlled by indifference to the rights, safety, or welfare lost approximately $57 million, is included in Hurwitz. The FDIC is paying OTS’s costs in of others. That case involved a bad faith the authority to sue memo for informational connection with this matter. claim against an insurer but the language of purposes. This claim is based both on re- The OTS has reviewed extensive docu- the opinion is very broad. This new standard, peated regulatory warnings and on actual mentation and has recently conducted a se- if applied, would make it very difficult, if approval, before funding of a grossly impru- ries of administrative depositions. We have not impossible, to prove our claims. dent loan that benefitted a Maxxam insider. The effect of these recent adverse decisions been informed that OTS staff is currently The claim on this transaction against bank is that there is a very high probability that preparing a broad-based draft Notice of counsel, a long time Hurwitz business asso- much or all of the FDIC’s conventional Charges against Hurwitz and others, includ- ciate, is for professional malpractice and claims will not survive a motion to dismiss ing Maxxam, for substantial restitution for breach of fiduciary duty and aiding and abet- unsafe and unsound practices and for en- on statute of limitations grounds. We would ting breaches of fiduciary duty. We believe forcement of a net worth maintenance agree- also be at increased risk of dismissal, or loss that it is a good claim on the merits, but we ment. Under the terms of our agreement at trial on the merits. see no viable basis under existing law for with OTS, FDIC will be the beneficiary of IV. The Pacific Lumber—Redwood Forest Mat- avoiding a statute of limitations defense. any recovery from the OTS enforcement ac- ter tion through settlement or litigation against Thus, we recommend against asserting this Any decision regarding Hurwitz and the the proposed respondents. All the potential claim. former directors and officers of USAT is respondents in the OTS investigation, in- likely to attract media coverage and com- Assessment of Defenses: We expect business cluding Hurwitz, have signed tolling agree- ment from environmental groups and mem- judgment rule and standard of care defenses ments with OTS which expire on December bers of Congress. Hurwitz has a reputation as and serious statute of limitations issues 31, 1995. OTS staff’s current expectation is a corporate raider, and his hostile takeover based on recent Fifth Circuit and other that they will seek formal approval for this Texas case law. Absent a change in the law, case before the tolling agreements expire on of Pacific Lumber attracted enormous pub- there is at least a 70% chance that much or December 31, 1995. licity and litigation because of his har- vesting of California redwoods. Environ- all of the claims relating to mortgage III. Significant Caselaw Developments Have mental interests have received considerable backed securities and derivatives trading Further Weakened the Viability of Suit by publicity in the last two years, suggesting will be dismissed based on the net worth the FDIC exchanging our D&O claims for the redwood maintenance agreements be honored is more Although we have continued to investigate forest. On July 21, 1995 we met with rep- likely to survive statute of limitations mo- and refine our potential claims during the resentatives of the Department of the Inte- tions, but raises a series of different merits pendency of the OTS investigation, two sig- rior, who informed us that they are negoti- issues. nificant court decisions, and the failure of ating with Hurwitz about the possibility of Congress to address the statute of limita- swapping various properties, plus possibly Suit Profile: The suit will attract media and tions problems, have further weakened the the FDIC/OTS claim, for the redwood forest. Congressional attention because of Hurwitz’s FDIC’s prospects for successfully litigating They stated that the Administration is seri- reputation in corporate takeovers, and his our claims in the United States District ously interested in pursuing such a settle- ownership of Pacific Lumber, which is har- Court for the Southern District of Texas. ment. We plan to follow us on these discus- vesting redwoods. Environmental interests A. Statute of Limitations sions with the Department of Interior in the have received considerable publicity, often suggesting exchanging these claims for trees. In the recent decision of RTC v. Acton, 49 coming weeks. The Department of Interior recently in- F.3d 1086 (5th Cir. 1995), the Fifth Circuit If the Hurwitz tolling agreement expires formed us that the Administration is seri- held that under Texas law, only self-dealing without suit being filed, we would rec- or fraudulent conduct, and not gross neg- ommend that we update those members of ously interested in pursuing such a settle- ligence, is sufficient to toll the two year Congress who have inquired about our inves- ment. tigation and make it clear that this does not statute of limitations under the doctrine of Timing and cost-benefit analysis: We intend end the matter of Hurwitz’s liability for the adverse domination. As a result of this opin- to use Hopkins & Sutter (Chicago/Dallas) and failure of USAT because of the ongoing OTS ion, we cannot rely on an argument that the minority firm Adorno & Zeder (Miami). investigation. gross negligence by a majority of the Board The estimated cost of litigation by outside Theory of suit: The claims are for gross members is sufficient to toll the statute of counsel is $4 million up to trial, and an addi- limitations. There is very little, if any, evi- negligence, breach of fiduciary duty and breach of the duty of loyalty. The claims tional $2 million through trial. We have in- dence of fraud or self-dealing. Most, if not curred outside counsel fees and expenses of all, of the affirmative acts that would form are: (1) USAT officers and directors, and $4 million to date. In-house costs to date are the basis for an FDIC suit occurred more Hurwitz as a de facto officer and director, approximately $600,000. No insurance cov- than two years before USAT failed. were grossly negligent in failing to act to erage appears to be available. The proposed B. The Merits prevent $50 million of additional losses from defendants have a combined net worth of ap- The law has also moved against us on the USAT’s first MBS portfolio. The positions proximately $150 million (Exhibit A). If the merits of the claims. The claims against were in place more than two years before case survives the statute of limitations chal- Hurwitz are more difficult than usual be- failure. Our analysis indicates that they lenge, we still face significant adverse cause he was not an officer or director of should have begun to cut their losses, and caselaw in Texas on the standard of care and USAT. We believe that his involvement rose wind down this set of positions, starting two the business judgment rule. For these rea- to the level of a de facto director, and for years before failure. sons, there is no better than a 50% prob- some purposes a control person, but his sta- (2) USAT officers and directors, and ability of obtaining a substantial judgment tus presents a notable hurdle. Hurwitz as a de facto officer and director, even if we survive statute of limitations de- Texas case law has essentially eliminated were grossly negligent in causing USAT to fenses in tact it would have an estimated liability for negligence in the name of apply- invest approximately $180 million in its sub- settlement value of $20–40 million. ing a very expansive business judgment rule sidiary, United MBS, leveraging the invest- defense. We believe the conduct here con- ment into $1.8 billion of mortgage backed se- If suit is authorized we would expect to stitutes gross negligence as that term is nor- curities (‘‘MSBS’’) and losing approximately offer Hurwitz one final opportunity to toll. mally defined. The law of gross negligence in $97 million, including interest, when USAT We would not sue the other proposed defend- Texas is currently unsettled, but a recent de- had already suffered disastrous results in its ants during 1995 if they leave their tolling cision by the Texas Supreme Court an- first MBS portfolio and was in a critically agreement with us and OTS in place. nounced a new standard of gross negligence weakened financial state. Approximately $80 Contacts: Jeffrey Ross Williams, Counsel, that will be very difficult to meet if it is ap- million of the $180 million was advanced (202) 736–0648; Robert J. DeHenzel, Jr, Coun- plied to D&O cases. In Transportation Insur- within two years of the failure. sel, (202) 736–0685, PLS; Betty Shaw, Inves- ance Company v. Moriel, 879 S.W.2d 10 (Tex. (3) Hurwitz, as a de facto officer and direc- tigations Specialist, Southwest Service Cen- 1994), the Texas Supreme Court defined gross tor and controlling person of USAT, ter, (214) 851–3042. negligence as constituting two elements: (1) breached his duties of loyalty to USAT by viewed objectively from the standpoint of failing to insist that UFG and Maxxam Concurrence: the actor, the act or omission must involve honor their net worth maintenance obliga- Date: July 27, 1995. an extreme degree of risk, considering the tions. While this breach may have first oc- WILLIAM F. KROENER III, probability and magnitude of the potential curred more than two years before failure, it General Counsel. harm to others, and (2) the actor must have was a breach that continued and escalated JOHN F. BOVENZI, actual, subjective awareness of the risk in- within two years of failure. Director, DDAS.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00101 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.246 pfrm07 PsN: E20PT1 E2440 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 EXHIBIT A—PROPOSED DEFENDANTS

Name Positions Net Worth

Charles Hurwitz ...... Director of UFG (11/10/83–2/11/88) ...... $140MM UFG Executive Committee (1983–2/11/88) ...... President and CEO of UFG (8/84–11/14/85) ...... Chairman of the Board of UFG (8/84–11/14/85) ...... UFG/USAT Strategic Planning Committee (1986 and 1987) ...... Barry Munitz ...... Director of USAT (8/26/82–1988) ...... $3.4MM USAT Executive Committee (1982–1988; Chairman, 1985–1988) ...... USAT Executive Compensation Committee (1982–1985) ...... USAT Investment Committee 8/8/86–5/19/87; Chairman, 1986) ...... UFG/USAT Strategic Planning Committee (1986 and 1987) ...... Director of UFG (1983–1988) ...... Chairman of UFG board (1988) ...... Chief Executive Officer and President of UFG (1988) ...... UFG Executive Committee (1983–1988; Chairman, 2/14/85–1988) ...... UFG Investment Committee (1987) ...... UFG Compensation Committee (1983–1988) ...... Jenard Gross ...... Chairman of the Board of USAT (2/14/85–1988) ...... $7MM CEO of USAT (2/14/85 to 1988) ...... President of USAT (1/8/87 to 1988) ...... USAT Executive Committee (1986–1988) ...... USAT Audit Committee (11/10/87–1988) ...... Chairman of USAT Investment Committee (5/8/86–1988) ...... USAT/UFG Strategic Planning Committee (1986–1987) ...... Director of UFG (1985–1988) ...... President and CEO of UFG (11/14/85–1988) ...... UFG Executive Committee (1985–1988) ...... Michael Crow ...... Executive VP (Fin/Adm) and Chief Financial Officer of USAT (12/83–1988) ...... Unknown Senior Executive VP (Fin/Adm) of USAT (1/8/87–1988) ...... USAT Executive Committee (1988) ...... USAT Investment Committee (5/8/86–1988) ...... USAT/UFG Strategic Planning Committee (1986 and 1987) ...... Director of UFG (1988) ...... CFO of UFG (1984–1988) ...... Senior VP of UFG (12/83–1988) ...... Net Worth Total ...... $150MM Available Insurance ...... $0 Total Recovery Sources ...... $150MM

PRIVILEGED AND CONFIDENTIAL ATTORNEY Under Hurwitz’s control, USAT made a erally insured deposit institution such as WORK PRODUCT large number of, at best, questionable real USAT and the assistance it would provide to Chairman Helfer, Vice Chairman Hove, Di- estate loans, both made and lost money on his takeover activities. He acquired control rector Ludwig, Acting Director Fiechter, Mr. its junk bonds, and suffered huge losses on over USAT’s approximately $3.3 billion in as- Geer, Mr. Mason, Mr. Hood, Mr. Zemke, Mr. two successful attempts to create paper prof- sets through entities owned and controlled Jones, Mr. J. Smith, Mr. Rose, Mr. Thomas, its through trading mortgage backed securi- by him for a $7.8 million investment. Mr. Graham, Mr. Newton, Mr. Whitney, Mr. ties (‘‘MBS’’) and instruments that sup- Hurwitz’s $7.8 million investment con- O’Keefe, Mr. Taylor, Ms. Anderson, Mr. posedly hedged the MBS. stituted 0.2% of USAT’s initial assets; the Monahan. We recommend three basic claims: the first American taxpayers lost $1.6 billion—48% of Memorandum to: Board of Directors, Federal for $97 million in (net) losses in the second USAT’s initial assets and 200 times Hurwitz’s Deposit Insurance Corporation MBS trading scheme, the second for approxi- investment. Hurwitz dominated the affairs of From: Jeffrey Ross Williams, Counsel, Pro- mately $50 million in additional losses which both USAT and the holding company, lever- fessional Liability Section could have been avoided but were incurred aged the institution heavily, and, ulti- Robert J. DeHenzel, Jr., Counsel, Profes- with respect to the institution’s first MBS mately, engaged in a series of grossly impru- sional Liability Section portfolio, and the third for in excess of $150 dent transactions—all at little or no risk to million for failure to comply with net worth Subject: United Savings Association of Texas himself. maintenance obligations of USAT. While we On December 30, 1988 USAT failed. At fail- Houston, Texas—In Liquidation Request believe that some additional claims (involv- ure the Association had assets of $4.6 billion; for Authority to Initiate Litigation ing losses on the first MBS portfolio, a pat- the loss to the FDIC is estimated at $1.6 bil- I. Introduction ently imprudent $32 million dividend by lion. United Savings Association of Texas USAT, grossly excessive salaries, and com- This memorandum requests authorization (‘‘USAT’’) presents a graphic picture of what mercial lending losses) could pass the Rule 11 to initiate litigation against Hurwitz and can happen when: two hopelessly insolvent test for good faith pleadings, our conclusion three former directors and officers of USAT. thrifts are combined (resulting in USAT); based on the facts now known to us is that The proposed lawsuit seeks approximately regulators/insurers (FHLBB, FSLIC and ultimately we could expect to lose on those $300 million in losses incurred as a result of FHLB-Dallas) lack resources to close the additional claims under a gross negligence/ gross negligence, breach of fiduciary duties thrift; regulatory and general accounting Texas business judgment rule standard. Con- of loyalty and care, knowing participation in rules allow, if not encourage, financial re- sequently, such additional claims are not and aiding and abetting breach of fiduciary porting that does not reflect economic re- recommended. We have also negotiated an duty and professional negligence. There is no ality, and there is a controlling person agreement in principle with United Finan- directors and officers’ liability policy. The (Charles Hurwitz (‘‘Hurwitz’’)) who (a) under- cial Group, Inc. (‘‘UFG’’), USAT’s first tier proposed defendants have an aggregate net stands the foregoing, (b) can obtain control holding company, to settle a separate tax worth of approximately $150 million. of the thrift by investing a nominal percent- claim for approximately $9.6 million, which Absent a change from the current state of age of his assets ($7.8 million to control $3.3 the law in the Fifth Circuit on the statute of we hope to finalize within the next 90 days. billion), (c) has substantial personal and cor- limitations, there is at least a 70% chance porate incentives to keep USAT open and II. Background that most or all of the case will be resolved under his control regardless of its actual In 1982, Hurwitz, a well-known Houston in- adversely to the FDIC on summary judgment condition (e.g., to maintain his ability to vestor active in leveraged corporate acquisi- or on a motion to dismiss. If, the claims sur- buy massive quantities of Drexel junk bonds tions, acquired USAT in connection with a vive the statute of limitations challenge, the with no funding concerns or real risk to him- merger of two Houston savings and loan odds of a favorable outcome remain marginal self and aid him in obtaining an $8 million holding companies, namely, UFG which at best because of adverse caselaw on the bonus from another Hurwitz controlled enti- owned 100 percent of USAT, and First Amer- standard of care and the business judgment ty, Maxxam, Inc. (‘‘Maxxam), and (d) could, ican Financial of Texas (‘‘First American’’). rule. and did, recruit and motivate enough officers From the outset of the Hurwitz regime, The admittedly high cost, high risk claims and directors (the ‘‘core group’’) for USAT to USAT was in serious financial trouble. It against Hurwitz and the former directors and assure that his goals were promoted despite struggled with a portfolio of under-per- officers outlined in this memorandum may their cost to USAT—and, ultimately, the forming and non-performing loans; it had the result in a significant recovery. After bal- American taxpayers. burden of $280 million in goodwill as a non- ancing the merits of the claims, the likely In addition to self-inflicted wounds, USAT income producing intangible asset; and it recovery sources, and the fact that the stat- was the victim of a multimillion dollar fraud had severe internal control problems. USAT ute of limitations defense may be be tested (by Couch Mortgage), and suffered the effects survived only by taking gains from extraor- early in the litigation, thus reducing the of holding a portfolio of real estate loans and dinary and high risk transactions. likely cost if the litigation is ultimately un- investments in the collapsing Texas econ- Hurwitz’s acquisition of USAT obtained for successful on that basis, we recommend that omy. him the financial leverage available in a fed- these claims be pursued.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00102 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.250 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2441 III. Theory of the Claims it had done so, the ultimate losses USAT suf- Hurwitz devised and approved USAT business The proposed litigation consists of three fered as a result of Joe’s Portfolio would strategies. He worked with other MCO/FDC claims which are summarized briefly below have been reduced by approximately $50 mil- employees to direct USAT’s securities in- and set out in more detail in Section V, lion. vestments. infra. The same members of the Investment Com- Further, Hurwitz hand-picked certain prior business and social friends for key positions A. Claims Against Hurwitz and the Core Group mittee involved with the UMBS claim, as well as Hurwitz, would be defendants on the at USAT to carry out his plans for USAT, The claims against Hurwitz and the pro- Joe’s Portfolio claim and the legal theories and hired others, paying them excessive sala- posed officer and director defendants will be would mirror those on the UMBS claim. ries despite their limited experience in the based upon losses resulting from USAT’s de- 3. Net Worth Maintenance Obligation savings and loan industry. The relationships cision to engage in two significant trans- these individuals had with Hurwitz and the actions, each grossly imprudent: the invest- By virtue of his position as a de facto offi- salaries USAT paid them compromised their ment of $180 million in a USAT subsidiary, cer and director and controlling person of loyalty to the institution. This group of United MBS (‘‘UMBS’’), to facilitate what USAT, Hurwitz owed to USAT a duty of loy- Hurwitz associates—the ‘‘core group’’—in- were billed as risk controlled arbitrage ac- alty and a duty to protect and care for the cluded Crow, Munitz, Kozmetsky, Gross, tivities (with losses of approximately $97 interests of the institution. By virtue of his Berner, and Huebsch. Each of them held posi- million) and its failure to act to prevent fur- position as a Board member and officer at tions not only with USAT but also the hold- ther losses in USAT’s first MBS portfolio UFG and MCO (two of USAT’s holding com- ing company, UFG, and with MCO/FDC. panies), and as a director and control person (with losses of approximately $50 million). B. The Drexel Connection The third claim is against Hurwitz only for of Federated Development Company A principal motive for Hurwitz’s acquisi- failure to maintain the net worth mainte- (‘‘FDC’’), Hurwitz was in a position to cause these entities to honor their net worth main- tion of USAT was the potential assistance it nance obligations of USAT. could provide for his takeover activities. The 1. The $180 Million Investment in United MBS tenance obligations to USAT. Hurwitz inten- tionally disregarded these duties and, indeed, initial plan called for using USAT as a mer- The claims against the proposed defend- chant bank which would directly participate devoted considerable efforts to helping UFG, ants for UMBS losses are predicated upon in hostile takeovers. The first such effort MCO and FDC avoid these responsibilities. strong warnings from regulators and USAT’s was the attempted takeover by MCO, FDC The loss attributable to his breaches of duty outside auditor concerning USAT’s securi- and USAT, of Castle & Cook (‘‘C&C’’) in late is in excess of $150 million. ties investments, the defendants’ knowledge 1983. The use of federally insured funds in of USAT’s deep financial trouble and USAT’s * * * * * connection with this activity resulted in liti- disastrous mismanagement of and dem- While we believe the entire USAT Board gation, unfavorable publicity and criticism onstrated inability to control its MBS in- was grossly negligent with respect to the from FHLBB regulators. Ultimately, vestment portfolio. The theory of the claims UMBS investigation and Joe’s Portfolio, we Hurwitz abandoned the C&C takeover and against most of the proposed defendants is do not and cannot recommend suit against thereafter utilized USAT to support his twofold. First, the USAT Board was grossly all Board members. Early in the course of takeover activities through less direct negligent in abdicating its supervisory role the investigation of the case, tolling agree- means. over the investment affairs of the institution ments were entered into with officers and di- In 1984, Hurwitz entered into what ap- by failing to carefully analyze, approve, and rectors who were perceived at the time to be peared to be a quid-pro-quo arrangement assure adequate controls on the investment key players. Other officers and directors who with Drexel Burnham Lambert, Inc. in UMBS. Second, certain directors and sen- were perceived to be of less significance were (‘‘Drexel’’) pursuant to which Drexel would ior officer members of the Executive Com- not presented with tolling agreements. With assist Hurwitz’s takeover activities in ex- mittee, Investment Committee and Strategic respect to those individuals with whom we change for USAT’s investment in Drexel un- Planning Committee (including Hurwitz) have tolling agreements, the selection of derwritten junk bonds. This conclusion is were grossly negligent by virtue of their hav- parties as defendants in the UMBS and Joe’s supported by the timing and nature of the ing orchestrated the formation of UMBS, ac- Portfolio claims has been governed, prin- trades and financings at USAT and is con- tively directed the investments in UMBS and cipally, by four factors. The first is the de- sistent with Drexel’s work with other lend- caused substantial USAT funds to be lost due gree to which the proposed defendant was in- ing institutions. In 1992, USAT Director and to UMBS’s high risk trading strategies. volved in the transactions at issue. The sec- Executive Committee member Barry Munitz Hurwitz, as a de facto director and an active ond is the knowledge of the affairs of the in- stated in an interview that an ongoing rela- participant on the Strategic Planning Com- stitution attributable to the proposed de- tionship with Drexel was important to mittee, is liable under both theories. The fendant. The third is the extent to which the Hurwitz. According to Munitz, Hurwitz need- claims against Hurwitz, in addition to those proposed defendant was a member of the ed to keep USAT open and free from regu- set forth above, are based on his knowing Hurwitz ‘‘core group’’. The fourth factor is latory intervention in order to maintain his participation in and aiding and abetting the the degree to which pursusing a defendant ‘‘ticket-to-ride’’ with Drexel, and refused to have other entities he owned or controlled officers and directors in the breach of their against whom legitimate claims now exist acquire a junk bond portfolio because of the duties. and is cost effective. The application of those four factors to individual defendants is risk. We believe that many of the accounting 2. Failure To Prevent Further Losses From driven gains taken by USAT to artificially USAT’s First MBS Portfolio—Joe’s Portfolio set forth in Section V infra. Finally, we did not propose suit against certain directors maintain net worth were undertaken to The claim against the proposed defendants who were not part of the ‘‘core group,’’ did avoid regulatory intervention and to ensure arising from USAT’s first portfolio—Joe’s not personally benefit, and were otherwise in that USAT would continue to provide Portfolio—is based on the failure to take ac- the same position as others as to whom we Hurwitz with access to Drexel—even at the tion in early 1987 to prevent exposing USAT had previously allowed the statute of limita- cost of operating the institution at a loss. to further losses. Joe’s Portfolio itself has tions to expire. We believe this result is fair USAT eventually became the eighth largest been described by one USAT analyst as a dis- and that it is unlikely to change the eco- purchaser of Drexel-underwritten junk bonds aster. USAT set up the portfolio without nomics of the claim. among all savings and loans nationwide. By hedging against the risks of declining inter- December 1986, 69% of USAT’s entire junk est rates and, when interest rates declined, IV. History and Regulatory Background bond portfolio, valued at $444 million, was USAT was left with interest rate swap agree- Drexel underwritten. ments requiring fixed interest payments well A. Hurwitz’s Control Over USAT During this period, Drexel arranged junk in excess of the short term interest rate pay- Charles Hurwitz exercised control over bond funding for Hurwitz’s takeover activi- ments USAT received in return. Rather than most of the activities of the Association. He ties and USAT purchased junk bonds and recognizing the loss inherent in the swap was the key decision make at the institution other investments from Drexel. From 1984 agreements, USAT engaged in a ‘‘roll down’’ although he had not formal title at USAT. In through 1988, Hurwitz obtained approxi- strategy, replacing higher coupon MBSs with addition to the control conferred by his mately $1.8 billion in junk bond financing more stable current coupon issues. The re- stock ownership in UFG, Hurwitz acted as a through Drexel for his takeover activities, sult was that USAT ended up with MBSs de facto officer and director of USAT—he and USAT purchased approximately $1.8 bil- yielding substantially less than the rates was Chairman of UFG, which had virtually lion of Drexel junk bonds, and other Drexel USAT was required to pay on its swap agree- no operations independent of USAT, and brokered securities. ments. caused USAT to hold joint USAT/UFG Board Drexel also assisted Hurwitz’s efforts to in- By December 31, 1986, it was obvious that meetings, which he attended; he attended sulate his key entities FDC and MCO from USAT’s strategy for Joe’s Portfolio made no certain Senior Loan Committee (‘‘SLC’’) USAT net worth maintenance obligations. In sense. The portfolio had a negative spread meetings (including the Park 410 meetings) June 1983, FDC and MCO filed an application and the low coupon MBSs exposed USAT to and selected Investment and Executive Com- with the FHLBB to acquire a controlling in- substantial risk of loss in the event that in- mittee meetings; and he was a member of the terest of as much as 35 percent of UFG and terest rates increased. Peterson Consulting UFG/USAT Strategic Planning Committee. thus to become a savings and loan holding has analyzed the portfolio and concludes Together with other officers and directors of company (‘‘SLHC’’) for USAT. In December that USAT should have terminated the FDC and MCO (the Hurwitz entities which 1984, the FHLBB approved the FDC/MCO ap- swaps and sold the MBSs in January 1987. If held a substantial stock interest in UFG), plication subject to the condition that FDC/

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00103 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.253 pfrm07 PsN: E20PT1 E2442 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 MCO maintain the net worth of USAT. That USAT declared and paid a dividend of $32.6 much extraordinary profit as possible, while condition was unacceptable to hurwitz, who million to UFG. The Federal Home Loan deferring losses, in order to keep the institu- engaged in extensive negotiations with the Bank Board’s Supervisory Agent in Dallas tion alive. Hurwitz’s motive in directing this FHLBB to attempt to eliminate or modify expressed ‘‘no supervisory objection’’ to the strategy was that so long as the institution that condition. These negotiations continued dividend because it fell within the limits of survived, it could purchase junk bonds and from December 1984 through at least 1987, the Bank Board’s December 6, 1984 resolu- Drexel could continue to facilitate his other but never resulted in an agreement. During tion, which provided that UFG would not financial objectives. their pendency, Hurwitz, nonetheless, ap- cause USAT to pay a dividend that exceeded a. USAT Mortgage Finance pears to have increased FDC/MCO’s control 50% of USAT’s net income. The $32.6 million Although USAT may have been in compli- over USAT. At December 31, 1984, Drexel ap- was 50% of profits after USAT’s $17 million ance with its liability growth limit at the pears for the first time as a substantial operation loss was offset against this ex- end of 1985, it achieved this result by moving shareholder of UFG, holding 585,371 shares traordinary gain.) However, the Supervisory its growth to subsidiaries for which USAT (or 7.2 percent). Agent stated that ‘‘this office is very con- reported only its investment, not the indi- In December 1985, Drexel and MCO entered cerned with the Association’s practice of vidual assets and liabilities of the subsidi- into an option with respect to 300,000 of the selling branch offices to fund upstream divi- aries. One of these subsidiaries, USAT Mort- UFG shares held by Drexel. Drexel had a dends, particularly in view of the Associa- gage Finance, Inc., was formed in late 1985 to right to put the shares to MCO in 1988 at a tion’s $17.4 million net operating loss for fis- acquire $500 million of MBSs funded by re- premium over market. Drexel also received a cal year 1984’’. The Supervisory agent also verse repurchase agreements. Potential de- substantial option fee for entering into the stated that ‘‘. . . we will continue to closely fendants state that USAT formed USAT transaction. Documents produced by MCO’s monitor the Association’s performance and Mortgage Finance to be a ‘‘finance sub- successor, Maxxam, indicate that the trans- will take action if the Association’s earnings sidiary’’ with the understanding that its as- action was structured to avoid the 25% own- and net worth position begin to deteriorate.’’ sets and liabilities would not have to be re- ership threshold which would have obligated 2. Liability Growth in 1985 ported on USAT’s books. They further assert MCO/FDC to maintain USAT’s net worth. USAT used the remaining 50% of its that USAT quickly learned that the regu- The agreement was extended in 1988 for no branch sale profit (and the resulting increase latory treatment it anticipated would not be consideration, to avoid Drexel putting UFG in net worth) to support additional growth available and therefore sold $350 million of shares to MCO when USAT already had ad- during 1985. As USAT described the situation the subsidiary’s MBSs, paying off a like mitted that it failed to meet minimum net in mid-1985, the increased net worth from the amount of reverse repurchase agreement li- worth requirements. Drexel did not exercise branch sale provided ‘‘a foundation upon abilities. its right to put the shares to MCO until 1989, which to build a new United.’’ The assets ac- The sale of USAT Mortgage Finance’s after USAT failed. quired by the ‘‘new United’’ principally con- MBSs resulted in a realized $9.3 million gain C. The Economic Context For The Claims sisted of mortgage-backed securities in 1985, without which USAT would have in- Against Hurwitz and the Core Group (‘‘MBSs’’) and ‘‘corporate securities’’—most curred a loss for the year. However, in real The conduct of the defendants which will of which were junk bonds. By June 30, 1985, economic terms, USAT’s sale of the MBSs re- be the subject of the proposed litigation USAT had acquired $489 million of MBSs sulted in a loss because USAT had acquired must be evaluated in the context of USAT’s funded by reverse repurchase agreements and interest rate swaps to extend the duration of overall financial condition. From the outset $288 million of ‘‘corporate securities’’ funded the reverse repurchase agreement liabilities. of Hurwitz’s involvement with USAT, the in- with brokered deposits. The $9.3 million gain on the MBS sales was stitution faced enormous financial chal- USAT’s growth during the first half of 1985 matched by a larger unrealized locked in loss lenges. Although its financial statements re- resulted in an increase in total liabilities in ($14.7 million) in the value of the swap agree- ported capital in compliance with regulatory excess of the annualized 25% rate for which ments. USAT did not recognize the loss in- requirements, the institution had a non- prior approval by USAT’s Principal Super- herent in the swap agreements, but instead earning asset—goodwill—on its books arising visory Agent was required under 12 CFR redesignated the swaps in order to justify de- from the First American merger. This large § 569.13–1(a)(1). USAT failed to obtain prior ferring the loss, and permit regulation of it (more than $280 million) intangible asset ex- approval. USAT’s liability growth led to a over the life of the agreements as payments ceeded USAT’s total reported capital, leav- request by the Supervisory Agent on October were made under the swaps. According to the ing USAT with no tangible capital on a liq- 22, 1985 that USAT’s Board execute a Super- workpapers of USAT’s outside auditors, Peat uidation basis. Moreover, the need to amor- visory Agreement under which the associa- Marwick & Mitchell (‘‘Peat Marwick’’), ‘‘the tize USAT’s goodwill over time created a tion would be obligated to comply with the forced sale of securities left an’’ ‘‘imbal- drag on earnings for the foreseeable future. liability growth regulation and provide a ance’’ between the securities portfolio and In addition to the challenge presented by monthly report concerning liability growth. the swap agreements. USAT explained to USAT’s goodwill, by the mid-1980’s the insti- After extended negotiations, USAT agreed to Peat Marwick that it had then entered into tution also faced the impact of the decline in limit its liabilities on December 31, 1985 to a ‘‘mirror swap’’ with respect to $230 million the Texas real estate market, which threat- $4.68 billion. USAT’s Board adopted a resolu- of the swaps in order to offset some of the ened earnings from USAT’s real estate re- tion expressing the agreement and a Feb- imbalanced position. The mirror swap locked lated assets and subjected the Association to ruary 18, 1986 memorandum from a FHLBB of in the negative spread that USAT would repeated increases in loan loss reserves. Dallas Subvisory Agent to the Bank Board’s have to pay over the life of the agreements, USAT management was well aware of the Director of Enforcement stated that ‘‘United provided they were not terminated (and the challenges it faced. A memorandum from was in compliance at December 31, 1985.’’ loss taken) at an earlier date. USAT’s transactions in USAT Mortgage USAT’s president, Gerald Williams, to 3. The Mortgage Backed Security Losses Hurwitz, dated April 12, 1985, stated that the Finance and its accounting enabled USAT to In 1985–1986 USAT engaged in a series of se- report a gain from the transaction without ‘‘biggest road block to operational profit im- curities transactions which seriously im- provement’’ was the approximately $241 mil- recognizing the corresponding loss on the in- paired the institution. These transactions il- terest rate swap agreements. This highly ag- lion of non-earning intangible asset of good- lustrated that the institution did not have will. A memorandum from USAT’s Chief Fi- gressive (and disputed) accounting treat- the desire, intent, or expertise to manage ment was approved by Peat Marwick. FDIC nancial Officer, Michael Crow, dated August such a securities portfolio properly. 21, 1985, stated that ‘‘we need to put together retained Peterson Consulting to evaluate the Even under the best of circumstances (i.e., transaction and calculate the loss inherent a slide show . . . for Mr. Hurwitz as to why the prospect of earning a net spread of ap- in the swap agreements. Peterson Consulting we cannot make money at United Sav- proximately 100 basis points on the MBS concluded that the ‘‘implied market value ings.... [explaining] why our profitability portfolio), the MBS investment strategy loss’’ on the $230 million mirrored swap is impaired by such things as goodwill amor- could not possibly have had a substantial im- agreements was $9.6 million and that, if the tization, below market mortgage loans etc.’’ pact on USAT’s existing and deepening prob- remaining $120 million of swap agreements 1. The Branch Sale and $32.6 Million Dividend lems due to its enormous goodwill carry and had been terminated, and transaction costs With that as prologue, in 1984, USAT sold its escalating losses on its non-performing taken into account, a loss of $5.1 million approximately half of its branch network real estate portfolio. In practical terms, a 100 would have resulted. If these losses had been with the stated intention of moving toward a basis point spread on a $500 million portfolio recognized in 1985, they would have caused ‘‘wholesale strategy’’ which would rely less would yield an annual profit of $5 million. USAT to report a $1,436,000 loss for the year on traditional core deposits and home mort- Before economic reality caught up with re- and to report net worth of $172,129,000, ap- gage lending and more on brokered deposits ported results, USAT has reported extraor- proximately $347,000 below the association’s and other ‘‘wholesale’’ activities. The branch dinary profits in this portfolio of approxi- required net worth at the end of the year. sale resulted in a reported profit of $81 mil- mately $70 million through the end of 1986— Thus, USAT entered 1986 with the knowl- lion. Rather than either offsetting this gain while the ultimate result from this portfolio edge that it had narrowly avoided reporting against goodwill (which was presumably was an approximately $190 million loss (ap- a loss for 1985; that in economic terms, it had based in large part on the franchise value of proximately $110 million in swap losses and incurred a loss on its swaps that, if recog- the branch network) or leaving the addi- $80 million in MBS losses) to USAT. USAT’s nized, would have reduced its net worth to tional capital in USAT to absorb future goal was simple—make every effort to de- slightly less than its regulatory require- goodwill amortization or operational losses, flect regulatory concern by generating as ment; and that its goodwill and other real

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00104 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.256 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2443 estate problems persisted and meant that, problems at USAT. They took no steps, how- sults in substantial losses and cannot be de- absent extraordinary transactions, in the ever, to assert control over the institution. fended as business judgments. words of USAT’s Chief Financial Officer, ‘‘we Thus: V. Discussion of Claims cannot make money at United Savings.’’ The Board as a whole was advised early in A. MBS Transactions b. The ‘‘Roll Down’’ of Joe’s Portfolio USAT’s history of significant problems in 1. Formation and Operation of UMBS the Assosciation’s real estate portfolio. In In 1985, USAT itself made substantial in- In late 1986 USAT decided to form a sub- January 1985, the entire Board was advised vestments in MBSs in what became known sidiary—UMBS—to engage in what was by Texas regulators that (a) scheduled items as ‘‘Joe’s Portfolio,’’ referring to Joe Phil- billed as leveraged MBS ‘‘risk’’ controlled had grown dangerously and exceeded the As- lips, USAT’s junk bond analyst who during arbitrage.’’ Either the attempts to hedge the sociation’s net worth ($153.7MM in scheduled this period also had responsibility for man- portfolio were grossly deficient or there were items constituting 105% of net worth and aging the MBS investments. After presen- a series of largely unhedged rolls of the dice 4.4% of assets), (b) the appraisal practices at tations by various investment banking firms or UMBS was used to put on a massive—al- USAT were suspect, and (c) ‘‘significant’’ in- engaged in the business of selling such trans- most $2 billion—straddle. That is, UMBS was creases in loss reserves would be forth- actions to savings and loans, USAT acquired set up so that no matter how interest rates coming. MBSs, funded them with reverse repurchase moved there would be large gains and large In February 1985, the Board acknowledged agreements, and entered into interest rate losses in its portfolio. UMBS took its prof- receipt of the Texas Savings and Loan De- swap agreements to effectively lengthen the its—to allow USAT to report profits—and let partment’s warnings concerning the growth maturity and duration of the reverse repur- its losses run. The reported profits were ap- of scheduled items at the Association and chase liabilities. USAT’s description of the proximately $60 million through December promised to monitor such matters more program in an October 28, 1985 letter to 1988, while actual accounting losses at liq- closely. Yet, in the same month, the Board, USAT’s Principal Supervisory Agent at the uidation were approximately $125 million. for the first time, delegated loan approval up FHLB of Dallas noted that the asset/liability USAT invested approximately $180 million to $70 million to the SLC in an act of re- match ‘‘virtually locks in a spread between in the UMBS, leveraged the investment into markable abdication of control over USAT’s United’s asset yield and funding cost.’’ a $1.8 billion portfolio of MBSs and ended up USAT’s program was seriously flawed from real estate lending. From 1984 through 1986, the Board and the losing about $97 million, taking into account the beginning. The interest rate swaps Audit Committee of the Board were repeat- the cost of the funds invested. Although we locked in a funding cost of approximately edly advised by the Association’s outside do not recommend naming all the Board 11%, which generated a positive spread when auditors that the ADC lending was a signifi- members as defendants, we believe the entire compared with the original MBSs in the cant problem at the Association and that the Board abdicated its responsibility to ade- portfolio having a yield of slightly over 12%. Association’s appraisal practices were defi- quately supervise USAT when it failed to But the home mortgages underlying the cient. Indeed, on the very day the Park 410 consider, approve, or control the risk inher- MBSs were subject to prepayment at the op- loan was approved by the Board, the Audit ent in the $100 million investment in UMBS. tion of the mortgagors. Shortly after USAT Committee met with outside auditors and The decision by certain directors and officers acquired the MBSs for Joe’s portfolio, inter- were advised again of problems with the As- to invest in UMBS and engage in these ac- est rates plunged, with the five year Treas- sociation’s appraisal practices. tivities was grossly negligent. The risk of ury rate falling from 10.88% in April, 1985 to Throughout 1985 and 1986 Board packets the UMBS investment was especially obvious 7.14% in April 1986, giving homeowners an in- forwarded to members of the Board for quar- and totally imprudent in light of USAT’s dis- centive to refinance their mortgages. As a terly meetings clearly indicated the growing astrous experience with its first ‘‘risk-con- result, USAT found that the MBSs were pre- danger that ADC lending posed to the insti- trolled’’ MBS portfolio, particularly in light paying at a much faster rate than had origi- tution and the rapidly rising rate of fore- of USAT’s weakened financial condition. The nally been estimated, depriving USAT of the closures in the portfolio. decision was a breach of the defendants’ fidu- high yielding assets which were needed to Throughout 1986 the Board was advised by ciary duties of loyalty because its purpose cover the 11% funding cost on the interest either Peat Marwick or by the Investment was to extend the life of USAT for the ben- rate swaps. Committee (Board members received copies efit of Hurwitz’s interests regardless of cost USAT reacted to the accelerating prepay- of Investment Committee minutes) that the or risk. Moreover, once the investment was ments by attempting to sell the high yield- significant increase in securities trading had made, USAT’s Investment Committee au- ing MBSs at a gain before they prepaid and yielded serious internal control problems, thorized UMBS to engage in speculative purchasing replacement MBSs at current and that the MBS portfolio was seriously strategies, gambling that large profits could coupon rates. The theory of this ‘‘roll down’’ distressed. be achieved, without hedging to protect strategy apparently was to acquire more sta- Board members were advised in February USAT’s investment in the event that the ble MBSs that would be less likely to prepay, 1986 that the income of the UFG Group was strategies failed. The authorization of these eroding the assets in the portfolio. However, plummeting and that the accounting gains strategies was grossly neglient and a breach USAT continued this roll down strategy long taken by USAT from MBS trading may not of the defendants’ fiduciary duty of loyalty. after it ceased to make sense. As interest reflect ‘‘real’’ results. USAT’s Board members were advised by rates declined USAT continued to sell MBSs The April 1986 Texas Examination and the Peat Marwick in early 1986 of internal con- at a gain and to reinvest in current coupon May 1986 FHLB Examination reported that trol problems and a steep rise in securities MBSs, even though the new MBSs yielded the institution had significant securities in- activities. They were also advised through less than the locked in funding cost on the vestment problems, a staggering substandard Investment Committee minutes that USAT’s interest rate swaps. When interviewed about assets problem, and was as much as $20 mil- MBS trading was in a confused and troubled the events of early 1986, Joe Phillips did not lion below its regulatory capital require- state. Remarkably, despite this, and in what recall that USAT had continued the roll ments. These findings were not formally appears to be another total abdication of re- down strategy after it had become futile, but communicated to USAT’s Board until 1987, sponsibility, the Board never considered or conceded that rolling down to MBSs which but regulators had periodic discussions with voted upon resolutions authorizing the in- yielded a negative spread (after taking into senior management on these items during vestment of any specific amount in UMBS, account the gains realized) made no sense. the summer of 1986. much less the $100 million initially invested USAT’s decision to roll down to lower cou- The claims against Hurwitz and the core in UMBS. The failure of Board members pon MBSs, rather than to ‘‘unwind’’ Joe’s group must be viewed against this back- Munitz and Gross (who were members of Portfolio may have been a conscious decision ground. By 1986 it was readily apparent to Hurwitz’s core group) to act to protect USAT to expose USAT to a risk of even larger the officials of USAT that the institution’s from these investment strategies, to take losses in the future in order to avoid imme- viability was in doubt. Yet within a four steps to control USAT’s MBS activities and diate recognition of the losses inherent in month period in 1986 (May to August) USAT to prevent the initiation of a new, even larg- the interest rate swap agreements USAT had approved major transactions with extraor- er phase of such activities, warrants pro- entered into in connection with Joe’s Port- dinary and unacceptable risk. These activi- ceeding against them. Although Kozmetsky folio. Had USAT admitted its error in struc- ties evidence blatant disregard for the offi- was a Board member and a member of turing Joe’s Portfolio and decided to unwind cers’ and directors’ duties to the institution Hurwitz’s core group, we do not recommend it, using the proceeds from MBSs to repay and illustrate the degree to which certain naming him as a defendant. reverse repurchase agreement lenders, it members of the Board deferred to the inter- The formation of UMBS was approved by would have been left with the adverse inter- ests and goals of Charles Hurwitz. Both of USAT’s Executive Committee at a meeting est rate swap agreements alone. There were the transactions underlying our proposed on August 7, 1986 but there was no recorded large imbedded losses in these swaps that claima display a common thread—namely, discussion at the meeting of the size of the would have to have been recognized if they the willingness of USAT’s officials to com- investments to be undertaken by USAT in had been terminated. mit substantial resources regardless of obvi- UMBS. Certain Hurwitz core group members, 4. Notice of Significant Problems To The Board ous long term risk of loss so long as there however, were aware of the magnitude of the Members and Senior Officers was a potential for reporting short term UMBS investment by early September. Ma- From 1984 through 1986 the officers and di- gains. The decisions to make the Park 410 terials prepared and distributed for a Sep- rectors of USAT were clearly advised by reg- loan, to invest in UMBS and the failure to tember 15, 1986 Strategy Meeting (attended ulators and outside auditors of significant act with respect to Joe’s Portfolio each re- by Hurwitz, Gross, Munitz, Crow and others)

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00105 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.259 pfrm07 PsN: E20PT1 E2444 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 include a recommendation to increase assets was to take the risks necessary to generate with the same swaps that you originally had through service corporations which will pur- substantial profits which would maintain on, it appears to me that you have worsened chase MBSs and hedge against interest rate USAT’s capital. That goal was pursued even your position.’’ risk. The materials mention a $100 million though it exposed USAT to capital losses By July 1986, it should have been clear to advance to a service corporation (presum- when interest rates increased, and jeopard- all of USAT’s senior management that some- ably UMBS) and a related asset increase of $1 ized the positive spread the portfolio was thing was seriously wrong with Joe’s Port- billion. A memorandum dated October 6, 1986 supposed to generate. folio. USAT had engaged Smith Breeden as to Crow, Phillips, Sandy Laurenson (who was Records concerning the operations of outside consultants to analyze the interest hired to manage the UMBS portfolio) and UMBS bear out Laurenson’s statements. rate sensitivity of USAT. The preliminary others (with copies to Gross and others) Contrary to the Statement of Purpose, conclusion was that USAT had positioned states that a new subsidiary had been estab- UMBS did not purchase enough GNMA puts itself so that, whether interest rates in- lished and capitalized at $100 million to be options to protect the value of its MBSs in creased or decreased, USAT was certain to utilized for Sandy Laurenson’s new MBS ar- the event that interest rates increased, as lose money. Peterson Consulting has re- bitrage activities. Thus, Hurwitz, Gross, they did from April through September 1987. viewed USAT’s report of Smith Breeden’s Munitz and Crow, as well as lower level offi- The GNMA puts options UMBS acquired analysis and concludes that it demonstrates cials at USAT, knew by October 6, 1986 that were apparently exercised for a gain of $3.6 the failure of USAT’s investment, trading a $100 million investment was contemplated million—much less than the loss on the and hedging strategies. USAT had produced and Hurwitz, Gross, Munitz and Crow must MBSs. The GNMA put options were replaced a portfolio that would generate a negative have by then reached the decision to make with additional asset hedges—Treasury note interest spread and that would lose money the investment. futures options—but they were either ac- whether rates went up or down. According to This decision was made at a time when quired too late or in an insufficient amount Peterson Consulting, a successful program USAT was in extreme financial difficulty. to offset the loss on the MBS assets. The re- would have produced a positive spread while The materials distributed at the September sult of UMBS’s inadequate asset hedges was at the same time protecting USAT from loss 15, 1986 Strategy Meeting contain projections a loss in market value of the assets of UMBS in the event of significant changes in inter- that, with no changes in interest rates, of approximately $140 million. Because the est rates. USAT would lose between $40 million and $60 liquidation took place within the approxi- By virtue of reports from USAT’s outside million in each of the next three years and mate time frame outlined by USAT for the auditors Peat Marwick and performance re- ports from senior management, by the fall of that USAT had a negative liquidation value investment—2 years—and hedges adequate to 1986, the full USAT Board also should have of $431.2 million. The materials further con- protect the value of the MBSs were not in known that something was wrong with cluded that growth and capital were both place, USAT incurred losses on its invest- USAT’s MBS portfolio which merited close needed ‘‘to restore the viability’’ of USAT ment in UMBS of at least $64.9 million (plus attention. In January 1986, the Board of Di- and that, before 1987 (when capital rules were interest). rectors was advised by Peat Marwick that to change), growth ‘‘must occur through sub- The UMBS operation involved enormous there had been a significant increase in secu- sidiaries.’’ Shortly before he left USAT, in a risks, which Laurenson understood and rities trading in 1985. Peat Marwick warned memorandum dated November 24, 1986, Ger- which she says she disclosed to members of that the increased activity and addition of a ald Williams wrote to Hurwitz, Gross and the Investment Committee and Hurwitz in trading room had caused deficiencies in in- Crow stating that USAT’s ‘‘base operation’’ their weekly meetings. The decision to un- ternal accounting controls, including (i) was losing money at a rate of $77 million a dertake those risks was reckless and grossly policies and procedures with respect to such year, up from $40 million in 1985. negligent. The result was that, when USAT’s activity had not been established; (ii) inter- We propose to also file suit against Munitz, investment in UMBS was finally terminated nal trading tickets were not completed prop- Gross, Hurwitz and Crow on the theory that by subsequent management, $172,171,894 of erly; and (iii) timely listing of the Associa- the decision to invest in UMBS was grossly USAT cash was invested in UMBS’s oper- tion’s securities positions were not properly negligent given USAT’s enormous losses ations and USAT recovered only approxi- maintained. In October 1986, the Audit Com- from based operations (making new high risk mately $107,330,000 of cash, resulting in an mittee was advised by the auditors that the investments inappropriate), given the ad- ‘‘out of pocket’’ loss of $64,997,000. If the cost investment in mortgage backed securities at verse financial consequences USAT experi- of financing USAT’s investment in UMBS at the Association had grown exponentially and enced from its investment in Joe’s Portfolio the average rate paid on USAT’s deposits is that ‘‘significantly’’ all MBS securities had and which were at high risk of being re- added to this ‘‘out of pocket’’ loss, USAT in- peated by UMBS, and given the fact that been sold and replaced with lower yielding curred a loss of $97,645,000. USAT was no longer viable at the time of the securities ‘‘with slower pre-payment experi- investment. Hurwitz, Munitz, Gross and 2. Failure to Prevent Further Losses From Joe’s ence to better match the maturities of the Crow were present at the September 15 strat- Portfolio Association’s liabilities.’’ Indeed, through a egy meeting when the magnitude of the in- The decision to invest in Joe’s Portfolio May 2, 1986 performance report to the Board, vestment—$100 million—was revealed and without hedging against the risks of declin- the Board was apprised of the fact that the presumably approved. De facto director ing interest rates left USAT with interest yield on higher coupon mortgage backed se- Hurwitz encouraged the UMBS activities and rate swap agreements requiring fixed inter- curities had deteriorated relative to that of knowingly participated in and aided and est payments well in excess of the short term lower coupon mortgage backs because of in- abetted the other defendants’ violations of interest rate payments USAT received in re- creasing speed of prepayment on the higher their duties. turn. Rather than recognizing the loss inher- coupon securities. Management informed the After UMBS was formed, USAT’s Invest- ent in the swap agreements, USAT engaged Board that, in order to protect unrealized ment Committee supervised the investment, in its ‘‘roll down’’ strategy with the result gains on the mortgage backed securities, the authorizing the various high risk strategies that USAT acquired MBSs yielding substan- Investment Group had sold the higher cou- that exposed USAT’s investment to loss. tially less than the rate USAT was required pon securities and replaced them with lower Munitz, Gross and Crow were senior execu- to pay on its swap agreements. Peterson coupon securities, thus reducing net interest tives of USAT and members of the Invest- Consulting has analyzed USAT’s portfolio spreads. By a performance report dated Au- ment Committee that approved these strate- and the roll down strategy and has concluded gust 5, 1986, the Board was informed that net gies. The Investment Committee also failed that, by the end of 1986, USAT had a negative interest income of $3.6 million fell short of to follow USAT’s stated goals for the UMBS spread on Joe’s Portfolio, even taking into the planned $7.2 million primarily because of investment. USAT’s stated goal for the account the gains realized from the sales of the reduced spread on mortgage backed secu- UMBS portfolio, as indicated by an attach- high coupon MBSs. rities. In November and December 1986, per- ment to the November 12, 1986 Investment Although USAT’s internal systems did not formance reports to the Board reported post- Committee minutes, was to ‘‘[b]uy high cou- produce comprehensive reports reflecting the ed losses for October and November of $7.2 pon FHLMC’s (10’s—12’s) and hedge assets status of Joe’s Portfolio and the risks it pre- million and $16.5 million, respectively, and and financing for 1 to 2 years.’’ A formal sented, numerous internal USAT memoranda increase in year to date interest rate swap Statement of Purpose for UMBS indicates reflect the knowledge of senior executives by expenses of $28.7 million and $32.5 million, re- that the arbitrage investment had a ‘‘a two mid-1896 that Joe’s Portfolio had turned into spectively. year time horizon’’ and that GNMA put op- a major problem posing substantial risks for By December 31, 1986, USAT’s problems tions would be used to hedge ‘‘the potential the future. A January 24, 1986 memorandum with its swaps and low coupon MBSs were so cash shortfall if the asset disposal does not from Gross to Gerald Williams questioned obvious that Hurwitz and his core group of cover the liability retirement.’’ Despite whether the MBS sales were ‘‘honest to executives and directors should have ad- these statements, Sandy Laurenson, who was goodness sales that still leave us with the dressed them. Peterson Consulting has ana- hired to manage UMBS, has admitted that same yield that we had before’’ or whether lyzed the status of Joe’s Portfolio as of De- USAT did not follow the Statement of Pur- ‘‘we have penalized our profits for the next cember 31, 1986 and concludes that steps pose for the subsidiary. Instead, with the full five to ten years on our portfolio to take could have been taken that would have re- knowledge and approval of the Investment that profit.’’ Gross wrote to Huebsch and duced the losses USAT ultimately incurred. Committee, USAT, through Laurenson, en- Gerald Williams on February 6, 1986, noting By December 31, 1986, USAT held relatively gaged in a leveraged ‘‘roll of the dice’’ in her that if you replace a 121⁄2% MBS with an low yielding MBSs and high cost swaps. By management of UMBS. The principal goal 111⁄2% MBS ‘‘and still have to match it up holding the low yielding MBSs, without any

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00106 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.262 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2445 hedges to protect against loss in the event shares. In August 1982 UFG agreed to merge nor its predecessor ever signed a separate net that interest rates increased, USAT exposed with First American Financial of Texas. The worth maintenance agreement it had no such itself to losses in the future if interest rates Bank Board approved the merger effective obligation, and (2) because it did not become increased. In fact, rates did increase begin- April 29, 1983 and First American’s insured the legal owner of this Block of stock until ning in April 1987, and the ultimate sale of subsidiary was merged into USAT. As part of after USAT failed, it never exceeded the 25 the MBSs from Joe’s Portfolio resulted in a the merger, UFG, as USAT’s holding com- percent threshold. loss of $107 million. Even after deducting $12 pany, was required by the Bank Board to c. Hurwitz Dominated USAT, UFG, MCO and million of gains USAT extracted from the enter into an agreement whereby UFG FDC portfolio after December 31, 1986, and taking agreed to maintain the net worth of USAT as Hurwitz was the controlling force of USAT, into account the spread between the yield on required by federal regulation. Resolution UFG, MCO and FDC. He was Chairman of the the MBSs and the repos funding them, USAT No. 83–252 of the FHLBB, imposed the fol- Board of MCO and it largest stockholder. He still lost about $80 million on the MBSs from lowing terms, among others, on UFG: was the Chairman of the Board of UFG. He Joe’s Portfolio. If the MBS portfolio had [T]he subject acquisition [is] hereby ap- also served as UFS’s President and Chief Ex- been sold on December 31, 1986, a gain of ap- proved, provided that the following condi- ecutive Officer. He was a member of UFG’s proximately $9 million would have resulted. tions are complied with in a manner satisfac- Executive Committee and the UFG/USAT Thus, USAT’s failure to act on December 31, tory to the [FHLBB’s] Supervisory Agent at Strategic Planning Committee. Hurwitz was 1986, increased USAT’s MBS losses by about the Federal Home Bank of Little Rock (‘‘Su- also a de facto director and senior officer of $89 million. pervisory Agent’’): USAT. He functioned as an active member of When both the swaps and the MBSs from ‘‘6. Applicant shall stipulate to the [Fed- the Board, if not its de facto director and sen- Joe’s Portfolio are taken into account, the eral Savings and Loan Insurance Corpora- ior officer of USAT. He functioned as an ac- net loss incurred by USAT as a result of its tion] that as long as it controls the Result- tive member of the Board, if not its de facto failure to liquidate Joe’s Portfolio on or ing Association [United Savings], Applicant chairman. He directed and controlled about December 31, 1986, was about $51 mil- shall cause the net worth of the Resulting USAT’s investment activity; he regularly at- lion. Peterson Consulting has concluded that Association to be maintained at a level con- tended Board and Committee meetings; he the swap agreements could have been termi- sistent with that required by Section selected USAT officer and directors; he con- nated at a cost of $149 million on December 563.13(b) of the Rules and Regulations for In- trolled and dominated virtually all of 31, 1986. By not terminating the agreements, surance of Accounts, as now, and hereafter USAT’s activities. No significant decision USAT ended up making $52 million of net in effect, of institutions insured 20 years or concerning USAT’s affairs was undertaken payments on the swaps until they were ter- longer and, as necessary, will infuse suffi- without his approval. minated at a cost of about $59 million, or a cient additional equity capital, in a form Hurwitz controlled the affairs of USAT total loss after December 31, 1986 of about satisfactory to the Supervisory Agent, to ef- both through direct particpation and $111 million. Arguably the failure to termi- fect compliance with such requirement.’’ through the actions of a core group of USAT nate the swaps on December 31, 1986 reduced On October 31, 1983 USAT and UFG caused officers or directors (‘‘the core group’’), USAT’s swap losses by approximately $38 to be delivered to the Federal Home Loan which included Barry Munitz (USAT Direc- million. Even after taking into account that Bank a written net worth maintenance com- tor), George Kozmetsky (USAT Director), the swap loss would have been $38 more had mitment. The commitment was signed by Jenard Gross (USAT ’s Chief Executive Offi- USAT liquidated the portfolio and termi- the Chairman of the Board of UFG and stat- cer), Michael Crow (USAT’s Chief Financial nated the swaps on December 31, 1986, the ed: Officer), Arthur Berner (USAT’s Executive ‘‘[The] Chairman of United Financial MBS loss would have been $89 million less, Vice President and General Counsel) and Group, Inc., [does] hereby stipulate that as resulting in net losses of $51 million attrib- Ronald Huebsch (USATs Executive Vice long as United Financial Group, Inc. controls utable to USAT’s refusal to face up to the President for Investments). Many members United Savings Association of Texas, it will problem of Joe’s Portfolio. of the core group held positions not only cause the net worth of United Savings to be We propose to assert a claim against In- with USAT but also with UFG and MCO. maintained at a level consistent with that vestment Committee members and attendees Barry Munitz (‘‘Munitz’’) was a director of required by Section 563.13(b) of the Rules and Hurwitz, Gross, Munitz and Crow for gross MCO. He was also a director of UFG from Regulations for Insurance of Accounts, as negligence for failure to address the prob- 1983 through 1988 and served on UFG’s Execu- now or hereafter in effect, of institutions in- lems with Joe’s Portfolio on or about Decem- tive Committee from 1983 and 1988. He was sured 20 years or longer, and, as necessary, ber 31, 1986. We will also contend that their Chairman of the UFG Executive Committee will infuse sufficient additional equity cap- failure to address the problem was a breach from February, 1985 through 1988. Jenard ital, in a form satisfactory to the Super- of their fiduciary duty of loyalty because it Gross (‘‘Gross’’) was a member of the UFG visory Agent, to effect compliance with such was intended to extend the life of USAT by Board of Directors from 1985 through 1988. He forestalling the regulatory intervention that requirement.’’ Pursuant to the commitment, UFG agreed was President and Chief Executive Officer of might have resulted if the swap loss had been UFG during the same time period. Michael recognized on December 31, 1986 or early in that it would infuse equity capital in a form satisfactory to the Supervisory Agent to Crow (‘‘Crow’’) was a director of UFG in 1988 1987. We will allege that Hurwitz is liable as and the Chief Financial Officer of UFG from a de facto director and that he aided and maintain compliance with regulatory net worth requirements. 1984 through 1988. Arthur Berner (‘‘Berner’’) abetted the other defendants in the viola- became director of UFG in 1988 and served on tions of their duties. On June 29, 1983, MCO and Federated filed an application with the Bank Board for ap- UFG’s Executive Committee. George 2. Net Worth Maintenance: Breach of the Duty proval to acquire control of USAT through Kosmetsky was a director of MCO and UFG. of Loyalty Aiding and Abetting Breach of the acquisition of up to 35% of UFG’s shares. He also served on UFG’s Audit Committee. the Duty of Loyalty a. Hurwitz Owed A On December 6, 1984, the Bank Board granted d. USAT’s Net Worth Deficiency Duty Of Loyalty To USAT conditional approval of the application of From the outset of Hurwitz’s involvement By virtue of his position as a de facto offi- MCO and Federated to acquire control of with USAT, the institution was deeply trou- cer and director and controlling person of USAT. The condition the Bank Board im- bled. Under his control, it grew steadily USAT, Hurwitz owned to USAT a duty of posed on MCO’s and Federated’s acquisition worse. As the institution’s financial health loyalty and a duty to protect and care for of control was that; ‘‘for so long as they di- plummented and its net worth declined, the interests of the institution. By virtue of rectly or indirectly control United Savings, USAT Board members serving at his request his position as a Board member and officer [MCO and Federated] shall contribute a pro undertook greater and greater risks. Rather at UFG and MCO (two of USAT’s holding rata share based on their UFG holdings, of than recognize USAT’s problems and con- companies), and as a director and control any additional infusion of capital . . . that front them constructively, Hurwitz, through person of Federated Development Company may become necessary for the insured insti- these USAT officers and directors (a) dra- (‘‘FDC’’), Hurwitz was in a position to cause tution to maintain its net worth at the level matically increased the liabilities of the As- these entities to honor their net worth main- required by the Corporation’s Net Worth sociation in violation of federal law, (b) gam- tenance obligations to USAT. Hurwitz inten- Regulation.’’ bled on large, cumbersome real estate tionally disregarded these duties and, indeed, In 1985 MCO entered into an option agree- projects with no realistic chance of success, devoted considerable efforts to helping UFG, ment with Drexel Burnam Lambert Group and (c) invested in complex financial instru- MCO and FDC avoid these responsibilities. (‘‘Drexel’’), which gave UFG the right to ments which investments were manipulated b. UFG’s, MCO’s and FDC’s Net Worth Mainte- ‘‘call’’ and Drexel the right to ‘‘put’’ the 7 to produce reported profits while in fact gen- nance Obligation percent of UFG’s stock held by Drexel. When erating multimillion dollar losses to USAT. In early 1982 Hurwitz began to acquire UFG combined with its other holdings, control of To avoid being called upon to comply with shares through companies he owned and con- this additional stock caused its total holding the obligation of UFG, MCO and FDC to trolled, including MCO Holdings, Inc. in UFG to exceed the 25% threshold. We be- maintain the net worth of USAT, Hurwitz (‘‘MCO’’) and Federated Development Com- lieve that this transaction made the net and his colleagues covered up the true state pany (‘‘FDC’’) or by having close colleagues worth maintenance obligation of the Board’s of the Association by a pattern of deceptive acquire the stock. By mid year, Hurwitz resolution applicable to MCO (a predecessor financial reporting and balance sheet manip- owned effective control of UFG, but held of Maxxam) and FDC. Our understanding of ulation. Gains were taken on certain securi- slightly less than 25% of its outstanding Maxxam’s position is that (1) since neither it ties transactions, while losses were left

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00107 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.265 pfrm07 PsN: E20PT1 E2446 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 imbedded in the portfolio; subsidiaries were fault by interest reserves of $17 million. 410 property for $42.5 million, with 75% sell- used to skirt liability restrictions; losses on Hurwitz, the Board, the SLC, and Stanley er-financing on a non-recourse basis. Al- real estate investments were repeatedly un- Rosenberg all share in the culpability for though USAT’s David Graham believed he derstated; and maturity matching credits this transaction which caused $57 million in had reached an agreement with Limited as were manufactured. The effect was to artifi- losses to the institution. to the material terms of the transaction, the cially maintain the reported net worth of 1. Potential Defendants deal collapsed soon after USAT retained, as USAT to protect the assets of UFG, MCO and USAT’s Board members who served on the its legal counsel, long-time Hurwitz friend FDC at the expense of USAT. SLC were grossly negligent in their failure (and Maxxam director) Stanley Rosenberg to Throughout much of 1987 and throughout to supervise USAT properly with respect to represent the Association in finalizing the 1988, even USAT’s reported capital did not its real estate lending practices. In abdica- transaction with Limited. On November 20, meet minimum regulatory standards. This tion of its responsibility in this known prob- the same day Limited returned, unexecuted, resulted, in substantial measure, from the lem area, the Board set a $70 million lending USAT’s letter of intent to purchase the prop- gross mismanagement of USAT for which limit for USAT’s SLC in the face of repeated erty for $38 million, 80% seller-financed, Hurwitz was responsible. On May 13, 1988, the warnings from regulators and Peat Marwick Rosenberg’s law partner Kenneth Gindy Bank Board advised USAT and UFG that that its lending practices and procedures began negotiations with Limited’s agent to USAT did not meet its regulatory capital re- were flawed and, in particular that its ADC sell the property to a different client of Rosenberg’s firm—Gulf Management Re- quirements as of December 31, 1987. The lending had severe problems. Given the insti- sources, Inc. (‘‘GMR’’). Indeed, Limited ulti- Bank Board directed UFG and UFG’s Board tution’s lending experience, such delegation mately agreed to sell the property to GMR to infuse capital sufficient to meet those re- amounted to a total abdication by the Board on terms more favorable to the purchaser quirements. UFG refused to abide by the of its responsibility to review and supervise and less favorable to Limited than those pre- written commitment to maintain USAT’s the institution’s lending activities. Indeed, it viously offered by Limited to USAT. Soon net worth. Similarly, MCO failed to infuse appears that the Board allowed the entire thereafter, Rosenberg became GMR’s 50% additional capital in accordance with its ob- real estate lending and investment activity partner in Park 410 West JV (‘‘Joint Ven- ligation. of USAT to operate with nominal internal ture’’), the entity formed to purchase the Hurwitz took no steps to encourage or controls and no oversight. Thus, the Real Es- property. compel UFG, MCO or FDC to honor their tate Investment Committee committed commitments although he had the power, in In the Spring of 1985, and prior to the clos- USAT to a substantial initial investment in ing with Limited, USAT accepted Rosen- fact, to do so. On December 30, 1988, the Bank Park 410 ($35 million), apparently without Board reiterated its request that UFG honor berg’s invitation to become his partner and Board knowledge or approval and in viola- agreed to pay all of Rosenberg’s financial ob- its net worth maintenance obligation. Again, tion of its authority. The SLC increased the UFG refused; Hurwitz did nothing. As of De- ligations to Joint Venture in exchange for commitment to $70 million—$80 million if half of Rosenberg’s 50% interest in Joint cember 30, 1988, USAT’s reported capital was the Board ratified the decision. Then the $534 less than the stipulated minimum. UFG Venture. In other words, USAT agreed to Board approved funding $80 million—all fund at least 50% of the projected $65 million is responsible for that full amount, but its without apparent concern that the project ability to respond may have been limited at acquisition, development and holding costs was not a bankable credit. The Board was in exchange for a one-fourth interest in the that time to the $35 to $40 million dollar grossly negligent in both its failures of su- range. Maxxam’s obligation, as interpreted project. The Real Estate Investment Com- pervision and in actually approving the park mittee (‘‘REIC’’) with Hurwitz in attendance by OTS, is roughly 30 percent of the $534 mil- 410 loan on terms extremely favorable to made the investment decision based on lit- lion, i.e., Maxxam’s percentage of UFG’s Rosenberg based on a cursory presentation tle, if any, independent due diligence. In- stock times the capital deficiency, or rough- by the SLC. Only Board member Winters stead, the REIC relied on wildly optimistic ly $160 million. Maxxam’s current reported voted to disapprove the loan. profit projections prepared by GMR (Rosen- capital is in the $140 million range. Officers and directors who served on the As part of his duty of loyalty to USAT, berg’s client and partner) and a totally dis- SLC will also be charged with gross neg- torted appraisal that gave a cumulative, Hurwitz had an obligation to cause UFG, ligence because they knew about both regu- MCO and FDC to make such contributions. undiscounted market value of $72.5 million latory criticism and Peat Marwick’s warning only if (and when) the property was sub- As a UFG, MCO and FDC director, officer, and that USAT’s lending activities (particu- and control person, Hurwitz was in a position divided and ready for development. The REIC larly ADC loans) had caused severe losses to described the appraisal as being ‘‘on an as is to take such action. He intentionally refused the institution. Despite this, the SLC gave to do so, thereby breaching his duty of loy- basis’’, but the appraisal expressly warned the Park 410 transaction only a cursory re- that it ‘‘does not represent the present as is alty to USAT. The consequent loss is in ex- view and relied instead on the borrower’s cess of $150 million. market value of the land,’’ such a valuation economic analysis and on a defective ap- being ‘‘beyond the scope’’ of the appraisal. VI. USAT’s Park 410 Loan [For Information praisal that was delivered orally before fund- Hurwitz’s influence was evident from the be- Purposes] ing, but not submitted in writing until after ginning of USAT’s involvement with the In April 1986, USAT made an $80 million the loan closed. The SLC allowed Hurwitz’s Park 410 property. Two members of non-recourse loan to an entity which was influence to compromise its deliberations Hurwitz’s core group served on the REIC— owned by Stanley Rosenberg, a prominent and the proper exercise of its duties. Gross and Crow. San Antonio attorney and close friend and Absent statute of limitations problems, Outside director James R. Whatley con- business colleague of Charles Hurwitz. The FDIC would also propose to sue Stanley firmed in his interview that the Park 410 in- loan was grossly imprudent. It was made Rosenberg for the damages incurred by vestment decision committing USAT to $35 without any significant underwriting in a de- USAT in the Park 410 loan transaction. million was never presented to the Board of clining real estate market when USAT offi- Rosenberg was both counsel to USAT and a Directors. The REIC’s authority to commit cials and the borrowers knew that the participant in the transaction. Knowing the the institution to an investment, without project was doing poorly and had little significant risks inherent in the loan, he prior Board approval, was limited to $2.5 mil- chance of success. The loan was also made nevertheless facilitated and encouraged lion. The Board took no steps to exercise despite warnings from regulators. For exam- USAT to complete the transaction. FDIC scrutiny over real estate investment deci- ple, in January 1985, the Texas Savings and would allege that Rosenberg used his conflict sions or, indeed, to even monitor what the Loan Department advised the Board and sen- position with USAT for his personal benefit REIC was doing. The fact that a commit- ior management that USAT’s lending port- and financial gain and that he aided and ment of such magnitude could be made with- folio was seriously flawed and that scheduled abetted the officials of USAT in the breach out Board approval or awareness dem- items constituted 105% of net worth. While of their fiduciary duties. onstrates the Board’s lack of care and its many of the scheduled items noted in the 2. Narrative Description of the Claim conscious indifference to the need to estab- Texas examination predated the Hurwitz re- Park 410 was a 427 acre tract of vacant and lish effective internal controls. USAT’s inde- gime, the comments represented a warning unimproved real estate located in western fensible investment in Park 410 set the stage to the institution about the fragile nature of San Antonio near the proposed site for Sea (and perhaps the excuse) for it to more than its portfolio. Added to these regulatory World. This general area had attracted con- double its financial exposure in the Park 410 warnings were repeated comments by siderable developer interest and many com- project. In the Spring of 1986, and a few USAT’s outside auditor, Peat Marwick, prior peting office/retail/residential developments months after closing the purchase from Lim- to the approval of the loan, that USAT’s real were being proposed. Its large size and loca- ited, USAT committed to become the lender estate lending was creating substantial prob- tion made Park 410 a ‘‘high profile’’ project for the entire project, with an exposure of up lems for the institution, that appraisals in of the type in which Hurwitz wanted USAT to $80 million dollars. numerous loan files were deficient, and that to be involved. Graham (the SLC chairman) now admits foreclosures and delinquencies were rising On October 10, 1984, USAT received a that the Park 410 project ‘‘got off to a slow rapidly. USAT’s Board and senior officers signed, non-binding letter of intent from start,’’ that the project was ‘‘too big, too dif- chose to ignore these warnings, in part, be- Park 410 West, Ltd. (‘‘Limited’’), a partner- ficult,’’ that there was trouble in the San cause the making of the loan generated im- ship consisting of Alamo Savings (‘‘Alamo’’) Antonio real estate market, and that Joint mediate fees, i.e. reported income of $2.5 mil- and developers Robert Arburn and C. R. Venture could not get outside funding to de- lion, for USAT. The loan was kept from de- McClintick, offering to sell USAT the Park velop the project. In the Fall of 1985, Joint

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00108 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.268 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2447 Venture applied to USAT for a $77.8 million to Rosenberg and GMR, but adverse to 3. Serious Statute of Limitations on the Parks loan to pay off the acquisition debt still USAT. If it was going to be involved at all, 410 Loan owed Alamo and McClintick, to provide as the lender of ‘‘last resort’’ for the bor- Because the Park 410 loan closed in April funds for development and to pay the holding rowers, USAT could have (and should have) 1986, more than two years before USAT’s costs of the project (taxes, interest, etc.). dictated terms which provided maximum failure, there is a serious statute of limita- Again, Hurwitz was involved from the start. protection for the institution. Instead, the tions problem on this claim that we do not Crow recalls Hurwitz presenting the loan loan was non-recourse to the borrower, and believe we can overcome. In light of the proposal to Graham and Childress. Graham guarantees were for only 25% of the loan and Fifth Circuit’s opinion in Dawson, the Su- reported directly to Hurwitz, as well as to took effect only after foreclosure and the preme Court’s refusal to consider whether a members of the SLC concerning negotiations declaration of a deficiency. The guarantors federal rule should be adopted under which in late 1985 and early 1986, and Hurwitz and were also allowed to credit their personal negligence by a majority of the directors Rosenberg participated directly in some of guarantees for any amounts drawn against would toll the statute of limitations, the the negotiations. Hurwitz also participated their $10 million letters of credit. In addi- failure of Congress to address the statute of in the 12/9/85, 1/6/86 and 3/17/86 SLC meetings tion, various improper disbursements were limitations problems through legislation, where the loan was discussed and ultimately made (without objection from USAT) out of and the Fifth Circuit’s recent opinion in Ac- approved. SLC member Jeff Gray recalls it the loan proceeds, including a $400,000 ‘‘loan tion, we do not believe there is a basis under being widely known and understood among fee’’ to Rosenberg and an undisclosed man- existing law for defeating a statute of limi- senior officials that Hurwitz wanted USAT agement fee to Rosenberg of $62,500 at clos- tations motion based on Park 410. Con- to make the Park 410 loan. ing and $75,000 per year thereafter. The Despite adverse comments from its Texas sequently, we do not recommend going for- transaction allowed the borrowers to avoid ward with claims arising out of Park 410. regulator regarding its real estate lending or minimize virtually all immediate ‘‘hard VI. Applicable Legal Theories and Defenses problems and in the face of Peat Marwick’s dollar’’ commitment to the project. repeated warnings in August 1984, February The deficiencies described above and the We recommend pursuing these claims with 1985 and October 1985 that ADC loans were a actions and inactions of USAT’s Board and the following legal theories: (A) breach of fi- problem for USAT and that real estate mar- SLC provide ample support to assert claims duciary duty of loyalty, (B) gross negligence kets were declining, the SLC approved the for gross negligence and breach of fiduciary and breach of fiduciary duty of care, and (C) loan on March 17, 1986, and thereby agreed to duty. Clearly the Board’s conduct con- knowing participation in and aiding and lend the Joint Venture $80 million, but made stituted conscious indifference to the finan- abetting breach of fiduciary duty. Our rea- its obligation to advance funds beyond $70 cial safety and soundness of the Association, sons are summarized below. million contingent upon first receiving particularly in view of the fact that (i) this A. Breach of Fiduciary Duty of Loyalty Board approval. Hurwitz and the SLC ap- was the largest loan ever made by USAT proved the loan despite knowledge that Joint Because of the role that USAT played in and, in the face of the warnings from Peat Venture had been unable to secure financing maintaining Hurwitz’s relationship with Marwick and state regulators, required care- from any other lender and in the face of sig- Drexel, the financial interest and net worth ful scrutiny (ii) SLC members knew that nificant deterioration of the San Antonio maintenance exposure that UFG, MCO and other lenders had refused to finance the real estate market. FDC had in USAT, and the business relation- project (iii) the financial projections were When the SLC approved the loan it had not ship with Rosenberg from which the bene- wildly optimistic and the appraisals flawed yet received the appraisal which was in- fitted personally, Hurwitz profited the most (iv) market conditions were getting worse tended to be, but was not, in compliance from the actionable transactions and stood not better and, (v) USAT could have walked with R41–b. Instead, Hurwitz and the SLC to lose the most had the plug been pulled on away from its initial ‘‘investment’’ in the based their analysis and approval on the bor- USAT sooner. Similarly, the other proposed project for $4.5 million. Instead, the SLC and rower’s (GMR) sales projections and on a dis- individual defendants were so closely tied to the Board (in large part because of Hurwitz’s torted preliminary appraisal by a Houston Hurwitz and his business interests that they influence) chose to commit up to $80 million appraiser having no apparent prior experi- compromised their ability to place USAT’s to a project which they knew or should have ence in San Antonio that gave a cumulative, interests ahead of Hurwitz’s. Munitz, Gross, known had a high probability of failure. undiscounted market value of $88 million. and Crow were dual UFG/USAT directors and GMR’s projections assumed sales of more As noted above, if there were no statute of received generous compensation from USAT. than 65 acres per year, a rate of absorption limitations problem with this claim, FDIC All but Crow had other business connections even higher than its projection of a year ear- would also propose to sue Stanley Rosenberg with Hurwitz that fostered divided loyalties. lier and at higher prices. In fact, it would be for his role in the transaction. Without ques- Munitz was also an officer and/or director of more than four years before the first acre tion, Rosenberg was at the core of Park 410 MCO and FDC at various times. Gross had an was sold at Park 410. and influenced many of USAT’s actions or equity interest in FDC. As a consequence of The final narrative appraisal sent to USAT inactions through his relationship with these relationships, UFG and Hurwitz prof- after the SLC approved the loan was grossly Hurwitz. Rosenberg was originally USAT’s ited at USAT’s expense. deficient. It relied upon stale comparables counsel in the transaction. However, he B. Gross Negligence and Breach of Fiduciary made a year earlier when the market was failed to close a transaction in which USAT, Duty of Care his client, would have had 100% of the bene- stronger, failed to quantify or explain ad- Many of our claims against Hurwitz and justments to comparables, failed to consider fits in exchange for 100% of the risk. Instead, he negotiated a series of deals which resulted the other proposed individual defendants will the impact of the glut of similar projects in be based on allegations of gross negligence the area and failed to contain all three ap- in Rosenberg himself having 25% of the prof- it potential (plus $462,500 of USAT’s cash), and breach of fiduciary duty of care. Recent proaches to value. Not surprisingly, both federal court decisions in Texas interpreting state and federal examiners strongly criti- another client had a 50% interest in the prof- its, and Rosenberg’s client USAT had 50% of Texas law preclude recovery for simple neg- cized the appraisal. ligence. Therefore, we will have to contend The loan closed on April 17, 1986, with the downside risk but only 25% of the upside potential. that the defendants were guilty of gross neg- USAT making an initial advance of $45.6 mil- ligence—a more rigorous standard. Although Given his knowledge, Rosenberg should lion. Three weeks later on May 8, 1986, the we believe that the decisions to make the have counseled USAT not to pursue the Park loan was approved by USAT’s Board of Direc- Park 410 loan and the UMBS investment, and 410 investment. Rosenberg breached his pro- tors, with Hurwitz, Kozmetsky, Gross and those with respect to Joe’s Portfolio, were fessional duty as an attorney by not warning Munitz in attendance. The Board package for grossly negligent, a recent decision by the USAT that it was on the verge of becoming this meeting contained the five page loan Texas Supreme Court announced a new a victim of a potentially illegal Texas land proposal approved by the SLC. This proposal standard of gross negligence that—if ap- flip (i.e., paying Alamo and McClintick three provided, at best, a cursory analysis of a plied—will make it much more difficult to times what they paid for the property less loan of this size and complexity. The min- prove our claims. utes of the meeting reflect no presentation than a year before), that the market was de- or discussion of the loan prior to Board ap- teriorating and that no other financial insti- C. Knowing Participation in and Aiding and proval. According to the minutes, outside di- tution would finance the deal. He failed to Abetting Breach of Fiduciary Duty rector Wayne C. Winters voted against the protect USAT’s interests as he was obligated Under Texas law, secondary liability theo- loan because of concerns about the loan to do. He compounded that breach by entic- ries, such as knowing participation in or aid- amount and the value of the property. Ac- ing and encouraging USAT into a deal that ing and abetting breach of fiduciary duty, cording to Graham, while Hurwitz did not he knew potentially would benefit him by can be used to reach the activities of cul- force USAT to make the loan, everyone on placing USAT at enormous risk. For this he pable persons, like Hurwitz or Rosenberg, the SLC and on USAT’s Board knew that is liable for malpractice and for this same who were neither officers nor directors of Rosenberg was a close friend of Hurwitz and conduct—irrespective of Rosenberg’s status USAT. Hurwitz can be held liable for the that Hurwitz was enamored with putting as USAT’s attorney—he is liable for aiding breaches of duty of Munitz, Gross, and the USAT in play on a big real estate deal in San and abetting USAT officers in the breach of others where he had knowledge that the oth- Antonio. the officers’ duties. Rosenberg and his law ers were breaching their duty to USAT and Hurwitz, the SLC and the Board permitted firm received $462,000 from the loan proceeds provided substantial assistance, direction or the loan to be made on terms very favorable and undisclosed management fees. encouragement. Based on the facts, Hurwitz

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00109 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.271 pfrm07 PsN: E20PT1 E2448 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 should be sued for his knowing participation sions. Furthermore, UMBS’s day to day in- $80 million was invested in UMBS in 1987 in breaches of fiduciary duty by the officer vestment decisions were controlled and di- after the initial investment had already and director defendants. rected by the USAT defendants, thus making begun to turn sour. D. Anticipated Defenses the line between the two entities for pur- Hurwitz’s Involvement—Hurwitz will as- poses of investment decision-making non-ex- sert that he cannot be held liable because he Business Judgment Rule The defendants istent. was never an officer or director of USAT. He will contend that the decisions we challenge Statute of Limitations—The defendants will also argue that even as a director of were business judgments for which they can- will argue that the statute of limitations has UFG, he did not exercise authority or con- not be held liable under Texas law. Recent expired on our proposed claims. Texas law trol over USAT and did not knowingly par- decisions in federal courts in Texas suggest requires claims of negligence, grow neg- ticipate in breaches of fiduciary duty by that the business judgment rule will be ap- ligence and breach of fiduciary duty to be USAT’s officers and directors. Because plied liberally to protect directors and offi- commenced within two years of accrual, un- Hurwitz, in fact, was actively involved in cers from claims for bad management deci- less limitations are tolled by equitable prin- virtually every aspect of USAT’s business, sions, even when large losses result. The ciples. In the Dawson case, the Fifth Circuit and especially in the management of its se- presence of ulterior motives, such as decided that the statute would not be tolled curities portfolio, we have a reasonable Hurwitz’s relationship with Drexel, his de- on an ‘‘adverse domination’’ theory unless a chance to overcome this defense. sire to avoid net worth maintenance claims, majority of the directors were guilty of more VII. Cost Effectiveness and Assessment of Pro- and his relationship to Mr. Rosenberg would than negligence in approving the challenged posed Litigation be relevant in our effort to avoid application corporate action, or in failing to discover of the business judgment rule. If approved, a lawsuit against the proposed wrongful conduct by others. The federal trial defendants would be filed in the U.S. District The defendants will contend that the deci- courts in Texas had split on the actual level sion to invest in UMBS was a reasonable Court for the Southern District of Texas, of culpability required, with some courts Houston, seeking approximately $300 million business decision under the circumstances. holding that gross negligence by a majority They will argue that the absence of alter- in damages. We propose using the law firm of of directors is sufficient to toll the statute Hopkins & Sutter and the minority owned native investments, given the downturn in and others holding that more culpable con- the Texas real estate market, and USAT’s firm of Adorno & Zeder. Both firms have duct, such as fraud, is required. The Supreme Legal Services Agreements with the FDIC need for earnings, made a leveraged invest- Court refused to consider in Dawson whether and do not exceed any fee cap. ment in MBS risk controlled arbitrage com- a federal rule should be adopted under which Potential recovery sources include the pro- pletely appropriate. They will point out that negligence by a majority of the directors posed defendants, who have an aggregate net UMBS had a positive spread and reported will toll the statute. This question has been worth of $150 million. In addition, the by- profits from its formation until the date a answered in the Fifth Circuit by the recent laws of MCO (now Maxxam), provide for the receiver was appointed for USAT, with re- decision in RTC v. Acton, 49 Fd.3 1086 (5th indemnification of any person who serves as ported 1986 earnings of $906,398, 1987 earnings Cir. 1995), holding that under Texas law, only an officer or director of a subsidiary (which of $37,479,283 and 1988 earnings of $20,251,468. self-dealing or fraudulent conduct, and not would include UFG and possibly USAT) or, They presumably will contest Laurenson’s gross negligence, is sufficient to toll the at the request of MCO, serves as an officer or account that the Investment Committee statute of limitations under the doctrine of director of any other corporation. Thus, gave its approval for a ‘‘dice roll.’’ They will adverse domination. Munitz (who was an officer and director of argue that it is inappropriate to evaluate The first $100 million of USAT’s equity in- MCO and/or FDC), may be entitled to indem- their investment strategy based on the re- terest in UMBS was recorded on the books of nification from Maxxam for his wrongful sults of a forced liquidation of the portfolio UMBS in November and December, 1986— acts as a USAT director and officer. Hurwitz after the receivership appointment, particu- more than two years before a receiver for may also be entitled to indemnification for larly because, if the MBSs had been held for USAT was appointed. After December 30, 1986 his wrongful acts as a director and officer of a longer time, they might have been sold at and before May 31, 1987, USAT raised its eq- UFG and because of his activities at USAT a profit after interest rates declined. uity contribution in UMBS by a total of $80 as a member of the UFG/USAT Strategic Nonetheless, there is a substantial risk million. In March 1987, USAT’s equity in Planning Committee. Maxxam is a publicly that the decisions we challenge will ulti- UMBS increased from $100 million to $150 traded company with market capitalization, mately be held to constitute business judg- million. In May 1987, it increased from $150 as of March 15, 1994, of $223 million and total ments for which we cannot recover losses. million to $180 million. We evaluated wheth- assets of $3.2 billion. Pre-Insolvency Duty. The defendants will er a claim could be made for USAT invest- The claims described in this memorandum argue that until USAT became insolvent, the ments in UMBS after December 30, 1986— arising out of the misconduct of officers and fiduciary duties of directors and officers ran within the Texas two year statute of limita- directors are large and complex. They are only to the institution’s equity holders, not tions. We will have to establish that losses also subject to a number of recent adverse to its creditors and depositors. Because resulted from the investments USAT made decisions by the Fifth Circuit Court of Ap- USAT was not reporting insolvency at the in UMBS in 1987. Because the net ‘‘out of peals, the Southern District of Texas and the time of the actions we challenge, the defend- pocket’’ loss on the entire $180,000,000 equity Texas Supreme Court which restrict sub- ants will argue that they had a duty to un- contribution was only $64,997,000, we would stantive liability and FDIC’s ability to reach dertake any and all lawful means to keep the have to argue that the last money invested significant claims accruing prior to Decem- institution open for as long as possible, even was the first money to be lost. The logic of ber 1986. As a consequence, FDIC’s Complaint if that course of conduct aggravated the that position may not be accepted by a will be vigorously challenged and appears losses to the FDIC, depositors and creditors. court. If it is not, it appears that our claim vulnerable to motions to dismiss and mo- We believe that this argument is without will fail because, arguably, USAT recovered tions for summary judgment. There is at merit and that the duties of directors and of- its entire 1987 investment when UMBS was least a 70% chance that these claims will be ficers run to the corporation, not to its liquidated and the ‘‘loss’’ suffered was a loss disposed of adversely to the FDIC on such shareholders. We will contend that directors of $64,997,000 of the contribution it made be- motions relating to the statute of limita- of financial institutions have very broad fi- fore December 30, 1986, prior to the two year tions. If, however, the claims survive sum- duciary duties to persons other than the statute of limitations. mary judgment and proceed to jury trial, the shareholders, including depositors. We will Regulatory Approval—The defendants also odds of a favorable outcome (by settlement also contend that no director or officer may are likely to contend that the regulators or verdict) improve, but do not exceed 50%. breach the fiduciary duty of loyalty, regard- knew about or approved USAT’s investment These variables make it difficult, if not im- less of the solvency of the institution. We activities in MBSs. Regulators did not pro- possible, to quantify the chances of success will argue that the defendants engaged in hibit MBS investments, but neither did they overall. speculative transactions to extend the life of direct or authorize USAT to do what it did. It is estimated that pursuing this matter USAT when the viability of USAT was ten- Moreover, the evidence will show that USAT to trial will cost approximately $4 million in uous, at best, and there was no reasonable did not affirmatively disclose (1) the losses fees and expenses, including expert witness expectation that it could continue in busi- inherent in its interest rate swaps from fees, and an additional $2 million in fees and ness. USAT Mortgage Finance in late 1985 or from expenses will be incurred through trial. Our Standing/UMBS—The defendants will USAT’s ‘‘Joe’s Portfolio’’ in early 1986, (2) downside risk is limited somewhat by the argue that the FDIC as USAT’s Receiver the fact that its ‘‘roll down’’ program for likelihood of an early statute of limitations does not have standing to challenge the in- ‘‘Joe’s Portfolio’’ resulted in a negative motion. It is thus likely that we will incur vestment activities of UMBS, a subsidiary. spread between the income on the MBSs and substantially less than the full cost of a trial They will argue that the Receiver does not the cost of the swaps, and that the swap if we are not going to prevail on the statute own those claims. The UMBS claims, how- problem could have been handled less expen- of limitations issue. To date we have in- ever, are based upon claims arising out of sively and with less risk for USAT, (3) the curred approximately $4 million in fees and USAT activity, i.e., USAT’s loss of $97 mil- fact that $100 million was invested in UMBS expenses for the investigation by outside lion as a result of the decision to invest $180 despite the disastrous experience with ‘‘Joe’s counsel, approximately $400,000 by the Office million of USAT money in UMBS without Portfolio,’’ which could only be understood if of Thrift Supervision and approximately proper controls and protection. The Receiver one knew about the swap dimension of the $600,000 for in-house investigation and in- clearly has standing to challenge such deci- problem and (4) the fact that an additional house attorney costs. Claims of this nature

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00110 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.274 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2449 and magnitude are very difficult to value. 1983 by Charles E. Hurwitz. Hurwitz lever- 4. Appears to FDIC inappropriate to in- That noted, if the case survived statute of aged the institution through speculative and clude OTS representatives in the meeting to limitations defenses, the estimated settle- uncontrolled investment and trading in large discuss possible settlement of its claims ment value would be $20–$40 million. mortgage-backed securities portfolios, with- against Hurwitz since OTS has not yet ap- July 28, 1995 out reasonable hedges, to $4.6 million in as- proved any suit against Hurwitz or his hold- Memorandum to: Catherine L. Hammond, Of- sets. Investments lost value and USAT was ing companies and OTS’ participation at fice of the Executive Secretary. declared insolvent and placed into FSLIC re- such meeting may be perceived by others as From: Robert J. DeHenzel, Jr., Counsel, Pro- ceivership on December 30, 1988. Loss to the an effort by the Executive Branch to influ- fessional Liability Section. FSLIC Resolution Fund is $1.6 billion. ence OTS’s independent evaluation of its in- Subject: Authority to Institute PLS Suit, In- 2. While Hurwitz was a controlling share- vestigation. stitution: United Savings Association of holder and de facto director of USAT he ac- V. FSLIC Resolution Fund (‘‘FRF’’) Issues Texas, Fin #1815, Proposed Defendants: quired, through a hostile takeover and with 1. The Financial Institutions Reform, Re- Former directors and officers, defacto di- the strategic and financial assistance of covery and Enforcement Act of 1989 rector and controlling person Charles Drexel Burnham Lambert, Inc., Pacific Lum- (‘‘FIRREA’’) (enacted Aug. 9, 1989), accord Hurwitz. ber Company, a logging business based in special treatment to certain savings & loan The enclosed memorandum requesting au- northern California. As a result, Hurwitz associations that failed prior to its enact- thority to institute a PLS suit is on the came to control the old growth, virgin red- ment. The FRF obtains its funds from the Board agenda for Tuesday, August 1, 1995. woods that are the principal focus of the Treasury and all recoveries from the assets Because Mr. Bovenzi is out of town and has Headwaters Forest. or liabilities of all FRF institutions are re- not had the opportunity to sign, we are not II. FDIC Litigation quired to be conveyed to Treasury upon the enclosing the original with the distribution 1. On August 2, 1995, FDIC as Manager of conclusion of all FRF activities. The statute today. We anticipate securing his signature the FSLIC Resolution Fund filed a lawsuit does not establish a date for the termination on Monday morning, and will then promptly against Mr. Hurwitz seeking damages in ex- of the FRF. FRF fund always in the red due have the original forwarded to your office. cess of $250 million. to huge cost of these thrift failures. The Deputies to the Directors and the Gen- a. Complaint contains three claims: 2. To date, FRF owes the Treasury approxi- eral Counsel are aware that Mr. Bovenzi has * Count 1 alleges breach of fiduciary duty mately $46 billion. not had the opportunity to sign and have no by Hurwitz as de factor director and control- 3. FDIC has decided that if Hurwitz offered objection to this procedure. ling shareholder of USAT by failing to com- the redwoods to settle the FDIC claims, we Please call me if you have any questions ply with a New Worth Maintenance Agree- would be willing to accept that proposal. Be- whatsoever. ment to maintain the capital of USAT; cause any assets recovered from FRF insti- JACK D. SMITH * Counts 2 and 3 allege gross negligence and tutions are required to eventually be turned RICHARD ROMERO aiding and abetting gross negligence in es- over to Treasury, the trees (i.e. the land con- tablishing, controlling and monitoring two veyance) could conceivably be transferred to large mortgage-backed securities portfolios. Treasury. RESOLUTION 4. May need legislation to assist in transfer 2. FDIC has authorized suit against three Whereas, pursuant to authority contained of land and other details of such a convey- other former directors of USAT that we have in the Federal Deposit Insurance Act and/or ance. The mechanics of such a transfer is not not yet sued; a tolling agreement with these pursuant to applicable state or federal law, a focus of FDIC’s current efforts, which are potential defendants expires on December 31, the Federal Deposit Insurance Corporation to persuade Hurwitz of liability and to seri- 1995. The court may order FDIC to decide to (‘‘FDIC’’), acting as conservator or receiver ously consider settlement. add them as defendants prior to that date. or in its corporate capacity has the author- 3. Status of FDIC Litigation: Pursuant to VI. Impediments to FDIC Direct Action Against ity to bring civil actions for monetary dam- the Federal Rules of Civil Procedure, the Trees ages against directors or officers, outside parties—through counsel—have met and ex- 1. FDIC has no direct claim against Pacific professionals, or fidelity bond companies (or changed disclosure statements that list all Lumber through which it could successfully their successors, heirs or assigns) of insured relevant persons and documents that support obtain or seize the trees or to preserve the depository institutions who fail to fulfill our respective positions. Moreover, the par- Headwaters Forest. Neither Maxxam, Inc. their responsibilities (‘‘professional liability ties have agreed to a scheduling order that (which owns Pacific Lumber and is con- claims’’); and reflects a quick pre-trial period. All dis- trolled by Hurwitz) nor Pacific Lumber are Whereas, the FDIC has investigated and covery is to be concluded by July 1, 1996. The defendants in FDIC’s suit. There is no direct evaluated professional liability claims that court has set a scheduling conference to dis- relationship between Hurwitz’ actions in- it may have arising from the failure or con- cuss all unresolved scheduling issues for Oc- volving the insolvency of USAT and the servatorship of United Savings Association tober 24, 1995; and a follow-up conference on Headwaters Forest owned by Pacific Lumber. of Texas, Houston; and November 28, 1995. Pacific Lumber was acquired by Maxxam but Whereas, based on such investigation and III. Settlement Discussions does not appear to have owned any interest evaluation, the Legal Division and the Divi- in USAT or United Financial Group, USAT’s sion of Depositor and Asset Services believe 1. FDIC has had several meetings and dis- first-tier holding company. Moreover, nei- there is a sufficient basis to prosecute such cussions with Hurwitz’ counsel prior to the ther USAT nor UFG ever owned an interest claims; and filing of the lawsuit. Hurwitz has never, how- in Pacific Lumber. Whereas, the Legal Division and the Divi- ever, indicated directly to FDIC a desire to 2. FDIC’s claims alone are not likely to be sion of Depositor and Asset Services have negotiate a settlement of the FDIC’s claims. sufficient to cause Hurwitz to offer the Head- recommended that the Board of Directors 2. As a result of substantial attention to waters Forest, because of their size relative (‘‘Board’’) of the FDIC authorize the filing of Pacific Lumber’s harvesting of the redwoods to a recent Forest Service appraisal of the a lawsuit seeking damages based on such by the environmental community, media in- value of the Headwaters Forest ($600 mil- claims. quiries, Congressional correspondence, and lion); because of very substantial litigation Now, Therefore, Be It Resolved, that the the state of California, Pacific Lumber has risks including statute of limitations, Texas Board hereby approves the filing of a lawsuit issued various press releases stating it would negligence—gross negligence business judg- against former directors and officers Barry consider various means of preserving the red- ment law, and Hurwitz’s role as a de facto di- Munitz, Jenard Gross and Michael Crow and woods. rector; and the indirect connection noted controlling person Charles Hurwitz, arising IV. OTS Investigation above, including the risk of Hurwitz facing out of the failure of United Savings Associa- 1. Since July 1994, the Office of Thrift Su- suit from Pacific Lumber securities holders tion of Texas and authorizes the General pervision has been investigating the failure if its assets were disposed of without Pacific Counsel (or designee), on behalf of the FDIC, of USAT for purposes of initiating an admin- Lumber being compensated by either out- to take all actions necessary or appropriate istrative enforcement action against siders or Hurwitz or entities he controls. to prosecute such lawsuit, including any ad- Hurwitz, five other former directors and offi- ditional litigation necessary to protect or as- cers, and three Hurwitz-controlled holding sure the viability or collectibility of the DOCUMENT N companies. The OTS may allege a violation claims to be prosecuted in such lawsuit. HOPKINS & SUTTER, of the Net Worth Maintenance Agreement DOCUMENT M CHICAGO, WASHINGTON, DALLAS, and unsafe and unsound conduct relating to March 24, 1995. DRAFT the two MBS portfolios and USAT’s real es- MEMORANDUM To: William F. Kroener, III, General Counsel. tate lending practices. If OTS files its ad- To: File. Subj: Meeting with Vice President Gore on ministrative lawsuit, it may allege damages From: F. Thomas Hecht. Friday, Oct. 20, 1995, at 11:00 a.m. that total more than $250 million. 2. OTS has met with Hurwitz’ counsel; no Re: Environmental Developments. DISCUSSION POINTS interest in settlement has been expressed to CC: Jeffrey R. Williams and Robert J. I. Background OTS. DeHenzel. 1. United Savings Association of Texas, 3. OTS is likely to formally file the charges Over the past year the FDIC has been sub- Houston, Texas (‘‘USAT’’), was acquired in within 45 days. ject to an intense lobbying effort by certain

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00111 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.277 pfrm07 PsN: E20PT1 E2450 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 environmental activists led by the Rose On January 20, 1995, DeHenzel and Hecht The case law on constructive trusts raises foundation of Oakland, California. Their met with Julia Levin of the Natural Heritage additional concerns. It is not, as argued by principal concern has been to conserve an Foundation (‘‘NHF’’), a group closely associ- the Rose Foundation, a generalized remedy area of unprotected old-growth redwoods in ated with the Rose Foundation. NHF is con- for any wrongful or deceitful conduct. The northern California known as the Head- ducting much of the lobbying effort on be- remedy typically involves equitable imposi- waters Forest, currently owned by Pacific half of the Rose Foundation and other envi- tion of a trust where one who is entitled to Lumber, a wholly owned subsidiary of ronmental activists on this issue. certain property (or the res of the ‘‘trust’’), is Maxxam, Inc. Because of the potential FDIC In addition to these more formal encoun- deprived of that property by fraud, wrong- and OTS claims against both Maxxam and ters, Williams, DeHenzel and Hecht have doing or false promise. Entitlement to con- Hurwitz, the Rose Foundation and others each been contacted repeatedly by the Rose structive trust is defined, in significant part, have urged that the agencies take steps to Foundation and its attorneys to explore the by statute in California. Thus: ‘‘One who protect the redwoods. They urge either a ne- theories in more depth and to urge the FDIC gains a thing by fraud . . . or other wrongful gotiated ‘‘debt for nature swap’’ in which the to take action. In each of these meetings and conduct . . . is an involuntary trustee of the agencies’ liability claims are traded away for in subsequent telephone conversations and thing gained for the benefit of the person the forest, or litigation to seize the assets of correspondence, the Rose Foundation and its who would otherwise have had it.’’ Calif. Civil Pacific Lumber. More recently, a Qui Tam allies have urged three general approaches to Code § 2224 (emphasis added). The case law was filed in the United States District Court the problem including: (a) the imposition of identifies three preconditions for the imposi- for the Northern District of California by a constructive trust over Pacific Lumber’s tion of the trust: (a) a discrete, identifiable Robert Martel, a free lance journalist and redwoods, (b) the seizure of redwoods using res, (b) an entitlement to the res by the environmental activist, seeking to draw the an unjust enrichment theory, and (c) obtain- plaintiff of which he or she was deprived and government into litigation against Maxxam, ing rights to the forest or, at a minimum, an (c) wrongful conduct by the defendant. See Hurwitz and Pacific Lumber. environmental easement, as part of a nego- GHK Associates v. Myer Group, Inc.., 274 The purpose of this summary is to memori- tiated settlement. The have also urged Con- Cal.Rptr. 168 (Cal. Ct.App. 1991). The FDIC is alize our contacts with these groups and to gressional action, filed a Qui Tam proceeding not an entity ‘‘who would otherwise have discuss the options they have urged upon the in the Northern District of California and had’’ Pacific Lumber or its hardwoods; the FDIC and OTS. threatened the FDIC with proceedings under FDIC has no entitlement to the assets of Pa- A. THE HEADWATERS FOREST AND PACIFIC the Endangered Species Act. cific Lumber of which the FDIC was de- LUMBER 1. The Constructive Trust and Unjust Enrich- prived. This seriously impairs any claim for The Headwaters Forest consists of about ment Theories the imposition of a constructive trust over 44,000 acres of forest ecosystems, including The possibility of acquiring Pacific Lum- those assets. Nor is it clear what the res of approximately 3,000 acres of old growth red- ber’s redwoods by the imposition of a con- such trust should be. To prevail, the Rose woods. These are the last vestiges of the vir- structive trust has been the centerpiece of Foundation must argue that Pacific Lum- gin redwood forest that once extended for 500 the legal work presented to the FDIC by the ber’s forests or the company itself is simply miles across Northern California and into Rose Foundation. The constructive trust a mutated form of USAT’s investment in southern Oregon. The Headwaters Forest is theory proceeds on the following assump- Drexel underwritten projects at the front also a nesting area for certain endangered tions: (a) that Hurwitz and Maxxam con- end of the quid pro quo. But this represents species. It is, by general agreement, an ex- trolled USAT; (b) that Hurwitz, with USAT’s very difficult problem of proof. The FDIC traordinary natural resource. Pacific Lum- funds, entered into an improper quid pro quo would have to establish a strong, if not di- ber owns much of the Headwaters Forest and arrangement with Drexel pursuant to which rect one-to-one, correlation between USAT surrounding areas, including the old growth federally insured funds were used to invest in investments in Drexel underwritten securi- redwoods. For many years, Pacific Lumber Drexel-underwritten junk bonds, (c) in ex- ties, and the reinvestment of equivalent utilized timber harvest techniques which change for USAT’s investments, Drexel pro- sums in Maxxam’s takeover of Pacific Lum- emphasized preservation of much of the old vided Hurwitz with financial assistance in ber by the third parties who issued those se- growth redwood acreage. It appears that the the hostile takeover of Pacific Lumber; and curities. Thus far in our investigations, such company is now committed to harvest the (d) USAT’s investment in the junk bonds correlations have not been established. timber more aggressively. This includes caused significant damages to USAT includ- The Rose Foundation and its attorneys, al- clear-cutting at least part of the unprotected ing it insolvency. The argument is that the ternatively, argue that because Hurwitz and redwoods. There are currently pending sev- acquisition of Pacific Lumber was the fruit Maxxam were ‘‘unjustly enriched’’ quid pro eral lawsuits brought by environmental of certain fraudulent or improper conduct, quo, Pacific Lumber and its holdings should groups and residents of the area seeking to namely, the quid pro quo arrangement, and be seized. Unjust enrichment, however, is a block some of the harvesting. The results that the FDIC, as successor to the failed factual circumstance—not a cause of action. It may, under appropriate circumstances, have been mixed. However, most recently the USAT has standing to impose a constructive justify restitution and the imposition of a United States District Court for the North- trust on Pacific Lumber as a result of the constructive trust, but it is not an inde- ern District of California issued an injunc- losses sustained. tion restraining Pacific Lumber from log- This is a difficult case. First, although pendent basis for granting relief. Lauriedale ging old growth redwoods in the Owl Creek there was obviously a reciprocal course of Associates Ltd. v. Wilson, 7 Cal. App. 4th area—about five miles from the Headwaters conduct between Hurwitz and Drexel, it is 1439, 9 Cal.Rptr. 2d 774 (First Dist. 1992). Un- Forest. After a two week trial the Court held not at all clear that such a course of conduct just enrichment allegations are typically that Pacific Lumber’s logging practices rep- (or even a firm agreement) was improper in made in support of requests for constructive resented a threat to the nesting areas of the any legal sense. USAT’s investment in junk trust, not as an alternative to them. There marbled murrelet. Among other matters, the bonds was authorized by federal regulation is, however, case law which allows case raises the issue of the ability of the En- and approved by USAT’s investment com- disgorgement of profits arising out of a dangered Species Act to reach private hold- mittee. Disclosure could be an issue, but breach of fiduciary duties which describes ings. Apparently, the decision will be ap- Board minutes and examination reports indi- such profits as ‘‘unjust enrichment’’. This pealed. cate that both regulators and Board mem- appears to be the theory upon which the Rose Foundation relies. See Heckmann v. B. FDIC CONTACTS WITH THE ROSE FOUNDATION bers knew of USAT’s investment in Drexel Ahmanson, 168 Cal.App.3d 119, 214 Cal Rptr. ET AL. underwritten bonds and knew of Hurwitz’s takeover activities as well. Board members 177 (1985). But in such litigation the profits As noted above, the Rose Foundation and must be clearly identifiable and closely other environmentalists have repeatedly and regulators may not have known of the full extent of the quid pro quo and this could tracked. As noted above, this would be dif- urged that the FDIC engage in a ‘‘debt for ficult in this case—unless one assumes that nature’’ swap as part of a negotiated settle- be used to develop claims further. This, how- ever, is qualitatively different set of facts the funds used for junk bond purposes trans- ment or undertake a course of litigation lated dollar for dollar through various third which would result in the seizure of Pacific than those alleged by the Rose Foundation. Most importantly, the junk bond portfolio parties at Drexel’s behest and then to Lumber’s assets, namely the redwoods. Rep- Maxxam for its acquisition of Pacific Lum- resentatives of the FDIC and Hopkins & Sut- was not the cause of USAT’s insolvency. Sig- nificant other problems dominated the Asso- ber. No one who has looked at these relation- ter have met with representatives of the en- ships closely is willing to take that position. vironmental groups to hear their presen- ciation including staggering losses from its tations and to evaluate their claims. Thus: mortgaged backed securities and related in- 2. The Redwoods As Subject of Negotiations On June 17, 1994, Thomas Hecht met with vestments, unamortized ‘‘good will’’ and the As their theories have become subject to Jill Ratner of the Rose Foundation in San deeply troubled real estate portfolio. What criticisms, certain of the counsel for the Francisco for an initial meeting at which the quid pro quo provides, however, is the Rose Foundation have shifted (at least in Ms. Ratner outlined her groups’ concerns. context for other USAT misconduct. For ex- part) from arguments compelling the seizure On October 4, 1994, Hecht, Jeffrey Williams, ample, it helps explain the lengths to which of the redwoods to urging the development of Robert DeHenzel and the Rose Foundation the officers of USAT manipulated the fi- an aggressive and high profile damages case and its lawyers participated in a teleconfer- nances of the institution in order to keep the in which the redwoods become a bargaining ence at which the claims prepared by the doors of the institution open so that Hurwitz chip in negotiating a resolution. This indeed, Rose Foundation were presented in more de- could continue to avail himself of Drexel may be the best option available to the envi- tail. contacts and resources. ronmental groups; its greatest strength is

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00112 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.280 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2451 that it does not depend on difficult seizure the False Claims Act. The essence of the ac- a violation of the Act. The cases cited by De theories. This approach would require that tion closely tracks the theories presented in- Stefano in support of his position involve in- both the FDIC and OTS undertake to make formally to the FDIC by the Rose Founda- stances where the link between environ- the redwoods part of any settlement pack- tion and its allies. Martel argues that the de- mental action and agency action is much age. It is a strategy which would attract con- ception and/or dishonesty inherent in the more direct See, for example, Pyramid Lake siderable attention if successful. It is, how- quid pro quo program ultimately amounted Paiute Tribe v. U.S. Dept. of the Navy, 898 ever, not without serious problems. For ex- to a fraudulent depletion of the insurance F.2d 1410 (9th Cir. 1990) (challenge to Navy’s ample, Maxxam is a publicly held corpora- fund and, therefore, fits within the reach of agricultural leasing program which require tion and Pacific Lumber is the only one of the False Claims Act. He seeks not only re- irrigation as an improper diversion of waters its holdings which is profitable. Minority covery for the fraud but the imposition of a containing endangered species). shareholders may be reluctant to allow a constructive trust over Pacific Lumber and/ It is unlikely that an ESA challenge to an substantial portion of the most profitable or the redwoods and to restrain FDIC settle- FDIC failure to sue will succeed. First, al- asset of the company to be traded away to ments unless environmental concerns are though failures to act can be reviewable satisfy debt—particularly debt associated taken into account. There are two serious agency action, cases successfully arguing with Charles Hurwitz and the operation of problems with the action. First, it fits very that position typically involve failure of an Agency to abide by clear regulation or law. USAT. Moreover, Pacific Lumber and poorly within the framework of the False The Supreme Court has repeatedly held that Maxxam have only limited ability to trans- Claims Act which is designed to accommo- decisions to sue are discretionary and out- fer funds or assets among one another. date claims against persons or entities who Maxxam could settle the case and be pre- side the realm of judicial review. Thus: submit fraudulent requests for payment. 31 ‘‘This Court has recognized on several oc- cluded from offering up the forests without U.S.C. § 3729 There is no direct, fraudulently casions over many years that an agency’s de- the consent of Pacific Lumber’s lenders. Pa- induced payment here. Whether more indi- cision not to prosecute or enforce, whether cific Lumber’s and Maxxam’s quarterly and rect items qualify remains to be seen. Sec- through civil or criminal process, is a deci- annual reports indicate that lenders have re- ond, such claims can only be based on public sion generally committed to an agency’s ab- quired that the companies to enter into cer- knowledge if the relator is the original solute discretion. [citations omitted]. This tain agreements restricting inter-company source. See U.S. et rel. Gold v. Morrison- recognition of the existence of discretion is transfers. Any violation of these agreements Knudsen Company, Inc., F.Supp. . 1994 WL attributable in no small part to the general would create significant additional legal 673690 (N.D. N.Y.) Here, the claims involve unsuitability for judicial review of agency problems for both Maxxam and Pacific Lum- exclusively public information and Martel decisions to refuse enforcement. ber. will have difficulty establishing himself as ‘‘The reasons for this general unsuitability This is not to argue that such an approach an original source. are many. First, an agency decision not to shouldn’t be seriously explored. It is to sug- Pursuant to the False Claims Act qui tam enforce often involves a complicated bal- gest, however, that the negotiations will be provisions, the government has 60 days with- ancing of a number of factors which are pe- difficult and involves a broad array of par- in which to advise the court whether it wish- culiarly within its expertise. Thus, the agen- ticipants. It would be a complex transaction es to intervene and take responsibility for cy must not only assess whether a violation involving lenders, government agencies, the the case or leave the case to the relators. 31 has occurred, but whether agency resources targeted principals and, potentially, U.S.C. § 3730(b)(2). During this time, the case are best spent on this violation or another, Maxxam’s minority shareholders. will be kept under seal and held in camera. whether the agency is likely to succeed if it 3. The Status of Congressional Action The defendants have not been served or ad- acts, whether the particular enforcement ac- As the ‘‘debt for nature’’ issue attained a vised of its existence. The United States At- tion requested best fits the agency’s overall certain degree of public exposure, Califor- torney has taken the position, in consulta- policies, and, indeed, whether the agency has nia’s Congressional delegation became active tion with the FDIC, that more time is needed enough resources to undertake the action at in developing legislation which would facili- before the government can intelligently as- all. . . . The agency is far better equipped tate such transactions. In August, 1993 Cali- sess its options in the qui tam setting. Ac- than the courts to deal with the many vari- fornia Congressman Dan Hamburg intro- cordingly, papers have been submitted to the ables involved in the proper ordering of its duced H.R. 2866 which was to have empow- Court seeking an extension of an additional priorities. . . . [ A]n agency’s refusal to in- ered the government to obtain the old 90 days. The relator does not object to the stitute proceedings shares to some extent growth redwoods by ‘‘donation, purchase or extension. the characteristics of the decision of a pros- exchange’’ but not condemnation. The Head- There are several options available to the ecutor . . . not to indict—a decision which water Forest would become a designated wil- government, including: has long been regarded as the special prov- derness area protected from clear cut har- (a) Intervene and stay the case pending ne- ince of the [decision-market].’’ Heckler v. vesting. The bill authorized appropriations gotiations and/or OTS administrative pro- Chaney, 470 U.S. 821, 831–832 (1985). to affect the acquisition. Senator Barbara ceedings. Moreover, the standard of review in such Boxer introduced virtually identical legisla- (b) Intervene and move to dismiss the case, circumstances is whether agency action is ‘‘arbitrary and capricious’’. Motor Vehicle tion in the Senate. The House bill survived given its failure to meet the requirements of Manufacturers Association v. State Farm hearings before the Agriculture Committee the False Claims Act. Mutual Insurance Co., 463 U.S. 29 (1983). and the Natural Resources Committee with- (c) Intervene and amend the Complaint to Given the careful deliberation by the FDIC out major alteration and was sent to the plead a more coherent case. as to whether to initiate litigation in Cali- floor. In September 1994 it passed the House (d) Leave the case to the relators. fornia, Texas or elsewhere and given the by a significant margin and was sent to the Whichever option is followed will be a problems associated with any such litiga- Senate. Initially, Pacific Lumber vigorously function of discussions between the FDIC tion, the decision not to proceed is simply opposed the legislation. In mid-autumn, 1994, and the Department of Justice. These discus- not arbitrary and capricious. Environmental the Company changed its position and an- sions are currently underway at the urging groups may disagree with the decision (if, in- nounced it would support the legislation in of Williams and DeHenzel. The Office of Thrift Supervision presently seeks little or deed, the FDIC determines not to act) but a light of House amendments which clarified successful challenge will require much more. the voluntary nature of any such transfer. no contact with the qui tam action. OTS No hearings were held in the Senate on the will, however, be kept apprised of the pro- House bill or on Boxer’s parallel legislation; ceedings as it develops its administrative DOCUMENT X no vote was taken in the Senate. proceedings. Attorney Client Privilege Attorney Work In the aftermath of the November, 1994 5. The Endangered Species Act (‘‘ESA’’) Product elections, the prospects for this legislation In a November 18, 1994 letter, Richard De Memorandum To: Board of Directors, Fed- passing either chamber are now very modest. Stefano, on behalf of the Rose Foundation, eral Deposit Insurance Corporation. Congressman Hamburg is no longer present raised for the first time the possibility that From: Jack D. Smith, Deputy General Coun- to push the issue. His replacement, Congress- the Endangered Species Act may be used to sel. man Riggs has not shown any interest in the challenge the FDIC’s failure to initiate liti- Date: July 24, 1995. legislation. The new Chairman of the House gation against Maxxam and Hurwitz. De Subject: Status of PLS Investigation; Insti- Natural Resources Committee, Don Young, Stefano argues that since ESA mandates tution: United States Association of apparently takes a dim view of the legisla- that ‘‘. . . all Federal agencies shall seek to Texas, Houston #1815. tion. Senator Boxer has not re-introduced conserve endangered species . . . and shall This memorandum reports on the status of her bill in the 104th congress. It appears that utilize their authorities in furtherance of the the continuing investigation of the failure of if there is to be such legislation, it will fol- purposes [the Act], 16 U.S.C. § 1531(c)(1), the United Savings Association of Texas low—not precede—a negotiated resolution FDIC must take into account the environ- (‘‘USAT’’), the separate investigation being involving the redwoods. mental impact on endangered species associ- conducted by the Office of Thrift Supervision 4. The Qui Tam Action ated with Pacific Lumber’s logging of the (‘‘OTS’’), current tolling agreements, settle- On January 26, 1995, Robert Martel, as rela- redwoods in the agencies decision to sue or ment negotiations with United Financial tor, filed an action in the United States Dis- not to sue. De Stefano argues, that the deci- Group, Inc., (‘‘UFG’’) USAT’s first tier hold- trict Court for the Northern District of Cali- sion not to pursue recoveries of the redwoods ing company, and our decision not to rec- fornia pursuant to the qui tam provisions of when there is a legal basis to do so may be ommend an independent cause of action by

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00113 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.283 pfrm07 PsN: E20PT1 E2452 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 the FDIC against the former officers and di- standard of gross negligence that will be claim on the merits, but we see no viable rectors of USAT and controlling person very difficult to meet. In Transportation In- basis under existing law for avoiding a stat- Charles Hurwitz. surance Company v. Moriel, 1994 WL 246568 ute of limitation. Thus, we recommend I. Background (Tex.), the Texas Supreme Court defined against asserting this claim. As you know, USAT was placed into re- gross negligence as constituting two ele- ASSESSMENT OF DEFENSES: We expect business judgment rule defenses and serious ceivership on December 30, 1988 with assets ments: (1) viewed objectively from the stand- statute of limitations issues based on recent of $4.6 billion. The estimated loss to the in- point of the actor, the act or omission must Fifth Circuit and other Texas case law. Ab- surance fund is $1.6 billion. After a prelimi- involve an extreme degree of risk, consid- sent a change in the law, there is at least a nary investigation into the massive losses at ering the probability and magnitude of the 70% chance that much or all of the MBS USAT, the FDIC negotiated tolling agree- potential harm to others, and (2) the actor claims will be dismissed based on the statue ments with UFG, controlling person Charles must have actual, subjective awareness of of limitations. The claim for failing to insist Hurwitz and nine other former directors and the risk involved, but nevertheless proceed that the net worth maintenance agreements officers of USAT/UFG that were earlier sen- in conscious indifference to the rights, safe- be honored is more likely to minimize stat- ior officers or directors that were perceived ty, or welfare of others. This new standard will make it very difficult, if not impossible ute of limitation motions but raised a . . . . as having significant responsibility over the SUIT PROFILE: The suit will attract real estate and investment functions at the to prove our claims. The cumulative effect of these recent ad- media and Congressional attention because institution. of Hurwitz’s reputation in corporate take- In May 1994, after a series of meetings with verse decisions is that there is a very high probability that the FDIC’s claims will not overs, and his ownership of Pacific Lumber, the potential defendants and the exchange of which is harvesting redwoods. Environ- considerable documents and other informa- survive a motion to dismiss either on statute of limitations grounds or the standard of mental interests have received considerable tion, we presented a draft authority to sue publicity often suggesting exchanging these memorandum recommending that we pursue care. Because there is significantly less than a 50% chance that we can avoid dismissal, it claims for trees. The Department of Interior claims against Hurwitz and certain of the recently informed us that the Administra- former officers and directors for losses in ex- is our decision not to recommend suit on the FDIC’s proposed claims. tion is seriously interested in pursuing such cess of $200 million. The proposed claims in- a settlement. volved significant litigation risk, in that the III. Debt for Nature Swap TIMING AND COST-BENEFIT ANALYSIS: bulk of the loss causing events occurred Our decision not to sue Hurwitz and the We intend to use Hopkins & Sutter (Chicago/ more that two years prior to the date of re- former directors and officers of USAT is Dallas) and the minority firm Adorno & ceivership, and were therefore subject to dis- likely to attract media coverage and consid- Zeder (Miami). The estimated cost of litiga- missal on statute of limitations grounds. In erable criticism from environmental groups tion by outside counsel is $4 million up to light of the Fifth Circuit’s opinion in Daw- and Congress. Hurwitz has a reputation as a trail, and an additional $2 million through son, a split of authority in the federal trial corporate raider, and his hostile takeover of trail. We have incurred outside counsel fees courts in Texas on the level of culpability re- Pacific Lumber has attracted enormous pub- and expenses of $4. quired to toll limitations and the Supreme licity and litigation because of his har- Attorney Client Privilege Attorney Work Court’s refusal to consider whether a federal vesting of California redwoods. Environ- Product rule should be adopted under which neg- mental interests have received considerable Memorandum To: Board of Directors, Fed- ligence by a majority of the directors would publicity in the last two years, suggesting eral Deposit Insurance Corporation. toll the statute of limitations, our strategy exchanging our claims for trees. We recently From: Jack D. Smith, Deputy General Coun- was to assert that gross negligence was suffi- met with the Department of the Interior, sel. cient to the toll the statute of limitations. who informed us that they are negotiating Stephen N. Graham, Associate Director (Op- After briefings with FDIC deputies and fur- with Hurwitz about the possibility of a debt erations). ther discussion with the potential defend- for nature swap and that the Administration Date: July 24, 1995. ants, we decided to defer formal FDIC ap- is seriously interested in pursuing such a Subject: Status of PLS Investigation, Insti- proval of our claims and continue the tolling settlement. We plan to pursue these settle- tution: United Savings Association of agreements. ment discussions with the OTS in the com- At about the same time that we deferred Houston, Texas #1815. ing weeks. This memorandum reports on the status of formal approval of the FDIC cause of action, IV. Updated Authority to Sue Memorandum the continuing investigation of the failure of we developed a new strategy for pursuing We have attached an updated authority to United Savings Association of Texas these claims through administrative enforce- sue memorandum for your review and con- (‘‘USAT’’), the separate investigation being ment proceedings with the OTS. After sev- sideration. It sets forth the theories and conducted by the Office of Thrift Supervision eral meetings with senior staff of the OTS weaknesses of our proposed claims in great (‘‘OTS’’) current tolling agreements, settle- Office of Enforcement, we entered into a for- detail. It should be considered for Board ap- ment negotiations with United Financial mal agreement with the OTS, who began an proval only if the Board decides, as a matter Group, Inc., (‘‘UFG’’) USAT’s first tier hold- independent investigation into the activities of public policy, that it wants the Texas ing company, and our decision not to rec- of various directors and officers of USAT, courts to decide the statute of limitations ommend suit by the FDIC against the former Charles Hurwitz, UFG, as well as USAT’s and standard of care issues rather than FDIC officers and directors of USAT and control- second tier holding company, Maxxam, Inc, a staff. The litigation risks are substantial and ling person Charles Hurwitz and other USAT publically traded company that is the probability of success is very low, but if officers and investors. We had agreed to significally controlled by Hurwitz. the Board were to decide that it wants to go delay a final decision on this matter until II. Significant Caselaw Developments Have Fur- forward with the filing of a complaint, we after OTS decides whether to pursue claims ther Weakened the Viability of an Inde- need to be prepared to file the complaint in against Hurwitz. However we were advised pendent Cause of Action by the FDIC the Southern District of Texas, on or before, on July 21, 1995 that Hurwitz would not ex- Although we have continued to investigate Wednesday, August 2, 1995. tend our tolling agreement with him. Con- and refine our potential claims during the We will be available to discuss this matter sequently, if suit were to be brought it would pendency of the OTS investigation, two sig- on very short notice. have to be filed by August 2, 1995. We are nificant court decisions and the failure of 1. USAT officers and directors were grossly taking that unusual step of advising the Congress to address the statute of limita- negligent in causing USAT to invest approxi- board of our conclusion that suit should not tions problems has further weakened the mately $180 million in its subsidiary, United be brought. FDIC’s prospects for successfully litigating MBS, leveraging the investment into $1.8 bil- As you know, USAT was placed into re- our claims in United States District Court lion of mortgage backed securities (‘‘MBS’’) ceivership on December 30, 1998 with assets for the Southern District of Texas. and losing approximately $97 million (includ- of $4.6 billion. The estimated loss to the in- In the recent decision of RTC v. Acton, the ing interest) when USAT had already suf- surance fund is $1.6 billion. After a prelimi- Fifth Circuit held that under Texas law, only fered disastrous results in its first MBS port- nary investigation into the massive losses at self-dealing or fraudulent conduct, and not folio and was in a critically weakened finan- USAT, the FDIC negotiated tolling agree- gross negligence, is sufficient to toll the cial state. Approximately $80 million of the ments with UFG, controlling person Charles statute of limitations under the doctrine of $180 million was advanced within two years Hurwitz and nine other former directors and adverse domination. As a result of this opin- of the failure. officers of USAT/UFG that were either senior ion, we can no longer rely on any argument 2. USAT officers and directors were grossly officers or directors that we perceived as that gross negligence by a majority of the negligent in failing to act to prevent $50 mil- having significant responsibility over the culpable Board is sufficient to toll the stat- lion of additional losses from USAT’s first real estate and investment functions at the ute of limitations. Moreover, there is very MBS portfolio. The positions were in place institution. little, if any, evidence of fraud or self-deal- more than two years before failure. Our anal- In May 1994, after a series of meetings with ing that is likely to survive a motion to dis- ysis is that they should have begun to cut the potential defendants and the exchange of miss on statute of limitations grounds. their losses, wind down this set of positions, considerable documents and other informa- Even if we could overcome the statute of starting two years before failing fiduciary tion, we prepared a draft authority to sue limitations problems, a recent decision by duty and aiding and abetting breaches of fi- memorandum recommending that we pursue the Texas Supreme Court announced a new duciary duty. We believe that it is a good claims against Hurwitz and certain of the

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00114 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.285 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2453 former officers and directors for losses in ex- the statute of limitations. There is very lit- soon as that should have been done. The cess of $200 million. The proposed claims in- tle, if any, evidence of fraud or self-dealing statute of limitations risks in this argument volved significant litigation risk. Most nota- that is likely to survive a motion to dismiss are (1) all of the money was originally in- bly, the bulk of the loss causing events oc- on statute of limitations grounds. vested more than two years before failure curred more that two years prior to the date A recent decision by the Texas Supreme and (2) if there is a claim based on USAT of receivership, and were therefore at risk of Court announced a new standard of gross being late in unwinding these transactions dismissal on statute of limitations grounds. negligence that will be very difficult to meet (we think it should have been done by Janu- In light of the Fifth Circuit’s opinion in if it is applied to D&O cases. In Transpor- ary 1, 1987), there is a real likelihood that Dawson, a split of authority in the federal tation Insurance Company v. Moriel, 1994 WL they should have unwound them more than trial courts in Texas on the level of (basi- 246568 (Tex.), the Texas Supreme Court de- two years before failure. cally because we are likely to loose on stat- fined gross negligence as constituting two B. The Merits ute of limitations grounds) because this mat- elements: (1) viewed objectively from the ter has been—and is likely to continue to standpoint of the actor, the act or omission The law has also moved against us on the be—highly visible. Culpability required to must involve an extreme degree of risk, con- merits of the claims. The claims against toll limitations and the Supreme Court’s re- sidering the probability and magnitude of Hurwitz are more difficult than usual be- fusal to consider whether a federal rule the potential harm to others, and (2) the cause he was not an officer or director of should be adopted under which negligence by actor must have actual, subjective awareness USAT. We believe that his involvement rose a majority of the directors would toll the of the risk involved, but nevertheless pro- to the level of a defacto director, but that is statute of limitations, our strategy at that ceed in conscious indifference to the rights, a notable hurdle. time was to assert that gross negligence was safety, or welfare of others. The case in- Texas case law has essentially eliminated sufficient to the toll the statutes of limita- volved punitive damage issues, but the lan- liability for negligence in the name of apply- tions. After briefings with the deputies to guage in the opinion is sweeping. This new ing a very expensive business judgment rule the Directors and further discussion with the standard if applied would make it very dif- defense. potential defendants, we decided to defer ficult, if not impossible to prove our claims. We believe the conduct here constitutes FDIC decision on whether to assert our The effect of these recent adverse decisions gross negligence as that is normally defined. claims and we continued the tolling agree- is that there is a very high probability that The law in Texas is currently unsettled, but ments. the FDIC’s claims will not survive a motion ***** II. OTS’s Involvement to dismiss on statute of limitations grounds. We would also be at an increased risk of dis- At about the same time that we deferred a missal on the merits. Because there is sig- decision on the FDIC’s cause of action, we Attorney Client Privilege Attorney Work nificantly less than a 50% chance that we met with OTS staff to discuss the possibili- Product can avoid dismissal on statute of limitation ties of OTS pursing these claims, plus a net grounds and because victory the * * * we do Memorandum To: Board of Directors, Fed- worth maintenance agreement claim, not recommend suit on the FDIC’s potential eral Deposit Insurance Corporation. through administrative enforcement pro- proposed claims. From: Jack D. Smith, Deputy General Coun- ceedings. After several meetings with senior sel. Stephen N. Graham, Associate Direc- staff of the OTS Office of Enforcement, we III. The Pacific Lumber—redwood forest matter tor (Operations). entered into a formal agreement with the Our decision not to sue Hurwitz and the Date: July 24, 1995. OTS, who began an independent investiga- former directors and officers of USAT is Subject: Status of PLS Investigation, Insti- tion into the activities of various directors likely to attract media coverage and criti- tution: United Savings Association of and officers of USAT, Charles Hurwitz, UFG, cism from environmental groups and mem- Texas—Houston, Texas #1815. as well as USAT’s second tier holding com- bers of Congress. Hurwitz has a reputation as This memorandum reports on the status of pany, Maxxam, Inc, a publically traded com- a corporate raider, and his hostile takeover the continuing investigation of the failure of pany that is largely controlled by Hurwitz. of Pacific Lumber attracted enormous pub- United Savings Association of Texas The FDIC is paying OTS’s costs in connec- licity and litigation because of his har- (‘‘USAT’’), the separate investigation of tion with this matter. vesting of California redwoods. Environ- USAT being conducted by the Office of The OTS has reviewed extensive docu- mental interests have received considerable Thrift Supervision (‘‘OTS’’), current tolling mentation and has recently conducted a se- publicity in the last two years, suggesting agreements, settlement negotiations with ries of administrative depositions. We have exchanging our D&O claims for the redwood United Financial Group, Inc., (‘‘UFG’’) been informed that OTS staff is currently forest. On July * * * we met with representa- USAT’s first tier holding company, and our preparing a broad base draft Notice of tives of the Department of the Interior, who decision not to recommend suit by the FDIC Charges against Hurwitz and others, includ- informed us that they are negotiating with against controlling person Charles Hurwitz ing Maxxam, for substantial restitution or Hurwitz about the possibility of swaping var- and other USAT officers and directors. unsafe and unsound practices and for en- ious * * * that the Administration is seri- We had hoped to delay a final decision on forcement of a net worth maintenance agree- ously interested in pursuing such a settle- this matter until after OTS decides whether ment. OTS staff plans to seek formal ap- ment. We plan to follow up on these settle- to pursue claims against Hurwitz, et al. How- proval for this case in the relatively near fu- ment discussions with the OTS and Interior ever, we were advised on July 21, 1995 that ture. Under the terms of our agreement with in the coming weeks. Hurwitz would not extend our tolling agree- OTS, FDIC will be the beneficiary of any re- V. Updated (Draft) Authority to Sue Memo- ment with him. Consequently, if suit were to covery from the OTS enforcement action randum be brought it would have to be filed by Au- through settlement or litigation against the In light of the complexity of visibility of gust 2, 1995. We are taking the unusual step proposed respondent. All of the potential re- this matter, and the short time frames, we of advising the Board of our conclusion that spondents to the OTS investigation have have attached for your information an up- suit should not be brought basically because signed tolling agreements with OTC which dated, draft, authority to sue memorandum. the FDIC is highly likely to lose on statute expire on December 31, 1995. It sets forth the theories (and weaknesses) of of limitations grounds because this matter III. Significant Caselaw Developments Have our proposed claims in some detail. Whether has been—and is likely to continue to be— Further Weakened the Viability of Suit by that memorandum sets out a viable claim on highly visible. We do not recommend suit. the FDIC the merits should be considered by the Board I. Background if the Board decides that it wants the Texas Although we have continued to investigate As you know, USAT was placed into re- District court to decide the statute of limi- and refine our potential claims during the ceivership on December 30, 1988 with assets tations issue rather than FDIC staff. If the pendency of the OTS investigation, two sig- of $4.6 billion. The estimated loss to the in- Board were to decide to go forward with the nificant court decisions, and the failure of surance fund is $1.6 billion. After a prelimi- filing of a complaint, we need to file the Congress to address the statute of limita- nary investigation into the massive losses at complaint in the Southern District of Texas, tions problems, has further weakened the USAT, the FDIC negotiated tolling agree- on or before, Wednesday, August 2, 1995. FDIC’s prospect for successfully litigating ments with UFG, controlling person Charles our claims in the United States District We are available to discuss this matter at your convience. Hurwitz and ten other former directors and Court for the Southern District of Texas. officers of USAT/UFG that were either senior A. Statute of Limitations officers or directors that were perceived as In the recent decision of RTC v. Acton, the A. Statute of Limitations having significant responsibility over the Fifth Circuit held that under Texas law, only All of the affirmative acts that would form real estate and investment functions at the self-dealing or fraudulent conduct, and not the basis for an FDIC unit occurred more institution. gross negligence, is sufficient to toll the two than two years before USAT failed. Thus, the In May 1994, after a series of meetings with year statute of limitations under the doc- only claims that have any chance of moving the potential defendants and the exchange of trine of adverse domination. As a result of a motion to discuss based on statute of limi- considerable documents and other informa- this opinion, we cannot rely on an argument tations are ones based on USAT’s failure to tion, we prepared a draft authority to sue that gross negligence by a majority of the unwind some positions in mortgage backed memorandum recommending that we pursue culpable Board members is sufficient to toll securities and derivative instruments as claims against Hurwitz and certain USAT

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00115 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.287 pfrm07 PsN: E20PT1 E2454 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 former officers and directors for losses in ex- than two years before USAT failed. Thus, the Hurwitz about the possibility of swapping cess of $200 million. The proposed claims in- only claims that have any chance of sur- various properties, plus possibly the FDIC/ volved significant litigation risk. Most nota- viving a motion to dismiss based on statute OTS claim, for the redwood forest. They bly, the loss causing events occurred more of limitations grounds are claims based on stated that the Administration is seriously than two years prior to the date of receiver- USAT’s failure to unwind some positions in interested in pursuing such a settlement. We ship, and were therefore at risk of dismissal mortgage backed securities and derivative plan to follow up on these discussions with on statute of limitations grounds. In light of instruments as soon as that should have been the OTS and the Department of Interior in the Fifth Circuit’s opinion in Dawson, a split done. The statute of limitations risks in this the coming weeks. of authority in the federal trials courts in argument are (1) all of the money was put at V. Updated (Draft) Authority to Sue Memo- Texas on the level of culpability required to risk more than two years before failure, and randum toll limitations and the Supreme Court’s re- (2) if there is a claim based on USAT being In light of the complexity and visibility of fusal to consider whether a federal rule late in unwinding these transactions (we this matter, and the short timeframes, we should be adopted under which negligence by think it should have been done starting no have attached for your information an up- a majority of the directors would toll the late than January 1, 1987), there is a real dated (draft) authority to sue memorandum. statute of limitations, our strategy at that likelihood * * * that they should have It sets forth the theories (and weaknesses) of time was to assert that gross negligence was unwound them more than two years before our proposed claims in some detail. Whether sufficient to toll the statute of limitations. failure. that memorandum sets out a viable claim on After briefings with the Deputies to the Di- In short, we have an argument for pre- the merits should be considered by the Board rectors and further discussion with the po- senting some claims, but that argument is if the Board decides that it wants the Texas tential defendants, we decided to defer an not likely to prevail. district court to decide the statute of limita- FDIC decision on whether to assert our B. The Merits tions issue rather than FDIC staff. If the claims, and we continued the tolling agree- The law has also moved against us on the Board were to decide to go forward with the ments. merits of the claims. The claims against filing of a complaint, we need to file the II. OTS’s Involvement Hurwitz are more difficult than usual be- complaint in the Southern District of Texas, At about the same time that we deferred a cause he was not an officer or director of on or before, Wednesday, August 2, 1995. decision on the FDIC’s cause of action, we USAT. We believe that his involvement rose We are available to discuss this matter at met with OTS staff to discuss the possibility to the level of a de facto director, but his your convenience. of OTS pursuing these claims (plus a net status presents a notable hurdle. worth maintenance agreement claim) Texas case law has essentially eliminated Attorney Client Privilege Attorney Work through administrative enforcement pro- liability for negligence in the name of apply- Product ceedings. After several meetings with senior ing a very expansive business judgment rule Memorandum To: Board of Directors, Fed- staff of the OTS Office of Enforcement, we defense. We believe the conduct here con- eral Deposit Insurance Corporation. entered into a formal agreement with the stitutes gross negligence as that term is nor- From: Jack D. Smith, Deputy General Coun- OTS, who began an independent investiga- mally defined. The law of gross negligence in sel. Stephen N. Graham, Associate Direc- tion into the activities of various directors Texas is currently unsettled, but a recent de- tor (Operations). and officers of USAT, Charles Hurwitz, UFG, cision by the Texas Supreme Court an- as well as USAT’s second tier holding com- Date: July 27, 1995. nounced a new standard of gross negligence In addition to presenting the attached au- pany, Maxxam, Inc., a publicly traded com- that will be very difficult to meet if it is ap- thority our memorandum for Board action, pany that is largely controlled by Hurwitz. plied to D&O cases. In Transportation Insur- this memorandum reports on the status of The FDIC is paying OTS’s costs in connec- ance Company v. Moriel, 879 S.W. 2d 10 (Tex. the continuing investigation of the failure of tion with this matter. 1994), the Texas Supreme Court defined gross The OTS has reviewed extensive docu- United Savings Association of Texas negligence as constituting two elements: (1) (‘‘USAT’’), the separate investigation of mentation and has recently conducted a se- viewed objectively from the standpoint of ries of administrative depositions. We have USAT being conducted by the Office of the actor, the act or omission must involve Thrift Supervision (‘‘OTS’’), current tolling been informed that OTS staff is currently an extreme degree of risk, considering the preparing a broad-based draft Notice of agreements, and settlement negotiations probability and magnitude of the potential with United Financial Group, Inc. (‘‘UFG’’), Charges against Hurwitz and others, includ- harm to others, and (2) the actor must have USAT’s first tier holding company. ing Maxxam, for substantial restitution for actual, subjective awareness of the risk in- We were advised on July 21, 1995 that unsafe and unsound practices and for en- volved, but nevertheless proceed in conscious Hurwitz would not extend our tolling agree- forcement of a net worth maintenance agree- indifference to the rights, safety, or welfare ment with him. Consequently, if suit is to be ment. OTS staff plans to seek formal ap- of others. This new standard, if applied, brought it would have to be filed by August proval for this case in the relatively near fu- would make it very difficult, if not impos- 2, 1995. Hurwitz actions have precluded that ture. Under the terms of our agreement with sible to prove our claims (3) further, through possibility. Thus the Board must now decide OTS, FDIC will be the beneficiary of any re- legislation Texas has attempted to compare, whether to authorize suit. While we would covery from the OTS enforcement action in essence, ‘authorizations in FDIC claims.’ only sue Hurwitz at this time, rather than through settlement or litigation against the The effect of these recent adverse decisions dividing the memo and possibly, having to proposed respondents. All the potential re- is that there is a very high probability that bring it back to deal with other individuals, spondents of the OTS investigation have the FDIC’s claims will not survive a motion the attached ATS seeks authorization to sue signed tolling agreements with OTS which to dismiss on statute of limitations ground. all of the individuals against whom we would expire on December 31, 1995. We would also be at increased risk of dis- expect to assert claims. In our view Hurwitz III. Significant Caselaw Developments Have missal on the merits. Because there is sig- and the other proposal defendants were Further Weakened the Viability of Suit by nificantly less than a 50% chance that we grossly negligent. There is a 70% probability the FDIC can avoid dismissal on statute of limitations that most or all the conventional claims Although we have continued to investigate grounds, and because even if we survived a that could be made in the FDIC’s case would and refine our potential claims during the statute of limitations motion, victory on the be dismissed on statute of limitations pendency of the OTS investigation, two sig- merits (especially on the claims most likely grounds. An additional claim against nificant court decisions, and the failure of to survive a statute of limitations motion) is Hurwitz has a better probability on the stat- Congress to address the statute of limita- uncertain given the state of the law in ute of limitations issue, but there are nu- tions problems, have further weakened the Texas, we do not recommend suit on the merous obstacles to successful prosection of FDIC’s prospects for successfully litigating FDIC’s potential claim. 4 that claim. Under these circumstances the our claims in the United States District IV. The Pacific Lumber—Redwood Forest Mat- Board must decide whether to authorize a Court for the Southern District of Texas. ter case with these high litigations risks. A. Statute of Limitations Our decision not to sue Hurwitz and the The attached authority to sue, memo- In the recent decision of RTC v. Acton, 49 former directors and officers of USAT is randum is summarized at the end of this F.3d 1086 (5th Cir. 1995), the Fifth Circuit likely to attract media coverage and criti- cover memorandum. held that under Texas law, only self-dealing cism from environmental groups and mem- Background or fraudulent conduct, and not gross neg- bers of Congress. Hurwitz has a reputation as As you know, USAT was placed into re- ligence, is sufficient to toll the two year a corporate raider, and his hostile takeover ceivership on December 30, 1988. After a pre- statute of limitations under the doctrine of of Pacific Lumber attracted enormous pub- liminary investigation into the massive adverse domination. As a result of this opin- licity and litigation because of his har- losses at USAT, the FDIC negotiated tolling ion, we cannot rely on an argument that vesting of California redwoods. Environ- agreements with UFG, controlling person gross negligence by a majority of the cul- mental interests have received considerable Charles Hurwitz and ten other former direc- pable Board members is sufficient to toll the publicity in the last two years, suggesting tors and officers of USAT/UFG who were ei- statute of limitations. There is very little, if exchanging our D&O claims for the redwood ther senior officers or directors that were any, evidence of fraud or self-dealing. forest. On July 21, we met with representa- perceived as having significant responsi- All of the affirmative acts that would form tives of the Department of the Interior, who bility over the real estate and investment the basis for an FDIC suit occurred more informed us that they are negotiating with functions at the institution.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00116 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.290 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2455 In May 1994, after a series of meetings with held that under Texas law, only self-dealing Date: July 24, 1995. the potential defendants and the exchange of or fraudulent conduct, and not gross neg- Subject: Status of PLS Investigation, Insti- considerable documents and other informa- ligence, is sufficient to toll the two year tution: United Savings Association of tion, we prepared a draft authority to sue statute of limitations under the doctrine of Texas—Houston, Texas #1815. memorandum recommending that we pursue adverse domination. As a result of this opin- This memorandum reports on the status of claims against Hurwitz and certain USAT ion, we cannot rely on an argument that the continuing investigation of the failure of former officers and directors for losses in ex- gross negligence by a majority of the cul- United Savings Association of Texas cess of $200 million. The proposed claims in- pable Board members is sufficient to toll the (‘‘USAT’’), the separate investigation of volved significant litigation risk. Most nota- statute of limitations. There is very little, if USAT being conducted by the Office of bly, the principal loss causing events oc- any, evidence of fraud or self-dealing. Thrift Supervision (‘‘OTS’’), current tolling curred more than two years prior to the date B. The Merits agreements, settlement negotiations with of receivership, and were therefore at risk of The law has also moved against us on the United Financial Group, Inc. (‘‘UFG’’), dismissal on statute of limitations grounds. merits of the claims. The claims against USAT’s first tier holding company, and our In light of the Fifth Circuit’s opinion in Hurwitz are more difficult than usual be- decision not to recommend suit by the FDIC Dawson, a split of authority in the federal cause he was not an officer or director of against controlling person Charles Hurwitz trial courts in Texas on the level of culpa- USAT. We believe that his involvement rose and other USAT officers and directors. bility required to toll limitations and the to the level of a de facto director, and for We had hoped to delay a final decision on Supreme Court’s refusal to consider whether some purposes a control person, but his sta- this matter until after OTS decides whether a federal rule should be adopted under which tus presents a notable hurdle. to pursue claims against Hurwitz, et al. How- negligence by a majority of the directors Texas case law has essentially eliminated ever, we were advised on July 21, 1995 that would toll the statute of limitations, our liability for negligence in the name of apply- Hurwitz would not extend our tolling agree- strategy at that time was to assert that ing a very expansive business judgment rule ment with him. Consequently, if suit were to gross negligence was sufficient to the toll defense. We believe the conduct here con- be brought it would have to be filed by Au- the statute of limitations. After briefings stitutes gross negligence as that term is nor- gust 2, 1995. We are not recommending suit with the Deputies to the Directors and fur- mally defined. The law of gross negligence in because there is a 70% probability that most ther discussion with the potential defend- Texas is currently unsettled, but a recent de- or all the FDIC case would be dismissed on ants, we decided to defer an FDIC decision on cision by the Texas Supreme Court an- statute of limitations grounds. Under such whether to assert our claims, in order to fur- nounced a new standard of gross negligence circumstances the staff would ordinarily ther investigate the facts, give time for the that will be very difficult to meet if it is ap- close out the investigation under delegated Texas law on adverse domination to take plied to D&O cases. In Transportation Insur- authority. However, because of the high pro- more concrete shape and ascertain the view ance Company v. Moriel, 879 S.W. 2d 10. (Tex. file nature of this case (evidenced by numer- of OTS. Therefore, the tolling agreements 1994), the Texas Supreme Court defined gross ous letters from Congressmen and environ- were continued. negligence as constituting two elements: (1) mental groups), we are advising the Board in II. OTS’s Involvement viewed objectively from the standpoint of advance of our action in case there is a con- At about the same time that we deferred a the actor, the act or omission must involve trary view. decision on the FDIC’s cause of action, we an extreme degree of risk, considering the I. Background met with OTS staff to discuss the possibility probability and magnitude of the potential As you know, USAT was placed into re- of OTS pursuing these claims (plus a net harm to others, and (2) the actor must have ceivership on December 30, 1988 with assets worth maintenance agreement claim) actual, subjective awareness of the risk in- of $4.6 billion. The estimated loss to the in- through administrative enforcement pro- volved, but nevertheless proceed in conscious surance fund is $1.6 billion. After a prelimi- ceedings. After several meetings with senior indifference to the rights, safety, or welfare nary investigation into the massive losses at staff of the OTS Office of Enforcement, we of others. This new standard, if applied, USAT, the FDIC negotiated tolling agree- entered into a formal agreement with the would make it very difficult, if not impos- ments with UFG, controlling person Charles OTS, who began an independent investiga- sible, to prove our claims. Hurwitz and ten other former directors and The effect of these recent adverse decisions tion into the activities of various directors officers of USAT/UTF who were either senior is that there is a very high probability that and officers of USAT, Charles Hurwitz, UFG, officers or directors that were perceived as much or all of the FDIC’s conventional as well as USAT’s second tier holding com- having significant responsibility over the claims will not survive a motion to dismiss pany, Maxxam, Inc., a publicly traded com- real estate and investment functions at the on statute of limitations grounds. We would pany that is largely controlled by Hurwitz. institution. The FDIC is paying OTS’s costs in connec- also be at increased risk of dismissal, or loss In May 1994, after a series of meetings with at trial, on the merits. tion with this matter. the potential defendants and the exchange of The OTS has reviewed extensive docu- IV. The Pacific Lumber—Redwood Forest Mat- considerable documents and other informa- mentation and has recently conducted a se- ter tion, we prepared a draft authority to sue ries of administrative depositions. We have Any decision regarding Hurwitz and the memorandum recommending that we pursue been informed that OTS staff is currently former directors and officers of USAT is claims against Hurwitz and certain USAT preparing a broad-based draft Notice of likely to attract media coverage and com- former officers and directors for losses in ex- Charges against Hurwitz and others, includ- ment from environmental groups and mem- cess of $200 million. The proposed claims in- ing Maxxam, for substantial restitution for bers of Congress. Hurwitz has a reputation as volved significant litigation risk. Most nota- unsafe and unsound practices and for en- a corporate raider, and his hostile takeover bly, the principal loss causing events oc- forcement of a net worth maintenance agree- of Pacific Lumber attracted enormous pub- curred more that two years prior to the date ment. Under the terms of our agreement licity and litigation because of his har- of receivership, and were therefore at risk of with OTS, FDIC will be the beneficiary of vesting of California redwoods. Environ- dismissal on statute of limitations grounds. any recovery from the OTS enforcement ac- mental interests have received considerable In light of the Fifth Circuit’s opinion in tion through settlement or litigation against publicity in the last two years, suggesting Dawson, a split of authority in the federal the proposed respondents. All the potential exchanging our D&O claims for the redwood trial courts in Texas on the level of culpa- respondents in the OTS investigation, in- forest. On July 21, we met with representa- bility required to toll limitations and the cluding Hurwitz, have signed tolling agree- tives of the Department of the Interior, who Supreme Court’s refusal to consider whether ments with OTS which expire on December informed us that they are negotiating with a federal rule should be adopted under which 31, 1995. OTS staff’s current expectation is Hurwitz about the possibility of swapping negligence by a majority of the directors that they will seek formal approval for this various properties, plus possibly the FDIC/ would toll the statute of limitations, our case before the tolling agreements, expire on OTS claim, for the redwood forest. They strategy at that time was to assert that December 31, 1995. stated that the Administration is seriously gross negligence was sufficient to the toll III. Significant Caselaw Developments Have interested in pursuing such a settle- the statute of limitations. After briefings Further Weakened the Viability of Suit by ment.* * * We plan to follow up on these dis- with the Deputies to the Directors and fur- the FDIC cussions with the OTS and the Department ther discussion with the potential defend- Although we have continued to investigate of Interior in the coming weeks. * * * the ants, we decided to defer an FDIC decision on and refine our potential claims during the Hurwitz tolling agreement * * expires, we whether to assert our claims, in order to fur- *** pendency of the OTS investigation, two sig- ther investigate the facts, give time for the nificant court decisions, and the failure of Texas law on adverse domination to take Congress to address the statute of limita- DRAFT more concrete shape and ascertain the views tions problems, have further weakened the Attorney Client Privilege Attorney, Work of OTS. Therefore, the tolling agreements FDIC’s prospects for successfully litigating Product were continued. our claims in the United States District Memorandum To: Board of Directors, Fed- II. OTS’s Involvement Court for the Southern District of Texas. eral Deposit Insurance Corporation. At about the same time that we deferred a A. Statute of Limitations From: Jack D. Smith, Deputy General Coun- decision on the FDIC’s cause of action, we In the recent decision of RTC v. Acton, 49 sel. Stephen N. Graham, Associate Direc- met with OTS staff to discuss the possibility F.3d 1086 (5th Cir. 1995), the Fifth Circuit tor (Operations)—DAS. of OTS pursuing these claims (plus a net

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00117 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.293 pfrm07 PsN: E20PT1 E2456 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 worth maintenance agreement claim) Texas case law has essentially eliminated tions issue rather than FDIC staff. If the through administrative enforcement pro- liability for negligence in the name of apply- Board were to decide to go forward with the ceedings. After several meetings with senior ing a very expansive business judgment rule filing of a complaint, we need to file the staff of the OTS Office of Enforcement, we defense. We believe the conduct here con- complaint in the Southern District of Texas, entered into a formal agreement with the stitutes gross negligence as that term is nor- on or before, Wednesday, August 2, 1995. If OTS, who began an independent investiga- mally defined. The law of gross negligence in the Board has no objection to the proposed tion into the activities of various directors Texas is currently unsettled, but a recent de- staff action to allow the tolling agreements and officers of USAT, Charles Hurwitz, UFG, cision by the Texas Supreme Court an- to expire, the Board need take no formal ac- as well as USAT’s second tier holding com- nounced a new standard of gross negligence tion. pany, Maxxam, Inc, a publically traded com- that will be very difficult to meet if it is ap- We are available to discuss this matter at pany that is largely controlled by Hurwitz. plied to D&O cases. In Transportation Insur- your convenience. The FDIC is paying OTS’s costs in connec- ance Company v. Moriel, 879 S.W.2d 10 (Tex. Concur: William F. Kroener, III, General tion with this matter. 1994), the Texas Supreme Court defined gross Counsel. The OTS has reviewed extensive docu- negligence as constituting two elements: (1) Concur: John F. Bovenzi, Director, DAS. mentation and has recently conducted a se- viewed objectively from the standpoint of ries of administrative depositions. We have the actor, the act or omission must involve APPENDIX 2 been informed that OTS staff is currently an extreme degree of risk, considering the RECORD 1 preparing a broad-based draft Notice of probability and magnitude of the potential Charges against Hurwitz and others, includ- harm to others, and (2) the actor must have To: Robert DeHenzel. ing Maxxam, for substantial restitution for actual, subjective awareness of the risk in- Cc: Ben Groner, James Cantrell. unsafe and unsound practices and for en- volved, but nevertheless proceed in conscious From: Paul Springfield forcement of a net worth maintenance agree- indifference to the rights, safety, or welfare Subject: Strange Call—United S&L Houston, ment. OTS staff plans to seek formal ap- of others. This new standard, if applied, TX. proval for this case in the relatively near fu- would make it very difficult, if not impos- Date: Friday, November 19, 1993. ture. Under the terms of our agreement with sible, to prove our claims. Bob, yesterday, Mary Saltzman sent an E- OTS, FDIC will be the beneficiary of any re- The effect of these recent adverse decisions mail to Ben Groner and me regarding a call covery from the OTS enforcement action is that there is a very high probability that she received from an individual named Bob through settlement or litigation against the the FDIC’s claims will not survive a motion Close. I will also forward her E-Mail to you. proposed respondents. All the potential re- to dismiss on statute of limitations grounds. Yesterday afternoon an individual who iden- spondents in the OTS investigation, includ- We would also be at increased risk of dis- tified himself as Bob Close called me. His ing Hurwitz, have signed tolling agreements missal on the merits. Because there is only a primary question was that he wished to with OTS which expire on December 31, 1995. 30% chance that we can avoid dismissal on speak to the individual who was inves- III. Significant Caselaw Developments Have statute of limitations grounds, and because tigating the United S&L failure. I asked him Further Weakened the Viability of Suit by even if we survived a statute of limitations the reason for his request and who he was. the FDIC motion, victory on the merits (especially on His reponse was that he was working with Although we have continued to investigate the claims most likely to survive a statute some environmental groups and he under- and refine our potential claims during the of limitations motion) is uncertain given the stood that FDIC had a claim against United pendency of the OTS investigation, two sig- state of the law in Texas, we do not rec- for $532 MM (I believe this is the amount nificant court decisions, and the failure of ommend suit on the FDIC’s potential claims. stated) and he referred to Charles Hurwitz Congress to address the statute of limita- IV. The Pacific Lumber—Redwood Forest Mat- specifically and to Taxpayers money lost in tions problems, have further weakened the ter the institution. Seems like the amount of FDIC’s prospects for successfully litigating A decision not to sue Hurwitz and the loss stated was $1.9 Billion. He went on to our claims in the United States District former directors and officers of USAT is say that people like Hurwitz needed to be Court for the Southern District of Texas. likely to attract media coverage and criti- ‘‘stopped’’. He also related that he was work- A. Statute of Limitations cism from environmental groups and mem- ing with a group in New York identified as ‘‘Wetlands’’ and in Northern California a In the recent decision of RTC v. Action, 49 bers of Congress. Hurwitz has a reputation as group called ‘‘EPIC’’. He gave the name this F.3d 1086 (5th Cir. 1995), the Fifth Circuit a corporate raider, and his hostile takeover stood for which I do not recall, but it was en- held that under Texas law, only self-dealing of Pacific Lumber attracted enormous pub- vironmental something. I asked him what or fraudulent conduct, and not gross neg- licity and litigation because of his har- was the source of his information and the ligence, is sufficient to toll the two year vesting of California redwoods. Environ- purpose of his call. He was vague about the statute of limitations under the doctrine of mental interests have received considerable purpose but related the following names as adverse domination. As a result of this opin- publicity in the last two years, suggesting exchanging our D&O claims for the redwood sources of his information. ion, we cannot rely on an argument that Attorney; Bob Bertain and Investigator; gross negligence by a majority of the cul- forest. On July 21, we met with representa- tives of the Department of the Interior, who Bob Martell, both in Northern California. He pable Board members is sufficient to toll the also gave a telephone number where he could statute of limitations. There is very little, if informed us that they are negotiating with Hurwitz about the possibility of swapping be reached later in the week * * *He indi- any, evidence of fraud or self-dealing. cated this was in Acadia California. He said All of the affirmative acts that would form various properties, plus possibly the FDIC/ he was currently in New York. He indicated the basis for an FDIC suit occurred more OTS claim, for the redwood forest. They this was in Acadia California. He said he cur- than two years before USAT failed. Thus, the stated that the Administration is seriously rently in New York until today and could be only claims that have any chance of sur- interested in pursuing such a settlement. This is feasible with perhaps some new mod- reached through James Hansen * * * viving a motion to dismiss based on statute Frankly, I do not know whether this indi- est legislative authority because USAT is a of limitations grounds are claims based on vidual is some kind of radical Tree Hugger FRF institution and therefore USAT recov- USAT’s failure to unwind some positions in on a mission to save the forest in California eries redound to the benefit of the U.S. mortgage backed securities and derivative or someone seeking to confirm whether FDIC Treasury. We plan to follow up on these dis- instruments as soon as that should have been is in process of going after Hurwitz and cussions with the OTS and the Department done. The statute of limitations risks in this United. I am a little suspicious, however, as of Interior in the coming weeks. When the argument are (1) all of the money was put at to the motives stated by the individual, in Hurwitz tolling agreement expires, we would risk more than two years before failure, and light of the specific dollar figures he related recommend that we update those Congress- (2) if there is a claim based on USAT being in the conversation but I do not want to men who have inquired about our investiga- late in unwinding these transactions (we come across sounding paranoid. I did not re- tion and make it clear that this does not end think it should have been done starting no late to him who was assigned to the Inves- the matter of Hurwitz’s liability for the fail- later than January 1, 1987), there is a real tigation or that I worked in Investigations. ure of USAT because of the ongoing OTS in- likelihood of a court finding that they Further, I did not ask him how he obtained vestigation. should have unwound them more than two my name and telephone #. years before failure. V. Updated (Draft) Authority to Sue Memo- I do not know whether to ignore this situa- In short, we have an argument for pursuing randum tion or not but I feel certain the individual some claims, but that argument is not likely In light of the complexity and visibility of will call me again since he was my name and to prevail. this matter, and the short timeframes, we in the course of the convervation I related B. The Merits have attached for your information an up- that I would need to look into his request to The law has also moved against us on the dated (draft) authority to sue memorandum. talk to the Investigator. This was simply a merits of the claims. The claims against It sets forth the theories (and weaknesses) of ploy to obtain information from him. Hurwitz are more difficult than usual be- our proposed claims in some detail. Whether There is a possibility you may wish to cause he was not an officer or director of that memorandum sets out a viable claim on speak to this individual to determine wheth- USAT. We believe that his involvement rose the merits should be considered by the Board er he may have information that is bene- to the level of a de facto director, but his if the Board decides that it wants the Texas ficial to our cause if he is who he says he is. status presents a notable hurdle. district court to decide the statute of limita- If so, please advise and I will relate this to

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00118 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.295 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2457 him; otherwise, I will do nothing and if he claims against Maxxam in exchange for pub- and many others. We believe Congressman calls I will state that his request to speak to lic title to ancient redwoods and other sen- Young’s actions are a clear abuse of Congres- the Investigator cannot be granted. If you sitive habitat in the Headwaters Forest area. sional subpoena authority and a heavy-hand- wish to discuss this further, call me at * * * Rose has researched and documented the fac- ed attempt to dissuade citizens from exer- To: Mary Saltzman, Ben Groner. tual and legal basis for FDIC and Treasury cising their constitutional right to petition Cc: Martha F. Boyles-Hance. Department suits against Maxxam and CEO the government regarding issues of concern. People can contact their Congressional and From: Paul Springfield. Charles Hurwitz. The suits seek $800+ million Senate representatives to ask them to sup- Subject: United S&L—Strange Call. restitution for the failure and taxpayer bail- port Debt for Nature and do everything in Date: Monday, November 22, 1993. out of Maxxam/Hurwitz’ Texas Savings and their power to ease a Debt for Nature swap Forwarded by: Paul Springfield. Loan. Maxxam credits Rose with catalyzing the suits. We also led shareholder campaigns for the agencies. It could help save the Head- Forwarded to: James Cantrell. for four years to reform Maxxam’s corporate waters today, and other valuable and threat- Forwarded date: Monday, November 22, 1993. governance and forest management prac- ened habitat tomorrow. Comments by: Paul Springfield. tices. In the most recent campaign (which Comments: Jim. FYI. Maxxam presented as ‘‘a referendum on Debt RECORD 2 [Original Message] For Nature’’), 80% of the shares outside of In light of the magnitude of the losses and I had a conversation with PLS attorney Hurwitz’ control voted for our resolutions, the FDIC’s well considered evaluation of li- Bob DeHenzel, Friday afternoon, 11–19–93, to and almost 50% voted to toss out Maxxam’s ability, I am particularly concerned that a devise an approach as to the appropriate Board in favor of our candidates. formal action has not yet been filed. Al- manner to deal with the inquiry from Dan It’s now or never for Debt for Nature. The though the FDIC has not publicly quantified Close. We determined that Mr. Close was to Treasury Dept. is all but concluded. This the claim, the UFG’s 10-K estimated the pose his inquiry in written form and address summer, the judge will make an advisory claim of $545 million failure to maintain the it directly to DeHenzel. I related this infor- ruling to the director of the Treasury’s minimum net worth and failure to remit tax mation to Close via another party that an- banking regulatory division. The director returns alone. swered the telephone # he had left. will then issue a restitution order. We be- My concern about this matter has been DeHenzel indicated he had some knowledge lieve Treasury has proven its case, and a heightened by my colleague Dan Hamburg, about the nature of the inquiry as well as the large restitution order is imminent. Maxxam who recently introduced legislation to ac- attorney Bill Bertain disclosed by Close. has many reasons to settle, and to offer quire ancient redwood forests owned by Pa- DeHenzel stated that this group was involved forestlands instead of cash: cific Lumber Company (PALCO). Principals in fighting a take over action of some com- A huge cash judgment could bankrupt in PALCO who acquired the company in 1985 pany by Hurwitz involving forest property in Maxxam. with Drexel Burnham/Milken high yield the northwestern United States. Apparently Some of Maxxam’s largest investors tell us bonds were also involved in the UFG/USAT they are trying to obtain information to uti- that they prefer debt for nature to a cash transactions. Evaluation of their liabilities lize in their efforts. payment. to the Federal government becomes particu- Hopefully, this will close the book, at least Debt for Nature is a win-win. Maxxam larly critical as the prospect of payment for from the Investigative perspective. Every- could trade forestlands which they can’t cut property acquisition proceeds. one, have a great holiday. profitably (but are environmentally price- I would appreciate your earliest possible less) in exchange for settling the federal response. To: Paul Springfield. claims and resolving some of Maxxam’s most Sincerely, Cc: Ben Groner. pressing and costly environmental disputes. HARRY B. GONZALEZ, From: Mary Saltzman. But FDIC & Treasury’s position is that Chairman. Subject: re: Strange Call-United S&L Hous- their mandate is to recover cash, not forest. ton, Tx. THE FAILURE OF UNITED SAVINGS ASSOCIATION If they took Headwaters forestlands in lieu OF TEXAS (USAT) Date: Monday, November 22, 1993. of cash, their mandate would be to liquidate FACT SHEET Forwarded by: Paul Springfield. the property or demand an equal value ex- Forwarded to: James Cantrell. change from Interior or BLM. An existing The FDIC has an outstanding claim Forwarded date: Monday, November 22, 1993. law (Coastal Barrier Resources Act) already against United Financial Group, holding Comments by: Paul Springfield. allows banking regulatory agencies to trans- company for the failed USAT in excess of Comments: Whoops. Sent the wrong one ear- fer property they acquire which is adjacent $548 million dollars. (United Financial Group lier. to an existing reserve, to resource manage- 10–K Report year ending 12/31/92). Five years have passed since this claim ment agencies. Rose seeks an amendment Forwarded to: Ben Groner. was asserted in 1988, and while the FDIC has which would clarify that the banking agen- Cc: Martha F. Boyles-Hance. extended the statute of limitations through cies could donate such property to resource Forwarded date: Monday, November 22, 1993. tolling agreements, the current statute of management agencies—avoiding the unac- Comments by: Paul Springfield. limitations ends on December 30, 1998. (UFG ceptable situation of forcing Interior to liq- Comments: Ben, the E-Mail being forwarded 10–K Report year ending 12/31/92). uidate some other holdings in exchange for seems to indicate where the party ob- When it was seized in 1988 by the FDIC, saving the Headwaters. FDIC (which has ac- tained my name. You will receive an- USAT was a wholly-owned subsidiary of knowledged that it is funding Treasury’s other E-Mail from me that should con- United Financial Group whose controlling case) would be much more aggressive in pur- clude this matter, at least for now. shareholders at the time of the collapse was suing a Debt for Nature settlement if they Thanks. Charles Hurwitz-run companies MAXXAM, had Congressional approval to donate recov- [Original Message] MCO, and Federated Development Corp. ered Headwaters forestlands to Interior. The Thanks for fielding that one, Paul! I re- Also, Drexel, Burnham, Lambert was a 8% amendment would also be good policy in its ceived the first call late on Thursday and shareholder (Washington Post, 4/16/91, own right—our research has already uncov- checked the institution on DOLLAR$. His MAXXAM Prospectus, 1988 and FDIC v. ered four other examples where such a policy comments were too close to be comfortable, Milken). would have facilitated public acquisition of and with all the bad publicity we have had in From 1986 to 1988, USAT purchased over properties that Interior was already trying the Scripps Howard papers lately I didn’t feel $1.3 billion worth of Drexel-underwritten to conserve. junk bonds. During that same period of time, I could pass him off to an ombudsman who We need to make significant progress in according to an FDIC lawsuit against Mi- might or might not understand the confiden- this Congress to show FDIC/Treasury that chael Milken, ‘‘the Milken group raised tiality of our claims. Anyway, at that hour I Debt For Nature is worth considering. We about $1.8 billion of financing for Hurwitz’s felt it was better to pass him directly on to also need to continue to keep the heat on takeover venture,’’ which included the 1988 you or to Ben so that you could deal with Hurwitz through his stockholders to force takeover of the Pacific Lumber Company, him. Sounds like you got some information Maxxam to agree to a Debt For Nature set- the world’s largest producer of old growth from him. The excitement never ends. tlement. Haven’t seen you in a while, hope all is well It will not be an easy fight. Several Mem- redwood. (FDIC v. Milken). According to Fortune, the failure of USAT with you. Have a good Holiday. .MMS bers of Congress, including House Majority constituted the fifth largest failed S&L bail- Whip Tom DeLay (R–TX), and Resources out, as of 1990, costing the taxpayers $1.6 bil- Committee Chair Don Young (R–AK), have RECORD 1A lion. (Fortune, 8/10/90). [From the Trees Foundation, July 17, 2000] demanded access to all of FDIC and OTS’ sensitive legal research and background in- A FINAL PUSH FOR DEBT FOR NATURE formation that is crucial to their case. More RECORD 2A (By the Rose Foundation) chilling from a constitutional and public lib- Meeting with Rep. Hamburg For six years, the Rose Foundation has erty standpoint, Congressman Young is de- Hamburg—Wanted to have the meeting. worked with other activists to save Head- manding all records of any communications Have an immediate interest in the case. In- waters Forest through a Debt for Nature with activists and organizations who support terested enough over potential filing of com- land swap. Debt for Nature means resolving Debt For Nature—including specifically plaint to ask what is about to proceed. Real- hundreds of millions in pending federal Rose, Trees Foundation, EPIC, Sierra Club, ized that this possible avenue would be lost.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00119 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.298 pfrm07 PsN: E20PT1 E2458 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 Received letter from * * *. Hope to get deci- I. Background FHLBB approval for his plan to use UFG’s sion by May ’94. In 1982, Charles Hurwitz, a well-known assets, which included the dividend from What is status of investigation? What are Houston investor active in corporate acquisi- USAT, to retire its acquisition debt. He ob- key factors? Is there specific date by which tions and divestitures, formulated a plan to tained approval by using his purported will- intend to make decision? What other agen- combine two Houston-based savings and ingness to contribute capital to USAT via a cies involved? Who is working on case? Mul- loans holding companies, UFG (which owned Southwest Plan transaction involving USAT. tiple attorneys? Reoccurring learning curve? 100 percent of USAT) and First American Fi- USAT admitted a failure to comply with Interesting to me as to why it takes so long nancial of Texas (‘‘First American’’). He ef- net worth requirements as of December 31, on 5th largest S&L failure in country. fectuated the acquisition by acquiring 23.3% 1987. On May 13, 1988, the FHLB-Dallas di- Smith—Failure in Dec. 1988. Very difficult of UFG’s stock through MCO and FDC, both rected UFG to infuse additional equity into to do a swap for trees. The investigation has of which he controlled, for approximately USAT sufficient to meet minimum regu- looked at several areas. Claim on the net $7.6 million. latory capital requirements. UFG did not worth maintenance agents. The FHLBB approved UFG’s merger with comply. On December 8, 1988, the FHLB-Dal- Thomas—Have been attempts to enforce First American on April 29, 1983 by Resolu- las issued a second written directive to UFG. this. We can’t find signed agent before tion No. 83–252 (the ‘‘Resolution’’). First UFG again refused to comply. On December FSLIC. We’ve never found the agent. Are American was merged into UFG and First 30, 1988, FSLIC was appointed receiver of claims Hurwitz has signed * * * agent to 3/1. American’s insured subsidiary was merged USAT and continued to make net worth de- J. Smith—We look for wrongdoing. Some into USAT. Approval was conditioned upon mands on UFG, which were not honored. might meet our standards. We look at is it a UFG maintaining the net worth of USAT at III. Potential Claims by the FDIC-Receiver good case and is it cost efficient. Are looking regulatory mandated levels and upon USAT Federal Courts have uniformly held that claims that in most optimistic dreams of it not paying dividends exceeding 50 percent of the FDIC, the RTC and the FSLIC as re- would be. USAT’s yearly ‘‘net income.’’ ceiver of failed financial institutions have no If can convince other side that we have The NWM commitment was contained in implied private or federal common law cause claim worth $400 million they want to settle. Paragraph 6 of the Resolution. It provided, of action to enforce the terms of NWM agree- Could be a hook into the holding co. in pertinent part, that UFG: ‘‘shall stipulate ments. FSLIC v. Savers, Inc., No. LR–C–89–529 Copy of testimony and Dawson case. to the [FSLIC] that as long as it controls (E. D. Ark. 1989); RTC v. Tetco, 758 F. Supp. Dept. of Labor. [USAT], [UFG] will cause the net worth of 1159 (W. D. Tex. 1990); and In Re Conner Corp., SEC Kate Anderton—Rep. Hamburg. [USAT] to be maintained at a level con- 127 B. R. 775 (E. D. N. C. 1991). All three of 2/3/94 sistent with that required by Section these decisions relied upon FSLIC v. Capozzi, Congressman Hamburg; Kate Anderton; 855 F.2d 1319 (8th Cir. 1988), vacated on other Kelsy Meek 563.13(b) of the Rules and Regulations of the [FSLIC] .... and, as necessary, will infuse grounds, 490 U.s. 1062 (1989), which held that Armando,—Tip us off about the law firm implying a private right of action for viola- don’t have $600/hr red flag. sufficient additional equity capital, in a form satisfactory to the Supervisory Agent, tion of thrift regulations would not comport 39,000—cut over with the purposes of the underlying statu- 5,000 acres—left old growth to effect compliance with such require- tory framework; the court deemed those pur- Cutting of the groves is limited by endan- ment.’’ poses to be prospective rather than compen- gered species The Resolution also required UFG to file a satory. J. Thomas higher risk than most. certification with the Supervisory Agent, In Savers, the court also found that a hold- Civil money penalties—have any deposi- within 30 days of the acquisition, stating the ing company’s net worth maintenance com- tion been taken. effective date of the acquisition and that the mitment was not enforceable as a private DOL—pension lawsuit Exec. Life against acquisition had been consummate and in ac- contract because the holding company was Exec. Life Maxxam cordance with the provisions of all applica- required by law to comply with the net SEC—filings against Maxxam call ble law, and regulations. UFG and Hurwitz deny, and we have been unable to establish worth maintenance regulation, and therefore that they signed a NWM stipulation or a cap- its commitment to abide by the regulation RECORD 5 ital maintenance agreement with the was not ‘‘bargained for’’ consideration which FEBRUARY 2, 1994. FHLBB. would support a contract. While the bankruptcy court in Conner PRIVILEGED AND CONFIDENTIAL ATTORNEY II. Utilization of USAT to Upstream Dividends similarly held that a holding company’s WORK PRODUCT to UFG promise to maintain the net worth of a sav- Memorandum To: Jack D. Smith, Deputy Hurwitz gained control of USAT for an ini- ings and loan association did not constitute General Counsel. tial investment of less than $8 million, yet in legal consideration, the court also held that From: Patricia F. Bak, Counsel and Robert 1984, he caused USAT to sell off approxi- the NWM stipulation did not constitute J. DeHenzel, Jr., Senior Attorney. mately one-half of its retail branch network, ‘‘offer and acceptance’’ that would give rise Subject: United Savings Association of Texas and on the basis of profits booked on these to a legally binding contract. Net Worth Maintenance Claims. sales, USAT issued a cash dividend of The Tetco court did not agree with the This memorandum summarizes potential $32,687,218 to UFG on March 18, 1985. Ini- Conner and Savers analysis of consideration. claims by the FDIC and the OTS against tially, this dividend was used to fund parent The Tetco court did, however, agree with United Financial Group, Inc. (‘‘UFG’’, for company operations and without it, UFG Conner that a NWM condition in a resolution failure to maintain the net worth of United would have experienced serious financial granting deposit insurance was a statement Savings Association of Texas (‘‘USAT’’) as problems. In June 1988, some of the remain- setting forth a regulatory condition, and a required by federal regulation. Based on our ing proceeds were used to retire a substan- net worth stipulation was merely an ac- review, we conclude that the FDIC has no tial part of UFG’s acquisition debt. knowledgment of regulatory requirements— viable claim against UFG for failure to The issuance of this dividend to UFG based statements which did not constitute a le- maintain USAT’s net worth pursuant to a on a one-time asset sale was imprudent. At gally binding contract. The court noted: net worth maintenance (‘‘NWM’’) stipula- the time of the dividend, USAT was unable ‘‘The terms of the net worth agreement and tion. Although a number of federal courts to generate profit from continuing oper- the regulatory approvals were never the sub- have held that federal banking agencies act- ations and the reduction in its regulatory ject of negotiations between the parties; ing as receivers for failed financial institu- net worth as a result of this transaction was their scope and effect were preordained to tions do not have a private right of action likely to require capital infusions. Further, the letter by the regulators. The Court be- for breach of NWM stipulations, the Court of while USAT reported Regulatory Capital of lieves there is no genuine issue of material Appeals for the Fifth Circuit has held that $207 million at the time the dividend was de- fact that the parties’ intent was to fulfill the such regulatory commitments are enforce- clared, USAT was not reporting itself insol- prerequisites of a regulatory blueprint. It able in cease and desist proceedings, even vent only because it had ‘‘goodwill’’ of $256 was not to create independent contractual post receivership. Accordingly, the OTS may million on its books as a result of USG’s ac- obligations. 758 F.Supp at 1162.’’ be able to pursue a NWM claim against UFG quisition of three other thrifts between 1981 The court further concluded that the NWM for failure to maintain USAT’s net worth, and 1983. Absent goodwill, USAT would have commitment did not involve ‘‘the type of pursuant to 12 USC § 1818(b)1. This adminis- had a negative net worth of $49 million at comprehensive agreement’’ that could, inde- trative proceeding must be commenced on or the time the dividend was paid. pendent of the regulations, be said to create before December 30, 1994, within six years of Although regulators expressed ‘‘no super- existing rights and obligations within the USAT’s failure. It is unclear whether OTS visory objection’’ to the dividend before it meaning of FIRREA or contract. has a viable claim against MCO Holdings, was paid, there is evidence that they were Finally, the court held that there is no pri- Inc. (‘‘MCO’’) and Federated Development misled by USAT. Moreover, beginning in late vate right of action to enforce a regulatory Corp. (‘‘FDC’’), which together owned at 1985, when USAT did, in fact, require addi- net worth maintenance condition, citing least 23% of UFG, although an argument tional capital, UFG declined to return this Ameribanc Investors Group v. Zwart, 706 F. could be made that MCO/FDC functioned as a dividend to USAT through a capital infusion. Supp. 1248 (E.D.Va. 1989) (holding that nei- de facto Savings and Loan Holding Company When it became certain that the FHLB ther the Bank Holding Act nor the Change in (‘‘SLHC’’) and should be responsible for would demand that UFG contribute addi- Control Act, 12 U.S.C. § 1730(q)(1) create a pri- maintaining USAT’s net worth. tional capital to USAT, Hurwitz obtained vate right of action for damages caused by

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00120 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.302 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2459 failure to comply with regulatory require- six years of separation from the institution. had the right to put to MCO, an additional ments). The amendments also encompassed separa- 3% of UFG common stock; In any event, quite apart from the weight tion from the institution. The amendments (d) UFG’s issuance to MCO/FDC, in 1985, of of authority holding that no private right of also encompassed separation effected UFG preferred stock which was convertible action for breach of contract exists, as noted through a closing, such as is the case here, of to UFG common; above, the FDIC can point to no evidence an institution. 950 F.2d at 1184.’’ (e) common officers and directors among showing that either UFG or Hurwitz signed a Finally, the Akin court rejected the argu- MCO, FDC and UFG, and net worth maintenance agreement. ment that post-closing exercise of cease and (f) the actual operating control of all three entities exercised by Charles Hurwitz. IV. OTS Administrative Proceedings pursuant to desist powers would unlawful usurp receiver- 12 USC § 1818(b)(1) ship authority. The court noted that in the Although the FDIC cannot prevail on a di- absence of clear congressional intent to im- RECORD 3B rect claim against UFG for violation of the pose an automatic stay of cease and desist FEDERAL DEPOSIT INSURANCE NWM stipulation, the OTS has the statutory proceedings upon receivership, the court CORPORATION, authority to pursue a NWM claim against need only look to ‘‘whether the agency’s [ac- Washington, DC, December 3, 1993. UFG in an administrative proceeding, pursu- tion] is based on a permissible construction Memo To: Chairman Hove. ant to 12 USC § 1818(b)1. See, Akin V. OTS, of the statute.’’ Chevron U.S.A., Inc. v. Nat- From: Alan J. Whitney, Director. 950 F.2d 1180 (5th Cir. 1992) holding that NWM ural Resources Defense Council, Inc., 467 U.S. Subject: Significant Media Inquiries and Re- agreement is enforceable in cease and desist 837, 842–43, 104 S. Ct. 2778, 2781–82, 81 L. Ed. 2d lated Activities, Week of 11–29–93. proceedings, and that attack on the validity 694 (1984). Regulatory Consolidation: Several news or- of the agreement for lack of consideration A. Involuntary Bankruptcy Petition Filed ganizations have asked what the FDIC’s po- must fail in light of Groos National Bank v. Against UFG sition is on the agency consolidation pro- Comptroller of the Currency, 573 F.2d 889 (5th On November 25, 1992, UFG’s preferred posal unveiled last week by Treasury. They Cir. 1978)). In Groos, the court rejected an ar- shareholders filed an involuntary bank- were told you believed that with Board ap- gument that a supervisory agreement was ruptcy petition against UFG seeking a reor- pointments imminent, it would be inappro- invalid because of a lack of consideration: ganization under Chapter 11 of the Bank- priate to take an agency position until the ‘‘The statute provides that a cease and desist ruptcy Code. If the bankruptcy petition is full board is in place. order may issue upon any violation of an eventually heard on the merits and the court Thrift conversions: Crain’s New York Busi- agreement between the agency bank and grants the petition in bankruptcy, the OTS ness, Philadelphia Inquirer and American says nothing of consideration. Nor is there may proceed on the NWM claim, if it deems Banker newsletters inquired about the thrift any reason to import the common law of it appropriate, by filing a motion in the mutual-to-stock conversion policy that the consideration, proper to private contractual bankruptcy court to require the trustee or FDIC is currently developing, specifically when our position on this subject will be relations, into the relationships between a debtor-in-possession to make good on UFG’s published. The calls came after American regulatory agency and the entity it regu- commitment to maintain the regulatory Banker ran an article in the Nov. 26 edition lates. The Comptroller is authorized by stat- capital of USAT. Section 365(o) of the Bank- reporting on Rep. Gonzalez’ legislation to ute to exercise extensive controls upon ruptcy Code provides: ‘‘In a case under Chap- limit thrift management profits from the ter 11 of this title, the trustee...shall im- banks; the statute clearly contemplates that conversions. We also received several inquir- mediately cure any deficit under any com- agreements may occur between the Comp- ies about our response to Cong. Neal’s letter mitment by the debtor to. . . the Director of troller * * * and if the Comptroller does of November 22 to you on the same subject, enter such an agreement by way of attaining the Office of Thrift Supervision...or its to which we have not yet responded. voluntary compliance, we will not introduce predecessors...to maintain the capital of O’Melveny & Myers: On Monday, the Su- the trappings of common-law consideration an insured depository institution.’’ preme Court agreed to hear this case, involv- to question that agreement. 573 F.2d at 896.’’ The purpose of Section 365(o) is ‘‘to pre- ing the FDIC’s ability to sue attorneys who In Akin, the court noted that under 12 vent institution—affiliated parties from represented banks that failed. The decision U.S.C. § 1818(b), the OTS director has expan- using bankruptcy to evade commitments to to hear the case prompted a flurry of press sive authority to issue cease and desist or- maintain capital reserve requirements of a inquiries about similar cases past and ders to correct violations of regulations or federally insured depository institution.’’ In present. We provided some statistical data written agreements between the agency and re First Corp., Inc., 973 F.2d 243, 246 (4th Cir. and limited information about the Jones Day an institution affiliated party, including the 1992). By operation of this section, if the pre- case, which is still active. power to seek reimbursement and restitution ferred shareholders are successful in their ef- First City Bancorporation: Bloomberg when a party has been unjustly enriched fort to force UFG into Chapter 11, USFP or Business News, Houston Bureau, called re- through the violation. The court noted that the trustee would have to turn over assets to garding possible settlement in the First City by failing to make capital infusions suffi- OTS in satisfaction of the capital mainte- Bancorporation’s claims case. It seems some- cient to cure the net worth deficiency, Akin nance commitment. If UFG does not make one is talking, because the reporter asked was able to retain capital which otherwise good on that commitment, Chapter 11 relief about a December 14 FDIC Board meeting to would have been contributed to the financial is not available. See Id. at 247. discuss the settlement. The reporter wanted institution. In affirming the director’s order If the adverse parties elect to proceed to know: If the FDIC committee working on requiring Akin to pay over $19 million to re- under Chapter 7, the OTS, in any event, the agreement approves the plan, does that store the net worth deficiency of the institu- should be able to claim a priority over gen- mean the Board will ‘‘rubber stamp’’ it? We tion, the court stated: ‘‘Read in its entirety, eral unsecured creditors as to ‘‘allowed unse- advised the Board does not rubber stamp the statute manifests a purpose of granting cured claims based on any commitment by anything. The Houston Chronicle also made broad authority to financial institution reg- the debtors to maintain the capital of an in- several inquiries about a possible settlement ulators. The statute suggest that unjust en- sured depository institution. 11 U.S.C. in this case, all of which we answered with richment has a broader connotation than in § 507(a)(8).’’ the standard response that we do not com- traditional contract law. Akin voluntarily V. Net Worth Maintenance Claim Against MCO/ ment on ongoing litigation. Los Angeles Times: Michael Parrish asked entered the Agreement with the FSLIC so FDC whether FDIC lawyers have considered that he could retain control over [the finan- On December 6, 1984, pursuant to FHLBB whether we could legally swap a potential cial institution]. He gained the significant Resolution 84–712, MCO and FDC received claim of $548 million against Charles Hurwitz personal benefit of retaining and disposing of FHLBB approval to acquire more than 25% (stemming from the failure of United Sav- funds or property which he was otherwise ob- of UFG and thereby become a SLHC with re- ings Assn. of Texas) for 44,000 acres of red- ligated to contribute to [the institution] in spect to USAT. FHLBB approval was condi- wood forest owned by a Hurwitz-controlled compliance with his agreement to be person- tioned upon MCO/FDC maintaining the net company. We advised Parrish we’re not ally liable for net worth deficiencies. Akin worth of USAT. In late 1987, after extensive aware of any formal proposal of such a trans- has failed to show that the director’s conclu- negotiations with the FHLBB, MCO/FDC re- action. However, we noted that a claim can sion that he was unjustly enriched is arbi- fused to accept these conditions and no be satisfied by relinquishing title to assets, trary and capricious. 950 F.2d at 1183.’’ agreement was made. However, an argument assuming there is agreement on their value. The court, in dicta, appears to reject an ar- could be made that MCO/FDC functioned as a We didn’t go any further with Parrish, but gument that § 1818 enforcement proceedings de facto SLHC with respect to USAT from at Doug Jones notes that even if Hurwitz satis- may only be initiated pre-receivership: ‘‘This least December 31, 1985, by virtue of the fol- fied our claim by giving us the redwoods, it interpretation belies congressional intent lowing: wouldn’t result in what Earth First! (the expressed to adopt broader cease and desist (a) their 23% interest in UFG; folks who demonstrated in front of the main powers with the passage of the FIRREA. The (b) Drexel’s acquisition, in December 1984, building last month) apparently is proposing, FIRREA included an amendment to * * . (3), of 7.2% of UFG’s common stock—a date i.e., that we then deed the redwoods property providing that the regulatory agency’s juris- which coincides with FHLBB Resolution 84– to the Interior Department. That would re- diction to institute cease and desist pro- 712; quire some extensive legal analysis and, ceedings continued beyond a party’s separa- (c) a December 31, 1985 option agreement since any claim we might assert against tion from the regulated institution, as long between MCO and Drexel, whereby MCO had Hurwitz would be a FRF matter, would like- as that party was served with notice within the right to acquire from Drexel, and Drexel ly entail Treasury Department concurrence.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00121 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.305 pfrm07 PsN: E20PT1 E2460 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001

RECORD 3A nation, by purchase with donated or appro- The fact that nonwilderness activities or NOVEMBER 30, 1993. priated funds, or by exchange for other lands uses can be seen or heard from areas within To: Pat Bak owned by any department, agency, on instru- a wilderness shall not, of itself, preclude From: J Smith mentality of the United States. When any such activities or uses up to the boundary of Subject: Hurwitz tract of land is only partly within such the wilderness area. Here are some materials that have been boundaries, the Secretary may acquire all or (d) STATE AUTHORITY OVER FISH AND WILD- sent to me. any portion of the land outside of such LIFE.—As provided in section 4(d)(8) of the (1) H.R. 2866—It may have a chance in Con- boundaries in order to minimize the payment Wilderness Act, nothing in this Act shall be gress—talk to Mike DeLoose (sp?) in legis af- of severance costs. Land so acquired outside construed as affecting the jurisdiction or re- fairs. Passage would put millions more in of the boundaries may be exchanged by the sponsibilities of the State of California with Hurwitz’s pocket. Secretary for non-Federal lands within the respect to wildlife and fish in any areas des- (2) Materials from Chuck Fulton re net boundaries, and any land so acquired and not ignated by this Act as wilderness. worth maintenance obligation. Evidently, utilized for exchange shall be reported to the SEC. 5. ADMINISTRATION. PLS is supposed to pursue that claim. Don’t General Services Administration for disposal (a) MANAGEMENT PLAN.—The Secretary let it fall thru the crack! If it’s not viable we under the Federal Property and Administra- shall develop, within 1 year after the enact- need to have a reliable analysis that will tive Services Act of 1949 (63 Stat. 377). Lands, ment of this Act, a comprehensive manage- withstand substantial scrutiny. and interests in lands, within the boundaries ment plan detailing measures for the preser- of the Headwaters Forest which are owned vation of the existing old growth redwood H.R. 2866 by the State of California or any political ecosystems in the Six Rivers National Forest Be it enacted by the Senate and House of Rep- subdivision thereof, may be acquired only by Addition, including but not limited to each resentatives of the United States of America in donation or exchange. of the following: Congress assembled, (2) The Secretary is authorized to accept (1) Prohibition of sale of timber from lands SECTION 1. SHORT TITLE. from the State of California funds to cover within the old growth redwood groves as de- This Act may be cited as the ‘‘Headwaters the cost for acquiring lands within the Head- picted generally on the map referred to in Forest Act’’. waters Forest, and notwithstanding any section 3(a). Timber sales in other areas SEC. 2. FINDINGS AND PURPOSE. other provision of law, the Secretary may re- shall be allowed consistent with the purposes tain and expend such funds for purposes of (a) FINDINGS.—The Congress finds that: of this Act and other applicable Federal laws (1) Redwoods are a significant national such acquisition. Such funds shall be avail- and regulations. symbol and a defining symbol of the State of able for such purposes without further appro- priation and without fiscal year limitation. (2) Measures to restore lands affected by California. previous timber harvests to mitigate water- (2) Old growth redwood trees are a unique (c) LAND ACQUISITION PLAN.—The Secretary shall develop and implement, within 6 shed degraduation and impairment of habi- and irreplaceable natural resource. tat for the marbled murrelet, spotted owl, (3) Most of the Nation’s old growth forests months after the enactment of this Act, a native salmon stocks, and other old-growth have been cut. Less than 5 percent of the land acquisition plan which contains specific forest dependent species (‘‘Restoration Meas- original 2,000,000 acre Coast redwoods remain provisions addressing how and when lands ures’’). standing. The groves that are left are crucial will be acquired under section (b). The plan to maintain habitat needed for survival of shall give priority first to the acquisition of The Management Plan shall be reviewed and old-growth dependent species. The Head- lands within the boundaries of the Head- revised every time the Six Rivers National waters Forest, for example, is home to one of waters Forest Wilderness identified on the Forest Land and Resource Management plan California’s three largest population of mar- map referred to in section 3(a). The Sec- is revised or more frequently as necessary to bled murrelets, rare sea birds that nest only retary shall submit copies of such plan to meet the purposes of this Act. in coastal old growth trees; the Northern the Committee on Natural Resources, the (b) APPLICABLE LAWS AND POLICIES.—(1) Spotted Owl; and native salmon stocks that Committee on Agriculture, and the Com- The Secretary, acting through the Chief of spawn in the Forest’s creeks. mittee on Appropriations of the United the Forest Service, shall administer the (4) The remaining unprotected stands of States House of Representatives and to the lands acquired under section 3(b) in accord- old growth forests and old growth redwoods Committee on Energy and Commerce, the ance with the Management Plan, this Act, are under immediate threat of being har- Committee on Agriculture, Nutrition, and and with the other laws, rules, and regula- vested without regard to their ecological im- Forestry and the Committee on Appropria- tions applicable to such national forest. In portance and without following Federal tim- tions of the United States Senate. addition, subject to valid existing rights, any ber harvest guidelines. (d) AUTHORIZATION OF APPROPRIATIONS.— lands acquired and designated as wilderness (5) Significant amounts of old growth red- There are hereby authorized to be appro- under section 4(a) shall also be administered woods in the proposed National Forest addi- priated such sums as may be necessary to in accordance with the provisions of the Wil- tions are being cut at a pace that is based on carry out the purposes of this Act. derness Act governing areas designated by paying high interest rates on poor quality SEC. 4. WILDERNESS AREAS. that Act as wilderness, except that any ref- bonds and not at a pace that is based on (a) DESIGNATION.—In furtherance of the erence in such provisions to the effective sound forest management practices. purposes of the Wilderness Act (16 U.S.C. date of the Wilderness Act (or any similar (b) PURPOSE.—The purpose of this Act is to 1131–1136), lands in the State of California ac- reference) shall be deemed to be a reference provide for the sound management and pro- quired under section 3 of this Act which are to the date of acquisition of such lands under tection of old growth Redwood forest areas within the areas generally depicted on the section 3 of this Act. in Humboldt County, California, and to pre- map referred to in section 3 as the ‘‘Head- (2) To the maximum extent practicable, all serve and enhance habitat for the marbled waters Forest Wilderness (Proposed)’’ shall work to implement the management plan’s murrelet, Northern Spotted owl, native be designated as wilderness and therefore as Restoration Measures shall be performed by salmon stocks, and other old growth forest a component of the National Wilderness unemployed forest and timber workers, un- dependent species, by adding certain lands Preservation System, effective upon acquisi- employed commercial fishermen, or other and water to the Six Rivers National Forest tion under section 3. Such lands shall be unemployed persons whose livelihood de- and by including a portion of such lands in known as the Headwaters Forest Wilderness. pends on fishery and timber resources. the national wilderness preservation system. (b) MAP AND DESCRIPTION.—As soon as (3) In order to facilitate management, the SEC. 3. ADDITION TO SIX RIVERS NATIONAL FOR- practicable after the inclusion of any lands Secretary, acting through the Chief of the EST. in the Headwaters Forest Wilderness, the Forest Service may enter into agreements (a) EXTENSION OF BOUNDARIES.—The exte- Secretary shall file a map and a boundary with the State of California for the manage- rior boundaries of the Six Rivers National description of the area so included with the ment of lands owned by the State or pur- Forest in the State of California are hereby Committee on Natural Resources of the chased with State assistance. extended to include the area comprising ap- House of Representatives and with the Com- SEC. 6. PAYMENTS TO LOCAL GOVERNMENT. proximately 44,000 acres, as generally de- mittee on Energy and Natural Resources of (a) PILT.—Solely for purposes of payments picted on the map entitled ‘‘Six Rivers Na- the United States Senate. The Secretary made pursuant to chapter 69 of title 31 of the tional Forest Addition proposed’’, dated may correct clerical and typographical er- United States Code, all lands added to the June 1993. Such area shall hereinafter in this rors in such boundary description and such Six Rivers National Forest by this Act shall Act be referred to as the Six Rivers National map. Each such map and boundary descrip- be deemed to have been acquired for the pur- Forest Addition. The map shall be on file and tion shall be on file and available for public poses specified in section 6904(a) of such title available for public inspection in the offices inspection in the Office of the Chief of the 31. of the Forest Supervisor, Six Rivers National Forest Service, United States Department of (b) 10-YEAR PAYMENT.—(1) Subject to an- Forest, and in the offices of the Chief of the Agriculture. nual appropriations and the provisions of Forest Service, Department of Agriculture. (c) BUFFER ZONES NOT INTENDED.—The subsection (c), for a period of 10 years after (b) ACQUISITION OF LAND.—(1) The Sec- Congress does not intend that designation of acquisition by the United States of lands retary shall acquire lands or interests in any area as wilderness under this section added to the Six Rivers National Forest by land within the exterior boundaries of the lead to the creation of protective perimeters this Act, the Secretary, with respect to such Six Rivers National Forest Addition by do- or buffer zones around the wilderness area. acquired lands, shall make annual payments

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00122 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.306 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2461 to Humbolt County in the State of California Inc. and Federated Development Corp., for From: Steve Lambert. in an amount equal to the State of California failure to maintain USAT’s net worth. I am Re: Points for July 21, 1994 Conference. Timber Yield Tax revenues payable under enclosing a copy of this memorandum for I. BACKGROUND the California Revenue and Taxation Code your independent review and consideration. A. History of old growth redwood preserva- (sec. 38101 et seq.) in effect as of the date of In summary, the staff has concluded that tion—RNP I; RNP II; State Park System; enactment of this Act that would have been the FDIC has no viable claim against UFG historical role of Pacific Lumber Company paid with respect to such lands if the lands based on an implied private or federal com- (PL) and change in 1986; expert witness had not been acquired by the United States, mon law cause of action for failure to main- ‘‘players’’—WTS, HJW, Fleming, NRM as determined by the Secretary pursuant to tain USAT’s net worth. However, the OTS (Miles; Rynearson). Primary valuation this subsection. may be able to pursue a NWM claim against issues. (2) The Secretary shall determine the UFG and perhaps others for failure to main- B. Current legislation not the first to deal amounts to be paid pursuant to paragraph (1) tain USAT’s net worth. It appears likely with Hurwitz or with Headwaters/PL (sever- of this subsection based on an assessment of that any such administrative proceeding ance tax proposal; elimination of section a variety of factors including, but not lim- must be commenced on or before December 631(a) benefits; refinancing). ited to— 30, 1994, within six years of USAT’s failure. II. HR 2866 (A) timber actually sold in the subject year See 12 U.S.C. § 1818(i)(3). A. Summary of substance: Adds 44,000 acres from comparable commercial forest lands of I would appreciate it if you would review of timberland to the Six Rivers National similar soil type, slope and such determina- this analysis and provide me with your view Forest in Northern California (3,000 acres of tion of appropriate timber harvest levels, and any proposals for further action. You virgin old growth, immediately adjacent (B) By comparable timber size class, age, should be aware that this case has attracted 1,500 acres to protect the 3,000 acres, plus the and quality. public attention because of the involvement rest for wildlife protection.) (C) market conditions, of Charles Hurwitz, and environmental In original bill, acquisition by donation, (D) all applicable Federal, State, and local groups have suggested that possible claims purchase or exchange. In House Natural Re- news and regulations, and against Mr. Hurwitz should be traded for sources Committee—but not by condemna- (E) the goal of sustainable, even-flow har- 44,000 acres of North West timber land owned tion. Authorizes appropriations to effect ac- vest or renewable timber resources. by Pacific Lumber, a subsidiary of Maxxam. quisition and allows acceptance of money (c) CALIFORNIA TIMBER YIELD TAX.—The Chairman Gonzales has inquired about the from the State of California. amount of State of California Timber Yield matter and we have advised him we would Requires FS to prepare a management plan Tax payments paid to Humboldt County in make a decision by this May. After you have for the acquired area, which would at least any year pursuant to the laws of California reviewed these papers, please call me or Pat prohibit timber sales from the 3,000 acres and for timber sold from lands acquired under Bak (736–0664) to discuss the next step and to contain measures to restore the lands pre- this Act shall be deducted from the sums to arrange coordination with our professional viously logged. Headwaters would become a be paid to Humboldt County in that year liability claims. Wilderness Area. under subsection (b). Sincerely, B. Status of Bill: 132 Cosponsors in House (d) 25-PERCENT FUND.—Amounts paid under JACK D. SMITH, (124 Dem.; 8 Republican). subsection (b) with respect to any year shall Deputy General Counsel. Of the Co-sponsors, 34 are on one of the be reduced by any amounts paid under the Committees dealing with FDIC. 13 of 26 Act of May 23, 1908 (16 U.S.C. 500) which are Democrats, including Chrm. Conyers on Gov. attributable to sales from the same lands in RECORD 8 Ops. are Co-sponsors (plus 2 Rep. and 1 inde- that year. Rose Foundation—Conference Call pendent); 16 out of 30 Democrats on Banking, SEC. 7. FOREST STUDY. 10/4/94 plus one Independent, are Co-sponsors. The Secretary shall study the lands within Tom Hecht * * * Hopkins & Sattler. 8 out of 27 Democrats on Energy and Com- the area comprising approximately 13,620 Jeff Williams & FTD, * * * merce are Co-sponsors. (Number don’t add to total, since some are on two Committees.) acres and generally depicted as ‘‘Study 2—3:15 p.m. Area’’ on the map referred to in section 3(a). Referred to two committees (House Agri- The study shall analyze the area’s potential Tom Lipp—Esq. culture and House Natural Resources) in Au- to be added to the Headwaters Forest and Kirk Byrd—Esq.,—and Dave Williams, Esq. gust, 1993. Hearings held in both Natural Re- shall identify the natural resources of the Jull Radner, Esq.—President—Rose Foun- sources Committee (October 12, 1993) and in area including the location of old growth for- dation. House Agriculture Committee (October 13, ests, old growth redwood stands, threatened Rick DeStefano, Esq.,—New Mexico—Real 1993). Reported out of House Natural Resources and endangered species habitat and popu- Estate & Litigator. on May 11, 1994 (amended to add language re- lations including the northern spotted owl Who is doing what on the investigation? lating to swap of Headwaters for surplus fed- marbled murrelet, commercial timber vol- Who makes the decision and how are they eral property.) ume, recreational opportunities, wildlife and made? Bill marked up by House Agriculture Com- fish, watershed management, and the cost of Tom Lippe—statutory mandates. Constructive trust—‘‘there is a lot to be mittee late July 13, 1994. Amended for tech- acquiring the land. Within one year of the explored there—perhaps it could work.’’ nical corrections, to add language relating to date of enactment of this Act, the Secretary Currently three lawsuits pending that are swap of Headwaters for surplus federal prop- shall submit a report with the findings of the protecting the oldest growth. Areas recently erty, to add sunset of acquisition authority— study to the Committees on Natural Re- logged are adjacent to the oldest trees. Cur- 10 years, to clarify that until timberland is sources, and Agriculture of the United rently 18 timber harvest plans that include acquired the owner may have full ‘‘enjoy- States House of Representatives and the very old growth trees. ment’’ of the rights of owning the property.) Committees on Energy and Natural Re- EPIC filed & agreed (10/3) a TKO to stop Ready for action by Rules Committee so sources, and Agriculture, Nutrition, and For- the cutting. that the two versions can be brought to the estry of the United States Senate. 5,000–6,000 acres of virgin old growth left— floor of the House. According to our informa- all in litigation. Some cases are winding tion, Speaker Foley has a desire not to have RECORD 6 down and may be coming back to St. of CA this bill considered this year, and has to cause legal defects and allow logging to ‘‘placed a hold on the bill’’. Kaiser Alu- FEDERAL DEPOSIT INSURANCE continue. In this case—logging may be per- minum, which is a subsidiary of MAXXAM, CORPORATION, mitted to continue in the next few months. INC. (871⁄2%), is the largest employer in Washington, DC, February 4, 1994. EPIC and Rose are running out of resources Speaker Foley’s district. Speaker Foley is CAROLYN B. LIEBERMAN, to continue to fight the logging. getting pressure from both sides (the con- Acting General Counsel, Habitat conservation plan may take 12 servationist organizations on the one side; Office of Thrift Supervision, Washington, DC. months to get Dept. of Interior/Fish and local constituents on the other). Speaker Re: United Savings Association of Texas Wildlife Service to residual growth still very Foley has long enjoyed the support of the DEAR MS. LIEBERMAN: On September 2, 1992 much at risk. conservationist community and has a I briefed Tim Ryan, Harris Weinstein and I Kathy Lacy—Asst. to Feinstein—can tell ‘‘tougher than normal’’ race this fall. How- believe Dwight Smith regarding possible us more about Headwater legislation. ever, he currently is on the ‘‘outs’’ with the claims stemming from the failure of United We will not discuss theories and hypothical national leadership of some conservationist Savings Association of Texas (USAT). In strategies with them. organizations because he recently refused to conjunction with our investigation of profes- Any published criteria for the FDIC’s all a conservationist-supported amendment sional liability claims arising out of that Board’s deliberation and ultimate decision on the Foreign Operations spending bill for failure, our staff has reviewed potential on how to proceed? No other * * * rec- FY 1995. Our information is that until claims against United Financial Group, Inc. ommendations of FDIC staff. Speaker Foley acts, no ‘‘rule’’ will be forth- (‘‘UFG’’), USAT’s first tier holding company, coming from the Rules Committee. for failure to maintain USAT’s net worth. No companion bill in the Senate. Some in- Our staff also reviewed the possible liability MEMORANDUM dication that California Senators not sup- of MCO Holdings and its successor, Maxxam, To: File. portive.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00123 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.309 pfrm07 PsN: E20PT1 E2462 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 III. S. 2285 owned subsidiary. Hurwitz the Chairman, Corp., defendant holding company was held A. This bill was introduced on July 14, 1994 President and CEO of MAXXAM, Inc. Direc- liable for the loan made to its now-insolvent by Senator Boxer of California. It is similar, tors include: Hurwitz, S.D. Rosenberg, E.G. subsidiary, despite the fact that defendant but not identical to the original H.R. 2866. Levin, and R.J. Crinkshank. was not a guarantor, there were other guar- B. The bill was referred to three Commit- C. Summary of history makes no mention antors who settled with the bank, and the tees (Energy, Environment, and Agri- of PL acquisition. Does mention acquisition subsidy was not insolvent at the time of the culture). No hearings have yet been sched- of 1,104,098 shares of common stock of United loan. Liability was based on defendant’s ac- uled. Financial Group, Inc. during 1982 and 1983. tual control of the proceeds of the loan to the subsidiary which interfered with the IV. MAJOR ISSUES sub’s ability to repay. It is also clear from MEMORANDUM A. Money. FS appraisal (by Jim Fleming, the opinion that the Fifth Circuit would based on HJW volumes) of the 4,500 acres is To: Jill Ratner, The Rose Foundation. have affirmed liability of the individual de- $500 million. Valuation data presented by From: Richard De Stefano. fendant Lloyd D. Brinkman if he had been Natural Resource Management Corporation Date: October 1, 1994. held liable below, but the issue of individual (in response to inquiry from Congressman Re: FDIC Claims Against MAXXAM And shareholder liability was not before the Hansen) would peg it over $600 million for Hurwitz: Federal cases applying breach Court. same 4,500 acres. Funding through normal of fiduciary duty and constructie trust Applying Illinois law, the Seventh Circuit source (Land and Water Conservation Fund) principles. upheld a constructive trust established by a seemingly not ‘‘doable’’. Ideas surfaced re- QUESTION PRESENTED state court. In Re Teltroncis, 649 F.2d 1236 (7th cently—pay some cash, get some from State Assuming MAXXAM and Hurwitz are sub- Cir. 1981), was a federal action by Debtor’s of California, use some of the value to pay ject to liability under California or Texas bankruptcy trustee against the state court off ‘‘debt’’ to FDIC, pay in part with ‘‘chits’’ law for breach of fiduciary duty to USAT’s receiver. The Debtor’s principal had fraudu- for excess government assets (like military creditors, and assuming state law authorizes lently advertised watches for sale, collecting bases, timber), pay in part by exchanges for the remedy of constructive trust, do federal about $1.7 million in prepaid orders with no other timberland. court decisions support the imposition by a intent to deliver the goods, then absconding B. Valuation Issues—many. Include market federal court of a constructive trust over PL with about $1.3 million to parts unknown. change (old growth redwood prices soaring— for the benefit of FDIC? There was about $800,000 in the Debtor’s ac- up at least 15% since Fleming appraisal); count which the Receiver seized per the state lack of true comparable sales (no old growth CONCLUSION court order for the benefit of the defrauded redwood sold ‘‘on the stump’’; effect of regula- There is overwhelming authority for impo- purchasers. The bankruptcy trustee sought tions (Cal. Bd. of Forestry; Endangered Species sition of constructive trust by federal court, in federal court to make those funds part of Act—marbled murrelets) on amount of ‘‘loggable with dozens of new decisions every few years the estate for all creditors. Held, the funds timber’’. Normal issues relating to volume, in complete harmony with the state court were not part of the estate but were in a con- quality. Right now seemingly no ‘‘discount’’ cases discussed in earlier memoranda. In structive trust for the purchasers. issue, since FS appraisal included no ‘‘dis- fact, while states court constructive trust On the specific question of wrongfully ob- count for size/volume’’. cases tend to arise in traditional state law tained corporate stock as the res of a con- C. No Condemnation Authority—Bill requires domains, such as family law, decedents’ es- structive, see Matter of First Georgia Financial a ‘‘willing seller’’, and PL not interested in tate and real property title disputes, the fed- Corp., 120 B.R. 239 (Bkrtcy M.D.GA. 1980). selling more than 4,500 acres, although one eral cases cover the spectrum of complicated There the Court endorsed the principle of the account puts the acreage at 7,000 acres. PL commercial matters and are factually closer constructive trust remedy but refused to would not allow Fleming on more than 4,500 to the subject claims. A federal court will apply it to the Debtor on the facts. Claimant acres. Seemingly interested in exploring sale not hesitate to reach MAXXAM and Hurwitz, was the mother of the Debtor’s sole prin- at fair market value of the 4,500 acres for if their liability is established under state cipal, who had advanced funds to Debtor cash and other creative compensation. law; will not hesitate to unwind a complex which used them to acquire stock. Held, D. FDIC—PL public position—there is no series of transactions such as the quid pro Debtor’s taking funds from the claimant was tie between Hurwitz/FDIC matter and PL quo described in the statement of facts; and not fraudulent but was a loan from mother. Headwaters. The idea of a ‘‘debt-for-nature’’ will not hesitate to reach PL and its assets (Here the Court applied Georgia law on the swap is ‘‘ludicrous’’, according to PL. David as the fruit of MAXXAM’s and Hurwitz’s fraud question, but in Bankruptcy cases the Barr of the FDIC quoted as down-playing the wrongful conduct. remedy of constructive trust is specifically viability of the plan—‘‘How do we turn those DISCUSSION authorized by statute. 11 U.S.C.A. § 550.) See trees into money to distribute to all those also, Voest-Alpine Trading USA Corp. v. Van- 1. Whether applying state law or con- creditors.’’ H&S role talked about in May 15, tage Steel Corp., 919 F. 2d 206 (3d Cir. 1990), struing federal statutes and regulations, the 1994 article in the Houston Chronicle. discussed below, which imposed a construc- Federal Court do not hesitate to impose con- E. Politics—Hamburg in a ‘‘Marginal seat’’. tive trust over corporate stock. structive trust as remedies for breach of fi- Switches back and forth from Democrat to It is clear that federal courts do not re- duciary duty, fraud, or unjust enrichment. Republican. Recent Democratic primary pit- quire a showing of fraud to justify imposi- For example, the Ninth Circuit applied Cali- ted Hamburg against Bosco (former Demo- tion of a constructive trust, but unjust en- fornia law in the diversity case Lund v. cratic congressman from same district on a richment is sufficient. Bush v. Taylor, 893 Albrecht, 936 F.2d 419 (9th Cir. 1991), to impose $15,000/month legal retainer from PL). Ham- F.2d 962 (8th Cir. 1990); U.S. v. Pegg, 782 F.2d a constructive trust on the excess proceeds burg won, but faces stiff Republican opposi- 1498 (9th Cir. 1986). of sale of a partnership asset. The partners tion in November from another former hold- Individuals controlling corporations are had agreed to dissolve their partnership, and er of this seat. Major issue will be ‘‘jobs vs. frequently held liable to the corporation’s had agreed on values and disposition of all murrelets’’. Seemingly lack of support on creditors in federal courts. Both American assets. While the unwinding of the partner- Senate side to do anything now. Last year a Metal Forming Corp. v. Pittman, 135 B.R. 782 ship was pending, one partner received an state ‘‘environmental bond referendum’’ de- (D. Md. 1992) and In Re American Motor Club, offer on an asset which was substantially feated. New one to be on ballot in near fu- Inc. (Bkrtcy E.D.N.Y. 1990) involved con- higher than the agreed amount, and which ture. Questionable support from Administra- structive trusts over property wrongly ac- he did not disclose to the plaintiff, but kept tion (officially against the current legisla- quired for the individual account of control- the secret profit for himself. The Lund Court tion because of money, but in favor of the ling persons of corporations, in breach of the clearly held that even a former partner has goal of preserving the trees and willing to fiduciary duties of the individuals to acquire fiduciary obligations, and held that a con- work to see what can be done.) the assets of corporations’ accounts, the structive trust is the appropriate remedy for Normal conservationist interest group sup- ‘‘corporate opportunity’’ doctrine. breach of those obligations, rejecting the de- port for the legislation, except that Save the Similarly, a constructive trust will be the fendant’s argument that damages were ade- Redwoods League seems to be opposed. Local remedy where an employee acquires property quate. See also U.S. v. Pegg, 782 F.2d 1986, up- government/politician opposition because of with funds embezzled from his employer. holding a constructive trust remedy for effect on jobs/tax base. MDO Development Corp. v. Kelly, 726 F. Supp. wrongful acquisition or detention of prop- 79 (S.D.N.Y. 1989). IV. QUESTIONS erty belonging to another. 2. Federal Courts will treat multiple, re- A. Source of stated Congressional expecta- The Fifth Circuit is also willing to impose lated transactions as a single transaction, tions regarding any lawsuit involving constructive trust in appropriate cases. The will pierce corporate veils, and will regard Hurwitz and USAT and/or United Financial Court applied Texas law in Matter of Carolin the substance of transactions over their Group. Paxson Advertising, Inc., 938 F.2d 595 (5th Cir. form, where equity so requires, in order to B. Ownership issues—According to Moody’s, 1991), and Matter of Monnig’s Dept. Stores, impose breach of fiduciary liability and the end of 1992 MAXXAM ownership shows Inc., 929 F.2d 197 (5th Cir. 1991). The Fifth Cir- remedy of constructive trust on controlling Hurwitz with 59.9% voting control, with cuit has also clearly embraced fiduciary li- persons who wrongfully benefit from com- 31.4% of common stock owned by him per- ability principles as applied to a parent cor- plex, inequitable transactions. sonally. The Pacific Lumber Company poration liability for obligations of sub- In Voest-Alpine Trading USA Corp. v. Van- (owner of Headwaters) shown as a wholly- sidiary. In Gibraltar Savings v. L.D. Brinkman tage Steel Corp., 919 F. 2d 206 (3d Cir. 1990), the

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00124 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.312 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2463 individual defendants were principal share- ity was limited to the amount of benefits re- well over 25% when the Drexel stock is added holders of an insolvent corporation (‘‘XYZ’’) ceived in any case.) to the MAXXAM/Federated stock), of which plaintiff was an unsecured creditor. The primary issue was the District Court’s MAXXAM nonetheless did not hold USAT These controlling shareholders induced a se- treatment of all these transactions as a sin- stock directly. However, it appears clear cured creditor to foreclose on substantially gle fraudulent conveyance. In affirming, the from our review of the general corporate all XYZ’s assets. Through several complex Tabor Realty Court faced for the first time, case law that so long as MAXXAM (or its financings involving the same foreclosing and squarely rejected, the defense contention predecessor, MCOH) exercised de facto con- creditor, the individuals formed a new cor- that LBO’s were too big, too complex, and trol over the savings and loan it will be re- poration, defendant Vantage Steel, which too important to big-time corporate finance, garded as having the same duties and obliga- purchased the assets, and opened for busi- ever to be analyzed under fraudulent convey- tions as would be imposed on a controlling ness, in the same business as XYZ, and with ance law. Although a damages case not in- shareholder of the savings and loan itself. the individuals in sustantially the same volving a constructive trust, Tabor Realty is If there is law specific to the savings and roles. The main issue was the applicability of important because it extended traditional loan context that contradicts this general Pennsylvania’s Fraudulent Conveyance stat- equitable principles to very complicated, principle, we would be very greatful if you ute (Pennsylvania Uniform Fraudulent Convey- modern financial transactions, and rejected could direct us toward it, if it is possible for ance Act, 39 Pa. Stat. §§ 354–357), which gen- the arrogant view that some transactions you to do so without compromising any con- erally prohibits transfers of assets or liens are so big, complicated, and important that fidentiality concerns. on assets either (1) with intent to defraud, or they are beyond the reach of equity. The Once again, thank you for your time and (2) for less than fair consideration and which Court’s reasoning applies not only to LBO attention. Please let me know if we can be of renders the transferor insolvent. Defendant transactions, but to their financial cousins service on this matter in any way. I will look argued that the statute did not apply to a se- engineered by Milken and Drexel. forward to hearing from you. ries of transactions where each step was law- It appears beyond doubt that federal courts Sincerely, ful. The Court held that a group of trans- will apply state law breach of fiduciary duty JILL RATNER, actions will be analyzed as a single trans- and unjust enrichment principles, will cut ROSE FOUNDATION FOR COMMUNITIES action where equity so requires, and upheld through tiers of related entities and multiple AND THE ENVIRONMENT. a constructive trust on the individual defend- transactions to reach the real controlling ants’ interest in the new corporation, for the persons and others who benefit from wrong- benefit of unsecured creditors of XYZ. THE ROSE FOUNDATION, ful conduct, and will impose constructive October 14, 1994. On the issue of ‘‘collapsing’’ multiple trusts in appropriate cases. transactions for fraudulent conveyance anal- BOB DEHENZEL, ysis, the Voest-Alpine Court relied on the FDIC, Washignton, DC. landmark Third Circuit decision in U.S. v. THE ROSE FOUNDATION DEAR BOB, I am enclosing summaries of re- Tabor Court Realty Corp., 803 F.2d 1288 (3d Cir. October 12, 1994. cent and pending cases affecting the Head- 1986). There the Court unwound a hideously Tom Hecht, waters Forest (as well as a couple of older complicated series of transactions com- Hopkins & Sutter, Counsel for the Federal cases that seemed likely to be of interest). prising a major leveraged buy out (‘‘LBO’’) of Deposit Insurance Corporation, Chicago, These are abstracted from a draft document a financially distressed group of related coal IL. that Jama, a volunteer at the Garberville mining companies (‘‘RAYMOND’’) by its DEAR TOM, I wanted to thank you again for Environmental Public Information Center president, DURKIN, who formed a new buy- arranging the October 4 teleconference with (EPIC) faxed to me on Wednesday. ing company (‘‘GREAT AMERICA’’). The Bod DeHenzel and Jeff Williams. I also want- I hope this information is helpful. Court’s recitation of facts runs for many ed to thank all three of you for taking the Randy Ghent, who is also a volunteer with pages, employing charts to track the rela- time to allow the Rose Foundation’s legal EPIC, is working on a map that will provide tionships and the dollars involved; for this team to present our arguments supporting a sense of what specific areas are directly af- memo, the facts can be greatly condensed; imposition of a constructive trust on Pacific fected by the cases summarized. RAYMOND was privately owned by wealthy Lumber, and supporting a petition for in- Thanks again for your interest and atten- individuals who employed DURKIN as a pro- junctive relief halting or severely limiting tion. fessional manager; the shareholders wanted logging on Pacific Lumber lands during the Sincerely, out, and granted DURKIN an option to pur- litigation of the FDIC’s claims arising out of JILL RATNER, chase all their shares, which option DURKIN the failure of United Savings Associatiation ROSE FOUNDATION FOR COMMUNITIES assigned to GREAT AMERICA; RAYMOND of. AND THE ENVIRONMENT. pledged all its assets, including coal mines In response to your requests for more spe- and substantial other real property, to SE- cific information on current logging within October 14, 1994. CURED LENDER for a loan of about $8.3 mil- the greater Headwaters area, or Headwaters TOM HECHT, lion; RAYMOND used the loan proceeds in Forest Complex: Hopkins & Sutter, Counsel for the Federal part to pay preferred creditors, part as a re- Jama Chaplin, at the Environmental Pub- Deposit Insurance Corporation, Chicago, serve for interest payments, and lent the bal- lic Interest Center (EPIC), in Garberville, IL. ance of about $4 million unsecured to California, has agreed to prepare a list of Dear Tom, I am enclosing summaries of re- GREAT AMERICA; GREAT AMERICA used pending and recently resolved litigation af- cent and pending cases affecting the Head- the money (and additional funds borrowed fecting Headwaters Forest, which she hopes waters Forest (as well as a couple of older against the same assets) to buy all the stock to fax to your office this week. cases that seemed likely to be of interest). of RAYMOND, paying defendant share- Randy Ghent, also of EPIC, is preparing a These are abstracted from a draft document holders about $6 million in cash (plus more map that indicates areas affected by the that Jama, a volunteer at the Garberville debt); SECURED LENDER sold its mort- pending and recently resolved court cases, as Enviornmental Public Information Center gages to PAGNOTTI, who sold them to well as areas that covered by active timber (EPIC) faxed on me on Wednesday. McCLELLAN; management could not turn harvest plans (THPs) or by THPs currently I hope this information is helpful. the operations around, and so defaulted; pending before the California Department of Randy Ghent, who is also a volunteer with McCLELLAN foreclosed and sold the assets Forestry (CDF). EPIC, is working on a map that will provide to a group of related companies (‘‘LOREE’’— The THPs on file with CDF contain some a sense of what specific areas are directly af- a separate company was formed for each information concerning the character of the fected by the cases summarized. major property, to redeem state and local affected forest parcels, including, in at least Thanks again for your interest and atten- property tax liens). When the financial dust some cases, the estimated number of old tion. settled, the former shareholders of RAY- growth trees per acre within the parcels. Sincerely, MOND got a lot of cash, LOREE got the Randy is willing to secure copies of the THPs JILL RATNER, mines, and the non-preferred creditors of that he has in his office. As a non lawyer ROSE FOUNDATION FOR COMMUNITIES RAYMOND got the shaft. (and someone generally opposed to unneces- AND THE ENVIRONMENT. The largest such obligation of RAYMOND sary use of wood products), he would, how- was to the IRS for about $20 million. The ever, like to know whether he should excerpt PENDING CASES U.S. sued everyone involved in each trans- sections related to the character of the par- action and everyone who received any of the cels or send the complete THPs, which he de- MARBLED MURRELET V. PACIFIC LUMBER loan proceeds (including the State of Penn- scribed as ‘‘extremely voluminous’’ to be This federal suit alleges that Pacific Lum- sylvania and two Pennsylvania counties, for copied. Please let me know which you would ber’s (PL’s) logging in Owl Creek Grove con- preferential payments of state employment prefer. stitutes a ‘‘take’’ in violation of the federal taxes and county real property taxes) in sev- /??????????copy missing and state Endangered Species Acts, either by eral related actions which were consolidated of stock in the savings and loan holding significantly disrupting the murrelet’s nor- for trial and appeal. After a 120-day trial, the company, United Financial Group (UFG), mal behavioral patterns or by actually injur- District Court unwound the entire deal. (It is which was the sole shareholder in the sav- ing or killing murrelets. not clear from the opinion whether any de- ings and loan, United Savings Association of Procedure: The suit was filed 4/16/93. It fendants escaped liability or whether liabil- Texas (USAT) (which percentage comes to originally named as additional defendants

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00125 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.315 pfrm07 PsN: E20PT1 E2464 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 the United States Fish and Wildlife Service pact. Further, the BOF has implied that CDF The murrelet was listed by the state as en- (USFWS), Department of Fish and Game has the obligation to determine whether a dangered on 3/12/92, and by the United States (DFG), Bureau of Forestry (BOF), and Cali- THP incorporates feasible mitigations. It Fish and Wildlife Service (USFWS) as fornia Department of Forestry (CDF). On 9/1/ must have information to do so. Therefore, threatened on 10/1/92. Immediately, USFWS 93 the federal district court dismissed the approval of plans without the necessary in- informed PL that the Owl Creek plan, if exe- Environmental Public Information Center’s formation is held to violate both CEQA and cuted, would violate the Endangered Species (EPIC’s) claims against all parties except the Forest Practice Act. Act. PL once again snuck into the grove, on PL. Steve Volker of Sierra Club Legal De- Conclusions by the DFG, the court held, as Thanksgiving weekend of 1992. EPIC ob- fense Fund (SCLDF) is currently appealing to possible effects of timber harvesting on tained an emergency stay from the Appeals this dismissal for EPIC. wildlife must be considered by the BOF be- Court. In March of 1993, PL removed the tim- During discovery, PL was sanctioned by cause possible destruction of old-growth de- ber it had illegally cut in November, netting the Court and ordered to pay EPIC $6,275 for pendent species and their habitat from har- another million. EPIC filed a federal case on withholding information. vesting of old-growth timber can fairly be 4/15/93. Trial was held August 15–24 and September described as significant and adverse. Thus, This case was eventually dismissed due to 6–9, 1994 in San Francisco before Visiting the BOF has an obligation imposed by CEQA the procedural error that EPIC did not con- Judge Louis Bechtle. Witnesses testified to to collect info regarding the presence of en- test the BOF ruling within 90 days. PL’s falsification of murrelet survey data dangered species. The Court also rejected the EPIC Attorneys: Julie McDonald, Joseph and to other material misrepresentations by BOF’s rational that the extensive surveys to Brecher. PL. address wildlife effects were not appropriate EPIC Contacts: Cecelia Lanman, Charles Status: awaiting ruling, anticipated in because of the costs and time commitments Powell. January of 1995, may be sooner. such surveys would impose on forest land- EPIC V. MAXXAM I owners. EPIC Attorneys: Mark Harris, Macon This suit, EPIC’s first against Pacific Cowles, Susan O’Neill, Charles Steven According to the evaluation by the DFG, logging these lands could have a significant Lumber (PL) and its corporate parent, in- Crandall, Brian Gaffney, Steve Wolker volved three THPs proposing to clearcut old- EPIC Contacts: Cecelia Lanman, Charles impact on old-growth dependent species. Be- cause DFG identified a potential significant growth redwood and/or Douglas fir forests. Powell, Josh Kaufman, Jamie Romeo, Laurie Two were in the Headwaters Forest area in Sarachek impact, the Court held that the Registered Professional Forester (RPF) must discuss al- Little South Fork Elk River and Salmon EPIC V. CDF (‘‘SEVEN THP’S’’) ternatives in the THP, suggest mitigations, Creek watersheds, and one at Sulphur Creek EPIC challenged CDF’s approval of seven and explain why feasible alternatives were of the Mattole. Timber Harvest Plans (THPs) in residual old- rejected. The Supreme Court upheld CDF’s The suit resulted in a ruling that the CDF growth areas of PL’s Headwaters Forest requirement that PL provide wildlife surveys had not only ‘‘rubber-stamped’’ the THPs, area. done by recognized wildlife professionals of but had intimidated the Department of Fish Procedure: TRO denied October, 1994. old-growth dependent species in the THP and Game (DFG) and the Regional Water Trial set for October 31. area and in the general vicinity. Quality Control Board staff from making EPIC Attorney: Brian Gaffney. This case involves virgin old-growth red- any comments critical of THPs. This suit re- EPIC Contact: Cecelia Lanman. wood and fir in PL’s Headwaters Forest area, sulted in a DFG policy shift to review some EPIC V. CDF (‘‘ALL SPECIES GROVE’’) on Lawrence Creek and Shaw Creek. old-growth plans more carefully. This involves a 186 acre THP in virgin old- Procedure: THPs 1–88–65HUM and 1–88– Procedure: THP 1–87–240 HUM, 1–87– growth redwood and fir habitat in PL’s Head- 74HUM, involving a total of 325 acres, denied 241HUM, 1–87–230HUM approved May/June by CDF 4/18/88 because wildlife information waters Forest area, at the confluence of Bell 1987. EPIC filed Petition 6/4/87 (Humboldt Ct. provided by PL determined to be inadequate. and Lawrence Creeks. PL refused to conduct #79879, Judge Paterson). Status: final 2–4–88: The BOF overturned CDF’s denial on 6/8/88; site-specific wildlife surveys and refused to THPs inadequate. PL appealed, but then EPIC filed petition 6/1/88 (Humboldt Ct. accept some DFG mitigation. abandoned its appeal. THP 87–230 later resub- #82371, Judge Buffington). TRO denied 6/28; Procedure: THP 1–90–069HUM approved 5/4/ mitted and approved, but EPIC lacked re- Appellate Ct. issued stay 7/1 and alternative 90. EPIC filed Petition 5/4/90, Humboldt Ct. sources to sue. writ 8/15. After trial 10/5/88, judge returned EPIC Attorneys: R. Jay Moller, Tom #90CP0341. Judge Nelson issued a Temporary THPs to BOF for further findings. Trial Lippe, Sharon Duggan, Thomas Petersen. Restraining Order 5/9/90. After trial 6/4/92, on Court denied Writ on 10/2/89 bases on BOF’s 6/5/92 Nelson denied injunction and writ, finding of no significant impact to species or holding in essence that the California Envi- habitat. Appeal Court reversed and remanded THE ROSE FOUNDATION, ronmental Quality Act (CEQA) applies much for denial of both THPs on 9/23/91. Petitions October 14, 1994. more narrowly to THPs than the decision in for rehearing filed by Pacific Lumber and TOM HECHT, EPIC’s first successfully litigated case, EPIC EPIC. Appellate Court re-decided case on 3/ Hopkins & Sutter, Counsel for the Federal v. Johnson, allows. Sierra Club v. CDF II 18/92, holding for EPIC. Appellate decision at Deposit Insurance Corporation, Chicago, (Hum. Ct. #90CPO405) was consolidated into 92 DAR 3711. California Supreme Ct. granted IL. this suit. The appeal has been briefed, but no Pacific Lumber’s petition for review. Status: DEAR TOM, I am enclosing summaries of re- date set for oral argument. For some time, final-California Supreme Ct. unanimous de- cent and pending cases affecting the Head- Tom Lippe had believed that Appeals Court cision for EPIC on July 21, 1994. waters Forest (as well as a couple of older was waiting for the Supreme Court to decide EPIC Attorneys: Tom Lippe, Bruce cases that seemed likely to be of interest). Sierra Club v. BOF, which presented very Towner, Richard Jay Moller. These are abstracted from a draft document similar issues. That case was decided July 21, that Jama, a volunteer at the Garberville SELECTED CASES OF HISTORIC INTEREST 1994. Environmental Public Information Center EPIC Attorney: Tom Lippe, R. Jay Moller, EPIC V. PACIFIC LUMBER (OWL II) (EPIC) faxed to me on Wednesday. Kenneth Collins This THP, which is the same THP involved I hope this information is helpful. EPIC Contact: Charles Powell in Marbled Murrelet v. Pacific Lumber, was de- Randy Ghent, who is also a volunteer with RECENTLY DECIDED nied by CDF 1/30/91. CDF acknowledged the EPIC, is working on a map that will provide area as habitat for one of only three remain- a sense of what specific areas are directly af- SIERRA CLUB V. BOARD OF FORESTRY ing California marbled murrelet populations, fected by the cases summarized. On July 21, 1994, the California Supreme and PL refused to provide adequate murrelet Thanks again for your interest and atten- Court unanimously affirmed a Court of Ap- surveys and mitigations. The murrelet was tion. peal judgment, holding that the California at the time a state ‘‘candidate’’ species. On Sincerely, Board of Forestry (BOF) cannot approve a appeal BOF approved THP over objections of JILL RATNER, THP that does not include information re- CDF, DFG, the Attorney General, and their ROSE FOUNDATION FOR COMMUNITIES quested by the CDF regarding the presence own counsel. At the BOF hearing PL was AND THE ENVIRONMENT in the plan area of old-growth dependent spe- given 3 hours to speak, and EPIC’s Cecelia cies. Significantly, the Court held that in ap- Lanman was ejected and threatened with ar- proving THPs the BOF must comply not only rest for speaking slighly over five minutes. MEMO with the provisions of the Forest Practice Procedure: Petition filed 3/26/81, Humboldt From: Steven C. Lambert (SCL). Act, but also with the more extensive re- Ct. #91CO244, alleging violations of CESA. 8/ To: FTH, RWP. quirements of CEQA, thus affirming the 26/91 Ferroggiaro’s Alternave Writ required Date: Wednesday, October 19, 1994 4:42 pm. standard previously imposed by the appellate the Board to reconsider the THP. 3/4/82 BOF Subject: Rose Foundation Letter. court in EPIC v. Johnson. re-approved THP with condition of adequate I received through inter-office mail a copy The Supreme Court ruled that CEQA does murrelet surveys. of an October 12th letter to Tom from Ms. vest CDF with authority to require informa- On a weekend in June 1992, PL began log- Ratner. tion to expressly specified in the Forest ging in Owl Creek without approval of state In her letter, Jill treats several issues— Practice Act rules if the info requested is or federal wildlife agencies, and was stopped only one about which I will comment here— necessary to determine whether a THP will only by EPIC’s legal action. The cut netted her discussion about the timber resource. As have a significant adverse environmental im- over $1,000,000. EPIC obtained TRO in 9/92. I appreciate what she is suggesting (and,

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00126 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.319 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2465 please understand, I’m not certain of the Headwaters Forest Legal Project, focusing Committee, it appears that Huebsch was the context in which this subject came up in on our efforts to urge the FDIC to seek re- primary buyer of Drexel-underwritten secu- your call with her), she suggests use of sat- covery of the property as a remedy for the rities for USAT and other entities, including ellite photography in order to get an ‘‘accu- looting of United Savings Association of MAXXAM, MCOH, UFG, and PL. A factual rate picture of the economic and environ- Texas (‘‘USAT’’). I participated in prepara- inquiry that we assume the FDIC has pur- mental resources at stake’’. tion of the Rose Foundation’s memorandum sued would be the method of allocating spe- I’d like an opportunity to discuss her sug- directed to your colleague, Steve Lambert cific securities purchased by Huebsch among gestion with you before someone adopts her on September 29, 1994 (‘‘Headwaters Memo’’), USAT and the others if, as we infer, Huebsch proposal. If the agency is interested in valu- and in the following conference call. Jim purchased ‘‘centrally’’ and then allocated ation information about the Headwaters and Ratner, Rose Foundation’s president, has the purchases afterwards. These facts tend to other PL holdings, I believe it first should asked me to follow up on certain points by show not only de facto control of USAT by look at valuation work already in the public this letter. MAXXAM/Hurwitz, but would be another domain—which was based at least in part on 1. Federal cases, generally. My research of basis of breach of fiduciary duty liability if an on-the-ground inventory (called a cruise) California state court decisions and Mr. there appeared to be a tendency to allocate of the property being appraised. The recent Camp’s review of Texas state court decisions, riskier issues to USAT. hearings before the House Committee pro- was incorporated in the legal analysis in the 4. Causation-in-fact of FDIC damages. vide some details about an appraisal con- Headwaters Memo. Subsequent research of MAXXAM may argue that the Drexel, under- ducted for the US Forest Service by Jim federal cases strongly supports that analysis. written junk bond investments of USAT Fleming (an MAI from Sacramento, CA)— My client has authorized me to provide you were not the cause-in-fact of its demise, and which I believe used cruise information from with a copy of my federal cases research if so it could be argued that the quid pro quo an Oakland, CA firm (Hammond, Jensen and memo to her dated October 1, 1994, which is was not a cause of the FDIC’s $1.3 billion loss Wallen) in valuing the 3000 acres of virgin enclosed. I conclude there: in bailing out USAT depositors. We respond, redwood and surrounding 1,500 acres of resid- ‘‘There is overwhelming authority for im- first, that Louis Ranieri, who took over ual/cutover/young growth forest in the Head- position of constructive trusts by federal USAT in 1989, described its investment port- waters. Another valuation, as I recall accom- courts. . . . A federal court will not hesitate folio as ‘‘80% bologna’’, according to the New plished at the request of a Congressman, was to reach MAXXAM and Hurwitz, if their li- York Times, February 20, 1989 [Headwaters accomplished by Gary Rynearson of Natural ability is established under state law; will Memo, pp. 23–24]. Resources Management, Inc. it was based on not hesitate to unwind a complex series of Second, we suspect that this defensive ar- similar volume information, but used State transactions such as the quid pro quo de- gument is premised at least in part on ar- Board of Equalization values/MBF for ‘‘aver- scribed in the statement of facts; and will cane accounting principles that a court age standards similar to those being ap- not hesitate to reach PL [short reference to would reject. We lack the information, and praised.’’ Pacific Lumber and other MAXXAM subsidi- probably the expertise, to specifically ana- You may recall that at our meeting in Chi- aries which own and control the Headwaters lyze the quality of the junk bond portfolio at cago I summarized the results of both valu- Forest] and its assets as the fruit of the time of USAT’s failure, but we assume ations for Mr. Williams. If you want me to MAXXAM’S and Hurwitz’s wrongful con- the defense’s argument would include: summarize the already-public information in duct.’’ that some junk bonds which had taken a a memo, I’ll be happy to do so. 2. The quid pro quo. The Rose Foundation huge hit in their market values, were never I have some mis-givings, based on past ex- contends that Charles Hurwitz and in default, and were paying premium re- perience, in trying to determine in any pre- MAXXAM in fact controlled USAT and its turns; arguably, these did not cause any fi- cise way, old growth redwood volumes/values investment decisions, and therefore had fidu- nancial damage to USAT. To the contrary, by use solely of aerial photography such as ciary duties to USAT; and that in breach of we urge that a Court would hold that the she is describing. The only use for such tech- their fiduciary duties, Hurwitz and market risk, even more than the risk of de- nology of which I am aware relates to mas- MAXXAM entered into an illegal agreement fault, is why investment in low grade bonds sive resource studies, where ‘‘preciseness’’ is with Michael Milken and Drexel Burnham is imprudent; and that this loss of asset not felt to be necessary for the purpose of Lambert (‘‘Drexel’’). Pursuant to that illegal value and net worth precipitated in substan- the study. I know of no valuation of redwood agreement, Drexel underwrote a series of tial part the insolvency of USAT, and the based on such photography. junk bond financings on the order of $800 FDIC losses. However, if the agency wishes to ‘‘go that that some junk bonds in default were later million which enabled MAXXAM to acquire route’’, then I could suggest several firms to completely redeemed after their issuers were PL and the Headwaters Forest properties, consider. I suggest, though, given what I taken over or reorganized, and caused no loss and Hurwitz and MAXXAM caused USAT to know about the technology and its use (or to USAT. Same response. invest in over $1 billion worth of very low lack thereof) for valuation purposes, that we If cause-in-fact of USAT’s demise is dis- grade, high risk securities underwritten by shouldn’t be ‘‘recommending’’ that the agen- puted, the issue would be not whether junk Drexel. cy rely on the type of photography Ms. bonds caused direct loss of principal and in- As set forth in the Headwaters Memo, Ratner is proposing. Rather, I would suggest terest to USAT, but whether investment in these contentions are based on information that IF the agency needs more information junk bonds was a substantial factor in the in the public records, most notably the than has already been accomplished for the insolvency of USAT. We believe the affirma- FDIC’s allegations in the federal court ac- Forest Service, then it should consider hir- tive is true and provable. tion, FDIC v. Milken. In the Headwaters ing someone in the timber appraisal profes- Third, we understand that USAT’s port- Memo and this letter we assume that the sion to provide the information/opinions it folio at its collapse included substantial quid pro quo allegations are provable. While needs. One note of caution: There aren’t very Drexel-underwritten ‘‘mortgage backed secu- we believe the information in the public many real qualified firms/individuals left rities’’, arguably these, as distinguished record is sufficient to establish the existence who appraise redwood—because of the dwin- from junk bonds, were the cause-in-fact of of a quid pro quo, at least prima facie, we dling supply in private ownership, their is a USAT’s demise. We urge that it makes no further assume that the FDIC has developed dwindling supply of top-notch redwood cruis- difference what particular investments, evidence beyond that available to us from ers/appraisers. As noted above, 3 firms are made to accommodate Drexel, actually public records. now ‘‘off-the-market’’ —so IF the agency caused the loss. To restate our third re- If the quid pro quo is proven, a Court will sponse parallel to the second, the issue is not really believes it will need independent valu- view investments by USAT as in effect hav- ation information (even if it is ‘‘down the whether quid pro quo investments caused di- ing been directly made in junk bonds issued rect financial loss to USAT, but whether the road’’), it might be well for them to consider by MAXXAM, proceeds of which financed ac- retaining someone now before they, too, are quid pro quo investments were a substantial quisition of PL. In essence the transaction factor in the insolvency of USAT. ‘‘gobbled up’’ by Pacific Lumber Company, constituted an unsecured loan made by 5. Unjust enrichment. FDIC claims arising the Forest Service, the State of California or USAT to MAXXAM for acquiring PL, which out of the USAT bailout are not dependent one of the environmental interest groups. had it been made directly would have been on proof even that the quid pro quo caused Please let me know if you need anything at prohibited by applicable Texas S&L regula- USAT’s insolvency. FDIC is not a mere cred- this time. Thanks. tions (discussed below). Whether these pro- itor of USAT, but now stands in place of hibited transactions damaged USAT or not, USAT. FDIC is not limited to complaining RICHARD DESTEFANO, they unjustly enriched MAXXAM and about specific transactions which damaged ATTORNEY AT LAW, Hurwitz (see discussion below), and form the FDIC’s interest, but may assert any right or Taos, NM, November 18, 1994. basis for a claim to recover the property now claim of USAT. Under Texas and California TOM HECHT, via imposition of a constructive trust. law a fiduciary is liable to his principal for Hopkins & Sutter, Chicago, IL 60602. 3. Role of Ron Huebsch and others. As de- any profits obtained in breach of fiduciary Re: United Savings Association of Texas. tailed in the Headwaters Memo pp. 12–16, duty, even if the principal is not damaged at Your client: Federal Deposit Insurance Cor- Ron Huebsch, Barry Munitz, and other all, and federal courts do not hesitate to en- poration. Hurwitz associates were active as officers, force the state substantive law, nor to im- My Client: The Rose Foundation. directors, and investment advisors for USAT pose constructive trust remedies. DEAR MR. HECHT: I write on behalf of The as well as other MAXXAM affiliates. Based Particularly instructive is First Nat’l Rose Foundation in connection with its on Hurwitz’s testimony before the Dingell Bank of La Marque v. Smith, 436 F. Supp. 824

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00127 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.321 pfrm07 PsN: E20PT1 E2466 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 (S.D. Tex. 1977). There, officers and principal tors and officers (65.3). This would seem to be gal transactions, which destroyed USAT and shareholders of the plaintiff banks were prof- exclusively factual, and provable here. benefitted Hurwitz and MAXXAM; and will iting from insurance commissions and re- 6.4 The regs limit aggregate loans to one hold that Hurwitz and MAXXAM had fidu- bates generated in connection with credit borrower (§ 65.4) to the net worth of the asso- ciary duties to USAT (and therefore to the life insurance which was required by the ciation. If the quid pro quo is viewed as, in FDIC), breached those duties, and were un- bank as a condition for certain loans. Fed- substance, an unsecured loan to MAXXAM justly enriched by their breach. The court eral and state regulators moved administra- for acquisition of PL, compare the amounts will not see Hurwitz and MAXXAM as care- tively to forbid the practice and to require of purchases of Drexel-underwritten securi- ful to walk just this side of liability, but that the commissions and rebates belonged ties in 1985–1987,with the net worth of USAT rather as participants in the looting of a to the banks and not the individuals. The at year-end for those years: Savings and Loan who are now destroying Court specifically found that the banks were Year; Purchases; Net Worth: the Headwaters Forest. We urge the FDIC to not damaged by the practice, yet ruled 1985, $280 million, $163 million take immediate action to restrain logging against the individuals on the grounds of the Headwaters Forest, and to proceed as breach of fiduciary duties to shareholders 1986, 688 million, 249 million 1987, 321 million, 63 million swiftly as possible to recover this irreplace- and depositors and unjust enrichment of the able asset. bank officers and principal shareholders. The 6.5 Loans to affiliated persons are further restricted, requiring the approval of a major- Very truly yours, Court stated: RICHARD DESTEFANO. ‘‘An officer, director or controlling owner ity of disinterested directors at a regular of any business entity has a fiduciary duty board meeting (§ 65.11). to make certain that the economic rewards 6.6 ‘‘One borrower’’ is defined to aggregate RECORD 8A accruing from a corporate opportunity inure loans made to affiliated entities where one [From the Humboldt Beacon, Aug. 26, 1993] hold only 10% of the other’s stock (§ 65.3). to all the owners of the enterprise. This obli- EARTH FIRST! WANTS 98,000; 4,500 ACRES TOPS, gation is even stronger in the case of a bank, 7. Full disclosure. If disclosure to the inde- PL SAYS both because of the fiduciary nature of bank- pendent directors of USAT or United Finan- ing and because of the duty to depositors.’’ cial Group of material facts relating to in- (By Glenn Franco Simmons) 436 F. Supp. at 830, 831 (emphasis added). vestment decisions of USAT, is germane to Contrary to many published and televised The La Marque Court cites several other FDIC’s potential challenge of those deci- reports, Congressman Dan Hamburg’s bill if cases for the proposition that controlling sions, the disclosure must be complete and passed will affect nearly 60,000 acres—not persons of banks have higher fiduciary duties meaningful, and extend not just to the super- 44,000 as Hamburg proposed. than with other businesses. On this issue and ficial facts about a particular investment, Furthermore, Hamburg has proposed an- the unjust-enrichment-without-economic- but to the existence and extent of the quid other 13,500 acres to be set aside as ‘‘study loss issue, the opinion seems very strongly pro quo. It seems almost certain that the acres.’’ to support an action by the FDIC against outside directors of USAT/UFG would con- Earth First! has set its goal at 98,000 acres. controlling persons of USAT. See also, Lund tend that they had no knowledge of the quid ‘‘It’s too much,’’ Bullwinkel said. ‘‘We v. Albrecht, 936 F.2d 459 (9th Cir. [Cal] 1991) pro quo, that they did not know that USAT’s can’t afford to keep setting aside more pro- (constructive trust imposed on secret profit investments in Drexel-underwritten securi- ductive timber land.’’ from sale of a partnership asset); U.S. v. ties were used to finance MAXXAM’s acqui- Hamburg has said that much of the land, if Pegg, 782 F.2d 1498 (9th Cir. [Cal] 1986) (con- sition of PL, and if they had known, would his bill succeeds, would still be open to ‘‘sus- structive trust for wrongful acquisition and have disapproved, and it also seems likely tainable’’ logging. detention of property belonging to the U.S.); that these outside directors would be be- ‘‘When has the federal government been Chien v. Chen 759 S.W.2d, 484 (Tex App. 1988) lieved, and a Court would find that there was able to do any job better than private indus- (secret profit by agent who purchased prop- no adequate disclosure. try?’’ asked Pacific Lumber Co. spokesperson erty through ‘‘front man’’, so seller was un- 8. The endangered Species Act (‘‘ESA’’) and Mary Bullwinkel. aware of buyer’s true identity as seller’s the mission of FDIC. While the FDIC is pri- She said PALCO does not believe the fed- agent and confidant); and Amalgamated marily focused on recovering money’s worth eral government can be a better steward of Clothing and Textile Workers Union v. for its loss in USAT, we urge that all federal the forests than private timber companies. Murdock, 861 F.2d 1406 (9th Cir. 1988) (pension agencies are mandated to consider the im- What Is The Headwaters? officials liable to disgorge from self-dealing pact of their decisions on endangered spe- The freshman congressman’s bill calls for despite lack of damage to plan members). cies. The Headwaters Forest is habitat for the purchase or exchange of 44,000 acres of Outside of Texas and California, the rules several endangered and threatened species, what appears to be mostly PALCO-owned are the same, that unjust enrichment of a fi- as detailed in the Headwaters Memo. land in the Headwaters area about 10 to 15 duciary without actual damage to the prin- The ESA states that ‘‘[I]t is the policy of miles northeast of Fortuna, Bullwinkel said. cipal, is sufficient for liability. Bush v. Tay- Congress that all Federal . . . agencies shall ‘‘The reason they named it the Headwaters lor, 893 F.2d 962 (8th Cir. 1990). We have found seek to conserve endangered species and Forest,’’ Bullwinkel noted, ‘‘is because it’s no authority for the contrary position that shall utilize their authorities in furtherance at the headwaters of two streams: Salmon damages are essential to a breach of fidu- of the purposes of this chapter’’. 16 U.S.C. Creek and the Little South Fork of Elk ciary duty cause of action, or a constructive § 1531(c)(1)(emphasis added), and further re- River.’’ trust remedy, in any unjust enrichment sce- quires that: ‘‘The Headwaters bill came from a very nario. ‘‘. . . all . . . Federal agencies shall, in radical proposal put together by people who 6. Texas Savings and Loan Regulations. In consultation with the Secretary [of the Inte- made the Headwaters an issue,’’ said Earth the Headwaters Memo, we have argued gen- rior], utilize their authorities in furtherance First! spokesperson Alicia Little Tree. erally applicable principles of fiduciary li- of the purposes of this chapter by carrying ‘‘They have been working on it for eight ability and constructive trust relief, shying out programs for the conservation of endan- years: Earth First!, E.P.I.C. and other people away from discussions of ‘‘banking law’’ be- gered . . . or threatened species. . . .’’ (16 who have been concerned about the well- cause of our lack of expertise. We have, how- U.S.C. § 1536(a)(1). being of Headwaters. ever, briefly reviewed Rules of the Texas The ‘‘duty to conserve’’ is an affirmative ‘‘They put together a proposal that calls Savings and Loan Department in effect in obligation of all federal agencies. Pyramid for not only a debt-for-nature swap, but also 1986. 7 Texas Administrative Code, Chapter Lake Paiute Tribe v. U.S. Dept. of the Navy, an employee-stock-option plan for the busi- 65, which seem to provide additional support. 6.1 Regarding the propriety of USAT’s in- 898 F.2d 1410. The ESA further provides that: nesses to restore the Headwaters . . . that vestment in Drexel-underwritten securities, ‘‘. . . each Federal Agency shall . . . insure has been decimated by these years of logging § 65.21, relating to investments in securities, that any action authorized, funded, or car- by Maxxam.’’ permitted only conservative investments ried out by such agency is not likely to jeop- The activist said Hamburg picked up on such as obligations of the U.S., the state of ardize the continued existence of any endan- the original proposal that she called ‘‘vision- Texas, and Texas municipalities, and savings gered . . . or threatened species or result in ary.’’ deposits in institutions insured by your cli- the destruction or adverse modification of ‘‘Hamburg, who is a first-year ent. habitat of such species which is determined congressperson,’’ Little Tree said, ‘‘... did 6.2 Throughout the regs, transactions with . . . to be critical. . . .’’ (16 U.S.C. 1536(a)(2). pretty good to get through the shell of the ‘‘affiliated persons’’ are prohibited outright Accordingly we urge that the FDIC deci- proposal that he got through, which is about or are limited in scope and require full dis- sion makers who will decide whether to seek all we could get in a compromise situation. closure to disinterested directors. See, e.g. recovery of the Headwaters Forest properties ‘‘I think he has done all he can, and I ap- § 65.11 re loans to affiliated persons; and have an affirmative duty to conserve the en- preciate his work. He should be congratu- § 65.19(5) regarding investments in real prop- dangered and threatened species who inhabit lated for all he could do.’’ erty. There is no specific prohibition on in- the forest, and further that the decision not Despite having reservations, she said she vestments in securities issued by affiliated to pursue recovery of the properties, if there didn’t disagree with Hamburg’s proposal. persons, but this is because the list of per- is a reasonable legal basis to do so, may be ‘‘I think a lot more is needed to protect mitted issuers of securities is so limited. in violation of the ESA. the Headwaters,’’ she noted, ‘‘because the 6.3 The regs define ‘‘Affiliated Person’’ to 9. Conclusion. We believe a federal court bill calls for willing sellers. Maxxam clearly include ‘‘controlling person’’, not just direc- will view this case as involving related, ille- stated that (it) is not willing to sell 4,500

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00128 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.323 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2467 acres. Selling Headwaters as a 4,500 acre is- market value’’ for property it deems as need- given to interest expressed by another fed- land doesn’t do anything to protect the an- ing to be government-owned for the public eral agency for which the facilities may be cient-redwood ecosystem. It just creates an good? In such cases, landowners have no transferred without cost (e.g., Army bar- isolated island of old trees; kind of like a choice but to ‘‘sell.’’ racks to FDIC, FDIC interest transfers to museum, except the trees die from the ‘edge ‘‘Ultimately, our goal is to have commu- Hurwitz-entity); (2) second preference is to a effect’ and from being so fragmented. It dries nity control of the acres in which we live and local economic redevelopment entity that out and kills it from the edges in.’’ the areas in which we work—community involves municipal or country agency, which She said examples of the edge effect can be control of the actual work and the actual then can transfer to investors; (3) other cre- found in Humboldt Redwoods State Park in jobs,’’ Little Tree said. ‘‘There shouldn’t be ative options will be considered. The US gov- Southern Humboldt. One example, she said, anyone who has to pick up and leave or be ernment is responsible for environmental is just south of Stafford in the first old- forced out of the area. And that is exactly clean-up. It seems possible to devise a pro- growth redwood groves below Visa Point. what the government is calling for—a short- posal that may interest Hurwitz and get the ‘‘You can just drive past them,’’ Little term mind-set that is going to create a de- cooperation of DOD and local redevelopment Tree said. ‘‘There are blow downs; they are prived timber industry in which they clear- group to work with FDIC and Hurwitz to no longer regenerating.’’ cut all the trees and (implement) even-aged come up with a viable plan, particularly in PALCO has offered to negotiate for the management. Texas where Hurwitz would get significant fair-market-value sale of 4,500 acres of what ‘‘I don’t think the government can offer us positive public exposure. I obtained from it considers the Headwaters. About 3,000 any solutions. The solutions have to come DOD list of all bases that are or will soon be acres of that is old growth and the 1,500-acre from the community itself, from coming to- closed that have facilities for sale or lease. I ‘‘buffer,’’ has a mixture of old- and second- gether and creating the solutions . . . The also am reviewing media articles that cover growth trees, Bullwinkel said. federal government has a lot to do and they successful transfers of such property to in- The trees are primarily redwood, although are not really that concerned about the in- vestors and will keep you informed of any in- there are some Douglas fir. tegrity of our communities.’’ teresting developments. It will not only be PALCO that is affected Bullwinkel said eminent domain is always If you have any questions or concerns, by Hamburg’s proposal. a concern, although she hasn’t heard of a please let me know. ‘‘There are private ranches out there,’’ concrete proposal. J.R. WILLIAMS. Bullwinkel said, ‘‘as well as some Sierra Pa- cific and Simpson land and back in there.’’ EARTH FIRST! GOALS No one seems to know what the boundaries ‘‘I would just like to talk about our goals RECORD 10 of Hamburg’s proposal are. and objectives of this week.’’ Little Tree said Easy thing for staff to do would be send the ‘‘Well, if you call Hamburg’s office, they at a news conference held in Rio Dell on existing draft ATS to the Board and manu- tell you that they really can’t give you a Monday. (See related story on page 1.) ally file suit. Also easy for entire counsel map because they really don’t have one be- ‘‘Many people knew about Headwaters and (remember, they always want to say). That cause they say it ‘is evolving’,’’ Bullwinkel the Headwaters proposal. It’s outrageous is not what we recommend. We recommend said. ‘‘Then you call the Forest Service and that we have to file a bill in Congress to pro- continued work [w/defense counsel—] on (1) they say they have what they believe are the tect the last of the ancient redwoods from a the merit of FDICs claim; (2) a possible cap- boundaries. man who stole them in the first place; that ital maintenance claim by OTS against ‘‘But, do they realize how far the boundary we have to buy them from Hurwitz who stole MAXXAM. of Hamburg’s bill is from the boundary of the them with a junk-bond bailout. Why? (1) Tactically, combining FDIC & Six Rivers National Forest? There is this ‘‘. . . We want Hurwitz in jail. ...We OTS claims—if they all stand scrutiny—is huge gap in there. How are they going to add don’t want to have to reward Hurwitz for more likely to produce a large recovery/the this land to the national forest?’’ stealing the Headwaters by paying him trees than is a piecemeal approach; (2) Both Bullwinkel said that at this point, she does money.’’ sides are learning/developing their case. And not know of any proposals other than the Bullwinkel said that demanding the arrest I believe that counsel for both sides truly Earth First! proposal that calls for 98,000 of Hurwitz is ‘‘ridiculous.’’ wants and needs a better understanding of acres. The second demand is an ‘‘exchange.’’ the case than we currently have. However, she admitted it’s a possibility. ‘‘We think it should be a debt-for-nature 9 mos ago, I was prepared to go with a ‘‘We don’t know; there is always a poten- swap,’’ Little Tree said,’’ whether he ‘‘straddle’’ theory and some other bits and tial that it could grow,’’ she said, ‘‘but that (Hurwitz) should give Headwaters to the pub- pieces, eg, dividend—not to be confused w/the would be devastating. The 44,000 acres is dev- lic and the money that would go to the pur- RICO claim. Villa’s submissions have been astating enough. Let’s talk disaster for chase of it should go to creating stability voluminous & instructive; they have also Humboldt County. How much more land are and jobs in the community as far as restora- been advocacing—some ‘‘facts’’ have been we going to take out of production?’’ tion work and creating some sort of sustain- stretched. EFI PROPOSAL able timber economy in our region.’’ We have paid the case ‘‘back’’ to $200 mil- Little Tree said Earth First! wants more ‘‘When has Earth First! ever brought any lion and we are very closer whether to sue land set aside than is targeted in Congress- jobs to this area?’’ Bullwinkel asked in re- Dr. Kozmetabi at all. man Dan Hamburg’s bill to protect animal sponse. Options: (1) Defer it all, incl. OTS, until and plant species. The other demand is ‘‘an immediate mora- (probably) 4th quarter ’94; (2) Authorize suit, ‘‘A lot of the species that live in the old- torium on logging in the Headwaters wilder- but hold off filing; (3) Authorize and file growth forest are specifically old-growth ness complex area.’’ Little Tree said. around the edges; (4) Sue (or settle) UFG on species,’’ Little Tree said. ‘‘So, if you have Although the boundaries of Hamburg’s pro- tax and cognital maintenance, and option 1 this little island, you get a very, very in-bred posal remain in limbo. Bullwinkel said Earth or 2 on the rest; (5) Option 2 or 3 except defer gene pool and they have no place to spread First! is mistaken if it believes that PALCO on Dr. Kozmetabi. out. is logging in what it considers the Head- If this wasn’t public, the FDIC would do #1. ‘‘Earth First! is calling for a 98,000-acre waters area. Know as much-more as usual, but complex wilderness complex, but not to lock-up the and both sides still learning. I think we Headwaters forest but to create buffers and should do it here—but complaints are likely RECORD 9 to put people back to work in the woods ac- (whatever we do). tually creating healthy ecosystems. To: Jack D. Smith@LEGAL OGC ‘‘. . . We are calling for 98,000 acres to pre- Hdq@Washington serve the Headwaters grove and the four From: Jeffrey Williams@LEGAL 5/19/95 PC—FROM JILL RATHER other old-growth groves that are inside the PLS2@Washington Alan McReynolds—Asst to Sec. of Interior— boundaries of the ‘wilderness’ complex,’’ she Subject: USAT/military bases Jeoff Webb—Sec. Congressional Liaison continued. ‘‘‘This would really mean taking Date: Monday, April 3, 1995 10:14:39 EDT Jay Ziegeler—Asst to * * * it out of the hands of corporate control and Jack: Just a note regarding our brief dis- Jill did fly over Headwaters w/McReynolds putting it in the hands of our community. It cussion on Charles Hurwitz and exploring last week. McReynolds—mostly interested in would make it so our community can decide creative options that may induce a settle- land for land swap. vis-a-vie military/or what will happen in the woods, so we can ment involving the sequoia redwoods in bases for trees. create long-term stability in our commu- FDIC/OTS case: I have reviewed the statutes McReynolds grew up with Hurwitz & their nity.’’ and regulations regarding the closure and re- families still have contact with one another. Bullwinkel said 98,000 acres is too much. vitalization of military bases and other fa- Did base conversion with at DOD. ‘‘Well, that is outrageous—98,000 acres?’’ cilities. The pace of sales has not met the Levan met w/McReynolds, Webb & Ziegeler— she said. ‘‘I think they are proposing that at services’ expectations and they are desparate this past Tuesday. Intention is that discus- this time to make it look more attractive, to to expedite and accommodate interested in- sion will continue. Webb and Ziegeler will make Hamburg’s proposal look more like a vestors. I spoke with a Department of De- consider doing preliminary work to explore compromise.’’ fense official on the general means to ac- whether or not fax notice would work. There What about eminent domain, in which the quire some property and there are numerous is no clear cutting going on outside of Head- government appropriates and pays ‘‘fair- ways. Among them are: (1) preference is waters but injunction was lifted yesterday.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00129 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.325 pfrm07 PsN: E20PT1 E2468 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 To: Jill Ratner, Rose Foundation. tionary nature of all of the programs, polit- for wildlife conservation purposes under 16 From: Natural Heritage Institute. ical considerations rather than legal and reg- U.S.C. § 667b. Re: Federal Inter-Agency Land Transfer ulatory fineres will be of paramount concern. 5. Land exchange under the Federal Land Mechanisms. With the right amount of political will, how- Policy and Management Act (FLPMA) as Date: April 19, 1995. ever, we believe that Headwaters can be amended by the Federal Land Exchange Fa- cilitation Act (FLEFA). I. INTRODUCTION placed in the hands of an appropriate man- agement entity without public expenditure 6. Disposal of public lands to state and You have asked us to provide you with an or independent legislation. local agencies or non-profit organizations for analysis of the mechanisms under Federal park and recreation purposes under the Rec- II. ANALYSIS law by which the Federal Deposit Insurance reational and Public Purposes Act (RPPA). Corporation (FDIC), as title-holder of the When the FDIC, in its capacity as receiver Each of these procedures provides for prop- Headwaters Forest, may be authorized to for a failed institution, takes title to land erty in the jurisdiction or control of one transfer the forest to a Federal, State, local, held by another in satisfaction of a claim Federal agency to be transferred either to or private entity rather than disposing of it against that person arising from wrongdoing another Federal agency, a state or local through sale. related to the failure of a financial institu- agency, or a private entity without a public Our research has uncovered six Federal tion, the FDIC forwards title to the land to sale and without cash payment. Some re- statutory programs that allow property its regional real estate sales division for dis- quire compensation in the form of lands of under the control of one Federal agency to posal. Funds from the sale go into the appro- approximately equal value (see section E of be transferred to another Federal agency or priate receivership account to cover admin- this memorandum, infra). Thus, working into non-Federal hands. These programs may istrative costs, and then into the general in- from the premise discussed in the above in- be characterized as either: (1) ‘‘exchange’’ surance fund as reimbursement for funds ex- troduction, that FDIC would be authorized programs, under which a Federal land-man- pended in covering the deposits in the failed and willing to exchange Headwaters for land agement agency trades some of its land for institution. of proximately equal value, any of the pro- non-Federal lands of approximately equal There does not appear to be any statutory grams discussed here could provide the stat- value in order to carry out agency objec- or regulatory mechanism in place whereby utory or regulatory basis for such an ex- tives; (2) ‘‘transfer’’ programs, under which the FDIC may dispose of assets acquired in change. property no longer required by one Federal satisfaction of a claim against a director of Case law addressing these statutory land- agency is simply given to another Federal a failed institution without any reimburse- transfer procedures is scant. In general, the agency; or (3) ‘‘disposal’’ programs, under ment whatsoever. Such a transaction may, few cases involving attacks on an agency’s which Federal property no longer required however, be provided for under internal FDIC decision to undertake a specific transfer of by any Federal agency is transferred to a policy guidelines, under the general receiver- land have primarily addressed questions of: state, local, or private entity. ship provisions of the bankruptcy laws, or plaintiffs’ standing to sue the agency (see, It is difficult to determine at this point under the FDIC’s corporate powers, and fur- e.g., Rhode Island Comm. on Energy v. GSA which of these programs, if any, would best ther research on this issue may be war- (II), 397 F.Supp. 41 (1975)); the validity of an agency’s determination that a proposed accomplish the Rose Foundation’s goals. ranted. The FDIC is authorized to settle transfer is in the ‘‘public interest’’ (see, e.g., None of these programs specifically author- claims by accepting property at less than National Coal Ass’n v. Hodel, 617 F.Supp. 584 izes the precise type of transaction in ques- market value, although any such settlement (1985)); the adequacy of transfer-related En- tion here, i.e., the transfer of property ac- must be approved by the FDIC’s board of di- vironmental Impact Statements required quired by the FDIC in settlement of a legal rectors. The FDIC’s primary interest is to restore under the National Environmental Policy claim (as opposed to property acquired via to the general insurance fund any funds ex- Act (NEPA) (see, e.g., Rhode Island Comm on normal appropriations and procurement pro- pended in satisfaction of a failed institu- Energy v. GSA (I), 561 F.2d 397 (1977)); and cedures). Furthermore, there are no par- tion’s depositors’ claims pursuant to a bail- whether the amount of land acquired was ticular sets of circumstances under which out. We may assume, then, that it is imma- larger than necessary to meet the transferee transfers are mandatory under any of these terial to the FDIC whether one particular agency’s needs (see, e.g., U.S. v. 82.46 Acres of programs. At the same time, none of the piece of property is sold in order to obtain Land, etc., 691 F.2d 474 (1982)). statutes or regulations or cases interpreting those funds, as opposed to another piece of Thus, this memorandum focuses on the them specifically prohibits such a trans- property, so long as the funds owned are ac- mechanics of these land-transfer procedures, action. A review of these sources indicates tually recovered. Thus, if a mechanism ex- analyzing the statutes themselves and their that any decision by an agency to enter into ists whereby another Federal agency holding administering regulations. any kind of land-transfer transaction will be, land of approximately equal value may ex- A. Transfer of ‘‘excess’’ property under in fact, almost entirely discretionary, re- change that land for land held by the FDIC FPASA gardless of the program. Thus, the primary for sale, the FDIC might raise no objection The Federal Property and Administrative concern under each program will be to con- so long as the two parcels were in fact worth Services Act (FPASA) (40 U.S.C. § 471 et seq.) vince the appropriate agency that the trans- the same amount. Further research is re- governs the disposition of property under the action in question will serve both the public quired regarding the FDIC’s corporate pow- jurisdiction and control of a Federal agency interest broadly, the agency’s interest spe- ers. that no longer needs it. Under FPASA, when cifically, and relevant political factors. Since there are no internal means by a Federal agency determines that property Of all the programs analyzed, those involv- which the FDIC may transfer assets it has under its control is not required for its needs ing the disposal of surplus Federal or mili- recovered, via constructive trust or other- and the discharge of its responsibilities, such tary real property are probably the best can- wise, to third-party public or private entities property is designated ‘‘excess property.’’ 40 didates, as they do not categorically require without reimbursement, it is necessary to U.S.C. § 472(e). FPASA then imposes a duty reimbursement to the disposing agency. examine the statutory and/or regulatory pro- on all executive agencies to transfer their These programs are more restricted than the cedures under which real property held by a excess property to other Federal agencies others, however, in that only certain agen- Federal agency may be transferred, without whenever practicable, 40 U.S.C. § 483(b), and, cies may receive surplus real property, and cash payment and without independent legis- correspondingly, to obtain excess property then only for certain enumerated purposes. lation, to other Federal agencies or to state from other Federal agencies rather than pur- Under these programs, therefore, an inter- and local bodies. Such procedures may pro- chasing new property. 40 U.S.C. § 483(c); 41 mediary agency such as the Park Service C.F.R. § 101–47.203–2. vide for an exchange of lands between FDIC would initially receive the surplus property and another Federal agency, preferably one i. Procedure for the disposing agency and then later suited for management and control of Head- Under FPASA, once an agency designates a transfer it to the FDIC in exchange for Head- waters, whereby FDIC would take title to particular piece of property as ‘‘excess,’’ the waters with the understanding that Head- property belonging to the other agency in agency must promptly inform the General waters would be managed only for authorized exchange for Headwaters. FDIC would then Services Administration (GSA) of the prop- uses. Thus, the disadvantage to these pro- be free to dispose of the land it received in erty’s availability for transfer. Id. at § 483(b). grams is that they will require an agreement exchange in any manner it sees fit. GSA maintains records of all Federal prop- between three parties instead of two, and Our research has found six statutory proce- erty reported as excess. See 41 C.F.R. § 101– this disadvantage may ultimately be pre- dures that may provide for such an ex- 47.202–3. Also under FPASA, when an agency clusive. In addition, if pending legislation in- change. These procedures are: (or a mixed-ownership Government corpora- troduced by Congressman Rohrabacher (R– 1. Transfer of ‘‘excess’’ property among tion such as the FDIC) determines that it re- CA) is passed, it would prohibit the disposal Federal Agencies under the Federal Property quires additional property to carry out an of surplus military property for exchange and Administrative Services Act (FPASA). authorized program, it must likewise inform purposes, thus precluding the type of trans- 2. Disposal of ‘‘surplus’’ Federal property GSA. Id. at 483(c); 41 C.F.R. § 101–47.203–3. fer we are proposing for Headwaters insofar to State or local governments under FPASA. Upon receiving notice from an agency that as military property is involved. 3. Disposal of surplus military property property is required, GSA will review its It would be imprudent to recommend pur- under the Base Closure and Realignment Act records of property reported excess, and its suing one or more programs over all others of 1990. own inventory of excess property, to ascer- until exploratory meetings with agency rep- 4. Disposal of surplus Federal and military tain whether any such property may be suit- resentatives are concluded. Given the discre- property to state fish and wildlife agencies able for the needs of the requesting agency.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00130 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.331 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2469 41 C.F.R. § 101–47.203–3 GSA must promptly to FDIC in exchange for Headwaters, if the Defense shall exercise this authority in ac- notify the agency whether any available ex- ‘‘President’’ determines that Headwaters cordance with all the regulations governing cess property is suitable. Id. constitutes ‘‘strategic or critical material.’’ the disposal of surplus property propagated If after receiving such notice an agency de- ii. The ‘‘land for parks’’ program under FPASA, viz, the Federal Property termines that the excess property of another Although the authority provided by Management Regulations, Title 41, Chapter agency will suit its needs, the agency must §§ 484(a) and 485(f) should be thoroughly con- 101 of the Code of Federal Regulations, prepare and submit ‘‘GSA Form 1334, Re- sidered, a subsequent section of FPASA may supra. Id. at Section 2905(b)(2)(A)(i). Thus, under the Act, the Department of quest for Transfer of Excess Real and Re- ultimately prove more useful. FPASA spe- Defense (DoD) is authorized to assign surplus lated Personal Property.’’ 41 C.F.R. § 101– cifically authorizes GSA to assign to the Na- military property to the NPS for disposal to 47.203–7(a). Then, upon determining that the tional Park Service (NPS) for disposal any State and local agencies for public park and requested transfer is ‘‘in the best interest of surplus real property ‘‘as is recommended by recreational use in accordance with the the Government and that the requesting the Secretary of the Interior as needed for Lands to Parks Program. The analysis of agency is the appropriate agency to hold the use as a public park or recreation area.’’ 40 GSA’s activities under the Lands to Parks property’’ (41 C.F.R. § 101–47.203–7(b)), GSA U.S.C. § 484(k)(2) [hereinafter, ‘‘the Lands to Program thus applies equally to DoD’s ac- may execute the transfer so long as the Parks Program’’]. Subject to the disapproval tivities under Section 2905 of the Act, and transfer is consistent with applicable GSA of the GSA, NPS may then ‘‘sell or lease may be incorporated here by reference. policy guidelines. 40 C.F.R. § 483(a)(1); 41 such real property to any State, munici- C.F.R. § 101–47.203–7(d), (e). pality, or political subdivision for public i. Procedure ii. Reimbursement park or recreational use.’’ Id. at The regulations governing the disposal of When a transfer of excess property is ap- § 484(k)(2)(A). surplus military property appear in Title 32 proved, FPASA authorizes GSA, with the ap- ii. Procedure under the Lands to Parks Program of the C.F.R. These regulations provide that in exercising the authority delegated to it by proval of the Director of the Office of Man- The regulations enforcing the Lands to GSA to dispose of surplus property, DoD is to agement and Budget (OMB), to ‘‘prescribe Parks Program provide that whenever GSA follow the same property disposal rules and the extent of reimbursement’’ for the trans- determines property to be surplus, GSA will procedures that the GSA follows, i.e., the fer. 40 U.S.C. § 483(a)(1). Although FPASA al- provide notice by mail to all public agencies Federal Property Management Regulations. lows for transfers without reimbursement in eligible to receive such property that the 42 C.F.R. § 91.7(a)(1). However, the DoD regu- certain situations 41 C.F.R. § 101–47.203–7), re- property has been declared surplus. 41 C.F.R. lations further allow for an ‘‘expedited proc- imbursement at ‘‘fair market value’’ as de- § 101–47.303–2(b). In particular, a copy of this ess’’ under which other DoD entities, other termined by GSA is required when a mixed- notice ‘‘shall be furnished to the proper re- Federal Agencies, and providers of assistance ownership Government Corporation, like the gional or field office of the NPS or the Fish to the homeless may identify military prop- FDIC, is either the transferor or the trans- and Wildlife Service.’’ 41 C.F.R. § 101–47.303– erty they wish to acquire before the base feree agency. 41 C.F.R. § 101–47.203–7(f). 2(d). In the case of real property that ‘‘may closes, and forward requests to DoD. Id. DoD Although neither FPASA nor the Federal be made available for assignment to the . . . will then work with the other DoD Compo- Property Management Regulations specifi- Secretary of the Interior for disposal under nents, Federal Agencies, homeless providers cally provide for reimbursement in-kind in [the Lands to Parks Program],’’ GSA shall and reuse planners early in the closure proc- the form of property of equal value, neither inform the appropriate regional office of the ess, in order to sort out these requests. Id. do they specifically prohibit it. Given the NPS three workdays in advance of the date Congressional intent to enable and facilitate Military Departments must make the no- the notice to be given simultaneously by tices of availability available to Federal land-exchanges under § 484(a), see Section B, NPS to additional interested public bodies of infra, as well as under other programs, how- agencies, local redevelopment authorities, State and local government. 41 C.F.R. § 101– and State and local governments. 32 C.F.R. ever, a colorable argument exists that 47.303–2(e). FPASA should be interpreted as allowing an § 91.7(a)(6). For a six-month period thereafter, The regional NPS office then reviews such the Military Departments shall consult with agency to transfer its excess property to an- notices and informs interested state and other agency and receive property of equal the local redevelopment authority and make local planners and park and recreation offi- appropriate final determinations whether a value in return. Thus, any excess property cials of site availability. Attachment B at p. currently held by a Federal agency author- Federal agency has identified a use for, or 2. Any state or local agency wishing to ac- shall accept transfer of, any portion of the ized to manage Headwaters should be quire the property must notify NPS of their conveyable to FDIC under 40 U.S.C. § 483 in property. 32 C.F.R. § (a)(7). If no Federal interest. Id. NPS will then work with the Agency requests the property during this pe- exchange for Headwaters, if the conveyed agency to develop an application for transfer property is of approximately equal value. riod, the property is be declared surplus. Id. of the land and forward the application to This screening or DoD’s excess real prop- B. Disposal of ‘‘surplus’’ property under GSA, recommending its approval. Id. erty to ascertain whether it matches prop- FPASA GSA will advise NPS of any additional in- erty requests from other Federal Agencies FPASA defines ‘‘surplus’’ property as ‘‘any formation required to process the state or must be completed within 6 months of the excess property not required for the needs local agency’s application to procure the date of approval of the 1995 closures. 32 and the discharge of responsibilities of all property. 41 C.F.R. § 101–47.303–2(h). Upon re- C.F.R. § (a)(4)(ii). This timeframe is meant to Federal agencies, as determined by [GSA&].’’ ceipt of the complete application for the afford Federal Agencies sufficient time to as- 40 U.S.C. § 472(g). GSA will generally declare property, GSA will consider and act upon it, sess their needs, submit initial expressions of surplus any excess property reported to it either granting or denying the transfer. 41 interest to the Department of Defense, and pursuant to 40 U.S.C. § 483(b), supra, if it de- C.F.R. § 101–47.303–2(i). apply for the property. 32 C.F.R. § (a)(5). Dur- termines, after reviewing other agencies’ re- iii. Reimbursement ing this period, Agencies sponsoring public quests for property pursuant to 41 C.F.R. In fixing the sale or lease value of property benefit conveyances, such as NPS, should § 101–47.203–3, supra, that the property does so disposed, the Secretary of the Interior also consider the suitability for such pur- not match the needs of any other agency. 41 must take into consideration ‘‘any benefit poses. Id. In the Notice of availability, the C.F.R. § 101–47.204–1. In other words, ‘‘excess’’ which has accrued or may accrue to the Military Departments must provide other property is property no longer required by United States from the use of such property Federal agencies with as full and complete the agency holding it, while ‘‘surplus’’ prop- by any such State, political subdivision, in- information as practicable regarding the erty is property not required by any Federal strumentality, or municipality.’’ 40 U.S.C. subject property. Id.; see 41 C.F.R. § 101– agency. § 484(k)(2)(B). This subsection is interpreted 47.303–2(b). Requests of transfers of property i. GSA’s disposal authority in general as permitting the Secretary of the Interior submitted by other Federal Agencies will FPASA authorizes GSA to dispose of sur- to convey such property to eligible State or normally be accommodated. Id. Decisions on plus Federal property by sale, exchange, local agencies without consideration or re- the transfer of property to other Federal lease, permit, or transfer for cash, credit, or imbursement. Agencies shall be made by the Military De- other property, upon such terms and condi- c. Disposal of surplus military property partment concerned in consultation with the tions as it deems proper. Id. at § 484(a), (c). The Defense Authorization Amendments local redevelopment authority. Id. FPASA further provides that ‘‘[a]ny execu- and Base Closure and Realignment Act of II. Limitations tive agency entitled to receive cash under 1990 (part A of title XXIX of Public Law 101– The DoD’s authority to transfer excess or any contract covering the lease, sale or dis- 510; codified as 10 U.S.C. § 2687 note) provides surplus property to other Federal agencies position of surplus property may in its dis- that the Administrator of General Services may, however, be limited by the Act’s provi- cretion accept, in lieu of cash, any property shall delegate to the Secretary of Defense, sion authorizing the DoD to transfer real determined by the President to be strategic with respect to excess and surplus real prop- property located at a closed military instal- or critical material at the prevailing market erty and facilities located at a military in- lation to the local ‘‘redevelopment author- price thereof at the time the cash payment stallation closed or realigned, ‘‘the authority ity’’ organized to ameliorate the negative or payments became or become due.’’ 40 of the [GSA] to dispose of surplus property economic impacts of the base closure. 10 U.S.C. § 485(f). These two sections may there- under [the Lands to Parks Program].’’ 10 U.S.C. § 2687 note Sec. 204(a)(4)(A). In addi- fore provide sufficient authority for GSA to U.S.C. § 2687 note Section 2905(b)(1)(B). The tion, the transfer must be without consider- transfer another agency’s surplus property Act further provides that the Secretary of ation ‘‘in the case of any installation located

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00131 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.336 pfrm07 PsN: E20PT1 E2470 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 in a rural area whose closure under this title to the authority to dispose of surplus prop- tem, or Wilderness preservation system, the will have a substantial adverse impact (as erty under the Lands to Parks Program, land will immediately become part of that determined by the Secretary) on the econ- ‘‘the authority of [GSA] to determine the unit without further action by the Sec- omy in the communities in the vicinity of availability of excess or surplus real prop- retary. 40 U.S.C. 1716(c). the installation and on the prospect for the erty for wildlife conservation purposes in ac- ii. Procedure economic recovery of such communities cordance with [16 U.S.C. § 667b].’’ 10 U.S.C. Land exchanges under FLPMA are admin- from such closure.’’ Id., at Sec. § 2687 note Section 7905(b)(1)(B). istered through guidelines contained in Title The military departments are authorized 204(a)(4)(B)(ii)(A). This may hamper any ef- 43, Part 2200 of the C.F.R. At the outset, it is to convey property that can be utilized for fort to transfer surplus military property to important to note that FLPMA land ex- wildlife conservation purposes to the state an agency able to exchange it for Head- changes are entirely within BLM’s discre- fish and wildlife agency without reimburse- waters. tion, and BLM is free to terminate an ex- A potentially greater limitation is a rider ment. 32 C.F.R. § 644,439(a). If property is con- change proposal at any time unless the par- bill (H.R. 1265) introduced by Congressman sidered by the District Engineer to valuable ties have entered into a legally-binding Rohrabacher (R–CA) to amend the surplus for wildlife conservation purposes, or if in- agreement. 43 C.F.R. 2200.0–6(a). Also, a land property disposal provisions of the Defense terest has been shown in acquiring the prop- exchange may take place only after the ap- Authorization Amendments and Base Clo- erty for that purpose, notice of availability propriate BLM officer determines that it will sure Realignment Act. The bill would pro- should be given to the agency administering ‘‘well serve’’ the public interest. 43 C.F.R. hibit DoD from transferring surplus military state wildlife resources and to the Federal 2200.0–6(b). In making this determination, property to other Federal agencies unless Fish and Wildlife Service if the property has BLM must give full consideration to ‘‘the op- the agency agrees not to use the property in particular value in carrying out the national portunity to achieve better management of any property exchange transaction. The bill migratory bird program. 32 C.F.R. Federal lands, to meet the needs of State and is currently pending before the National Se- § 644.429(b). Any state desiring to make appli- local residents and their economies, and to curity Committee, and NHI will continue to cation for property for wildlife conservation secure important objectives, including but track its progress. will be furnished copies of Application For not limited to: protection of fish and wildlife iii. Return of lands transferred ‘‘temporarily’’ to Real property For the Conservation of Wild- habitats, cultural resources, watersheds, wil- the Department of Defense by the Department life with accompanying instructions for derness and aesthetic values.’’ BLM must of the Interior preparation. In evaluating the application, also find that the resource values and the the responsible District Engineer will re- Unrelated to DOD’s general authority to public objectives that the Federal lands or quest review of the application by the Re- dispose of surplus military property, a fur- interests to be conveyed may serve if re- gional Office of the Fish and Wildlife Serv- ther section of this regulation provides that tained are not more than the resource values ice, Department of the Interior, and will ob- any lands that have been transferred from of the non-Federal lands and the public ob- tain that Service’s recommendation as to the Department of the Interior to a Military jectives they could serve if acquired. 43 the value of the property for wildlife con- Department for the latter’s temporary use C.F.R. § 2200.0–6(b)(1). Once BLM accepts title servation purposes. 32 C.F.R. § 644.429(c) ‘‘are to be returned to the Secretary of the to the non-Federal lands, the lands become Interior’’ if they are still suitable for the E. BLM Land Exchanges under FLPMA and remain public lands, subject to BLM programs of the Secretary of the Interior. 32 The Federal Land Policy and Management management. 43 U.S.C. § 1715(c). C.F.R. § 91.7(a)(9)(i). The Military Depart- Act of 1976 (FLPMA) as amended by the Fed- Exchanges may be proposed by BLM itself, ment concerned will notify the Secretary of eral Land Exchange Facilitation Act or by ‘‘any person, State, or local govern- Interior, normally through the Bureau of (FLEFA), 43 U.S.C. § 1701 et seq., authorizes ment.’’ 43 C.F.R. § 2201.1. Initial exchange Land Management (BLM), when withdrawn the Secretary of the Interior to exchange proposals are directed to the authorized offi- public domain lands are included within an federally-held public lands for non-federal cer responsible for the management of Fed- installation to be closed. 32 C.F.R. lands if the Secretary of the interior deter- eral lands involved in an exchange. Gen- § 91.7(a)(9)(ii). BLM will then screen these mines that the public interest would best be erally, the parties to an exchange bear their lands within the Department of Interior to served by the exchange. 43 U.S.C. § 1716(a). In own costs. 43 C.F.R. § 2201.1–3. However, if the determine if these lands are suitable for re- making this determination, the Secretary is BLM finds it to be in the public interest, it turn to the Department of Interior. 32 C.F.R. required to consider Federal, state and local may agree to bear the other party’s costs. Id. § 91.7(a)(9)(iii). Thus, it should be ascertained needs for ‘‘lands for the economy, commu- A flow-chart describing the entire BLM land whether BLM has transferred any land in nity expansion, recreation, food, minerals, exchange process appears as Attachment A California to DoD on a temporary basis. If and fish and wildlife.’’ Id. The Bureau of to this memorandum. so, the decision to return the property to Land Management (BLM) exercises the Sec- iii. Three-party land exchanges BLM will be nondiscretionary, thus elimi- retary of the Interior’s authority under the BLM regularly organizes what are called nating the need to persuade DoD to dispose land exchange provisions of FLPMA. 43 ‘‘three-party land exchanges’’ of Federal for of the property in a particular manner. After C.F.R. § 2200.0–4. non-Federal lands. Under a three-party ex- BLM retakes control of the property, it i. The ‘‘equal value’’ requirement and would be a question of orchestrating a land- change, the non-Federal land in question is ‘‘assembled land exchanges’’ sold initially to a third-party, usually a pri- exchange under FLPMA (see section E., FLPMA requires that any lands exchanged infra.) Accordingly, NHI will attempt to vate land trust, for cash. The third-party under the Act be of equal value, or if they then holds and manages the land pending identify military property in California that are not equal, that the values be equalized is owned by the Secretary of the Interior. BLM’s identification of the parcel or parcels by payment of money to the grantor or BLM of Federal land to be exchanged, a process D. Disposal of surplus Federal and military as circumstances require. 43 U.S.C. § 1716(b). that can take years. Once the Federal lands property to state fish and wildlife agencies This equalization requirement may be are selected, BLM conveys them to the third- for wildlife conservation purposes under 16 waived, however, if BLM and the other party party in exchange for title to the non-Fed- U.S.C. § 667b agree to the waiver, and BLM determines eral lands it holds. The third-party then may Enacted in 1948, 16 U.S.C. § 667b, authorizes that the exchange will be expedited and that sell the lands conveyed to it to recover the GSA to dispose of surplus Federal property, the public interest will be better served cost of the initial purchase. both military and non-military, by transfer- thereby. BLM may not waive cash equali- A narrative description of a three-party ex- ring it to a state agency for wildlife con- zation payments where the amount is more change upheld in the past appears as Attach- servation purposes. Specifically, the statute than 3% of the value of the federal lands ment C to this memorandum. provides that upon request, surplus real being exchanged, or $15,000, whichever is less. iv. Restrictions property under the jurisdiction of a Federal Id. Restrictions on BLM land exchanges under agency which, in the determination of GSA, If the non-Federal land sought to be ac- FLPMA include: (1) a requirement that the may be utilized for wildlife conservation pur- quired is worth substantially more than any Federal and non-Federal lands exchanged lie poses in the state where the property lies, single parcel of Federal land within the state within the same state (43 U.S.C. § 1716(b); 43 may be transferred to the state’s fish and (or vice versa), the parties may enter into an C.F.R. § 2200.0–6(d)); (2) a requirement that an wildlife agency. This differs significantly ‘‘assembled land exchange.’’ An assembled environmental analysis under NEPA be pre- from the program provided by the Lands to land exchange is an agreement under which pared after an agreement to initiate an ex- Parks Program, in that such land may be the parties agree to the consolidation of change is signed (43 C.F.R. § 2200.0–6(h)); and transferred only to a State fish and wildlife multiple parcels of land for purposes of one (3) a requirement of conformity with exist- agency such as the California Department of or more exchange transactions. 43 C.F.R. ing land use plans (43 C.F.R. § 2200.0–g(g)). Fish and Game, and not to a county or mu- § 2200.0–5(f); § 2201.1–1. Thus, several parcels of nicipality. Furthermore, the property may Federal land may be exchanged for a single, F. U.S. Forest Service Land Exchanges be utilized only for wildlife conservation valuable parcel of non-Federal land. Under FLPMA purposes and not for parks or recreation pur- FLPMA also provides that if the non-fed- In addition to authorizing BLM to enter poses. eral land acquired by exchange is situated into land exchanges, FLPMA (43 U.S.C. § 1701 The Defense Authorization Amendments within the boundaries of an existing Na- et seq.) authorizes the Secretary of Agri- and Base Closure and Realignment Act au- tional Park, Forest, Wildlife Refuge System, culture to exchange lands within the Na- thorizes GSA to delegate to DoD, in addition Wild and Scenic Rivers System, Trails Sys- tional Forest System (NFS) for non-Federal

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00132 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.340 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2471 lands upon a determination that the public Realignment Act requiring the return of ways be reached at 736–0648 to discuss this interest will be well served thereby. 43 U.S.C. lands held by the Department of Defense ‘‘on matter further. § 1716(a). The substantive provisions of loan’’ from the Department of the Interior June 15, 1995—Told Wms to advise FBI and FLPMA, including authorizations and limi- may be a favorable option in light of the Rob Russell. tations on authority, apply equally and iden- non-discretionary nature of the initial trans- tically to the Secretary of the Interior for fer. Under this provision, land must be trans- public lands and the Secretary of Agri- ferred to the Department of the Interior, RECORD 13 culture for National Forest lands. Thus, the thus eliminating the need to convince the THE ROSE FOUNDATION analysis of FLPMA contained in Section E., Defense Department to dispose of the prop- FOR COMMUNITIES & THE ENVIRONMENT supra, of this memorandum may be incor- erty, in its discretion, in a particular man- Please deliver, 43 pages including cover, to porated here by reference. ner in its discretion. As stated above, NHI Steve Lambert The Forest Service regulations governing will attempt to identify military property in Please call (510) 658–0702 to report any exchanges appear in Title 36, Part 254 of the California that is owned by the Department problems in transmission C.F.R. These regulations mirror the correl- of the Interior. ative regulations governing BLM land ex- To: Steve Lambert, Hopkins & Sutter changes. The discussion of the latter regula- From: Jill Rainer, Rose Foundation for Com- tions in Section E. applies equally and may RECORD 12 munities and the Environment also be incorporated here by reference. One MEMORANDUM Steve: key difference in the exchange procedure, To: Jack D. Smith, Deputy General Counsel Thank you for the opportunity to share however, is that NFS land exchanges may in- From: Jeffrey Ross Williams, Counsel, PLS our analysis of the case for imposition of a volve, in additional to outright land ex- Date: 15 June 1995 constructive trust on the assets of Pacific changes, ‘‘land-for-timber’’ (non-Federal Subj: United Savings Association of Texas, Lumber in connection with the FDIC’s land exchanged for the rights to Federal tim- In FDIC Receivership, Investigation of claims against MAXXAM, Inc. We hope the ber), or ‘‘tripartite land-for-timber’’ (non- Charles Hurwitz and Others. following memorandum will provide a useful Federal land exchanged for the rights to Fed- We received a letter (from among the hun- starting point for a full and frank discussion eral timber cut by a third party on behalf of dreds we received in the last 60 days) that of those issues presented. the parties to the exchange). 36 C.F.R. § 254.1. discusses the ‘‘debt-for-nature’’ transaction Most of the lawyers who participated in Initial Forest Service land exchange pro- that various environmental groups have been the preparation of the memo will be avail- posals are directed to the Director of the ap- advocating to resolve the claims involving able for a phone conference at 1:00 p.m., Pa- plicable unit of the NFS. 36 C.F.R. § 254.4. Hurwitz and USAT. It contains a reference cific time, on Tuesday, the 27th. These in- G. The Recreation and Public Purposes Act to the Oklahoma City bombing and a call to clude: The Recreation and Public Purposes Act ‘‘defuse this situation.’’ I want to bring it to Kirk Boyd and Dave Williams, Boyd, (RPPA) (43 U.S.C. § 868 et seq.) authorizes the your attention. Huffman and Williams, (415) 981–5500. Secretary of the Interior to dispose of public As you know, the above-referenced inves- Tom Lippe (counsel for the Environmental lands to a State, county, municipality, or tigation has resulted in attracting the atten- Public Information Center), (415) 495– non-profit organization for any recreational tion of organizations and individuals that 2800. or public purposes. Before the land may be have interests in environmental preserva- Peter Camp, of Camp, Von Kallenbach (206) disposed, however, it must be shown to satis- tion. This has arisen as a result of Charles 689–5613. faction of the Secretary that it is to be used Hurwitz’s acquisition (through affiliates) of I can be reached at the Rose Foundation of- for a definitely proposed project, that the Pacific Lumber, a logging company in Hum- fice, at (510) 658–0702. land is not of national significance, nor more boldt County, California, that owns the last Rick DeStefano, who has recently joined the than is reasonably necessary for its proposed stands of old growth, virgin redwoods. It has team, is unable to attend. use. 43 U.S.C. § 868(a). No more than 25,600 been widely reported that the company has We will be looking forward to talking with acres may be conveyed for recreational pur- been harvesting the virgin redwoods in a des- you and your colleagues. poses in any one State per calendar year. 43 perate attempt to raise cash to pay its and INTRODUCTION U.S.C. § 868(b)(i)(C). its holding company’s, Maxxam, Inc.’s, sub- Conveyances of lands for recreational pur- stantial debt obligations. The MAXXAM Corporation, through its poses shall be made without monetary con- The environmentalists’ issues are centered wholly owned subsidiaries Pacific Lumber sideration, while conveyances for any other on preserving the old growth redwoods Company (Del), Scotia Pacific, and the purpose shall be made at a price fixed by the through a mechanism of persuading Hurwitz Salmon Creek Corporation (Collectively Secretary of the Interior through appraisal to settle the government’s claims involving ‘‘Pacific Lumber’’, or ‘‘PL’’, in this memo- or otherwise, after taking into consideration losses sustained on the USAT failure by, in randum) currently controls and logs an area the purpose for which the lands are to be part, transferring the redwood stands to the known as Headwaters Forest in Humboldt used. 43 C.F.R. § 869–1(a). The Secretary may FDIC or other federal agency responsible for County, California. Headwaters Forest is a not convey lands reserved for National managing such forest lands. FDIC has re- collection of forest lands that contain the Parks, Forests, Wildlife Refuges, or lands ac- ceived thousands of letters urging FDIC to last major unprotected stands of old growth quired for specific purposes. 43 C.F.R. pursue such a transaction. redwood in the world. These stands of an- § 2741.1(a). Potential applicants should con- The environmental movement, like many cient trees, many of which are between 1000 tact the appropriate District Office of BLM others, is not homogeneous and contains ex- and 2000 years old, are remnants of the great ‘‘well in advance of the anticipated submis- treme elements that have resorted to civil virgin redwood forest that once extended sion of an application.’’ 43 U.S.C. § 2741.3(a). disobedience and even criminal conduct to more than 500 miles from its southern tip to Dependent on the magnitude and/or public further their goals. As a result of the recent its northern boundary, blanketing the west- interest associated with the proposed use, tragedy in Oklahoma City, everyone appears ern coastal range from Big Sur to southern various investigations, studies, analyses, more sensitive to the possibility that people Oregon. public meetings and negotiations may be re- can and do resort to desperate, depraved The Rose Foundation contends that quired of the applicant prior to the submis- criminal acts. Accordingly, we take any ref- MAXXAM’s control of Pacific Lumber and sion of the application. 43 U.S.C. § 2741.3(c). erences to such conduct, even ones that ap- the Headwaters Forest properties is unlawful ‘‘Omitted lands’’ and unsurveyed islands pear innocent, more seriously. and was wrongfully obtained, as a result of a may be conveyed to States and their local Among the hundreds of letters we received prohibited transaction which breached of political subdivisions under the Act as well. last month is one that contains a reference MAXXAM’s fiduciary duty as a controlling 43 C.F.R. § 2742.1 to the Oklahoma City bombing that I want shareholder of the thrift, United Savings As- III. CONCLUSION to bring to your attention. The author does sociation of Texas (USAT), and which led to As stated in the introduction, it is difficult not make any directly threatening state- USAT’s 1988 failure and bailout by the Fed- to ascertain which of these programs, if any, ments but appears, at least to me, to have eral Deposit Insurance Corporation (FDIC) would be best suited to the type of exchange personal knowledge of the deep passions and which cost taxpayers more than $1.3 billion. the Rose Foundation seeks to orchestrate. divisions that various environmental activ- We believe that the FDIC, as the party in- Given the highly discretionary nature of all ists harbor on these preservation issues. This jured by the alleged breaches of fiduciary the programs, ‘‘scoping’’ meetings with the is particularly evident when he states, ‘‘Do duty, has the authority to seek imposition of necessary agency personnel will be necessary us all a favor and save the forest and defuse a constructive trust on the proceeds of the to ascertain the degree of interest at the var- this situation.’’ The author’s hometown of prohibited transaction and to compel ious decisionmaking levels of both the agen- Sebastopol, CA., happens to be a hot-bed of MAXXAM’s disgorgement of Pacific Lumber cy disposing of property, the agency initially environmental activism and conflict since and all its assets. receiving the property, and/or the FDIC. Be- the 1960s. The FDIC must act quickly to file an ac- fore such meetings take place, we do not rec- In the event you believe this letter de- tion against MAXXAM seeking ommended that one or more programs be serves greater scrutiny, it should be referred disgorgement. While the statute of limita- pursued to the exclusion of all others. to the local office of the Federal Bureau of tions has been extended by agreement in this Based on legal analysis alone, however, the Investigation. I would be pleased to contact matter, we respectfully point out that the provision of the Military Base Closure and them if you deem it appropriate. I can al- policies behind the statute of limitations

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00133 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.343 pfrm07 PsN: E20PT1 E2472 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 still hold true: recollections are fading; evi- verely limiting logging during litigation. 40.6% through related entities and through dence is being lost; witnesses may soon be- Most of the facts and conclusions asserted in the ownership of family members, Hurwitz come unavailable. Of particular concern in this memorandum must be known to and be- has served continuously on the MAXXAM this matter is the age of the Texas State yond contradiction by the FDIC, since the Group’s board since the MAXXAM Group was bank-examiner who played the central role FDIC alleged essentially the same facts in created as the successor to Simplicity Pat- in reviewing or supervising the review of the compliant filed in FDIC v. Milken. tern Corporation in June of 1984. USAT’s records; it is our understanding that There are many issues that are beyond the MAXXAM Group, Inc. (MAXXAM Group of he is now more than seventy years old. scope of this memorandum. It does not reach MGI) was created from Simplicity Pattern In addition, the FDIC must act quickly to any issues related to the eventual disposi- Corp (SPC) in June of 1984. MAXXAM Group protect the value of the res during litigation tion of Pacific Lumber’s assets after began its corporate existence as a subsidiary by positioning for a temporary restraining disgorgement. While the writers believe legal of MCO Holdings (MCOII), (another Hurwitz order and preliminary injunction to prevent mechanisms exist for transferring property controlled corporation, which acquired the any further irreparable harm such as has oc- acquired by the FDIC to other government Simplicity Pattern Corporation in 1982. curred as a result of recent intensive logging agencies without specific authorizing legisla- MAXXAM Group was formed as the result of a complicated set of interrelated trans- operations. These operations began Sep- tion, the writers currently assume that the actions. Simplicity Pattern Corporation tember 15th and are, in all probability, con- pending acquisition bill will create a willing (SPC) first spun off its actual pattern oper- tinuing. The recent logging involves buyer for many of these assets, i.e., the US ations as a production subsidiary, Simplicity clearcutting residual old-growth in or near Forest Service. Pattern Inc. (SPI). The parent corporation This memo does not reach any potential environmentally sensitive areas within the then sold the production subsidiary to an- choice of laws issues; where potentially ap- 44,000 acre area which is currently the sub- other corporation known as the Triton plicable, the writers will discuss both Texas ject of pending acquisition legislation in Group Inc. (TGI) which simultaneously Congress (HR 2866, which passed in the House and California law. It does not reach any spe- merged with yet another company, the Re- of Representatives September 21, 1994 and is cific issues of banking law, thrift regulation, public Corporation. currently under consideration in the Sen- or Federal securities law. Nor does it reach In the course of the the deal, Simplicity ate). We believe that these practices con- any issues related to the FDIC’s responsibil- Pattern’s parent corporation changed its stitute the deliberate destruction and dis- ities and obligations to the public to recover name to MAXXAM Group, Inc. and renamed sipation of irreplaceable assets. funds lost in the S&L bailout or to protect its real estate subsidiary, Twin Fair, which The trees that are currently falling rep- public resources. became MAXXAM Properties Inc (MPI). MPI resent an irreplaceable resource. From a This memo assumes that the location of simultaneously merged with Maxxus, an- purely economic standpoint, the old-growth the disposal property gives rise to jurisdic- other Hurwitz controlled company, Fed- trees are an order of magnitude more valu- tion in a Federal Court in the Northern Dis- erated Development Company (FDC). able than second growth; one 1000 year old trict of California. The writers have not Throughout much of the period we will be tree is worth more than $100,000 on the tim- made any attempt to compare the Ninth Cir- discussing, MAXXAM continued to be a sub- ber market. Top grade ‘‘clear redwood’’, cuit and Fifth Circuit case law on relevant sidiary of MCOH. In 1985, MCOII owned 37.2% which comes from the densest heartwood of issues or to otherwise evaluate the desir- of MAXXAM Group Inc. FDC (which, taken old growth trees, has long been prized for its ability of one forum over another. However, together with Hurwitz and his group, main- durability as well as its beauty. Such wood barring any compelling reason to litigate tained 65.2% voting control of MCOH) owned (when kiln dried) costs about $3.49 per board outside of California, we believe that the an additional 4.5% of MAXXAM directly. The foot at the local lumber yard. Lower grades public interest would be served best by remaining MAXXAM stock was largely held of redwood fetch from $.89 per board foot bringing the action within the state most af- by institutional investors. ($2.19 when kiln dried), for wood that is all fected by its outcome. There was also significant overlap of lead- ‘‘mirch’’ or sapwood, to $1.19 a board foot for FACTUAL SUMMARY ership among MCOH, MAXXAM and FDC. All five of FDIC’s trustees and five of MCOH’s ‘‘construction heart’’ grade, wood that is The factual basis for our argument can be seven directors (four of whom were were mostly heartwood, with some defects. A red- stated quite simply: common to both MCOH and FDC sat on wood tree must grow for more than 500 hun- (1) MAXXAM controlled and dominated MAXXAM’s ten member board. Charles dred years before it can be milled to produce United Savings Association of Texas (USAT), Hurwitz, George Kozmetsky, Barry Munitz substantial quantities of prime grade clear functioning, in actuality, as its controlling and Ezra Levin served on all three boards, redwood. shareholder. and occupied positions of real leadership From an environmental standpoint, the (2) Without providing full disclosure to within the three organizations. trees of Headwaters Forest represent an irre- USAT’s disinterested directors, MAXXAM, placeable resource of another kind. The ma- On September 24, 1986 a MAXXAM Group/ and MAXXAM’s CEO, Charles Hurwitz, used MCOH merger was announced, which was jestic ancient groves of Headwaters Forest MAXXAM’s position of trust and confidence represent one of the three remaining Cali- completed in April of 1988, when MCOH as a controlling shareholder, to enter into a emerged as the surviving parent corporation, fornia nesting areas for the endangered sea- prohibited deal with Michael Milken and the bird, the marbled murrelet, which requires renamed, however, as MAXXAM Incor- firm of Drexel, Burnham, Lambert. porated. Through an exchange of stock in closed canopy, virgin groves of old-growth (3) Under the terms of that deal, or quid pro the two companies, MAXXAM Group, Inc. trees for its nesting grounds. Headwaters is quo, MAXXAM caused USAT to purchase became a wholly owned subsidiary of also home to spotted owl (listed as endan- large amounts of Drexel under-written secu- MAXXAM Inc. In other words, MAXXAM gered by the State of California and as rities in return for Drexel arranging the fi- succeeded to all of MCOH’s interests and as- threatened by the Federal Fish and Wildlife nancing for MAXXAM’s takeover of Pacific sets and to all the interests of MAXXAM Service), and home to the southern seet sala- Lumber. Group, Inc., as well. It is entirely possible mander (under consideration for listing by (4) The quid pro quo worked very much to that, as is common practice, this merger was the Federal Fish & Wildlife Service as the benefit of MAXXAM and to the det- actually planned long before it was an- threatened; recommended for state listing as riment of USAT in that MAXXAM acquired nounced; this possibility should be explored ‘‘threatened’’ by California Department of a valuable, asset-rich company, while USAT in discovery. Fish & Game). Up to 10% of California’s wild was left with over a million dollars of essen- In the years immediately prior to its re- Coho Salmon, (which are under consider- tially worthless securities. naming as MAXXAM, MCOH had served as ation for a Federal listing as threatened by (5) The preponderance of these worthless the primary acquisition vehicle for the var- the National Marine Fishery Service) spawn Drexel securities in USAT’s portfolio precip- ious Hurwitz related corporations; once ac- in the rivers that give Headwaters its name. itated, or at least contributed in very signifi- quired, Simplicity and then MAXXAM The adjacent residual old growth provides cant part, to USAT’s failure, and dictated Group, joined in performing that function for buffer zones needed to keep the ancient the size of the FDIC’s ultimate $1.3 + billion the Hurwitz financial empire. MAXXAM groves intact and protect the vulnerable spe- contribution to the S&L bailout. played a significant role in the arguably co- cies. The 44,000 acre acquisition area, which (6) Drexel’s role in the financing of the PL ordinated acquisition campaigns and alleged ties isolated ancient groves together with acquisition was critical to the takeover’s green-mail activities of the various related each other and with other protected areas, success, because MAXXAM’s strategy re- companies in Hurwitz financial empire. incorporates significant residual old-growth quired cash for a 100% tender offer and Charles Hurwitz and MAXXAM’s Control of as well as second growth and represents the MAXXAM could not get financing elsewhere. United Savings Association of Texas area’s best chance for overall habitat recov- A brief history of the MAXXAM Corporation During all of the relevant times, ery. Although the MAXXAM Incorportated MAXXAM’s CBO Charles Hurwitz and The Scope of This Memorandum (MAXXAM) is publicly held, its fortunes and MAXXAM or MCOH exerted actual control This memorandum will summarize law and its business practices are almost inex- over the affairs of United Savings Associa- publicly available evidence supporting a im- tricably intertwined with those of its con- tion of Texas. That control was exerted position of a constructive trust and trolling shareholder, President, CEO, and through and demonstrated by several mecha- disgorgement of Pacific Lumber. It will also Chairman of the Board, Charles Hurwitz. In nisms: 1) ownership and control of a substan- summarize the facts and law supporting a pe- 1985, Charles Hurwitz owned 3% of the stock tial bloc of voting stock in the holding com- tition for a temporary restraining order se- of the MAXXAM directly, and controlled pany that was the S&L’s sole owner, coupled

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00134 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.347 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2473 with ownership of options to acquire more tor, it was never necessary for MAXXAM to The third group, the PennCorp directors, voting stock and ownership of preferred control a majority of voting stock in order were those associated with PennCorp, which stock which, in time, would have converted to exercise de facto control over the savings by virtue of owning a substantial portion of to voting stock had Hurwitz considered con- and loan. Records of UFG stock ownership preferred stock, placed four directors on the version desirable, 2) control of the boards of for the year 1986 show that 43.02% of UFG’s board. directors of the holding company and the voting stock was held in trust by the broker- Control of the Executive Committee S&L, 3) control of the executive committee age firm of Cede and Co. With 43% in trust, In early 1985, UFG–USAT formed an Execu- of the S&L, 4) control of the S&L investment and thus in all probability held by non-vot- tive Committee to determine USATs restruc- department and investment committee. ing shareholders, MAXXAM (or its prede- turing and investment strategy. Stock Ownership cessor) and Drexel merely needed to control The original members of the executive one share more than half of the remaining committee were Hurwitz, Munitz and Wil- United Savings Association of Texas 57%, in other words to control slightly more (USAT), a Texas state chartered savings and liams, along with two representatives of the than 28.5% of the holding company’s voting pre-merger group, C.E. Bentley (UFG/USAT’s loan, was a wholly owned subsidiary of the stock—a test that they met handily. savings and loan holding company, United Chairman of the Board from 1983 until 1985 Control of the Board of Directors Financial Group (UFG). According to the and President and CEO in 1984) and James R. complaint in FDIC v. Milken, ‘‘In mid-1983, In 1982 Charles Hurwitz first hired Barry Whately. Bentley resigned in November of Hurwitz, through two companies he con- Munitz and placed him on the boards of FDC, 1985, around the time of MAXXAM’s acquisi- trolled, Federated Development Co. and MCO UFG, MCOH and Simplicity as Hurwitz’ rep- tion of Pacific Lumber and when USAT’s purchases of Drexel junk bonds were at or Holdings, Inc., acquired approximately 23% resentative. As a director of UFC, Munitz ap- near their highest levels. Williams resigned of UPG.’’ In other words, when MAXXAM parently was given the task of ensuring that shortly afterward, in January 1986, possibly Group was created in 1984, its parent com- MAXXAM and its predeccesor corporation to prevent a conspicuous imbalance that pany, MCOH, already had a substantial in- retained actual control of the savings and would have made Hurwitz and MAXXAM’s terest in UFG, to which MAXXAM succeeded loan without overstepping any statutory or control apparent. when MAXXAM Group and MCOH merged. In regulatory boundaries that would have made United Financial Group’s 198810K report to such control indisputable. For Munitz, this Control of Investment Decisions meant continuing negotiations with the the SEC, MAXXAM is described as owning, Shortly after UFG–USAT formed the Exec- FHLBB to avoid confirming any agreements together with an affiliated entity (Federated utive Committee to redirect USAT’s invest- that would have situated MAXXAM or any of Development Co.), 23.3% of UFG’s common ment strategy, Ron Heubsch was hired to be its affiliates as guarantors of the S&L’s net stock. the VP of the Investment Department which worth. It also meant developing UFG–USATs Drexel held another major bloc, between served the Executive Committee. Heubsch, internal decision making structure and 7% and 9.7% of UFG stock. Again from the who had been employed by or associated board membership to mask the actual con- FDIC v. Milken complaint, ‘‘Drexel and with Hurwitz since 1969, worked for FDC dur- trol exercised by MAXXAM and its affiliates. ing the 1984–1985 Pacific Lumber takeover Hurwitz were the largest shareholders of Following the December 1982 merger of UFG during the entire period . . . together campaign and was reported to have acted as UFG/USAT and First American Financial of advisor to MAXXAM’s investment managers. controlling more than 30% of UFG’s out- Houston (FAF) (which created UFG/USAT in standing stock from 1984 until 1988, when As was noted in testimony before the Din- the form it was to have from that date until gell Committee, Heubsch also conducted ar- USAT failed.’’ Since MAXXAM (through it was seized by the FSLIC in December of Hurwitz) and Drexel (through Milken) con- guably coordinated arbitrage operations for 1988), UFG/USAT’s directors consisted of MCOH ($35 million) MAXXAM ($70 million) spired to control the S&L for their own ben- three groups with distinct characteristics. and UFG–USAT ($150–200 million); these arbi- efit and to the detriment of the USAT and The first group was made up of nine direc- trage activities began in 1986 or earlier and ultimately the FDIC, for our purposes tors who had served on the board of UFG/ continued through 1987 or later. During this Drexel’s stock ownership contributed to USAT before the UFG/FAF merger. This period Heubsch also served as Vice President MAXXAM’s contol as well, and the whole group was leaderless and had not developed for USAT’s investment department. should be attributed to MAXXAM. strong working relationships since the ma- Under the direction of the Executive Com- In addition to the outright ownership of jority of this group had served less than four mittee and Heubsch, the redirection of common stock, MAXXAM’s predecessor cor- months prior to date that MAXXAM’s CEO, USAT’s investment strategy was ultimately poration and affiliates held various options Charles Hurwitz, joined the board in 1983. quite drastic, converting USAT from a tradi- and other convertible instruments that in- The second group, the ten Hurwitz direc- tional savings and loan, with assets con- creased their ability to control UFG and tors, were associates of Hurwitz who could be sisting primarily of home mortgages, to an USAT. In June, 1984, UFG–USAT issued Se- said to be under the control of MAXXAM and investment bank, albeit a highly distorted ries C Convertible Preferred Stock. FDC– its affiliates. FHLBB rules required that 50% one, with assets consisting primarily of MCOH bought 97.5% of the issue. The series or more the directors be under a corporation ultra-high risk corporate securities. C was replaced (prior to its conversion date) or individual’s control before that entity Other Officers and Key Employees by series D in June 1987 which was replaced could be said to be a control person by this (prior to its conversion date) by Series E, in test. Hurwitz avoided establishing this type Other key employees of USAT had connec- June of 1988. The tactic of not actually exer- of conspicuous control of the board, although tions to MAXXAM related companies and to cising conversion rights but continuing to he succumbed in late 1987 when the exodus other Hurwitz affiliated entities as well. The maintain those rights, was apparently en- from the board overcame planning. The sec- First City National Bank’s connection to gaged in at the direction of MAXXAM’s ond group’s influence increased as it ex- UFG–USAT included the recruitment of Chairman of the Board, Charles Hurwitz, in panded its membership through the addition other USAT officers such as Michael R. Crow order to prevent activation of net worth of corporate officers to the board, and as the and Bruce F. Williams, who served as Vice guarantees which would have been required first group suffered attrition in late 1985. President and treasurer, and perhaps James by the Federal Home Loan Bank Board This second group, the Hurwitz directors, R. Walker, who was recruited from a large (FHLBB) had the percentage of voting stock formed the leadership group within UFG– Texas bank’s holding company and served attributable to MAXXAM’s predecessors USAT, controlling UFG’s Executive Com- USAT in marketing and branch administra- come to exceed 25% of the outstanding vot- mittee and USAT’s investment department tion. ing stock. In December 1985, MCOH bought a from their inception in 1984. In addition to MAXXAM’s Acquisition of Pacific Lumber put-call option for 300,000 shares of UFG– Hurwitz, who served as President and CFO of After MAXXAM sold the Simplicity Pat- USAT from Drexel, further increasing UFG–USAT in 1985 (i.e., during the period tern operating division, MAXXAM func- MAXXAM’s predecessor’s ability to exercise when MAXXAM was amassing its war chest tioned essentially as an investment com- voting control if the need should arise. and implementing plans for the Pacific Lum- pany; its assets consisted primarily of secu- At the end of 1985, Drexel’s and MAXXAM’s ber takeover), this group included George rities and real estate. Had this situation con- interests in USAT were: Kozinetsky and Barry Munitz, both of whom tinued, MAXXAM, as an investment com- also served on MAXXAM, MCO and FDC pany, would have been subject to stringent Total/ boards contemporaneously. Munitz chaired reporting requirements. It was, therefore, Total/ con- UFG–USAT’s Executive Committee from its %Common option ver- very much to MAXXAM’s advantage to ac- sion inception until it was disbanded in 1988. This quire a manufacturing or resource extraction group also included Gerald R. Williams, who subsidiary. During 1984 Hurwitz began FDC–MCOH ...... 23.3 26.97 41.97 was recruited from First City National searching for an operating company that Drexel ...... 9.67 6.0 6.0 Bank, a bank in which MAXXAM had in- MAXXAM could acquire. Totals ...... 33.0 33.0 47.97 vested and with which MAXXAM’s prede- According to testimony and documents cessor MCO had an oil purchase agreement. submitted by Hurwitz in the course of 1988 It is important to note that while the per- Williams served on the UFG–USAT Board hearings before Dingell’s Oversight and In- centage of voting stock controlled by from 1984 through January of 1986, and vestigation Subcommittee of the Committee MAXXAM and Drexel (or MAXXAM’s prede- served the board in various capacities at on Energy and Commerce, Bob Quirk of cessors and Drexel) remained below 50%, USAT including Executive VP, CEO and Drexel, Burnham, Lambert, first brought Pa- even taking into account the conversion fac- President. [q] cific Lumber to MAXXAM’s attention in or

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00135 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.349 pfrm07 PsN: E20PT1 E2474 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 around December of 1984. Quirk, at the re- an individual, corporation or individuals and organization included a number of poor per- quest of MAXXAM’s Robert Rosen, had pre- corporations acting as a group hold stock ex- formances which would have prevented its pared a list of forest products companies ceeding 5% of a single corporation’s out- qualifying for any of the traditional methods that were attractive as potential acquisition standing shares. Second, the Articles of In- of raising large amounts of capital, and, targets. MAXXAM and Drexel recognized corporation of the Pacific Lumber Company under the circumstances, even the loose reg- hidden values in Pacific Lumber’s 190,000 had what is known as a ‘‘super majority’’ ulations of the 80’s precluded banks from acres of real property in Humboldt County; clause. If a raider acquired 5% or more of making commercial loans backed by the the value of the redwood forests, which had PL’s share’s without permission of the PL kind of collateral MAXXAM could muster. not been inventoried by timber crews in board, then the raider would need an 80% ap- More important, MAXXAM was barred from more than 30 years, was not accurately re- proval vote of the stockholders if the raider taking money from its captive S&L, United flected in the market price of PL stock. Pa- wanted to force a merger. Otherwise, only a Savings Association of Texas, even though cific Lumber’s selective harvesting practices simple majority was needed. USAT’s assets measured at about $5 billion. had left the company with significant re- On September 30, 1985, MAXXAM revealed This kind of financing was, however, serves of old growth timber, including sig- its intention to buy 100% of PL’s shares and Milken’s specialty; Milken had built a large nificant reserves of old-growth redwood, force a merger. At that time, taking into ac- network of S&Ls, insurance companies, pen- which distinguished it from other timber count the PL stock acquired from Jefferies sion funds and corporations dependent on companies. Once owned by a liquidator, along with the 2.2% that MAXXAM acquired capital infusions provided by Drexel issued these trees could be turned into cash, pro- before August 6, MAXXAM publicly claimed junk bonds sold through the market hat viding impressive profits for a new owner, in- ownership of only 994,900 PL shares or 4.58% Milken and Drexel controlled. This ‘‘junk stead of the more modest income stream of PL’s outstanding stock, 90,837 shares short bond network’’ was the source of billions of generated by the old owners’ more conserv- of 5%. On October 2, 1985, MAXXAM filed a dollars for Milken and his friends. The net- ative harvesting strategies. 14D–1 with a Tender Offer price of $38.50 and work worked both ways, though. To get huge Clearly, the focus of the takeover was the filed a disclosure pursuant to HSR. sums of money for takeovers, the raider had land and trees, not the other subsidiaries or On October 22, 1985, MAXXAM received to give something back. In MAXXAM’s case assets of PL. All of PL’s subsidiaries and as- permission of the PL Board to buy more there was a large pool of capital that sets, including offices, ranch lands, the cut- than 5% of PL’s stock. At that time, the PL MAXXAM controlled but could not tap di- ting and welding division and the over-fund- Board believed that MAXXAM then held less rectly, i.e. the assets of United Savings Asso- ed pension fund, would be sold for or con- than 5% of the timber company’s out- ciation of Texas. The complaint in FDIC vs Milken alleged: verted to cash shortly after the merger, to standing shares, and required MAXXAM to ‘‘Between 1985 and 1988 the Milken group pay down the bank loan portion of the $850 secure approval of only 50% of the share- raised about $1.5 billion of financing for million debt resulting from the takeover. holders to effect the sought after merger. Hurwitz takeover ventures. In return, Only a 100% tender offer would preserve However, at the time MAXXAM was author- Hurwitz caused USAT to purchase huge the hidden values in PL for the benefit of ized to effect the merger on a simply major- amounts of Drexel-underwritten junk bonds. MAXXAM once the takeover was completed. ity, Ivan Boesky owned a major block of PL . . . For MAXXAM’s purposes, it was critical stock under circumstances that suggest that that the value of the forest assets not be re- ‘‘The Milken Group placed much of the he was holding that stock for MAXXAM’s debt Drexel underwrote for USAT with its vealed to the PL shareholders or telegraphed benefit, once again potentially dem- to the market, since, once recognized, those network. For example, about $272 million onstrating the lengths to which MAXXAM face amount of the $615 million of senior sub- values would belong to whichever stock- would go to secretly accumulate stock and holders held PL shares at that time. ordinate extendible notes (the ‘‘zero coupon capital for a Pacific Lumber takeover. notes’’ underwritten by Drexel to finance The importance of MAXXAM’s secretly ac- Boesky began buying PL stock on Sep- cumulating the stock and capital required to Hurwitz’s takeover of the Pacific Lumber tember 27, 1985. At the time of MAXXAM’s Company (‘‘Pacific Lumber’’) in 1986 was make a credible 100% tender offer in the Oct. 2 tender offer, Ivan Boesky had pur- planned hostile takeover (in other words, to purchased by First Executive and various of chased a total of 143,400 shares of Pacific its subsidiaries, Columbia and GNOC Cor- prepare an offer that PL truly could not Lumber. Public documents show that on Oc- refuse) is underscored by the lengths to poration (‘‘GNOC’’), a subsidiary of Golden tober 22, 1985, Boesky was the largest holder Nugget, Inc. (‘‘Golden Nugget’’). Similarly, which Hurwitz and MAXXAM went to keep of PL stock, with over 5%. Next was regulatory agencies and the public in the the Milken Group placed a significant MAXXAM, with slightly less than 1 million amount of the senior subordinated extend- dark about MAXXAM’s interest in PL and shares and slightly less than 5%. Boesky’s accumulation of PL stock. MAXXAM began ible notes issued in connection with the Pa- purchases of PL stock became widely known. cific Lumber takeover with S&Ls, including acquiring PL stock in June of 1985, stopping At critical moments, Boesky’s purchases on on August 5, 1985 after accumulation just AMCOR, a wholly-owned subsidiary of Lin- the open market may have made any alter- coln Federal Savings & Loan, Hupter Sav- short of the $15,000,000 worth of shares that native to MAXXAM seem unrealistic and would have triggered the notice provisions of ings Associations and Pima.’’ perhaps even less desirable. ‘‘In exchange for these entities purchase of the Hart, Scott, Rodino Act (HSR) which re- A suit on behalf of PL’s pre-merger share- the Pacific Lumber financing, the Milken Group quires public notification of stock purchases holders (in which a $50,000,000 settlement is and Hurwitz arranged for USAT to purchase valued at more than that amount. pending), alleges that Boesky purchased that other Drexel-underwritten junk bonds (empha- On the same day, Ezra Levin’s law firm of stock at Milken’s request for the purposes of sis added).’’ Kramer, Levin, acting on behalf of secretly buttressing MAXXAM’s position While the Rose Foundation can’t possibly MAXXAM, contacted the law firm of Mor- prior to MAXXAM’s making its takeover know what additional evidence the FDIC has gan, Lewis, Bockius, who represented the plan public. These allegations reflect mate- assembled concerning the MAXXAM/Drexel brokerage firm of Jefferies & Co., to discuss rial in the SEC and US indictments of quid pro quo, the evidence in the public a put/call arrangement, which Hurwitz testi- Milken and Drexel (based in considerable record is sufficient to convince the Founda- fied his lawyers had indicated was permis- part on information given them by Boesky) tion of the truth of the allegation. For the sible under HSR without making the ar- suggesting that Boesky was used by Milken period beginning in spring of 1985, when rangement or any prior purchases public, and Hurwitz to help MAXXAM secretly gath- MAXXAM first began amassing the capital even given the size of Hurwitz’s prior hold- er control of a larger percentage of PL stock for its Pacific Lumber takeover, and con- ings. While Hurwitz denied that MAXXAM and to help keep potential ‘‘white knights’’ tinuing until December of 1988 when and Jefferies entered into any kind of formal out of the PL takeover. The government’s MAXXAM lost control of USAT, there is a put/call agreement, option arrangement or case against Milken tells us that, at a min- clearly observable correspondence between other contract, the Dingell committee hear- imum, Boesky bought PL shares at Milken’s the size of USAT’s purchases of Drexel high- ings reveal that Jefferies began buying PL request once the takeover was announced, risk securities and the size of bond issues un- stock on August 6 continuing to buy until and that when Boesky sold those shares he derwritten by Drexel for MAXXAM and re- September 27, 1985 when Jefferies sold 500,000 gave about half of the profits to Drexel. lated entities, which were then placed with shares to Hurwitz at more than $4/share less others in the Drexel network. (Please see ac- How did MAXXAM exploit its position as a than its value at close of market. Arguably companying chart). controlling shareholder in USAT to take- this reflects the same pattern of prohibited These reciprocal transactions can be sum- stock ‘‘parking’’ that led to the subsequent over Pacific Lumber? marized as follows: indictment of the Jefferies firm’s principal While MAXXAM was able to secure some In May of 1985, Drexel underwrote and Boyd Jefferies in connection with stock conventional financing for its takeover ef- placed a $150 million bond issue for parking for Boesky and others. fort, MAXXAM could not have raised the MAXXAM, of 1985 Drexel underwrote and MAXXAM’s direct stock purchases stopped $900 million necessary for the 100% tender placed a $35 million bond issue for MCOH. just short of acquiring a 5% interest in Pa- offer without Drexel’s help. Conventional The funds generated by these bond issues al- cific Lumber. Had MAXXAM acquired a 5% bank financing for the amount required was lowed MAXXAM and MCOH to purchase the interest or greater, several consequences out of the question, since MAXXAM, even shares of PL stock that Jefferies had accu- would have flowed. First of all, securities when considered together with Hurwitz and mulated. Correspondingly, on July 1, 1985, laws require the filing of a form 13D with the his related companies, had only about $100 USAT recorded purchases of Drexel issued Securities Exchange Commission (SEC) when million in assets. MAXXAM’s history as an high risk bonds valued at $280 million.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00136 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.351 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2475 In November of 1985, Drexel underwrote a Hurwitz but rendered USAT insolvent, to the holders, along with liberalizing class action $450 million bond offering for MAXXAM the detriment of the FDIC. rules, that it is a common, but mistaken be- proceeds of which were used to acquire more 2. Whether, as a remedy under California lief that California affords better rights and Pacific Lumber stock to complete the cap- and Texas law, the Courts will impress a con- remedies to minority shareholders than to ital build-up necessary for MAXXAM’s ten- structive trust over Pacific Lumber for the creditors. Actually, the fiduciary duty of der offer. Then, in June of 1986, Drexel float- benefit of the FDIC. controlling shareholders to creditors was ed another $430 million in ‘‘Bridge Notes’’ for Conclusions well established at the time of Ahmanson, MAXXAM, which allowed MAXXAM to re- 1. Under both California and Texas law, and creditors were never hobbled with a need place the earlier $450 million issuance. On MAXXAM and Hurwitz, as controlling per- for a derivative action, but had a direct right July 1 of 1986, USAT recorded purchases of sons of USAT, had a fiduciary duty to USAT of action. The language quoted above from the Ahmanson decision, quoting Remillard, $688 million worth of Drexel junk bonds, rep- and its depositors MAXXAM and Hurwitz quoting Pepper, shows that all three courts resenting the peak of USAT’s Drexel bond breached their fiduciary duty to USAT and specifically contemplated creditors. See also, purchases. Also in July, Drexel underwrote a its depositors by engaging in financing Commons v. Schine, 35 Cal.App. 3d 141, 110 $575 million bond issue for Pacific Lumber, transactions for the acquisition of Pacific these ‘‘Reset Notes’’ were used to pay off the Cal.Rptr. 606 (1973) discussed below. Lumber which rendered USAT insolvent, but The celebrated procedural innovations of Bridge Notes; the rest were used for general benefited MAXXAM and Hurwitz. MAXXAM Ahmanson mask the fact that the Ahmanson corporate purposes, which may have included and Hurwitz are liable to the FDIC, which court also expanded the substantive fidu- reducing the bank debt incurred in the take- stands in the shoes of USAT and its deposi- ciary obligations of controlling shareholders. over. tors, and was injured by the wrongful con- Prior law enforced fiduciary obligations vis- After 1986, USAT’s Drexel securities pur- duct of MAXXAM and Hurwitz. a-vis corporate assets and corporate opportu- chase began to taper off, with only about 2. The Courts should impress a construc- nities, but there was laissez faire attitude $321 million worth of such purchases re- tive trust over Pacific Lumber for the ben- with respect to a shareholder dealing strictly corded in July of 1987. These purchases prob- efit of the FDIC, because MAXXAM and in his stock. In the case of a sale of control- ably represent USAT’s last purchases in con- Hurwitz acquired Pacific Lumber with funds ling interest for a substantial premium nection with the Pacific Lumber deal. misappropriated from USAT, and MAXXAM above the per-share market value of minor- In 1986, junk bonds represented 97.4% of all and Hurwitz were unjustly enriched. ity shares, the excess was considered to be corporate securities held by USAT. A very Discussion payment for control as such, which was high percentage of these were Drexel issues, 1. Controlling shareholders have a fidu- deemed to be an asset of the operation rather which had a higher default rate than that of ciary duty to the corporation and its credi- than the shareholder. Thus, a fiduciary duty other junk underwriters. USAT’s portfolio tors. existed with respect to such respect to such was described by Louis Ranieri, who took control premiums. Otherwise, a majority control of the seized S&L in January of 1989, A controlling shareholder or group of shareholders, even if they hold no corporate shareholder’s dealings with his shares did as ‘‘80% bologna.’’ Unquestionably, USAT’s not entail fiduciary obligations to minority office, and do not sit on the corporation’s junk portfolio played a major role in deter- shareholders. mining the size of the FDIC’s $1.3 billion+ fi- Board of Directors, have a fiduciary duty to The Ahmanson Defendants did not receive nancial contribution to the Ranieri group the corporation and its creditors, not to use any control premium, and argued that the bailout plan for USAT. unfairly their control of the corporation for lack of public market for the minority sav- Renowned economists George Akerlof and their personal benefit to the detriment of the ings and loan shares was unaffected by De- Paul Romer have developed an economic corporation and its creditors. The leading fendants’ conduct. The Court held, however, model which demonstrates, in general, the case in California on controlling shareholder that the majority shareholders have a fidu- motivation for Milken and Drexel to con- liability is Cal. 3d 93, 81 Cal.Rptr. 592 (1969). ciary obligation not to benefit themselves spire with someone such as Hurwitz in or- In Ahmanson, the Supreme Court, in an unfairly by virtue of their controlling posi- chestrating a plan of the type described here. opinion by Chief Justice Traynor, confirmed tion, and to share those benefits with the Among other things, Akerlof and Romer existing California law imposing a fiduciary corporation, its minority shareholders, and demonstrate convincingly that it was pos- duty on majority shareholders. The Court its creditors. sible for Milken and Drexel to use institu- quoted with approval from the earlier Court Texas law imposes a virtually identical ob- tions like USAT to ensure full subscription of Appeals opinion in Remillard Brick Co. v. ligation upon a controlling shareholder a of particularly risky junk bond issues, defer- Remillard-Dondini, 109 Cal.App. 3d 405, 241 duty to deal fairly with corporation, its ring the ultimate failure of those issues, in P.2d 66 (1952), which in turn quoted from the other shareholders and its creditors. This order to maintain their short term sales and U.S. Supreme Court opinion in Pepper v. Lit- duty is broader than the trust fund doctrine. profits. [George A. Akerlof & Paul M. Romer, ton, 308 U.S. 295., 60 S. Ct. 238; This broad duty results from the controlling Looting: The Economic Underworld of Bank- ‘‘*** ‘A director is a fiduciary * * * So is shareholder’s inside knowledge of the cor- ruptcy For Profit, NBER Reprint No. 1869 a dominant or controlling stockholder or poration’s affairs and the opportunity such a (1993)]. This model provides expert support, group of stockholders * * * He who is in such controlling insider has to manipulate the as well as an academic economic analysis, of a fiduciary position * * * cannot use his corporation’s affairs for his personal advan- how it was possible for both Drexel and power for personal advantage and to the det- tage. Tigrett v. Pointer, 5 80 S.W. 2d 3 MAXXAM to make a huge amount of money riment of stockholders and creditors no mat- (Tex.Civ.App.—1978. writ ref’d n.r.e.). by looting the federal treasury. The model is ter how absolute in terms that power may be Hurwitz and other common members to also interesting because it suggests that and no matter how meticulous he is to sat- the MAXXAM and UFG boards stood in an Hurwitz may well have planned and expected isfy technical requirements * * * Where especially demanding position. Transactions all along that USG/USAT would fail and the there is a violation of these principles, eq- between board of directors of corporations FDIC be forced to foot the bill. uity will undo the wrong * * *’ This is the having common members will be guarded as There are a number of additional sources law of California’’ 1 Cal. 3d at 108, 109, 81 jealously by the law as are personal dealings of information concerning the alleged quid Cal.Rptr. at 599,600. between director and his corporation. In pro quo and its impact on USAT’s financial In Ahmanson, the Defendants controlled other words, each director and officer of UPG condition, which, while not part of the public 85% of a closely held savings and loan asso- and MAXXAM must put the interests of the record, are available to the FDIC, and which, ciation, of which Plaintiff was minority corporation whose hat they wore at the to our knowledge, have been ignored up to shareholder. In order to create a public mar- time, ahead of the other corporation, to this time. These include potential testimony ket for their own stock, the Defendants which they also owned a duty of loyalty. by the former chief bank examiner for the formed a public company, and contributed Further, the burden of proving the fairness State of Texas who supervised the review of their controlling interest in the savings and of the transactions is on the interested direc- USAT’s records, as well as testimony and loan to the public company, thereby freezing tors. Where the fairness of such transactions evidence developed in connection with a law- out the minority. Plaintiff initiated a class is challenged, the burden is upon those who would maintain them to show their entire suit brought by former shareholders of Pa- action lawsuit, which was dismissed by the fairness and where sale is involved, full ade- cific Lumber arising out of the alleged im- Trial Court based on then-existing law which quacy of consideration. Crook v. Williams proprieties in MAXXAM’s takeover. required a derivative action, and prohibited a direct action, whenever a minority share- Drug Co., 558 SW 2d 500 (Tex. Civ. App.—1977, LEGAL ANALYSIS holder’s grievance was common to all minor- writ ref’d n.r.e.). For example, enforcement Questions Presented ity shareholders. In reversing the Trial of contracts between corporations having 1. Whether, under California and Texas Court, the Supreme Court established a new, common membership on their boards of di- law, MAXXAM, INC. (‘‘MAXXAM’’) and direct right of action against majority share- rectors is not favored. Reynold-South- Charles Hurwitz (‘‘Hurwitz’’) as controlling holders, and also took the opportunity to ad- western Corp. v. Dresser Industries, Inc. 438 persons of United Savings Association of dress other issues of the case, including lib- SW 2d 135 (Tex. Civ. App.—1969, no writ). [See Texas (‘‘USAT’’), are subject to liability to eralizing the class action certification rules, also Gaither v. Moody, 528 S.W. 2d 875 (Tex. the FDIC for breach of fiduciary duty, aris- and a full discussion of the fiduciary duties Civ. App. 1975. writ ref’d n.r.e.) holding that ing out of ‘‘junk bond’’ financing of the ac- of majority shareholders. at the time of the merger of one corporation quisition of Pacific Lumber which conferred In fact, Ahmanson was so celebrated for es- with another, a director and major share- substantial benefits on MAXXAM and tablishing direct actions by minority share- holder of a corporation stood in a fiduciary

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00137 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.353 pfrm07 PsN: E20PT1 E2476 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 relationship to both corporations.] To the ex- proved the transaction under those cir- A typical statment of the rule occurs in tent the common directors and officers had cumstances. Mazzera v. Wolf, 30 Cal. 2d 531, 183 P.2d 649 divided loyalties, and failed to disclose mate- The purchases of billions of Drexel junk se- (1947): ‘‘A constructive trust may be imposed rial information relating to the purchase of curities had a direct, and dire, impact on the when a party acquires properties to which is junk securities, such officers and directors USAT’s financial health. While the precise not justly entitled, by actual fraud, mistake violated their duty to the purchasing cor- extent of that impact can only be deter- or violation of a fiduciary or confidential re- poration (UFG/USAT). The fiduciary obliga- mined by testimony of those who conducted lationship.’’ tions of the managers, directors and officers the critical reviews of the saving’s and loan’s The Ninth Circuit Court of Appeals has of USAT should be viewed as running toward portfolio and records, it is clear from held that the essence of the constructive the shareholders of UFT and the depositors. Akerlof & Romer’s review of the literature trust theory is to prevent unjust enrichment See, In Re Weslec, 434 F. 2d 195 (5th Cir. 1970). on the failure rates of Drexel securities, that and to prevent a person from taking advan- As a controlling shareholder of UFG/USAT, in the absence of those investments the bail- tage of his own wrongdoing, and that a con- Hurwitz had a duty to deal fairly with UFG/ out of USAT been substantially smaller, if it structive trust may be imposed in prac- USAT, its depositors and its other share- were even necessary at all. tically any case where there is a wrongful holders. Hurwitz’ failure, or more likely, in- Hurwitz and MAXXAM did not make cer- acquisition or detention of property to which tentional refusal, to disclose the terms of the tain the economic rewards (such as they another is entitled. United States v. Pegg, agreement with Milken and Drexel violated were) resulting from the prohibited trans- 782 F.2d 1498 (1986, 9th Cir). this duty. It is a classic example of conflict action with Milken and Drexel flowed to all Imposition of a constructive trust is a typ- of interest and misuse of inside information: owners of UFG and its subsidiary, USAT. To ical remedy for breach of fiduciary duty in Hurwitz used his insider’s knowledge of the contrary, Hurwitz engineered the trans- Texas as well, and has often been applied in UFG’s affairs to manipulate UFG/USAT into actions to ensure the benefits flowed to the context of breaches of duty by corporate purchasing Drexel junk bonds to the benefit MAXXAM, not UFG, USAT and their deposi- officers and directors. Therefore, assuming, of Hurwitz and MAXXAM. tors and shareholders. To the extent that arguendo, that Hurwitz, acting on behalf of It is axiomatic that Hurwitz, as an officer, UFG and USAT’s depositors and share- MAXXAM, breached both his and director, and controlling owner owed a typ- holders took the risk of the sub silentio deal MAXXAM’s fudiciary duties by self-dealing ical fiduciary duty to UFG and USAT. Fagan with Drexel, those depositors and share- and failing to disclose all material informa- v. La Gloria Oil and Gas Co., 494 S.W.2d 624 holders should also have received the re- tion to the officers, directors, and share- (Tex. Civ. App.—1973, no writ); Dowdle v. wards. holders of UFG, a constructive trust can and Tex. Am. Oil Corp., 503 S.W.2d 647 (Tex. Civ. By causing USAT to invest in the poor should be imposed upon their assets con- App.—1973, no writ). this duty requires the quality Drexel-underwritten securities, cerned, including, but not limited to, the officer and director to place the interests of which destroyed USAT and damaged the stock of Pacific Lumber. the corporation ahead of their own. The FDIC to the tune of $1.3 billion, MAXXAM The equitable remedy of imposition of con- power of Hurwitz’ office was required to be and Hurwitz breached their fiduciary duty to structive trust may be awarded for breach of exercised solely for the benefit of the cor- USAT and its depositors. the higher standards of conduct demanded in poration, i.e. UFG/USAT, not MAXXAM, 2. It is immaterial whether the controlling a fiduciary relationship. Chien v. Chen, 759 MCO Holdings, or Hurwitz. Canion Texas interest is directly owned, or is indirectly S.W.2d 484 (Tex.App.—Austin 1988); Republic Cycle Supply, Inc., 537 S.W. 2d 510 (Tex. Civ. held through affiliated persons or entities. of Haiti v. Crown Charters, 667 F.Supp. 839 App. 1976, no writ). (Directors of corporation In Commons v. Schine, 35 Cal. App. 3d 141, (imposition of constructive trust is appro- owed to it a duty of loyalty and were bound 110 Cal.Rptr, 606 (1973), the Defendant con- priate remedy for breach of fiduciary duty). to in any business which might result in per- trolled a corporation, which in turn con- For example, a constructive trust was im- sonal benefit to a director or officer, or trolled a second corporation, which in turn posed on alleged ill gotten profits realized by which might result in a benefit to any other was the general partner of a real estate lim- ERISA fiduciary as a result of fiduciary’s al- corporation (e.g., MAXXAM) in which they ited partnership. When the limited partner- leged breach of duty of loyalty, even though had a personal interest the officers and di- ship got into financial difficulty, the Defend- plan participants and beneficiaries had al- rectors must demonstrate the highest good ant caused it to liquidate substantial assets ready received actuarily vested plan bene- faith). See Reynolds Southwestern Corp., and to pay in full a debt to Defendant, which fits. Amalgamated Clothing & Textile Work- supra. rendered the partnership insolvent, unable to ers Union v. Murdock, 861 F.2d 1 Cir. 1988). Texas not only recognizes this fiduciary pay its other creditors. Plaintiff, the Bank- A fiduciary is liable to turn over to the duty, but charges the insider to make cer- ruptcy Trustee acting for the other credi- principal any money or property received as tain that the economic rewards flowing from tors, brought the action in state court to re- a result of the breach of his duty of trust. US corporate opportunities inure to all owners cover the payment from Defendant on a the- v. Goodrich, 687 F.Supp. 567 (MD Fla. 1988) af- of the enterprise. That obligation is even ory of breach of fiduciary duty. Notwith- firmed 871 F.2d 1011 (11th Cir.). Constructive stronger in the case of a bank, both because standing that the debt was legitimate, that trusts are frequently imposed where the of the fiduciary nature of banking and be- it was due and payable, and that California breach of fiduciary duty is committed by a cause of the duty to depositors. First Nat. law expressly authorizes preferential pay- corporate fiduciary, such as a director. Bates Bank of La Marque v. Smith, 436 F. Supp. 824 ments (Civil Code § 3432), the Court held the v. Cekada, 130 FRD 52 (ED Va. 1990). A cor- (d. Tex. 1977), aff’d in part, vacated in part, Defendant liable for the entire amount of the porate fiduciary will not be allowed to retain 610 F.2d 1258 (5th Cir.). A corporate fiduciary payment on a theory of unjust enrichment. proceeds arising from a violation of his fidu- may not derive a personal benefit in dealing The Court was not deterred at all by the De- ciary duty. Poe v. Hutchins, 737 SW 2d 574 with corporation’s fund or its property. fendant’s indirect ownership, but grounded (Tex.App.—Dallas 1967, writ ref’d n.r.e.). Texas Soc. v. Fort Bend Chapter, 590 S.W.2d its decision on the fact of control. The Court The general rule of corporate opportunity 156 (Tex. Civ. App.—1979, writ ref’d n.r.e.). stated: demands that if an officer or director in vio- But despite his duties to UFG/USAT ‘‘One who dominates and controls an insol- lation of his duty acquires gain or advantage (which, it appears, he ignored), Hurwitz, act- vent corporation may not . . . use his power for himself, interest so acquired is charged ing on behalf of MAXXAM, was able to lever- to secure for himself an advantage over with trust for the benefit of the corporation, age UFG/USAT assets into financing other creditors of the corporation. [Citing In Re American Motor Club, 109 BR 595 MAXXAM’s takeover of Pacific Lumber by Pepper v. Litton, supra, and other cases.] (Bankruptcy ED NY 1990). The officers of a means of an all cash tender offer. Absent The corporate controller-dominator is treat- closely held corporation, to which the cor- Drexel’s junk bond financing of the tender ed in the same manner as director . . . and poration systematically diverted its assets offer, MAXXAM did not have the money to thus occupies a fiduciary relationship to its without documents of title or other formali- make such an offer. Absent Hurwitz’ com- creditors. [Citations] As a guilty fiduciary, ties, failed to demonstrate good faith in mitment agreement to cause UFG/USAT to he is liable in quasi contract to the extent their dealings with corporation. The result purchase billions of dollars of Drexel junk that he has unjustly enriched himself of his under Tennessee law was to hold any pro- bonds, Drexel would not have financed the breach [citations].’’ 35 Cal.App. 3d at 144, 110 ceeds from sale of transferred assets in con- tender offer. Absent UFG/USAT’s purchase of Cal. Rptr. at 608 structive trust for corporation and its credi- billions of dollars of Drexel junk bonds, there The fact of domination and control of tors. In Re B&L Laboratories, 62 BR 494 could not have been a Pacific Lumber tender USAT by Hurwitz and MAXXAM would ap- (Bankruptcy MD Tenn 1986). Delaware law is offer. pear to be provable, and has been already al- similar. Had there been full disclosure of all mate- leged by the FDIC in action referred to in If a corporate officer of director violates rial facts surrounding Hurwitz’s involvement the statement of facts. The fiduciary duty of his duty to the corporation and acquires gain with Milken and Drexel to the disinterested Hurwitz and MAXXAM to USAT and its or advantage for himself, the law charges the UFG/USAT directors, including disclosure of creditors would not be blunted by the indi- interest so acquired with a trust of the ben- the agreement to purchase junk securities in rect nature of their control through affili- efit of the corporation while denying to the exchange for later financing, would UFG/ ates and subsidiaries. betrayer all benefit and profit. Phoenix Air- USAT have purchased billions of Drexel 3. Both Texas and California Courts have lines Services v. Metro Airlines, 390 SE 2d junk? It is highly uhlikely that the disin- repeatedly impressed constructive trusts 919, 194 (Ga.App. 120, rev’d 397 SE2d 699, 260 terested directors, cognizant of their own ob- over the ill-gotten assets acquired by a fidu- Ga 384, on remand 403 SE2d 832, 199 Ga.App. ligations to UFG/USAT, would have ap- ciary in breach of his fiduciary duties. 92 (1989).

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00138 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.355 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2477 MAXXAM and Hurwitz diverted USAT’s as- Indeed, the weight given environmental con- it, the FDIC, on the other hand, has powers sets into the Milken system, and benefited sequences is so significant and the public in- of discovery and powers of subpoena, and has from their wrongful conduct by obtaining terest in environmental protection so strong access to the resources of one of the nation’s 100% financing for the takeover of Pacific that courts have held that plaintiffs need largest and best respected law firms, with in- Lumber. MAXXAM and Hurwitz were un- only establish either a ‘‘fair chance of suc- house multi-state legal research facilities. justly enriched by their wrongful conduct. cess on the merits’’ or ‘‘the raising of ques- We are convinced that if we can make a good There is substantial authority, in both Cali- tions serious enough to require litigation.’’ case for the FDIC’s, and the U.S. taxpayers’, fornia and Texas for imposing a constructive Marbled Murrelet v. Babbitt, Case No. C 93 equitable rights in these extraordinary prop- trust over Pacific Lumber for the benefit of 1400–FDMS (unpublished decision) (N.D. CA erties, the FDIC can make an even better the FDIC, as successor to USAT. 1994) p. 6–7 (emphasis in the original). (Text case. We are interested in discussing how we 4. Given the propriety of imposing a con- of decision follows under separate cover.) can work cooperatively to make sure that structive trust over Pacific Lumber for the Applying this standard, let us review the the best possible case is made, and made benefit of the FDIC, injunctive relief is ap- facts we have outlined above. Based solely on quickly, for recovery of these important as- propriate to protect the res during litiga- information in the public record, it is clear sets. There are, as noted above, a number of tion. that there are questions raised which are se- rious enough to require litigation. These sources of information concerning When the FDIC succeeds in litigating its questions, including the allegation of a pro- MAXXAM’s conduct as a controlling share- claims against MAXXAM and Hurwitz for hibited quid pro quo in which Milken and holder of UPG/USAT, the alleged MAXXAM/ breach of fiduciary duty, it will acquire, Drexel conspired to exploit the purchasing Drexel quid pro quo, and its impact on through constructive trust, equitable rights ability of USAT to prop up Drexel issues, in USAT’s financial condition, which we believe over Pacific Lumber’s assets. In addition to return for Drexel securing financing for are available to the FDIC, which, to our recovering millions of dollars worth of prop- MAXXAM’s acquisition of Pacific Lumber, knowledge, have been ignored up to this erties for the American taxpayers, it will ac- have been raised in FDIC v. Milken, and re- time. While the statute of limitations had quire the Headwaters Forest with its very lated issues were raised in both SEC v. been tolled by agreement in this matter, unique environmental values and issues. time still tends to erode evidence. Memories As mentioned above, substantial tracts of Milken and US v. Milken. While those cases settled before the are fading; witnesses may become unavail- old growth are being cut down right now. strength of the evidence supporting these al- able; records are being lost. We believe that While cutting was halted over the summer, legations could be evaluated in court, there continued unexplained failure to pursue during the nesting season of the endangered is sufficient evidence in the public record to these potential sources of evidence would in- marbled murrelet, that nesting season ended demonstrate that the FDIC has, a the very dicate a true unwillingness on the part of the September 15 and Pacific Lumber has re- least, a ‘‘fair chance’’ of proving that FDIC to seriously pursue this matter. sumed cutting at a drastic rate. By winter, First, if the FDIC is to make a case for any Hurwitz, acting on behalf of MAXXAM, many very large and very old trees will be claims arising out of USAT’s failure, it breached that company’s fiduciary duties as gone and a good deal of old growth habitat seems appropriate to immediately subpoena a controlling shareholder of UFG/USAT, and/or buffer will be destroyed. Mr. Art Leiser, the retired chief banking ex- causing MAXXAM to acquire Pacific Lumber Where, as here, such dire, irreversible envi- aminer for the Texas State Banking Com- as a direct result of those breaches, and that, ronmental consequences are at issue, espe- mission who reviewed and supervised the re- therefore, imposition of a constructive trust cially consequences that impact an endan- view of USAT’s records during the period on the proceeds of that transaction is appro- gered species, emergency injunctive relief is from 1982 to 1988. Mr. Leiser is now more priate and that, therefore, ultimately a peti- particularly appropriate. than seventy years old, so time is truly of tion for the disgorgement of Pacific Lumber Generally, under Federal law, as articu- the essence. It also seems appropriate to sub- has, again at the very least a ‘‘fair chance of lated in the 9th Circuit, injunctive relief poena all documents and records controlled success.’’ This evidence includes records of should be granted if the moving party can by Mr. Leiser or the Texas State Banking USAT’s purchases of Drexel junk bonds meet one of two tests: Commission records that relate to the con- equivalent in value to contemporaneous First if: duct of USAT’s investments and other busi- Drexel issues of MAXXAM debt instruments (1) The moving party will suffer irreperable ness during that time, both so that Mr. used to finance MAXXAM’s Pacific Lumber injury if the injunctive relief is not granted; Leiser can refresh his recollection and so takeover; it also included Akerlof and (2) The moving party will probably prevail that Mr. Leiser can testify concerning the Romer’s expert analysis of the economic fac- on the merits; significance of those documents and records. tors that permitted institutions such as (3) In balancing the equitics, the non-mov- Because of confidentiality constraints, Mr. USAT to be used (and demonstrate the like- ing party will not be harmed more than the Leiser’s testimony requires a letter of au- lihood that they were used) by Milken to en- moving party is helped by the injunction; thorization from Mr. James Pledger, who is sure that risky Drexel issues were fully sub- and the current Texas Savings and Loan Com- scribed. (4) Granting the injunction is in the public missioner. Such a letter would almost cer- interest. We are also convinced that the FDIC has access to evidence that further documents tainly be issued upon receipt of a subpoena. Landi v. Phelps, 740 F.2d 710, 712 (9th Cir. the alleged breaches of fiduciary duty and It is our understanding that despite repeated 1984), citing William Inglis & Sons Baking Co their critical role in the PL acquisition, encouragement to do so, the FDIC has failed v. ITT Continental Baking Co., 526 F2d 86, 87 which, when presented to the court will to contact Mr. Leiser. (9th Cir. 1975); or, second, by demonstrating: Second, it would seem that the FDIC make the probability of the FDIC’s ultimate ‘‘either a combination of probable success on should immediately subpoena the deposition success in this matter even more apparent. the merits and the possibility of irreparable transcripts and files of Mr. Bill Bertain, an Among this evidence is evidence assembled injury or that serious questions (on the mer- attorney in Eureka, California, who testified in connection with FDIC v. Milken, SEC v. its) are raised and the balance of hardships before the Dingell Committee on the Pacific Milken and US v. Milken. We are also con- tips sharply in his favor;’’ (emphasis in the Lumber and who is currently representing a vinced that by exercising its powers of dis- original) group of former shareholders of Pacific Lum- covery and powers of subpoena, the FDIC The Ninth Circuit has stated that the tests ber in their case against MAXXAM arising can, with diligent effort further develop the are not separate, but ‘‘represent two points out of alleged improprieties in the takeover. evidence required to make success in the on a sliding scale in which the required de- It is our understanding that the MAXXAM/ matter close to certain. gree of irreparable harm increases as the Drexel quid pro quo became a central issue probability of success decreases.’’ Oakland CONCLUSION in that case as the case moved toward the Tribune v. Chronic Publishing, 762 F. 2d 1374, The Rose Foundation believes it has estab- currently pending $50,000,000 settlement. 1376 (9th Circ. 1985). Under this formulation, lished that a very strong case exists for the Moreover, it our understanding that al- the Supreme Court requires that the public claim that the FDIC has equitable rights to though both staff attorneys and outside interest be considered where the public may the assets of Pacific Lumber. If immediate counsel for the FDIC are aware that there is be affected. Weinberger v. Romero-Barcelo, action is not taken to protect these rights, significant overlap between the issues raised 456 U.S. 305, 312; 102 S. Cit. 1798, 1803 (1982); the taxpayers will lose a potential recovery in that case and those presented by the American Motorcyclist v. Watt, 714 F.2d 962, of some of the 1.3 billion dollar expenditure claims arising out of the failure of USAT, 967 (9th Cir. 1983). required to bail out UPG/USAT. Addition- the FDIC has not made any attempt to sub- Environmental impacts, and especially im- ally, the FDIC will allow the loss of the last poena the deposition transcripts or other po- pacts involving an endangered species are unprotected area of old growth redwood for- tential evidence accumulated in connection considered especially important and carry a est in the world, an old growth forest that, with that case. presumption of irreparability. Save the Yaak as the Rose Foundation has pointed out, is Third, if the FDIC has not already done so, Comm. v. Black, 840 F. 2d. 962, 967 (9th Cir. the rightful property of the American people. it would seem that the FDIC should imme- 1988) (presumption of irreparable harm in en- The Rose Foundation and its counsel have diately depose Charles Hurwitz, Barry vironmental action alleging NEPA viola- access only to publicly available information Munitz, George Kozmetsky, Ezra Levin, Ron tion); Sierra Club v. Marsh, 816 F. 2d. 1376, on the conduct of USAT’s affairs, and lim- Heubsch and other key officers, directors and 1382–84 (9th Cir. 1987) (presumption of irrep- ited resources with which to acquire and employees of USAT, UTG, MAXXAM, MCOH arable harm in endangered species action). analyze that information. As we understand and Federated Development Company.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00139 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.357 pfrm07 PsN: E20PT1 E2478 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 Among other things, these depositions loan guarantee program. Rather, the govern- From: J. Kirk Boyd. should be directed toward uncovering strate- ment, upon inspection of USAT, discovered Date: May 19, 1995. gies employed to obscure MAXXAM and that there was a ‘‘hole’’ in USAT that was a Re: United States of America, ex rel., Robert Hurwitz’ control of UPG/USAT, and toward result of the depletion of assets of USAT. Martel v. Charles Hurwitz, et al. U.S. developing evidence of the MAXXAM/Drexel Given the size of the hole, the government District Court, Northern District of Cali- quid pro quo. was left with two choices: one, the govern- fornia, Case No. C 95–0322 VRW. At the same time that it is pursuing all ment could let USAT go into default and The purpose of this memo is to address the possible avenues for developing additional then pay the depositors’ claims upon federal question of what false claims were made by evidence, it is vital that the FDIC act as guarantees, or two, the government could the defendants and whether the false claims speedily as possible to file an action for put money into USAT to fill the hole suffi- made are actionable under the False Claims breach of fiduciary duty against the ciently to convince a third party to purchase Act. Based upon the analysis below, false MAXXAM corporation, seeking imposition of USAT. claims were made and the payment of gov- a constructive trust and disgorgement of Pa- As you know the latter course was taken ernment funds for the bailout of the depleted cific Lumber and moving immediately for in- and the government sold USAT out of receiv- USAT makes these claims actionable under terim protection of these extraordinary for- ership to Ranieri. As part of the deal with the False Claims Act. est assets, which are in truly imminent dan- Ranieri, on or about December 30, 1088, and FACTS ger of irreparable harm as a result of PL’s continuing thereafter, the government paid Through MAXXAM Inc., Hurwitz, recent, continuing logging onslaught. In this substantial amounts into USAT. We con- MAXXAM’s controlling shareholder, Presi- instance, failure to act in a timely fashion clude from the authorities discussed in our dent, CEO, and Chairman of the Board, was could preclude recovery of a national asset of legal memo that this pay out, combined with also the controlling shareholder of USAT in extraordinary and incalculable value. the false statements regarding net worth and the 1980s. MAXXAM was formed from merg- the quid pro quo conspiracy, is sufficient to ers of various Hurwitz-controlled corpora- satisfy the claim requirement as described in RECORD 14 tions in the early 1980s. As outlined in our McNinch, Neifert-White and their progeny. complaint, Hurwitz controlled USAT (with The government should not overlook the use HOPKINS & SUTTER, the help of Drexel) and his claims to the con- June 29, 1995. of 31 U.S.C. § 3729(3) in this case. There was a trary can be easily disproved. conspiracy by Hurwitz and others to make JEFFREY ROSS WILLIAMS, In December 1984, Drexel Burnham Lam- Federal Deposit Insurance Corporation, Wash- false claims regarding net worth so the gov- bert, Michael Milken’s firm, brought Pacific ington, DC. ernment would not catch on while they trad- Lumber to Hurwitz’s attention as a possible DEAR JEFF: Enclosed is the May missive ed out the assets of the institutions they takeover target. Hurwitz decided that he from the Rose Foundation and an ‘‘Adden- controlled to one another. wanted to acquire Pacific Lumber since the In consideration of the applicable law and dum’’ to the written disclosure statement. In value of its redwood forests had not been the factual circumstances of this case, we reviewing my qui tam materials, I was not inventoried in more than thirty years and it hope that upon review of the legal memo the sure if you had received this or not. There is was significantly undervalued on the mar- government will be even more inclined to not much new here, although the legal argu- ket. However, MAXXAM’s assets and bor- join in this qui tam suit. We look forward to ment is somewhat more developed. rowing potential alone were not enough for hearing your thoughts on these legal issues. Best regards, Hurwitz to raise the $900 million necessary You will also see enclosed herewith a sup- F. THOMAS HECHT. for a 100% tender offer. Although MAXXAM’s plement to the disclosure statement sub- captive Savings & Loan, USAT, had assets mitted previously. We are providing further worth $5 billion, Hurwitz was barred from BOYD, HUFFMAN, & WILLIAMS, details to the original statement with re- taking that money directly. He learned this SAN FRANCISCO, CA, May 19, 1995. spect to the investigative activities of the lesson when he tried to use USAT funds di- Joann Swanson, relator, in particular his contact to Mr. Art rectly to take over Castle & Cook but was Assistant U.S. Attorney, San Francisco, CA. Leiser and the valuable information that Mr. enjoined by a court in Hawaii. STEPHEN J. SEGRETO, Leiser has. I have spoken with Mr. Leiser To avoid the restrictions on his use of fed- U.S. Department of Justice, Washington, DC. and believe that the ‘‘107 forms’’ that he and erally insured USAT funds for takeover pur- Re: United States of America, ex rel., Robert others in his bank examiners’ office required poses, Hurwitz joined Milken’s ‘‘junk bond Martel v. Hurwitz, et al. Case No. C95 0322 to be prepared by USAT show that numerous network’’ in order to indirectly tap USAT’s VRW. written false claims were made by Hurwitz assets. This network was comprised of S&Ls, DEAR JOANN AND STEPHEN, It has been and his representatives with respect to insurance companies, pension funds and cor- some time since we have discussed this case USAT’s net worth. In my first conversations porations that were dependent on capital in- and I am anxious to hear how the govern- with Mr. Leiser, he told me that no govern- fusions provided by Drexel-issued junk ment’s investigation of the legal claims is ment officers from the FDIC or any other bonds, and was the source of billions of dol- going. As I have told you before, we have a governmental organization has spoken with lars for Milken and his friends. In order to team of lawyers that have been spending him regarding his knowledge of the false use this source of cash, Hurwitz had to ante- considerable time analyzing the potential claims made with respect to net worth (even up by buying junk bonds from Drexel. To do causes of action and designing a structure after we had submitted the memo from The this, he used the large pool of capital, the as- for a qui tam false claims case. When I last Rose Foundation which included information sets of USAT, that he could not directly tap. spoke with Mr. Segreto, he asked what is the from Mr. Martel regarding Mr. Leiser). In order to keep a stream of money to oth- false claim that was made. I responded that Later, and more recently, when I spoke to ers members of the conspiracy who, in turn, there were numerous false claims made re- Mr. Leiser, he said that he had been con- would cause money to flow to him, Hurwitz garding net worth. The question then be- tacted but that the contact was only cursory caused USAT to engage in numerous dubious comes, given that false claims were made re- and that his deposition has never been practices to boost its short term profits. He garding net worth, did these false claims re- taken, nor had he been asked to review im- caused USAT to stop making residential real sult in a payment by the government? portant documents that were prepared at his estate loans, sold 71% of the branch offices, In the case of United States v. McNinch, direction regarding the net worth of USAT. inflated deposits by purchasing ‘‘hot money’’ 356 U.S. 595 (1958), a case involving federally Hopefully your office is using its investiga- deposits (deposits originated by other insti- guaranteed loans, the Court held that the tory powers under the qui tam stature to tutions at unreasonably high interest rates), mere submission of a false application to a contact Mr. Leiser and memorialize through and sold brokered certificates of deposit at credit institution, which in turn procured a deposition or other statement the informa- unreasonably high interest rates. In short, FHA insurance of the loan, did not con- tion that he has to offer. Mr. Leiser is an el- Hurwitz stopped operating USAT as a home stitute a false claim against the government. derly man and his valuable testimony should mortgage lender and began a trade off of its The Court stated, ‘‘the conception of a claim be secured. assets for his personal benefit. against the government normally connotes a I look forward to talking with the two of With the money that he raised by selling demand for money or for some transfer of you about the government’s ongoing consid- off assets and increasing liabilities from 1985 property.’’ However, in footnote 6, the Court eration of this qui tam suit. As I have said to 1987, Hurwitz used USAT to purchase over expressly left open the question whether the before, and these memos substantiate, we in- $1.28 billion junk bonds from Drexel. In re- result would be different if there were a de- tend to cooperate fully with the government turn, during the same years, Drexel fault on the loan and a demand upon the gov- and hope that you will tell us if there is any underwrote about $2.2 billion of junk notes, ernment as guarantor. The accompanying way that we may be of further assistance. bonds, and debentures to finance corporate legal memo discusses the cases subsequent to Sincerely, acquisitions, such as the takeover of Pacific McNinch where, as in the case at hand, the J. KIRK BOYD. Lumber, by MAXXAM. The timing of these government did pay out money as a result of actions was not a coincidence—they con- the false claims that were made to obtain or stituted an explicit and illegal deal, a quid BOYD, HUFFMAN & WILLIAMS, maintain government loan guarantees. pro quo, which had the purpose and effect of The facts of the Hurwitz case are some- ATTORNEYS AT LAW transferring USAT’s assets to MAXXAM and what unique in that there was no direct de- Memorandum leaving the FDIC and the U.S. taxpayers mand made for payment under the federal To: Joann Swanson, Stephen Segreto. holding the empty bag of the looted S&L.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00140 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.359 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2479 Knowing that USAT was federally insured, ‘‘by virtue of the Act’s construction . . ., it covered by the False Claims Act. Id. at 599 and wanting to continue to drain its assets is sufficient for liability to attach that Rob- n.6. without being put into receivership, Hurwitz ert L. Teeven knowingly caused to be pre- Shortly after the McNinch decision, the misrepresented the net worth of USAT. Fur- sented to the Department of Education false Court of Appeals for the Third Circuit spe- thermore, to hide the effects of these fraudu- and inflated default claims based on a policy cifically addressed this question in United lent investments on USAT, Hurwitz acceler- of deliberately failing to pay student re- States v. Veneziale, 268 F.2d 504 (3d Cir. 1959), ated paper gains and hid losses through un- funds.’’ 862 F. Supp. at 1221, n.32. Specifi- where the government, having guaranteed a acceptable accounting devices, such as not cally, the government contended that the de- loan based on a fraudulent application, was ‘‘marking to market’ securities which had fendant knew ‘‘that if a student defaulted on required to pay under its guaranty. The lost market value, but instead carrying them his loan and had not been paid a refund that court recognized it was resolving the ques- to cost. Ultimately, Hurwitz was able to was due, the necessary and foreseeable result tion left open in McNinch. shuffle enough USAT money into his pockets would be that the outstanding loan balance In the McNinch opinion the Supreme Court expressly left open the question whether the to buy Pacific Lumber. for the student would be too high and thus additional facts of default on the loan and FALSE CLAIMS ACT the default claim submitted to the Depart- ment of Education would be too high.’’ Id. In demand upon the government as guarantor In United States v. Neifert-White, 390 U.S. 228 this case, Hurwitz knew that by mistaking would make a case under the False Claims (1967) the Court affirmed the broad Congres- USAT’s net worth there was a ‘‘hole’’ devel- Act. That question is before us now. Id. at sional purpose of the Act, holding that the oping in USAT—a hole that would later have 504. The Veneziale court held that ‘‘the gov- False Claims Act is a far-reaching remedial to be filled with taxpayers’ money—which it ernment, having been compelled to pay an statute extending to ‘‘all fraudulent at- was. He also knew that the junk bonds pur- innocent third person as a result of a defend- tempts to cause the government to pay out chased with USAT funds would be worthless ant’s fraud in inducing the undertaking, is sums of money.’’ 390 U.S. at 233. In that case, or would stop significantly in value and the entitled, to assert a claim against the de- the Supreme Court held that supplying false foreseeable result would be USAT’s collapse fendant under the False Claims Act.’’ Id. at information in support of a loan application and the depositors’ submission of claims to 505. Similarly, this case involves a situation to a federal agency constituted a ‘‘claim’’ the FDIC. where, based on Hurwitz’s false claims re- within the meaning of the Act. Even though The Teeven court held that Teeven’s al- garding net worth which allowed Hurwitz to the loan application was not a direct claim leged knowledge and direction of the refund operate the S&L as a federally insured insti- for payment of an obligation owed by the policy was sufficient to make out a claim tution, the government was forced to pay government, it nevertheless was ‘‘an action under the False Claims Act. In so holding, out money to the creditors when the S&L which has the effect of inducing the govern- the court rejected the defendant’s argument collapsed. ment to part with money.’’ 390 U.S. at 232. In that even if the failure to pay refunds was Other circuit courts have agreed that the construing the Act, the Court noted found to be attributable to him, as a matter result of the false claim inquiry is different from when there is a submission of ‘‘[d]ebates at the time suggest that the Act of law, it still would not constitute the McNinch false documents and a need for a the govern- was intended to reach all types of fraud, knowing submission of a false claim. The ment to pay out as guarantor. For example, without qualification, that might result in court wrote: ‘‘Neither the text of the statute United States v. Ekelman & Assocs., 532 F.2d financial loss to the Government. . . . the nor case law interpreting it, mandate that a 545 (6th Cir. 1976), held that individual de- Court has consistently refused to accept a Defendant is only liable when he/she has fendants were liable for the costs of mort- rigid, restrictive reading, even at the time made or caused to be made false statements gage defaults after false loan applications when the statute imposed criminal sanctions in connection with a false claim.’’ 862 were submitted to the government under the as well as civil.’’ Id. at 232. Similarly, in this F.Supp. at 1222. VA and FHA loan guarantee and insurance case, Hurwitz’s fraud did not consist of a di- Indeed, 31 U.S.C. § 3729(c) defines a ‘‘claim’’ programs. The court reasoned that McNinch rect claim, but his actions nevertheless ‘‘had including any request or demand for money held that there was no claim because the the effect of inducing the government to part or other things of value, whether or not FHA disbursed no funds. Here, however, the with money.’’ under contract, so long as any portion of the court wrote, ‘‘it is sufficient to note that the Moreover, the Supreme Court held in money or property requested will either be instant case involves a false statement made United State ex rel. Marcus v. Hess, 317 U.S. 537 provided or reimbursed by the United with the purpose and effect of inducing the (1943), that defendants can cause a false States. 3 According to Congress, the Act is Government immediately to part with claim for payment to be presented to the meant to reach any fraudulent attempt to money,’’ and that the cause of action arose government by their conduct. In Hess, con- cause the government to pay out money, when the mortgage holder presented a claim tractors who, through collusive bidding, ob- even if the claim is made against a party to the VA or FHA for payment on the guar- tained contracts with municipalities to work other than the government, if the payment on federal Public Works Administration anty or insurance. of the claim would ultimately result in a loss In United States v. Hibbs, 568 F.2d 347 (3d projects, were held liable under the Act be- to the United States S.Rep. No. 345, 99th Cir. 1977), in holding that a causal connec- cause, though paid directly by the munici- Cong. 2d. Sess. 10 (1986), reprinted in 1986 U.S. tion must be shown between loss and fraudu- palities, the project was funded largely by CODE CONG. & ADMIN. NEWS 5266, 5275. lent conduct, the Third Circuit Court of Ap- federal government. The Court held that the The defendants may argue that based upon peals cited McNinch for proposition that ‘‘the provisions of the statute, considered to- the holding in United States v. McNinch, 356 making of a false certificate, standing alone, gether, indicate a purpose to reach any per- U.S. 595 (1958), there is no false claims be- does not entitle the government to the stat- son who knowingly assisted in causing the cause the government never paid on a claim utory forfeiture. There must have been a government to pay claims which were made against the deposit guarantee. Rather, payment.’’ Id. at 350. In United States v. Amer- grounded in fraud, without regard to wheth- the government infused capital into USAT so ican Heart Research Found, 996 F.2d 7 (1st Cir. er that person had direct contractual rela- that there would be sufficient capital and 1993), in holding that reverse false claims, tions with the government. 317 U.S. at 544–45. claims would not be made. i.e., when government receives too little Like the defendants in Hess, the taint of In United States v. NcNinch, 356 U.S. 595 money, are ‘‘claims’’ within False Claims Hurwitz’s misrepresentation of net worth (1958), a case involving federally guaranteed Act, the First Circuit Court of Appeals and illegal quid pro quo scheme entered into loans, the Court held that the mere submis- agreed with Neifert-White, which distin- every depositor’s potential claim which was sion of a false application to a credit institu- guished McNinch on grounds that it involves the cause for payment into USAT by the tion, which in turn procured FHA insurance no payment of government money. Id. at 10 FDIC. of the loan, did not constitute a false claim n.3. The Supreme Court reaffirmed the Hess in- against the government. In that case, the Lower courts as well have held McNinch to terpretation of the Act in United States v. FHA merely agreed to insure a home im- its particular facts in finding that submis- Bornstein, 423 U.S. 303 (1976). The Court held provement loan, and it did not actually dis- sion of false applications which ultimately that the False Claims Act gives the govern- burse any funds. The Court stated: ‘‘The con- cause the government to pay out funds con- ment a cause of action against a subcon- ception of a claim against the government stitute a ‘‘claim’’ under the False Claims tractor who ‘‘causes’’ a prime contractor to normally connotes a demand for money or Act. submit false claims. The fraud need not have for some transfer of public property.’’ Id. at Although most of the federally guaranteed been perpetrated through a direct contract 599. Although the Court held that a lending loan cases involve two parties, an individual with the government, and the party held lia- institution’s application for credit insurance or corporation that submits the false loan ble need not have been the party who sub- under the FHA program was not a ‘‘claim,’’ application and the bank or credit corpora- mitted the claim to the government. the Court expressly left open the question tion that approves the loan, United States ex The theory of liability under the Act in the whether the result would be different if there rel. Lavalley v. First Natl. Bank of Boston, 1990 case at hand is similar to that successfully had been a default on the loan and a demand U.S. Dist. LEXIS 9913 (D.Mass. 1990), is a case argued in United States v. Teeven, 862 F. Supp. upon the government as guarantor: where the bank itself was accused of pre- 1200 (D. De. 1992). In Teeven, the government Since there has been no default here, we senting a false and misleading ‘‘material ad- brought an action under the False Claims need express no view as to whether a lending verse change report’’ to the FmHA which in- Act against Teeven as Chairman of the institution’s demand for reimbursement on a duced the FmHA to guarantee the loans of a Board of the USA Training school. The court defaulted loan originally procured by a corporation that went bankrupt. The govern- agreed with the government’s argument that fraudulent application would be a ‘‘claim’’ ment alleged that the bank failed to apprise

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00141 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.362 pfrm07 PsN: E20PT1 E2480 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 the government of its misgivings about the the relator was also active in community af- trading.’’ Hurwitz would cause his investor, corporation’s management and ability to fairs. The relator, along with others, worked Ron Huebsch, to purchase corporate securi- repay the loans, and this fraud was moti- vigorously to place three measures on the ties from Milken and if gains were recog- vated by its special relationship with the ballot for Humboldt County in 1988, includ- nized, then they would be immediately construction lender on the project, which it ing measures that put limitations on off- taken, but if the securities’ value declined, wished to protect from loss on the construc- shore drilling off the California coast. These they would remain on the USAT books at tion loan. This scenario is similar to the case measures were approved by the voters and their purchase price. Through this process at hand, where Hurwitz, wishing to protect became law. Hurwitz and the other defendants were able MAXXAM’s takeover projects and knowing In the following year, the relator and oth- to deplete the assets of USAT while main- that the S&L would most likely collapse, ers prepared additional ballot measures, one taining a facade that they were satisfying submitted false accounting reports to the of which pertained to pollution caused by their net worth requirement in order to re- government to assure continued federal in- forestry practices in Humboldt County. The main a federally insured savings and loan. surance of the S&L funds. political activism of the relator was opposed Throughout this period of time the relator by Charles Hurwitz and Pacific Lumber. De- was preparing materials for a book on the liberate efforts were made by Hurwitz and activities of Charles Hurwitz, Michael Attorney-Client Privilege, Attorney Work Pacific Lumber to undermine the relator’s Milken and others. In furtherance of this en- Product political activities including threats to ad- deavor he went to Texas to talk with the Addendum to Written Disclosure Statement vertisers in the relator’s newspaper that chief bank examiner, Art Leiser, the person for the Case of United States of America ex they would be boycotted by Pacific Lumber in a position to review the assets of USAT rel., Robert Martel, Plaintiff, v. Charles if they continued to purchase advertise- and analyze whether Hurwitz and other were Hurwitz, Barry Munitz, Maxxam Group, ments. The relator continued to investigate making misrepresentations to the govern- Inc., Federated Development Company, Hurwitz even when he and his advertisers ment about their net worth. In a private United Financial Group, and Does 1–100, in- were subjected to anonymous threatening meeting with Mr. Leiser, Mr. Leiser in- clusive, Defendants phone calls for his continuing work on for- formed the relator that yes, Charles Hurwitz and the directors of USAT had misrepre- Provided to the Attorney General of the estry issues. Faced with personal attacks and an adver- sented the net worth of USAT and that they United States, Department of Justice, tising boycott by Pacific Lumber, the relator had been dramatically increasing USAT’s li- Washington, D.C., and the United States remained undaunted and continued his inves- abilities at the same time that they were Attorney, Northern District of Cali- tigation of Charles Hurwitz. Part of this in- making these misrepresentations. Further, fornia—May 19, 1995—Read and Approved vestigation included looking into Mr. it was discussed how these misrepresenta- by Robert Martel Hurwitz’ control of UFG, the holding com- tions allowed USAT to remain in business I. BACKGROUND pany for USAT. It was determined through long after it should have, thereby giving A. Previous Submission of Disclosure Statement investigation that Charles Hurwitz had Charles Hurwitz and others the opportunity to further deplete the assets of USAT which A qui tam action was filed on January 26, abused his control over an insurance com- pany in New York and was forced to pay would ultimately be repayed by United 1995 by the plaintiff-relator Robert Martel on States taxpayers pursuant to Federal De- behalf of the United States of America. The fines. The investigation also revealed that Charles Hurwitz had close ties to Michael posit Insurance guarantees. compliant was filed under seal in accordance Specially, Mr. Leiser explained to the rela- Milken and that Michael Milken had been re- with the procedures for the False Claims Act tor that there were monthly reports that he and a written disclosure statement was sub- sponsible for assisting Charles Hurwitz in his had prepared by his examiners concerning mitted at that time. The written disclosure effort to amass capital for the purchase of USAT and that these monthly reports in- statement included exhibits which provided UFG, the holding company for USAT. Upon a cluded rankings of the status of USAT. Sev- a detailed explanation of the facts revealing closer look at USAT, it was recognized by eral rankings reflected that USAT were in- fraudulent activity. the relator that the goal of Charles Hurwitz deed in trouble and that it was not meeting The purpose of this addendum to the writ- in purchasing USAT was to use the assets of its net worth requirements regardless of the ten disclosure is to further elaborate upon USAT to attain his goals as a corporate raid- representations that were being made by the history of the realtor and describe how er. The relator located documents in Hawaii USAT directors such as Barry Munitz. he uncovered false claims by the defendants concerning an attempt by Charles Hurwitz to Furthermore, the relator also met with including their misrepresentations regarding use the USAT funds to take over Castle & other journalists in Houston and upon fur- the net worth of United Savings Association Cooke, a publicly traded company with ex- ther study of the stock ownership of UFG, of Texas, USAT. tensive land holdings. The documents re- the relator further uncovered that Charles viewed included a court order enjoining Hurwitz was also misrepresenting to the gov- B. Personal History of the Relator Charles Hurwitz from using the USAT funds ernment the amount of control that he had Robert Martel (hereinafter ‘‘relator’’) has (which were federally insured) as capital for over UFG. Had Hurwitz admitted that he had worked for many years as an investigative corporate raiding. more than 25% control over UFG, then his journalist. The relator received his degree Knowing of Hurwitz’ connections to responsibility to maintain new worth re- from St. Mary’s College in mathematics and Milken, the relator also investigated quirements would have increased. Under no thereafter did graduate work at the Univer- Milken’s connections to other savings and circumstances did Hurwitz want his net sity of Santa Clara. He has also studied loans. It was apparent to the relator that worth requirements to go up * * * stocks and bonds transactions, as well as Hurwitz, having been thwarted in his effort corporate financing, and has been licensed by to use the funds of USAT directly in his cor- RECORD 15 the National Association of Securities Deal- porate takeover aims, may try to cir- ers. cumvent the court’s decision by making an Memorandum In 1983 the relator started a newspaper arrangement with someone else to, in effect, To: Douglas H. Jones, Acting General Coun- called ‘‘The Country Activist.’’ The news- launder the USAT money. Upon review of sel paper reported on community issues in documents obtained through his investiga- Through: Jack D. Smith, Deputy General northern California, including issues regard- tion, the relator determined that Hurwitz Counsel ing timber harvesting. As both a founder and had caused the USAT savings and loan to From: Marilyn E. Anderson, Senior Counsel; writer for this newspaper, the relator did in- purchase large amounts of bonds from Mi- Patricia F. Bak, Counsel; Robert J. vestigative work regarding the Pacific Lum- chael Milken and that Michael Milken, in DeHenzel, Jr., Senior Attorney ber Company and its land holdings in Hum- turn, had caused other entities such as Co- Subject: Retention of Outside Counsel, boldt County including ancient old-growth lumbia Savings & Loan and the First Execu- United Savings Association of Texas forests. The Country Activist published sev- tive Life Insurance Company to purchase Date: February 14, 1994 eral articles concerning Pacific Lumber for- bonds issued by Hurwitz in his takeover of This memorandum outlines our search for est issues. Pacific Lumber. counsel in this matter, narrows the consider- As part of the investigative work of the During this investigation it also became ation to two firms, Cravath, Swaine & Country Activist, the relator followed the apparent to the relator that Charles Hurwitz Moore/Duker & Barrett and Hopkins & Sut- takeover of Pacific Lumber by Charles and the other directors of UFG were deplet- ter, and sets forth some of the considerations Hurwitz and Maxxam, Inc. This investigation ing USAT to send funds to Milken. Milken, we deem relevant to the selection of counsel included interviews with people affected by in return, caused others to purchase bonds to assist the Professional Liability Section takeover as well as the review of documenta- for Hurwitz’s corporate raids such as the in handling the United Savings Association tion concerning Charles Hurwitz and the ac- takeover of Pacific Lumber. It was discov- of Texas (‘‘USAT’’) directors’ and officers’ li- tivities of the Maxxam Corporation includ- ered that one way Hurwitz and the others ability litigation. We understand that it will ing its control of United Financial Group went about this was through the improper be attached to the recommendation of the (‘‘UFG’’), the holding company for the Texas unstreaming of assets as dividends from Associate and Assistant General Counsel. savings and loan, United Savings & Loan of USAT to UFG. Another method the relator Background Texas (‘‘USAT’’). recognized from his experience as a stock- USAT failed on December 30, 1988. The pro- In addition to being the founder and a broker was that assets were being improp- jected loss to the insurance fund is $1.6 bil- writer for the Country Activist newspaper, erly drained from USAT through ‘‘gains lion. The Professional Liability Section, as

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00142 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.364 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2481 assisted by outside counsel, has investigated ∑ A respected ‘‘presence’’ and proven track inasmuch as both Cravath, Swaine & Moore potential claims relating to the failure of record that will carry weight with the pro- and Duker & Barrett lack minority partici- the institution and is prepared to request au- posed defendants and the court, pation from within; thorization to initiate litigation against a ∑ Aggressive, clever approach to litigation, ∑ Certain logistical, management, and co- number of former directors and officers of with the breadth of resources to handle po- ordination issues are raised by the participa- USAT, USAT’s holding company, United Fi- tentially unique settlement options, perhaps tion of at least three firms, two of which are nancial Group, Inc. (‘‘UFG’’) and Charles requiring coordination with Congress, in New York; and Hurwitz. Mr. Hurwitz has a national reputa- ∑ Familiarity with not only basic legal ∑ The firm’s high hourly rates and the pre- tion in corporate acquisitions and takeovers. issues, but exotic securities products and ac- vious negative publicity concerning those Others among the proposed defendants also counting issues/quick study with ability to rates in the Drexel Litigation. are very prominent. come up to speed under significant time lim- Hopkins & Sutter If approved, suit would be based upon itations, including dealing with experts in claims of gross negligence, breach of fidu- Hopkins & Sutter is a large national, Chi- this highly specialized fielf, cago based, firm that has handled vast ciary duties of loyalty and care and knowing ∑ Local Texas presence; and amounts of FSLIC, and subsequently FDIC participation in the breach of fiduciary duty. ∑ Compliance with Minority/Women Owned and RTC, litigation. During the period from at least 1984 through Firm Guidelines. 1988, USAT paid imprudent dividends to Although we found Reid & Priest to be a Pros: UFG, allowed UFG to wrongfully retain tax highly competent firm, with insightful com- ∑ The firm has broad experience with FDIC refunds belonging to USAT, make a large im- ments concerning the proposed claims and issues, organization and personnel, particu- prudent loan to a Hurwitz affiliate, and paid potential strategies, the firm eliminated larly with respect to professional liability excessive compensation to USAT manage- itself from consideration based on its stated claims and staff. The firm was outside coun- ment who were Hurwitz’s friends and associ- inability to commit the needed resources to sel in the Silverado, FirstSouth, F.A., Gi- ates to MCO Holdings, Inc. (‘‘MCO,’’ later a matter of this magnitude at this time. Our braltar Savings Association and Texas Bank know as Maxxam) and Federated Develop- & Trust Company cases, among others; ment Corporation (‘‘FDC’’), entities which observations of the pros and cons of the re- maining firms we interviewed are as follows: ∑ The ‘‘core’’ partners who would staff the collectively owned a significant percentage case—particularly John Rogers—are sharp Cravath Swaine & Moore and Duker & Barrett of and exercised even greater control over and very familiar with the issues. Mr. Rog- UFG. While these transactions alone re- While we were interested in hiring Cravath ers, a highly regarded trial lawyer, was ac- sulted in losses approximating $100 million, Swaine & Moore, and more particularly tively involved in MBS issues on behalf of to conceal its growing insolvency, USAT also David Boies of that firm as lead counsel, the the FHLBB during the time frame relevant engaged in imprudent gains trading in mort- proposal made by Mr. Boies and his firm was to USAT’s activities, as was Hopkins & Sut- gage-back securities which resulted in addi- that we hire both Cravath Swaine & Moore ter partner Michael Duhl, who has already tional losses in the hundreds of millions of and Duker & Barrett. The Duker & Barrett undertaken an analysis of certain tax issues dollars. firm largely consists of former Cravath Almost immediately after USAT’s failure, related to UFG on behalf of TAOSS; Swaine & Moore lawyers with whom Mr. ∑ The firm has a Dallas office, is willing to UFG approached the FDIC to try and settle Boies has worked while at Cravath and the FDIC’s claims against it. Since that open a Houston office, and is familiar with thereafter. Staffing for the case would in- time, the Professional Liability Section has local practice; clude David Boies as lead counsel, Bill Duker ∑ engaged in on going discusssions with the po- Past cases have left the Professional Li- and Duker & Barrett lawyers and paralegals tential defendants, which discussions have ability Section with an excellent working re- and lawyers and paralegals from Cravath and continue to include the exchange of in- lationship with the firm on all levels; Swaine & Moore as needed, all for a single ∑ formation bearing on the merits of the The firm has offered concessions on bill- fee arrangement. FDIC’s claims. The investigation has re- ing for travel and expenses and also will en- ceived considerable Congressional and press Pros: tertain and has proposed an alternative fee attention. There is no insurance in this case ∑ David Boies, a nationally recognized and arrangement; ∑ and any large recovery is dependent on es- highly regarded trial lawyer, who has per- The firm would be able to provide minor- tablishing Hurwitz as a de facto director of sonally committed to handle all major as- ity participation from within, with partners USAT, establishing liability against one pects of the litigation on behalf of the FDIC; and/or associates with FDIC, although per- very wealthy outside director and tapping ∑ The firm, based both on Mr. Boies’s rep- haps not professional liability, experience; ∑ The firm has a proven record handling into a potential indemnification by Maxxam utation and the firm’s prior participation in high profile litigation on behalf of the Cor- of certain USAT directors. the Drexel case on behalf of the FDIC, would poration and, drawing on its extensive rep- As noted above, the parties are still ex- likely have an immediate impact on the liti- resentation of the lumber industry, will be changing and analyzing information related gation and perhaps increase the chances of able to cover all aspects of any potentially to the merits of the claims. While it is our early settlement, hope that we might be able to reach a pre-fil- ∑ The firm is widely regarded as aggres- unique debt for redwoods settlement ar- ing settlement and the proposed defendants sive, bright, and creative and has a dem- rangements; ∑ Potential conflicts have been reviewed have raised the possibility of utilizing some onstrated ability to cover all waterfronts in by the Outside Counsel Conflict Committee form of alternative dispute resolution, the large, highly publicized litigations; and resolved in a manner which would not current tolling agreement which expires on ∑ The firm has broad experience with secu- preclude the firm’s participation in this May 31, 1994, will not be extended. We have a rities/accounting issues, including having se- case; and significant amount of work which remains to cured highly favorable results on behalf of ∑ Firm partners who would serve on the be completed prior to the expiration of the the FDIC and RTC in the Drexel Litigation; trial team know the players, having pre- tolling agreement which requires the hiring ∑ The firm has had experience with FDIC viously litigated against counsel for certain of lead trial counsel now. issues, procedures and personnel, although of the defendants, John Villa of Williams & Thomas Manick, now a partner with the not directly with FDIC professional liability Connelly. Miami firm of Adorno & Zeder, has been inti- staff; mately involved with the investigation of ∑ Mr. Boies knows and has a good relation- Cons: these claims for over 16 months and has a ship with a key player, counsel for Hurwitz, ∑ The firm would not likely bring an im- commanding knowledge of virtually every Richard Keeton, for whom he served as suc- mediate, discernible impact upon entry into aspect of the case. The case now requires the cessor counsel in the Texaco Litigation; and the case, inasmuch as it is largely perceived addition of a sizable, nationally recognized ∑ The firm, and Mr. Boies in particular, as the ‘‘firm of choice’’ for the FDIC. The firm with securities expertise which is famil- are familiar withi Mr. Hurwitz and certain of firm is now under the FDIC mandated fee cap iar with FDIC professional liability issues his trading activities through the Drexel and projects that it will remain well under and procedures. Litigation. the cap in the future; Firms Considered ∑ Cons: Certain firm members’ active participa- The litigation, if approved, will likely be tion in MSB issues on behalf of the FHLBB ∑ filed in the Southern District of Texas. Vir- Cravath’s long-standing and substantial provides special expertise in this area, but at tually all of the qualified firms in Texas client, Salomon Brothers, although not a the cost that this history might make it dif- were conflicted, forcing us to look to firms target of the FDIC’s proposed suit, is at least ficult for the firm to bring the independent headquartered in other major metropolitan a witness in such a suit and could be named view necessary to make sound litigation risk areas. as a third party by defendants, raising cer- assessments; and We interviewed three firms: Cravath, tain potential conflict issues. We are in the ∑ The firm does not have a reputation for Swaine & Moore (New York), along with process of conducting, but have not yet com- the boldness of action or creativity which Duker & Barrett (also New York), Reid & pleted, an evaluation of other potential con- may enhance FDIC’s ability to secure an Priest (New York and Washington, D.C.), and flicts as required by the Statement of Poli- early recovery in this case. Hopkins & Sutter (Chicago and Dallas). cies Concerning Outside Counsel Conflicts of Factors which we considered important in Interest; selecting outside counsel to serve as lead ∑ No Texas presence—would have to retain RECORD 16 counsel handling the USAT Litigation are: local counsel, probably a Texas MWOLF firm 7/17/95—Phone call from——5 p.m.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00143 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.366 pfrm07 PsN: E20PT1 E2482 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 Alan McReyolds—202–208–6318, Spec. Asst. At about the same time that we deferred IV. Updated Authority to Sue Memorandum to Sec. of Interior—Status of our potential formal approval of the FDIC cause of action, We have attached an updated authority to claims—how OTS is organized., etc? we developed a new strategy for pursuing sue memorandum for your review and con- Someone to describe * * * receiving calls these claims through administrative enforce- sideration. It sets forth the theories and our claims and FDIC almost daily from ment proceedings with the OTS. After sev- weaknesses of our proposed claims in great members OTS roles of Congress and private eral meetings with senior staff of the OTS detail. It should be considered for Board ap- citizens. Office of Enforcement, we entered into a for- proval only if the Board decides, as a matter his schedule—Nextweek—vacation;—fol- mal agreement with the OTS, who began an of public policy, that it wants the Texas independent investigation into the activities lowing week—travel. courts to decide the statute of limitations of various directors and officers of USAT, —Would really like to meet this week if at and standard of care issues rather than FDIC Charles Hurwitz, UFG, as well as USAT’s all possible. staff. The litigation risks are substantial and second tier holding company, Maxxam, Inc., —He has not spoken to Jack Smith. the probability of success is very low, but if a publically traded company that is signifi- —Would like meeting to take place this the Board were to decide that it wants to go cantly controlled by Hurwitz. week if at all possible because of his vaca- forward with the filing of a complaint, we tion and travel schedule. II. Significant Caselaw Developments Have Fur- need to be prepared to file the complaint in 7/18/95—JOT reaction—1:30 am. ther Weakened the Viability of an Inde- the Southern District of Texas, on or before, Talk to Jack Smith and Alice Goodman— pendent Cause of Action by the FDIC Wednesday, August 2, 1995. TUT’s reaction—Smith and Goodman Although we have continued to investigate We will be available to discuss this matter should be here with us. and refine our potential claims during the on very short notice. pendency of the OTS investigation, two sig- nificant court decisions and the failure of RECORD 17 Congress to address the statute of limita- RECORD 18 Memorandum To: Board of Directors, Fed- tions problems has further weakened the July 20, 1995—Meeting with T. Smith, JOT, eral Deposit Insurance Corporation. FDIC’s prospects for successfully litigating M.A. and JW. From: Jack D. Smith, Deputy General Coun- our claims in United States District Court Re: McReynolds—Kozmetsky—Hurwitz— sel. for the Southern District of Texas. ***. Stephen N. Graham, Associate Director (Op- In the recent decision of RTC v. Acton, the Jack—We will not go forward if CTS ***. erations). Fifth Circuit held that under Texas law, only If OTS does not file suit, we will have to Date: July 24, 1995. self-dealing or fraudulent conduct, and not decide our case on the merits before tolling Subject: Status of PLS Investigation, Insti- gross negligence, is sufficient to toll the expires. tution: United States Association of statute of limitations under the doctrine of Memo for G.C. to Chairman— Texas, Houston #1815. adverse domination. As a result of this opin- Updates statutes of case and recommends This memorandum reports on the status of ion, we can no longer rely on any argument that we let Kormetsky out. the continuing investigation of the failure of that gross negligence by a majority of the If suit against Hurwitz *** sue only him United States Association of Texas culpable Board is sufficient to toll the stat- and not others. (‘‘USAT’’), the separate investigation being ute of limitations. Moreover, there is very Find out if Hurwitz will talk. conducted by the Office of Thrift Supervision little, if any, evidence of fraud or self-deal- Write a memo on case status to GC. (‘‘OTS’’), current tolling agreements, settle- ing that is likely to survive a motion to dis- Ten page memo should do it. ment negotiations with United Financial miss on statute of limitations grounds. Continue telling *** or let them go. Group, Inc., (‘‘UFG’’) USAT’s first tier hold- Even if we could overcome the statute of If ordinary case, we do not believe there is ing company, and our decision not to rec- limitations problems, a recent decision by a 50% chance we will prevail. Therefore, we ommend an independent cause of action by the Texas Supreme Court announced a new cannot recommend a lawsuit. the FDIC against the former officers and di- standard of gross negligence that will be McReynolds—handle same as the Hill pres- rectors of USAT and controlling person very difficult to meet. In Transportation In- entation. Charles Hurwitz. surance Company v. Moriel, 1994 WL 246568 (Tex.), the Texas Supreme Court defined I. Background gross negligence as constituting two ele- RECORD 19 As you know, USAT was placed into re- ments: (1) viewed objectively from the stand- July 21, 1995, 11:00 McReynolds, Depart- ceivership on December 30, 1988, with assets point of the actor, the act or omission must ment of the Interior. of $4.6 billion. The estimated loss to the in- involve an extreme degree of risk, consid- surance fund is $1.6 billion. After a prelimi- ering the probability and magnitude of the nary investigation into the massive losses at potential harm to others, and (2) the actor July 21, 1995. USAT, the FDIC negotiated tolling agree- must have actual, subjective awareness of 8K acres; 3800 core Merelot Bird, Fish & ments with UFG, controlling person Charles the risk involved, but nevertheless proceed Wildlife. Hurwitz and nine other former directors and in conscious indifference to the rights, safe- Habitat conservation plan and cutting plan officers of USAT/UFG that were either senior ty, or welfare of others. This new standard with MAXXAM. Has til 9/15 to tell us about officers or directors that were perceived as will make it very difficult, if not impossible cutting plans. having significant responsibility over the to prove our claims. M called Allen at home last Thursday at 8 real estate and investment functions at the The cumulative effect of these recent ad- p.m. institution. verse decisions is that there is a very high Wilson Task Force—creative strategy for In May 1994, after a series of meetings with probability that the FDIC’s claims will not acquisition of the 3800. the potential defendants and the exchange of survive a motion to dismiss either on statute BLM considerable documents and other informa- of limitations grounds or the standard of Gov’s Office—California Resources Agen- tion, we presented a draft authority to sue care. Because there is significantly less than cy—California Fish and Game—State Park memorandum recommending that we pursue a 50 percent chance that we can avoid dis- Bird—California Coastal Conservancy. Six claims against Hurwitz and certain of the missal, it is our decision not to recommend individuals serve on task force. American former officers and directors for losses in ex- suit on the FDIC’s proposed claims. Lands Conservancy—negotiate sometimes cess of $200 million. The proposed claims in- III. Debt for Nature Swap for Interior. volved significant litigation risk, in that the Our decision not to sue Hurwitz and the Gov. Wilson—Terry Gordon—various acqui- bulk of the loss causing events occurred former directors and officers of USAT is sition strategies. more than two years prior to the date of re- likely to attract media coverage and consid- California has sections of timber to trade ceivership, and were therefore subject to dis- erable criticism from environmental groups $100 M. missal on statute of limitations grounds. In and Congress. Hurwitz has a reputation as a H values 8K at 500 M. Interior wants to light of the Fifth Circuit’s opinion in Daw- corporate raider, and his hostile takeover of deal it down. H really wants $200 M total. son, a split of authority in the federal trial Pacific Lumber has attracted enormous pub- California delegate is really putting the courts in Texas on the level of culpability re- licity and litigation because of his har- pressure on. quired to toll limitations and the Supreme vesting of California redwoods. Environ- Dallas/Ft. Worth—Base closure—Wednes- Court’s refusal to consider whether a federal mental interests have received considerable day 10:30 meeting with OTS. rule should be adopted under which neg- publicity in the last two years, suggesting Memo for Chairman. ligence by a majority of the directors would exchanging our claims for trees. We recently Frances 208–4615; Alan McReynolds 202–208– toll the statute of limitations, our strategy met with the Department of the Interior, 6308. was to assert that gross negligence was suffi- who informed us that they are negotiating cient to the toll the statute of limitations. with Hurwitz about the possibility of a debt RECORD 20 After briefings with FDIC deputies and fur- for nature swap and that the Administration ther discussion with the potential defend- is seriously interested in pursuing such a RECORD 21 ants, we decided to defer formal FDIC ap- settlement. We plan to pursue these settle- $400,000 expenses on OTS proval of our claims and continue the tolling ment discussions with the OTS in the com- Have not decided whether to bring case— agreements. ing weeks. won’t decide for some months.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00144 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.369 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2483 Alan McReynolds—Admin. wants to do Hit for dismissed suit ment of Interior wants to see the property deal Hit for walking based on staff analysis of acquired. He said that the Secretary is very —Gov. Wilson w/DOI had task force of 6 70% loss if most/all on S & L aware of the fact that this is a very impor- groups. Told to find way to make it happen Likely cost $4m & $2m. tant regional issue. He explained that the —CA will trade $100 million CA timber If out early or S & L or able to slow—stay Department would like to make this a ‘‘bi- —Admin. might ?? mil. base due to OTS, lower. But no guarantees. partisan’’ effort. Very difficult to value: if survives S & L Had call from atty. appraisal on prop. for McReynolds’ Role $500m. Said they want to make a deal. Don’t largely in tact McReynolds said that he will be the ‘‘point know how much credence we have from them USAT person’’ on the project. While he claimed to about a claim. At same time telling them to When last discussed think everyone’s hope be new to the problem, he said that he had get rid of claim. He can’t cut them down. was OTS *** would avoid the fateful day already visited with the BLM in Washington If we drop suit, will undercut everything. when our principals had to decide . . . and California and that he had met with the RECORD 22 whether to sue on USAT Governor’s office concerning the matter. It Hurwitz refusal to toll wrecked that plan. was clear that he had read much of the back- USAT ATS recommends suit against Hurwitz, ground material on the subject. May recall briefed re OTS—paying some some—not all—others tolling with McReynolds is in the Secretary’s office. He months ago. OTS is making progress, but not Also states intention to let go 3 outside di- has a good reputation within the Depart- ready. Thus, tolling again. OTS staff hopes rectives OTS isn’t tolling with to have draft notice of charges to Hurwitz, et We believe USAT Ds, Os & defacts dir/o ment. al, Aug.–Sept. (Apologize for short fuse)—we Hurwitz were grossly neg in Deference to the Governor’s Office thought we would be able to put off a final (1) Lending—Park 410 McReynolds said four different times dur- decision until OTS acted. Hurwitz refused to (2) Joe’s Portfolio ing the conversation that he believes that toll. (3)UMBS Governor Wilson’s office is properly the lead Normal matter, we would close out under The problems include: for negotiations on the matter. He claimed delegated authority w/o bringing it to your— (A) S of L—Park 410, no reasonable basis that he does ‘‘not want to insult’’ the Gov- Bd’S—attention. under existing law ernor. He said that Terri Gordon will be the Joe’s . . . when liq—money at UMBS . . . However, given (a) visibility—tree people, leader of the negotiations. He is very con- $100m out, $80m to go . . . $50–$60m principal Congress and press; (b) basis is Texas S of L, cerned that meetings held in Washington, lost we thought you—Bd—should be advised of without Gordon’s attendance or at least her (B) Hurwitz is defacto dir what we intended to do—and why—before it (C) FHLB policies did encourage ‘games’ w/ assent, will create problems that will make is too late. futures & options acctg it difficult to come to an agreement. He said OTS is looking at: 1) Bad loans; incl. park Looked for other g.f. claim that he did not want to ‘‘send a signal’’ that 410; 2) MBS—Joe’s portfolio. Recommend Hurwitz—defacto D&D & con- this matter is ‘‘political.’’ UMBS trol person, breached duty of loyalty to Indeed, he said that the recent meeting among Democratic staffers created potential (3) Maxxam capital maintenance agree- USAT in failing to cause UFG, MCO fed- problems. He was acquired to explain at ment erated to honor capital maintance obliga- length the reason for the meeting to Gordon. (4) UFG tax claim, etc, agreement in prin- tions! cipal to settle subject to B C+ approval. Beats S of L The Wednesday Meeting Between Democratic $9.6m. Tough merits case [$150m] Congressional Staff and McReynolds If FDIC case—(1) Bad loan—Park 410 (4 McReynolds confirmed that neither the yrs); (2) MBS—Joe’s portfolio (21⁄2 yrs); RECORD 25 Secretary nor anyone else from Interior, met with members of Congress on Wednesday, UMBS (2–4 yrs). PATTON BOGGS, LLP, During last two years law has moved Anchorage, AK. July 12th. Instead, the meeting included var- against us in Texas. To: Joli Pecht ious staff from a few California members in- S of L: Dawson—2 yrs ago—more than ? Company: Maxxam cluding Brown and Stark. There were no Acton— this spring—more than ??? ??—Loose Fax Number: 713–267–3702 staff members from Boxer or Feinstein’s of- on Park 410.—Loose (most or all) on Total Pages Including Cover: 3 fices. He said that a letter from the members re- UMBS;—Likely loose Joe’s portfolio 70% From: John C. Martin questing a meeting prompted the Wednesday most, or all, out.. Sender’s Direct Line: 907–263–6032 meeting. He also said that a comparable re- OTS—No apparent S of L issue (except Date: August 7, 2000 quest was sent to the Department of Agri- Kozmetski**) Client Number: 5921.101 Merits: Joe’s portfolio—not unwinding, Comments: Joli, I found this memo to the culture. starting 1/187 is most likely to survive. file immediately after our conversation. I The Department’s Negative View of Riggs’ Leg- (1) Facts—3 mos earlier, S of L 1+yr later, thought you might be interested to see the islation done memo. (Note that the automatic date on our McReynolds said that BLM dislikes the ap- (2) Standard of core—gross neg. Texas—pu- system changed the date of the memo from proach taken in what he described as ‘‘Riggs’ nitive damage case—cited in intentional/ July 14, 1995 to today’s date.) bill.’’ He muttered words to the effect of, knowing * * * I’ll look for more documents as time per- ‘‘we should not exchange old growth forest Bottom line: likely to lose on S of L let it mits in the next few days. to get old growth forest.’’ go or have ct. dismiss it. John The Department’s Desire to Acquire the Prop- Redwood swap—Interior/Calif; Forests— PATTON BOGGS, L.L.P. erty Without Legislation base—FDIC/OTS claim(?) Continue to fund OTS; We’d also write Memorandum McReynolds said two different times dur- Congress re what & why rather than await- TO: File/5921.101. ing the conversation that he does not believe ing reaction mechanics: Brief Deputies; FROM: John C. Martin. that legislation is necessary to acquire the Board presentation. DATE: July 14, 1995. property. He believes that the Department SUBJECT: Conversation with Allen can acquire the property using its adminis- McReynolds. trative authority. More specifically, he said RECORD 23 I had a telephone conversation with Allen that he believes that property can be sold to CONTEXT McReynolds concerning the Department of accumulate money that could be used in the Sue by Aug 2—Kurwitz, the rest rolled toll- Interior’s approach to the Headwaters Forest acquisition. He recognizes that several ing following property matter. We talked about a number pieces of property must be sold to raise Hurwitz, insiders have tolled w/OTS of different aspects of the matter. He indi- enough money to pay for the acquisition. He Proposes: if authority ‘‘one last chance’’ cated that (i) the Department of Interior implied that the Governor’s office and the for Hurwitz to toll; not sue others wants to acquire the property, (ii) he does California Democratic delegation favor this OTS is investigating Draft Notice of not believe legislation is necessary, (iii) he approach. charges coming—staff and others believe that the transaction While he did not elaborate, he indicated Loans should be a cash agreement rather than a that he believed that a ‘‘three-way deal’’ is Joe’s Portfolio land exchange, and (iv) he believes the Gov- the appropriate approach. He said that Terri UMBS ernor’s office should take the lead in nego- Gordon is working with the American Land New worth maintance: [UFG] toll Maxxam tiations on the subject. The following sum- Conservancy on the subject. Redwoods—‘Headwaters marizes the information and comments he Potential Meeting Press, environmentalists Congress follow provided. McReynolds said that he would be pleased Interior trying to find a deal (Legislation to The Department’s Desire to Acquire the Prop- to meet with us along with Terri Gordon. He achieve) erty suggested that, if we are so inclined, we Delima (why they get paid the big bucks— McReynolds said several times during the could set a meeting with Gordon either here take: course of the conversation that the Depart- or in Sacramento. He suggested that we

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00145 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.373 pfrm07 PsN: E20PT1 E2484 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 schedule the meeting for some time after he Bruce Rinaldi OTS (Enforcement). Supervision; John M. Lane, Manager, Special returns from his one-week vacation. Situations and Applications Section I, Office CC: Thomas H. Boggs, Jr. RECORD 27 of Supervision and Applications, Operations Donald V. Moorehead Branch, Division of Supervision; John F. TRANSCRIPT OF A MEETING OF THE BOARD OF Aubrey A. Rothrock Carter, Manager, Special Situations and Ap- DIRECTORS OF THE FEDERAL DEPOSIT INSUR- plications Section II, Office of Supervision ANCE CORPORATION HELD IN THE BOARD and Applications, Operations Branch, Divi- RECORD 26 ROOM, FEDERAL DEPOSIT INSURANCE COR- sion of Supervision; Bobby L. Hughes, Chief, PORATION BUILDING, WASHINGTON, DC OTS/FDK Meeting July 26, 1995 at 10:50 a.m. Case Management Section, Office of Assisted (CLOSED TO PUBLIC OBSERVATION—AUGUST 1, J. Smith Acquisitions (FRF), Operations and Agree- 1995; 10:05 A.M.) Hurwitz won’t sign tolling agreement with ment Management Branch, Division of Reso- At 10:05 a.m. on Tuesday, August 1, 1995, lutions; Marilyn E. Anderson, Senior Coun- FDIC. Need to file lawsuit by August 2. the Board of Directors of the Federal Deposit J. Thomas—Chance of success on State sel, Professional Liability Section, Litiga- Insurance Corporation met in closed session tion Branch, Legal Division; Thomas L. limitations is 30% or less. in the Board Room of the FDIC Building lo- —Will continue discussions with Helfer. Holzman, Counsel, Corporate and Special cated at 550 17th Street, NW., Washington, Litigation Section, Litigation Branch, Legal —Pressure from California congressional DC, to consider certain matters which it delegation to proceed Division; Jeffrey R. Williams, Counsel, Pro- voted, pursuant to subsections 552b(c)(4), fessional Liability Section, Litigation Dept. of Interior—Alan McReynolds (c)(6), (c)(8), (c)(9)(A)(ii), (c)(9)(B), and (c)(10) Branch, Legal Division; Richard B. Foley, of Title 5, United States Code, to consider in —Administration interested in resolving Senior Attorney, Resolutions Section, Su- case and getting ***. a meeting closed to public observation. Ricki Helfer, Chairman of the Board of Di- pervision and Legislation Branch, Legal Di- —Pete Wilson has put together a multi- vision; Robert J. DeHenzel, Senior Attorney, game fish group rectors; Andrew C. Hove, Jr., Vice Chairman of the Board of Directors; Stephen R. Professional Liability Section, Litigation —California would put up $100 million of Branch, Legal Division; Jeffrey P. Bloch, California timberland Steinbrink, acting in the place and stead of Eugene A. Ludwig, Director (Comptroller of Senior Attorney, Resolutions Section, Su- —Hurwitz wants a military base The pervision and Legislation Branch, Legal Di- Dalles and find work—suitable for commer- the Currency); Jonathan L. Fiechter, Direc- tor (Acting Director, Office of Thrift Super- vision; Wendy B. Kloner, Senior Attorney, cial development Corporate and Special Litigation Section, —Hurwitz also wants our claims settled as vision); Leslie A. Woolley, Deputy to the Chairman for Policy; William A. Longbrake, Litigation Branch, Legal Division; Marilyn part of the deal R. Kraus, Audit Manager, Assistance Agree- Two weeks ago—Hurwitz’ lawyer called Deputy to the Chairman for Finance and Chief Financial Officer; Roger A. Hood, Dep- ment Audit Branch, Office of Inspector Gen- Terri Gordon at home and told him he should uty to the Vice Chairman; Walter B. Mason, eral; Lars S. Viitala, Senior Tax Accountant, not be tuned out by $500 million appraisal. Jr., Deputy to the Director (Office of Thrift Tax Unit, Office of Assisted Acquisitions What is OTS’ schedule? How comfortable is Supervision); Stephen L. Ledbetter, Special (FRF), Operations and Agreement Manage- OTS with giving info to Interior Assistant to the Deputy to the Chairman and ment Branch, Division of Resolutions; Gar- R. Stearns Chief Operating Officer; James D. LaPierre, field Gimber, III, Examination Specialist, Tolling Agreement extended until Decem- Special Assistant to the Deputy to the Planning and Program Development Section, ber 31, 1995 with 30-day kickout beginning Chairman and Chief Operating Officer; Operations Branch, Division of Liquidation; September James Phillip Battey, Assistant to the Mark C. Randall, Ombudsman, San Fran- cisco Region, Division of Depositor and Asset *** Chairman for Public Affairs; Stanley J. Pol- ing, Assistant to the Deputy to the Chair- Services; and Regena S. McMillian, Oper- 16 witnesses in June including Hurwitz man for Finance; Diane Page, Assistant to ations Assistant, Record Services Group, Op- working on 2d draft of NOC the Deputy to the Director (Comptroller of erations Unit, Operations Assistant, Record K. Guido the Currency); William F. Kroener, III, Gen- Services Group, Operations Unit, Operations —MBS Case Summary eral Counsel; Paul L. Sachtleben, Director, Section, Office of the Executive Secretary, —We have done a $$ analysis of what we Division of Compliance and Consumer Af- were present at the meeting. think we can claim in NOC fairs; Robert H. Hart-heimer, Director, Divi- Chairman Helfer presided at the meeting; Mr. Langley acted as Secretary of the meet- B. Rinaldi sion of Resolutions; Steven A. Seelig, Direc- tor, Division of Finance; John F. Bovenzi, ing. —Net Worth Case Summary Director, Division of Depositor and Asset PROCEEDINGS Negotiating with UFG regarding settle- Services; Carmen J. Sullivan, Ombudsman; Chairman Helfer: I’m pleased to call this ment of net worth claim Jerry L. Langley, Executive Secretary; Alice morning’s meeting to order. May I have a Looking at Maxxam C. Goodman, Director, Office of Legislative Sunshine motion? J. Williams Affairs; James A. Renick, Senior Deputy In- Vice chairman Hove: Make a Sunshine mo- (1) Need copies of Tranx—copies of disk- spector General; Jack D. Smith, Deputy Gen- tion. [I move that the Board of Directors de- ettes eral Counsel, Litigation Branch, Legal Divi- termine that Corporation business requires (2) Send documents’ exhibits to J. Williams sion; Eric J. Spitler, Deputy Director, Office its consideration of the matters which are to —Cover letter to Jeff—sharing and assist- of Legislative Affairs; John V. Thomas, As- be the subject of this meeting on less than ance under statutue sociate General Counsel, Professional Liabil- seven days’ notice to the public; that no ear- Duffy—Where is he? ity Section, Litigation Branch, Legal Divi- lier notice of this meeting was practicable; —Need to get together with Duffy and sion; A. David Meadows, Associate Director, that the public interest does not require con- Hargett Operations Branch, Division of Supervision; sideration of the matters which are to be the USAT/UFG Value of Claims Paul M. Driscoll, Associate Director, Oper- subject of this meeting in a meeting open to ations and Agreement Management Branch, public observation; and that these matters Net Worth Maintenance Obligations UFG/ Division of Resolutions; Stephen N. Graham, may be considered in a closed meeting pursu- MAXXAM & Federated [REDACTED] (T 76/ Associate Director (Operations), Operations ant to subsections 552b(c)(4), (c)(6), (c)(8), 73). Branch, Division of Depositor and Asset (c)(9)(A)(ii), (c)(9)(B), and (c)(10) of Title 5, Reckless Speculation In Mortgage Backed Services; Thomas A. Schulz, Assistant Gen- United States Code.] Securities. eral Counsel, Corporate and Special Litiga- Chairman Helfer: And a second. Unsafe and Unsound Loans to Affiliated tion Section, Litigation Branch, Legal Divi- Director Fiechter: Second. Parties (including Cost of Funds @ 9%). [RE- sion; Henry R.F. Griffin, Assistant General Chairman Helfer: All in favor? DACTED] Counsel, Resolutions Section, Supervision Vice Chairman Hove: Aye. Sub Total Cost of Funds from December 31, and Legislation Branch, Legal Division; Director Fiechter: Aye. 1988 to Present (71⁄2% Cof FDIC). Mr. Steinbrink: Aye. Jesse G. Snyder, Assistant Director, Office of Total Residual Value of Park 410. Chairman Helfer: Redacted by Committee Supervision and Applications, Operations OTS/FDIC Meeting on July 26, 1995 on Resources. Branch, Division of Supervision; Gerald B. Mr. Walton: Redacted by Committee on Bryan Veis OTS (Enforcement). Stanton, Assistant Director (Assisted Acqui- Resources. Paul Leiman OTS (Enforcement). sitions (FRF)), Operations and Agreement Chairman Helfer: Redacted by Committee Jeffy Williams FDIC Legal. Management Branch, Division of Resolu- on Resources. Ken Guido OTS (Enforcement). tions; M. Lauck Walton, Assistant General Director Fiechter: Redacted by Committee John V. Thomas FDIC PLS. Counsel, Professional Liability Section, Liti- on Resources. Rick Stearns OTS (Enforcement). gation Branch, Legal Division; Patti C. Fox, Vice Chairman Hove: Redacted by Com- Jack Smith FDIC. Assistant Executive Secretary; John H. mittee on Resources. Bob Dettenzel FDIC PLS. Hatch, Assistant Inspector General, Office of Mr. Steinbrink: Redacted by Committee on Marilyn Anderson FDIC PLS. Supervision and Resolutions Division Audits, Resources. Thomas Hecht Hopkins & Sutter. Office of Inspector General; Susan E. Carroll, Chairman Helfer: Redacted by Committee John Rogers Hopkins & Sutter. Special Assistant to the Director, Division of on Resources.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00146 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.375 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2485 Mr. Walton: Redacted by Committee on This is, of course, a very visible matter. It Mr. Thomas: It might have some marginal Resources. is visible for something having no direct re- benefit but I don’t think it would make a Chairman Helfer: Redacted by Committee lationship to this case, but having some indi- large difference. I think the reality is that on Resources. rect relationship. Mr. Hurwitz, through FDIC and OTS staff have worked together, Vice Chairman Hove: Redacted by Com- Maxxam, purchased Pacific Lumber. Pacific expect to continue to work together, and so, mittee on Resources. Lumber owns the largest stand of virgin red- I don’t think it would have a major impact. Chairman Helfer: Redacted by Committee woods in private hands in the world, the It might make some difference, but I think on Resources. Headwaters. That has been the subject of particularly any effort to resolve this with— Director Fiechter: Redacted by Committee considering—considerable environmental in- with—a solution that involves the redwoods on Resources. terest, including the picketing downstairs of would be extremely difficult. The FDIC Chairman Helfer: Redacted by Committee a year or so ago. It has been the subject of would have to be involved whether we au- on Resources. Congressional inquiry and press inquiry. So thorize suit or not. And so you—you’re talk- Vice Chairman Hove: Redacted by Com- we assume that whatever we do will be visi- ing about a marginal difference. mittee on Resources. Director Fiechter: Redacted by Committee ble. Chairman Helfer: On the—the—basically, Interior, you should also be aware—aware, on Resources. as I understand the—the Fifth Circuit’s judg- Mr. Steinbrink: Redacted by Committee on the Department of Interior is trying to put ments about Texas law, they essentially say Resources. together a deal to get the headlines [sic] that the statute of limitations begins run- Chairman Helfer: Redacted by Committee trade property and perhaps our claim. They ning at the point at which the conduct took on Resources. had spoken—they spoke to staff a few days place; that it’s complained about, even Mr. Walton: Redacted by Committee on ago about that and staff of the FDIC has in- though those individuals who were in control Resources. dicated that we would be interested in work- of the institution and committed the con- Chairman Helfer: The—second memo- ing with them to see whether something’s duct would not have been likely to sue them- randum with respect to a professional liabil- possible. We believe legislation would ulti- selves— ity suit involves United Savings Association mately be required to achieve that. But Mr. Thomas: That’s correct. of Houston, Texas. Mr. Thomas. again, if it’s the Board’s pleasure, we would Chairman Helfer: —on behalf of the insti- Mr. Thomas: I will try to be brief but I at least try to find out what’s happening and tution. And that the theory of adverse domi- won’t be able to be quite that brief. With me pursue that matter and make sure that noth- nation is that, during that period when the today are Marilyn Anderson, Senor Counsel ing goes on we’re not aware of—we’re not individuals in control were unlikely to sue in section, and Jeff Williams and Bob part of. themselves because of their misconduct or DeHenzel, who will be called upon if there This is a difficult case. Redacted by Com- their gross-negligence as the case may be, are hard questions. mittee on Resources. that courts in some jurisdictions have recog- Chairman Helfer: Good, we’re glad you Chairman Helfer: Under adverse domina- nized the tolling of the statute of limita- have help. tion. tions. That is, the tolling of the commence- Mr. Thomas: Well, after the first one I’m Mr. Thomas: Redacted by Committee on ment of the period when the statute of limi- not sure I’ll need any. Resources. tations will run, until that point at which Vice Chairman Hove: Don’t be so sure of Chairman Helfer: Are there questions? the institution’s no longer under adverse that. Director Fiechter: One comment. I’m told domination. Chairman Helfer: You’ve got to watch by our Enforcement staff that they will be Mr. Thomas: Right. those attorneys, don’t you? making a recommendation to me sometime Chairman Helfer: But that Texas law has Mr. Thomas: The memorandum that we in mid to late September, but don’t have one been interpreted to the contrary. have before us today seeks authority to sue at present, as to how we might proceed. Mr. Thomas: (Redacted by Committee on Charles Hurwitz as a de facto director and of- Vice Chairman Hove: Because I’m curious Resources). ficer of United Savings Association of Texas, to know what happens, if we choose not to Chairman Helfer: But as to one of the or USAT, also as a control person of that en- pursue this, with the OTS claim and— claims, you believe there is a reasonable ar- tity, and it also seeks authority to sue three Mr. Thomas: It—it would have no direct af- gument that you can get beyond that issue. insiders of USAT. The claim is based on—the fect on the OTS claims. Mr. Thomas: (Redacted by Committee on case will be based on three claims, the first— Vice Chairman Hove: Okay. Resources). (Redacted by Committee on Resources). Mr. Thomas: They have tolling agreements Chairman Helfer: But they have a con- Chairman Helfer: So if suit is not in—if in place with—with all four of these gentle- tinuing obligation, however, one could argue, we—if we don’t authorize suit today and suit men and those tolling agreements would not on the part of the bank to reexamine these is not brought tomorrow, all these claims be off—are not affected by—by our action investments on a regular basis. And that’s are lost. one way or the other. the theory behind all of our judgments about Chairman Helfer: As I understand it, the Mr. Thomas: To the FDIC. banks having sufficient controls in place to other three have agreed to tolling agree- Staff has conducted an extensive investiga- make a judgment about whether their con- tion. We spoke to them a few days ago. I ments— Mr. Thomas: Right. tinuing stewardship of the institution can be know they intended to speak to Director justified on safety and soundness grounds. Fiechter in the interim. I hope they were Chairman Helfer:—with the FDIC. Mr. Thomas: And we wound not sue them Mr. Thomas: (Redacted by Committee on able to do that. They are preparing a draft Resources). notice of charges, but no decision has been tomorrow. Chairman Helfer: Okay. And that it’s—to Chairman Helfer: Given the problems with made by the director—at least none had been Hurwitz who has not agreed, although he has the adverse domination interpretation of the made as of last week, I assume it’s still agreed to a tolling agreement with the OTS. Fifth Circuit, I take it, it would be—it would true—on whether to bring all or any portion Mr. Thomas: That’s correct. be advantageous to salvage some aspects of of that claim. Chairman Helfer: And therefore, you’ve these—these theories if—if that were pos- The Board must decide today whether to asked the Board to take a look at—at all of sible. bring this claim. The reason we must decide the—the body of the case and all of the pro- Mr. Thomas: (Redacted by Committee on today is that Charles Hurwitz declined to ex- spective defendants, but would propose to Resources). tend the tolling agreement with us. He ex- bring suit only against Hurwitz, if he fails to Chairman Helfer: I’m sorry, what’s a Rule tended the tolling agreement with OTS, but provide the appropriate tolling agreement by 11 motion? he did not extend the tolling agreement with noon tomorrow. Mr. Thomas: For sanctions for bad faith the FDIC. So we must sue tomorrow, if we Mr. Thomas: Yep. We’re—we’re seeking au- pleading. are to sue unless, if suit is authorized, he thority on the mort—on both the mortgage- Chairman Helfer: Uh-huh. agrees to a tolling agreement. What we backed securities claims to sue all four peo- Mr. Thomas: (Redacted by Committee on would propose to do, unless the Board be- ple so—Redacted by Committee on Re- Resources). lieves we should do otherwise, if suit is au- sources. Chairman Helfer: I see. So you’re not rec- thorized, we would call Mr. Hurwitz’ counsel Chairman Helfer: So if suit is not in—if ommending bringing that claim. and advise that we will sue unless we have a we—if we don’t authorize suit today and suit Mr. Thomas: (Redacted by Committee on tolling agreement in hand by noon tomor- is not brought tomorrow, all these claims Resources). row. We do not know whether he would sign are lost. Chairman Helfer: How much had they lost? that agreement or not. And we certainly Mr. Thomas: To the FDIC. Mr. Thomas: I don’t know the answer to would not—we would urge the board not to Chairman Helfer: To the FDIC. the question but it was not a disaster. When approve this on the assumption that he will Mr. Thomas: Any recov— they put in the additional $80 million, they sign the tolling agreement, but we think Chairman Helfer: The OTS is separate. were not putting money into an entity that there is a realistic possibility that he may. Mr. Thomas: That’s right. And any recov- was insolvent or close to insolvent. And be- We would make that recommendation be- eries by OTS would come to the FDIC. cause— cause the statute of limitations problems are Chairman Helfer: Are the—does the FDIC’s Chairman Helfer: Is that the standard for serious enough. We’d rather not raise them if authorization to sue enhance the prospect— gross negligence? we can avoid that without injuring our posi- prospects for a settlement on a variety of Mr. Thomas: (Redacted by Committee on tion. issues associated with the case? Resources).

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00147 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.378 pfrm07 PsN: E20PT1 E2486 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 Chairman Helfer: Are there any other com- Chairman Helfer: (Redacted by Committee Chairman Helfer: No. From you? ments or questions? on Resources). Vice Chairman Hove: [No] Director Steinbrink: I—I had one very gen- Mr. Thomas: (Redacted by Committee on Chairman Helfer: No. eral question to get your opinion on. If—if Resources). Director Fiechter: [No] we bring this litigation and—and the courts Chairman Helfer: To summarize, you’re Chairman Helfer: No. Can the chair make a follow the trend they’ve been doing and—and recognizing—you—you’re recommending motion? slap us, does that in any way impact the that the Board authorize the suit. You are Mr. Langley: Bill says, yes, the chair can OTS’s case, in your opinion? indicating that the pleadings would su— make a motion. Mr. Thomas: (Redacted by Committee on would withstand a Rule 11 motion. Chairman Helfer: Okay. I’m going to make Resources). Mr. Thomas: They should. I—I don’t war- a motion to pursue this suit in this case. Is Chairman Helfer: But that’s simply trying rant that they will, but I warrant that they there a second to the motion? the OTS case ahead of the OTS case. should. The difference is the District Courts Mr. Steinbrink: I’ve never seen this before. Vice Chairman Hove: Um-huh. in the Fifth Circuit. Chairman Helfer: We still can vote on the Mr. Thomas: That’s—that’s right. And— Chairman Helfer: (Redacted by Committee merits of this, you all. I think we should Chairman Helfer: That’s the issue that on Resources.) have a recorded vote. So I ask for a second to would be presented. Mr. Thomas: I’m not going to argue that my motion so we can have a recorded vote on Mr. Thomas: That’s right. It—it would be there is a better than 50 percent chance of whether to institute suit. very unlikely this case would go to trial on recovery in this case. But it is—we—we’re Vice Chairman Hove: A question; clarifica- the merits before an OTS matter went for- not talking about a 5 [percent] or 10 percent tion? ward, assuming it’s going to go forward be- case. We think the statute of limitations Chairman Helfer: Yeah? fore the tolling agreements at the end—the issue is about 70 percent against us on the Vice Chairman Hove: Can a motion be sec- end of this year. mortgage-backed securities claims. We think onded and then voted against the motion? Vice Chairman Hove: How much do we the claims on the merits are roughly 50/50. Chairman Helfer: Can the person who sec- spend in—in this case before we know about Director Fiechter: So what is the math onds the motion vote against it? the mortgage-backed security issue, John? here? We would have spent $4 million to go Mr. Langley: Yes. Mr. Thomas: There’s good news and there’s to trial, $2 million in trial. And they had a— Vice Chairman Hove: I will second. bad news. If we plead it well and argue it what is the likely probability of the settle- Chairman Helfer: Yes. All right, all in well, we may get to spend a lot. If—if—if it ment and the chance that we’ll collect? favor of inst—of the staff’s recommendation goes out on a—on a early motion, then that Mr. Thomas: Well, if you want to multiply to authorize suit in this case. Please record would control—it would contain the cost. the math out, and, unlike most of our cases, that the chair votes, yes. All opposed to in- But we’re—we’re certainly going to try to I think this is one where they are relatively stituting suit in this case? plead it to keep it in, if we go forward with independent variables; most of them, I think, Vice Chairman Hove: Aye. this. It would—and, if we succeed, it would are highly dependent and when you start Director Fiechter: Aye. come down to a fact question for the jury at multiplying them together, you get a silly Mr. Steinbrink: I think that I would defer trial, as to whether the statute of limita- result. But here, 35 percent would not be an to the chair in this case and, in the first re- tions had run before— unrealistic expectation in terms of this—a quest, vote with the chair. Chair Helfer: That’s a fact question— substantial verdict being returned here. And Chairman Helfer: Okay. So that would be a Mr. Thomas: Well, in— if we get past the summary judgment mo- two to two vote and I assume that that Chairman Helfer: —not a law question? tions, our estimate is that the case would would not authorize suit in the case. Is that Mr. Thomas: —in terms of when the ac- have between—(redacted by Committee on correct? tions took place. If—one of the—if—if we can Resources)—settlement value. But it is ex- Mr. Langley: Right. That’s correct. play it out that far. We’re not—you know, I tremely difficult to value a case of this size Chairman Helfer: All right. think there’s a— and a case with these risks, because they’re Director Fiechter: Well, then, we want to Chairman Helfer: Isn’t it much more likely unlike a D&O case where you have $10 mil- revisit it? that it would be resolved on a motion to dis- lion in net worth and a claim for $4 million. Mr. Steinbrink: Talk some more about it. miss? There is no market. There—there aren’t a lot Director Fiechter: As I un— Mr. Thomas: Yeah. Or—or a motion for of cases like this. Those are our best guesses. Chairman Helfer: Then I think we have to summary to— If—if you work through the math, the low have a motion to reconsider the matter by Chairman Helfer: If it were going to be end of that would be—(Redacted by Com- someone who voted against. resol— mittee on Resources). Director Fiechter: I make the motion that Mr. Thomas: Yes. Or a motion for sum- Chairman Helfer: Are there any other com- we reconsider it. mary. Well, either one. ments or questions? May I have a motion to Chairman Helfer: And a second. Chairman Helfer: Sorry—or a motion—ei- accept the staff’s recommendation to author- Mr. Steinbrink: I will second. ther one, actually. ize the institution of a professional liability Director Fiechter: (Unclear). Mr. Thomas: Yeah. I think that’s the like- suit against certain former directors and of- Chairman Helfer: All right. ly— ficers of United Savings Association of Hous- Vice Chairman Hove: A first. Director Fiechter: What will the outlay be? ton, Texas? Anyone want to make the mo- Director Fiechter: Can the Board members I mean, I think you mentioned $6 million to tion? voting in favor give me a sense of— go all the way. Director Fiechter: I take it this is up or Mr. Steinbrink: Well, I mean— Mr. Thomas: I would assume if it—well, if down if tomorrow— Director Fiechter: —it’s the expenditure we keep in the claim for failing to have the Chairman Helfer: Yeah. It’s up or down. of—we’re assuming—what, John?—several other institutions honor their net worth Director Fiechter: —it runs. million dollars to figure out how far we go maintenance agreements, presumably the Chairman Helfer: It’s up or down. I think on this? litigation would continue for some time. I you’re saying that there is a high probability Mr. Thomas: Let’s—let’s talk through that imagine we’re committed to spending at that, on one of the claims, the claim will not a little bit. We’ve spent $4 million so far on least half a million dollars and quite pos- go forward on statute of limitations grounds. this matter. And part of that— sibly most or all of $4 million to get to trial, There is a lower probability—there is a high Chairman Helfer: I’m sorry, how much? if we go forward. probability that the other claim will go for- Mr. Thomas: Four million dollars so far on Chairman Helfer: On that claim. ward despite statute of limitations claims. this matter, approximately. Mr. Thomas: On— That the chances of recovery on the merits Director Fiechter: I was told by our staff Chairman Helfer: The question I think was, on the first claim are very high. The chances that we’re taking advantage of—of your $4 what about that claim that’s resolved on a of recovery on the merits on the second million— motion to dismiss or a summary judgment claim are a bit lower. The probability of a Mr. Thomas: Yes. motion? high recovery, should the case go forward on Director Fiechter: —of the—there’s value— Mr. Thomas: (Redacted by Committee on the merits, is significant, but that has to be Mr. Thomas: There are—there are— Resources). offset against the difficulties with respect to Director Fiechter: —from our perspective. Chairman Helfer: (Redacted by Committee one of the claims on statute of limitations Mr. Thomas: —there are—three different on Resources). grounds. Have I summarized? areas of value for the money that’s been Mr. Thomas: (Redacted by Committee on Mr. Thomas: It has to be offset against the spent.—(Redacted by Committee on Re- Resources). statute of limitations risk on the better sources). Chairman Helfer: (Redacted by Committee claim, the more conventional claim, and the A significant amount of money has been on Resources). difficulties in proving the merits of the—(Re- spent over the last year, both in trying to Mr. Thomas: (Redacted by Committee on dacted by Committee on Resources). make sure we know where we stand and in Resources). Chairman Helfer: All right. Is there a mo- working with OTS to—instead of making Chairman Helfer: (Redacted by Committee tion to accept—accept the staff’s rec- them relearn everything, give them the in- on Resources). ommendation to proceed with suit in this formation we have in a meaningful, useful Mr. Thomas: (Redacted by Committee on case? way; help them work through what they’re Resources). Mr. Steinbrink: [No.] doing; pay for the consultants they’re using.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00148 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.381 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2487 We would expect there to be overlap, if both Mr. Thomas: (Redacted by Committee on Mr. Thomas: They—the restitution claims this claim and the OTS claim go forward, Resources). are really a right to recover money for the par—in parallel, and that’s another question. Chairman Helfer: It obviously would have benefit of the person who’s been injured. And Both whether we would want that to happen, been helpful to have worked with the OTS all that’s—that’s really the argument. Is it assuming tha—that Hurwitz says, okay, sue along so that we weren’t presented at the OTS’s right to recover the money and then me. And we’d have a question of where the point of the running of the statute—of the have it go to the right people? Or is it really courts would—if we say our—we—we’d like tolling of the tolling agreements with this the victim’s rights and OTS is the entrance to stay this whole matter until OTS’s matter dilemma of not knowing whether the merits through—through which collection is—is is resolved. Suppose at—at the end of the of the claims are going to be separately pur- achieved. And I don’t think there’s a—there year OTS brings a claim, assuming that for sued. isn’t an answer that I’m aware of. purposes of talking through what will hap- Mr. Thomas: It—we’ve been working ac- Chairman Helfer: But I thought our argu- pen, we might very well say we would rather tively with them for over a year. We had ment all along was that the OTS has a sepa- agreed among ourselves that we would—both stay our claim and let OTS resolve this in- rate right. That this isn’t a subterfuge to get FDIC and OTS had agreed we would only ex- stead of having the same case go on two fo- around the FDIC statute of limitation prob- tend the tolling agreements with people if rums. The court might or might not let us do lems. That is has separate legal rights and they agreed to extend them with both. None that. It—we would sort of make that argu- separate injuries that it can seek payment of us realized until about 10 days ago, 13 days for. ment and if Hurwitz joined in it, we have a ago, that there was even an issue as to Mr. Thomas: They have separate legal better chance. But there’s no guarantee we’d whether Hurwitz was going to sign a tolling rights, but whether it’s a separate injury is be allowed to do that. If that happened, we agreement, because they had extended them a real question. But let me—let me frame the would hold our costs down. If they go for- several times. OTS staff ultimately reached ward in parallel, there will be some signifi- what—the only possible conclusion. They question just a little bit differently. Suppose cant overlap between the cost of this litiga- were not prepared to—to make a final rec- the FDIC settled with Hurwitz, gave him a tion and cost which we would otherwise— ommendation, so they had to accept tolling general release, and then OTS proceeded Chairman Helfer: But we do not know with Hurwitz and not—even though he against Hurwitz on exactly the same claims whether the OTS is going to bring suit. wouldn’t toll with us. They—you know, any- and got a restitution order. Would he be able Mr. Thomas: That’s correct. thing else would have been self-defeating. to say, I’ve already settled with the person Chairman Helfer: That’s the problem with That’s how we got into this and I can only who’s getting this money. I don’t have to this analysis. apologize to the Board for it. pay. That’s the question. If you give a—be- Mr. Thomas: That’s correct. Director Fiechter: So can you help me out? cause if we dismiss with prejudice, we’d be Chairman Helfer: If we knew— Would our agreeing to sue Hurwitz now— putting ourselves essentially in that same Mr. Thomas: That’s part— that wouldn’t necessarily be ‘‘us’’ the FDIC, position. Chairman Helfer: —that, we could take hedging our bet in terms of whether or not Chairman Helfer: And—all right, then let that into account. OTS decides to sue in two months. You’re me carry the argument further. What if we Mr. Thomas: Yeah, That’s part of why I— suggesting that it might complicate— didn’t institute suit in this case? The OTS I didn’t go through this discussion earlier— Mr. Thomas: Sue— brings it and then Hurwitz says, this is a— Chairman Helfer: Um-huh. Director Fiechter: —the process if we Mr. Thomas: —because it is very problem- this is a restitution claim for the deposit in- didn’t pursue a parallel effort— atic. Not very problematic; it’s an unknown. surance funds. The institution that is re- Mr. Thomas: Bri— sponsible for managing the funds has—has If we—(Redacted by Committee on Re- Director Fiechter: —for the nest couple of sources). decided not to bring the claim. Therefore, years? the OTS doesn’t have any right to seek res- Chairman Helfer: I guess I don’t under- Mr. Thomas: Bringing the suits, I don’t titution for the deposit insurance fund. stand your analysis. We can dismiss with think, compromises OTS’s ability at all. The prejudice. We can seek a dismissal with prej- Mr. Thomas: We think that’s a lose. only question that I—that I see is one the Chairman Helfer: Well, I don’t—I—I don’t udice of our claims at any point— Chairman raised. If we said, all right, OTS quite understand why you’re so sure one may Mr. Thomas: That’s correct. has brought a parallel case. It makes sense be a winner and this one—you’re so sure this Chairman Helfer: —at any point that the to us to stop this. The court won’t simply one is a loser— OTS decided to proceed— stay it. Hurwitz won’t agree to a dismissal Mr. Thomas: Wh— Mr. Thomas: We could certainly do that. without prejudice or to a dismissal without Chairman Helfer: —in the Fifth Circuit Chairman Helfer: —if it decided to proceed. prejudice to OTS as an express preservation which has— And— of our right to—to restitution in the OTS Mr. Thomas: Yeah. Mr. Thomas: Wh— claim. Then we have the—the question, Chairman Helfer: —not been recently very Chairman Helfer: And how many courts which is unresolved, whether we could sim- can say, no, you can’t dismiss your claim favorable to the FDIC. ply dismiss the case with prejudice, save the Mr. Thomas: What—that I’m sure about— with prejudice. ‘‘With prejudice’’ meaning additional costs, and if—if doing that that it resolves the matters for all time and on the question of what happens if we dis- would—would leave some risk of whether we miss with prejudice is I don’t know an an- we cannot bring the suit again later. could collect for restitution. And as I say, I Mr. Thomas: We—we’d have to—to look at swer and I don’t think there is a definitive don’t believe there are any cases that actu- answer that says we’re okay. I—that—I whether there’s any case law and I suspect ally address that issue. I—because I know we mean, it’s not that I’m confident we would the answer is no. We’d have to take a risk, in talked about it from time to time in other lose that argument, it’s that—I—I simply terms of dismissal with prejudice, whether contexts and no one, in any—any of the regu- need to alert you. I—I think there is an issue that would prejudice our rights for restitu- lators that I’m aware of has ever seen a there if we dismiss with prejudice. We’d have tion. I don’t know the answer to that ques- case—we haven’t seen a case that addresses to figure out whether that would prejudice tion. I haven’t really addressed the question. that issue. Arguments can be made on both our claim and—and that’s—that would likely Chairman Helfer: The rights for restitu- sides. tion, however, relate to a contractual agree- Chairman Helfer: Why does the case get to be a risky issue, because it’s unsettled. ment with the OTS, don’t they? presented if the OTS has a recovery? And we Chairman Helfer: I—I just don’t under- Mr. Thomas: (Redacted by Committee on have an agreement with the OTS that they stand why our failure to pursue this claim Resources). will restore—because we’re, after all, cur- doesn’t give rise to that argument to stop Chairman Helfer: There—there is no ben- rently paying the OTS’s cost for pursuing the OTS from proceeding to a claim that efit to proceed with the case either from the the matter and we have an agreement with seeks restitution for the deposit insurance court’s perspective or from the defendant’s the OTS that if there’s a recovery we—this fund. perspective, should we seek to dismiss out recovery will go into the bank insurance Mr. Thomas: They can certainly make that our claims with prejudice. And— comp—funds. Whose—whose—whose right is argument. I—I don’t remember any case Mr. Thomas: As long—as long as we’re it to complain? that’s definitely decided that, but I know it’s willing to dismiss them with prejudice— Mr. Thomas: The—the way it would arise is been argued about. But I don’t— Chairman Helfer: That’s point one. Hurwitz and the other defendants would Director Fiechter: Isn’t there parallel Mr. Thomas: —that’s— argue that OTS’s claim is for restitution, the cases, or cases where we would have pursued Chairman Helfer: Point two, as to the— restitution flowing back to the FDIC. And if it for the benefit of you or the RTC? the—the issue of whether it pre—prejudices we have dismissed with prejudice, then they Mr. Thomas: The—I don’t remember any our restitution, if we’re seeking a dismissal would argue that that covered our right to that actually have gotten to a point where with prejudice because we’ve become con- re—recover at any forum. and I would argue the claim had expired and money was trans- vinced that the statute of limitations prob- the contrary. But I think that it’s—it’s not ferred, that weren’t settled. lems are overriding and that the claims will something I—that I could give— Vice Chairman Hove: John, a point of clar- be separately pursued and the deposit insur- Chairman Helfer: But I thought the FDIC— ification, are—is this suit from deposit insur- ance funds will have the recoveries which the OTS— ance funds or is this for the FSLIC resolu- they are due on the merits, then I don’t un- Mr. Thomas: —you a clear opinion on. tion fund? derstand why that would pre—prejudice the Chairman Helfer: —has a separate right to Mr. Thomas: The FSLIC resolution fund. restitution—ability to get restitution as to sue—and a separate—separate injuries to Vice Chairman Hove: Thank you. I—it did both claims. seek recovery on. not make a difference—

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00149 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.383 pfrm07 PsN: E20PT1 E2488 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 Chairman Helfer: But it’s still the FDIC as this—do you think it is likely Mr. Hurwitz given the lack of precedent, that the FDIC manager. would want to proceed with both sets of liti- could avoid expending funds that duplicate Vice Chairman Hove: It’s still the FDIC, I gation simultaneously? what the OTS might choose to do. But you’re agree, but I think (unclear)— Mr. Thomas: He shouldn’t. hedging in that, if the OTS decides not to Chairman Helfer: No, I appreciate the clar- Chairman Helfer: If he had a chance to pursue in two months, we leave open the op- ification for the record. Yes. stay one of the proceedings and not spend tion of the FDIC proceeding. I’m willing to Mr. Thomas: Yes, it—particularly if there the money on one of them, do you think he’d go with proceeding on— was ever an issue, in terms of resolution of— likely take that chance? Chairman Helfer: My—my understanding is of this as part of the settlement, with the Mr. Thomas: He shouldn’t. Of course, he that the staff would have no intention to du- Int—involving Interior and the redwoods, shouldn’t. plicate litigation or litigation costs with the that—it might make a difference in terms of Chairman Helfer: He shouldn’t what? I’m OTS, to the extent the staff can control how complicated the legislation had to be to sorry. that— achieve it. Because it—where you—it’s an Mr. Thomas: He should not want to pro- Mr. Thomas: Certainly, we’re— issue of taxpayer money rather than insur- ceed in both forums. I mean, it’s—it’s not Chairman Helfer: —possibility— ance fund money. economically rational, as I view the world, Mr. Thomas: —trying to avoid it today and Mr. Steinbrink: Can—can I go back and be but then again, the fact that he didn’t sign we’ll continue to try to avoid it. a little more basic. And—and—and—and cor- the tolling agreement is not, in my view, Chairman Helfer: And the issue there sim- rect me if—if I’ve got in my mind this— economically rational. ply is the court’s willingness to stay the pro- this—this wrong. But we’ve got a group of in- Chairman Helfer: No. I think it—given the ceeding. dividuals here who have cost the FDIC $1.6 difficulty the Board is having deciding to Director Fiechter: It’s—it’s your view that billion. We’ve got a court system that has bring suit, it was quite economically ration- you can’t come up with a good reason why not ruled in our favor, recently, on certain al. He’s clearly telling the Board to put up or they wouldn’t be willing to stay. elements of the case. We’ve spent 4 million shut up, don’t you think? Chairman Helfer: Well—I’m—I— bucks and we may spend 10 million bucks, Mr. Thomas: Oh, yeah. I—I—I have not dis- Director Fiechter: And I just don’t know— plus another [$]600,000, if you go all the way cus—I never met Mr. Hurwitz, but I think Chairman Helfer: —it—it’s— through this case. And we’ve got the possi- it’s pretty clear that he views this as a mat- Director Fiechter: —that much about the— bility—there is never a guarantee in this ter of calling our bluff, when you boil it Chairman Helfer: —dangerous—what is the world—of a 50 percent success rate, perhaps down. saying, a fool—‘‘A lawyer seeking to be his lower but 50 percent, for settlement some- Director Fiechter: My views on this were, own counsel has a fool for a client.’’ I recog- where in the—(Redacted by Committee on in part, based on the—just the math, the cost nize that, but I can’t help but bring to bear Resources). of proceeding versus what we might collect. to this matter my own, somewhat limited, Mr. Thomas: Well, the [$]7 [million] to [$]14 Are you suggesting there’s a reasonably good experience with litigation and my own read- [million] is simply multiplying the percent- chance that we could agree to sue today but ing of more li—more—greater experience at age likely—the success, against that range. that, should OTS proceed—decide to pursue the appellate level in the Fifth Circuit, ad- That’s— this in a couple of months, and as I under- mittedly with one of the sounder judges of Mr. Steinbrink: And we’ve got a statute of stand it OTS would have a probably stronger the Circuit, which are not unfortunately limitations that expires tomorrow and we’ve case than the FDIC, that the FDIC could ones that we seem to come before. So I have got another federal agency whose pursuing then go slow or ask for a dismissal with prej- to bring that to bear. Obviously, I don’t have the same actions. udice and that the FSLIC Resolution Fund the range of experience of Mr. Thomas, so I Mr. Thomas: They’re investigating. would therefore be no worse off than if the would have to defer to his advising the Board Chairman Helfer: We don’t know that yet. FDIC today decided not to sue. on legal matters. Mr. Steinbrink: Maybe. Mr. Thomas: (Redacted by Committee on Mr. Thomas: Our expectation is that Chairman Helfer: They’re looking at it. Resources.) Hurwitz would not want to proceed on two Mr. Thomas: They’re investigating, yes. Chairman Helfer: For a motion to dismiss? fronts, but there are no guarantees and he is Mr. Steinbrink: Now, is there anything in Mr. Thomas: Motion to dismiss and re- a person who has made it clear that he there that’s—that’s necessarily wrong? lated—particularly if we get into any kind of doesn’t always do, in any forum, what other Mr. Thomas: I think you had an extra discovery. people expect of him. It doesn’t make sense $600,000 added on, but other—in our—our Chairman Helfer: Yes, but a motion to dis- to want to spend the money in two places. cost— miss, I can see the lower end of the range. A Vice Chairman Hove: I guess I—I can ap- Mr. Steinbrink: (Redacted by Committee summary judgment motion I can see the preciate what Steve was pointing out that— on Resources). higher end of the range, or higher probably. that—that there are losses here and—and no Mr. Thomas: Yeah. Yeah. But, no— Mr. Thomas: (Redacted by Committee on question about—some of these people are— Director Fiechter: Am I right, John— Resources.) are not the kind of people that you’d like to Mr. Steinbrink: And— Mr. Steinbrink: But the one thing that is see in the financial services industry and— Director Fiechter: Oh, sorry. certain is that we have people who, in our and that they did some things that weren’t Mr. Steinbrink: And by—if—if we choose to opinion and the historical opinion of the reg- appropriate. And I guess we’re doing it more pursue this case, in your opinion we are not ulatory agencies, have done things that are on principal—the—the principal of it. But— going to harm the OTS’s case. but the economics of the thing still doesn’t Mr. Thomas: I think that’s right. unsafe and unsound and have performed acts make sense. But, in the sense of collegiality, Mr. Steinbrink: And if you—if we choose that we don’t think are appropriate and if—if the Chairman is interested in having to—not to, we probably won’t harm the they’ve cost the FDIC $1.6 billion with these this go forward, I’m willing to let it go for- OTS’s case. acts— Mr. Thomas: I think that’s correct. Mr. Thomas: The—the acts of these indi- ward. Director Fiechter: But that if we do pursue viduals during the stew—well, this institu- Chairman Helfer: I believe the court’s un- it, you’re not certain whether we, the FDIC, tion had equity capital of some rather mod- willingness—let me ask one more question, can drop out. Should OTS decide to pursue, est amount and if you took out the goodwill on Texas law. What does Texas law say about we have parallel— in 1983 before Hurwitz bought it, it would adverse domination? Mr. Thomas: We have a—a reasonable pros- have been insolvent. Their acts—their— Mr. Thomas: The truth is, the Fifth Circuit pect to being able, in one way or another, to under their control, this institution went wrote on a clean slate, for all practical pur- drop out. In fact, we probably have a good from being marginally insolvent to a [$]1.6 poses. There are—the Texas courts’ laws— prospect, but we don’t have a guarantee that billion loss. Yes. the Texas court cases really don’t say much we can do it. Chairman Helfer: And you believe those of anything. They simply said, well, this is Chairman Helfer: Can you give me an ex- acts constitute gross negligence? what we think the Texas courts would do. We ample of a court that has refused to allow a Mr. Thomas: Yes. asked, in one of our recent cases, to have the case to be dismissed with prejudice by the Chairman Helfer: Without question. I Fifth Circuit certify something to the Texas party that sought— mean, it’s the staff’s view that the facts sup- Supreme Court to answer the question. They Mr. Thomas: No. port that these acts were grossly negligent. declined. Chairman Helfer: —to bring the case? Mr. Thomas: In terms of the claims we’re— Chairman Helfer: That, of course, depends Mr. Thomas: No. There’s not question we we’re discussing here, they lost a lot of on the panel one gets in the Fifth Circuit. could—if—we can get out. money for other things. They were the sub- One of the—at least one of the virtues of this Chairman Helfer: But you’re raising the ject—they were the victim of fraud; they case might be to press that issue of how far restitution issue. were the victim of bad economy; they were a the adverse domination determination goes Mr. Thomas: Right. Right. Yeah, there’s no victim of a lot of other things, but the things and whether one can look to the sta—the question— we propose to sue on we believe are grossly continuing conduct after—let me state it dif- Chairman Helfer: Whether we would want negligent, yes. ferently. If one can look to continuing con- to. Director Fiechter: On my understanding duct adverse to the insured institution, even Mr. Thomas: Right. that the—that to the extent we find that the where the act that led to that took place Chairman Helfer: So then your issue is, suit today is redundant and that there is a during the period which the court said the would the court stay the proceeding? If good probability, but you can’t guarantee,

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00150 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.385 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2489 statute of limitations would bar, if that on August 1, 1995 (Closed to Public Observa- Maxxam could be held liable for USAT’s would essentially allow the Fifth Circuit to tion). losses, and if such a swap became an option, ameliorate wha—what I personally believe to (SEAL) the FDIC would consider it as one alter- be a gross disservice to insured institutions LENETA G. GREGORIE, native and would conscientiously strive to not to recognize the principal of adverse Counsel and Special Assistant, resolve any pertinent issues.’’ domina—adverse domination in this context. to the Executive Secretary. If you are asked specifically about this So— issue, we believe there is no reason to devi- Mr. Thomas: I couldn’t agree more. ate from this position. RECORD 28 Chairman Helfer: Pardon? Please do not hesitate to contact Jeffrey Mr. Thomas: I couldn’t agree more. Memorandum To: Alan Whitney, Director, Williams, at 736–0648, or Bob DeHenzel, at Chairman Helfer: So I have to say that my Office of Corporate Communications. 736–0685 if you have any questions whatso- concern is we have principals that have Alice Goodman, Director, Office of Legis- ever. caused a $1.6 billion loss. We—to the U.S. lative Affairs. taxpayer. We have a judgment that, as to the From: Jeffrey Ross Williams, Counsel, Pro- RECORD 29 claims that we would bring, these individ- fessional Liability Section. Robert J. uals were not simply negligent but grossly DeHenzel, Jr., Counsel, Professional Li- 8/15/95—Hurwitz negligent as to the insured institution. And ability Section. Alan McReynolds and Larry Millinger—In- we have the prospect of making claims that Subject: PLS Lawsuit Filed Today Against terior 208–6172 might lead a different panel of the Fifth Cir- Charles Hurwitz. Jeff Webb, Interior, Land acqui cuit to make a judgment that would amelio- As you know, yesterday the FDIC Board of K Zeigler, Fish and Wildlife rate some of the grosser adverse aspects of Directors authorized the filing of a PLS suit OTS—Rick Sterns, Bruce Rinaldi California Delegation wrote Interior for the previous Fifth Circuit decisions. I recog- against Charles E. Hurwitz arising out of the creative suggestions as to how to acquire the nize that, of course, a panel could simply fol- failure of United Savings Association of redwoods. low suit. What prospect—is there a split in Texas (‘‘USAT’’), Houston, Texas. The Rick—OTS—can’t really discuss their the Circuits on this? Is there two Circuits FDIC’s complaint was filed this afternoon in the United States District Court for the claims—policy to be quiet and they’ve gone essentially the same way? Alan—Hurwitz lawyers Mr. Thomas: (Redacted by Committee on Southern District of Texas in Houston. A copy of the complaint is attached for your Terry Gorton—Rep of Calif Resources). Gov’s office—Spec Asst to Sec of Natural Chairman Helfer: But you’re saying there reference. The complaint seeks damages against Resources. are no Texas Supreme Court decisions on Hurwitz in excess of $250 million and alleges Strategy—a fund of property owned by point. So the Fifth Circuit is essentially in- claims for gross negligence, breach of fidu- state to sell or trade—70 to 100 m. feels deal terpreting state law based on its own judg- ciary duty and breach of the duty of loyalty can be cut $150 to 250 m. ment about state law. arising out of his own conduct and for aiding Hurwitz’ lawyers said the $500 m appraisal Mr. Thomas: (Redacted by Committee on and abetting the conduct of others who should not be an obstacle for price/deal. Resources). served as officers and directors of USAT. The Obstacles to logging: Chairman Helfer: Would there be a pros- complaint alleges that Hurwitz dominated Presidential ambitions of Wilson—com- pect that a different panel of the Fifth Cir- and controlled USAT as a controlling share- plicates matters for Interior. cuit might allow certification of the issue? holder, a de facto senior officer and director Interior doesn’t have surplus property to Mr. Thomas: (Redacted by Committee on and controlling person. put on table. Resources). Count I of the complaint alleges that 16 bases in Calif to be closed could chop off Chairman Helfer: No, I understand. Hurwitz breached his fiduciary duty of loy- a piece or pieces Mr. Thomas: —forum either, but it’s— alty to USAT by failing to ensure that H told Terri he would take Grand Prairie Chairman Helfer: I understand, but that at USAT’s net worth was maintained by its par- Tex Naval Air Station. least— ent company, United Financial Group, Inc. Should Interior go visit DOJ and see about Mr. Thomas: ——worth a try. (‘‘UFG’’) and by its controlling shareholders acquiring property. Chairman Helfer: —it sets a clear stand- MCO Holdings, Inc. (‘‘MCO’’ now known as Rick says nothing here will influ OTS deci- ard— Maxxam) and Federated Development Cor- sion to bring an action. Rick—FDIC will prob have to go thru a Mr. Thomas: That’s right. poration (‘‘Federated’’). Count II of the com- Chairman Helfer: —of what the state law plaint alleges that Hurwitz was grossly neg- round of motions. JDS says we would sit at a global settle- is— ligent and breached his duty of loyalty to ment table. Dirs briefed—no objection stat- Mr. Thomas: That’s right. USAT in failing to act to prevent additional ed. Chairman Helfer: —as opposed to the Fifth losses from USAT’s first mortgage backed Alan—fear of sending wrong messg by pur- Circuit. securities portfolio. Count III alleges that suing this at all. Mr. Thomas: And we’ve had some suc- Hurwitz was grossly negligent and breached RTC has approached Interior. cesses, ‘‘we’’ in the RTC. For example, in his duty of loyalty to USAT in causing Maryland, the District Court certified a mat- USAT to invest substantial amounts of ter to the Maryland Supreme Court. Every- mortgage backed securities in its subsidiary, RECORD 30 one thought that we would lose in Maryland United MBS, resulting in substantial losses. FEDERAL DEPOSIT INSURANCE and they came back and said, oh, no adverse As we informed the Board, this action will CORPORATION, domination is the law in Maryland; a very be highly visible because Hurwitz and USAT Washington, DC, November 6, 1995. favorable decision. We have so—we have cir- have attracted media coverage and comment MEMORANDUM TO: Kathleen McGinty, cuits going both ways but they again are ba- from environmental groups and members of Chairperson, Council on Environmental sically looking at state law. Congress. Hurwitz has a reputation as a cor- Chairman Helfer: Okay. There has been a Quality, Executive Office of the Presi- porate raider, and his hostile takeover of Pa- dent. motion to reconsider the previous vote of the cific Lumber attracted enormous publicity Board with respect to the staff’s rec- FROM: Jack D. Smith, Deputy General and litigation because of his harvesting of Counsel, Federal Deposit Insurance Cor- ommendation to authorize the institution of California redwoods. Environmental inter- a PLS suit in the matter of United Savings poration. ests have received considerable publicity in SUBJECT: Headwaters Forest/Charles Association of Houston, Texas. Given that the last two years, suggesting exchanging motion, I would now seek a new motion in Hurwitz, Debt-for-Nature Transaction. our D&O claims for the redwood forest. We At a meeting in your office on October 22, support of the staff’s recommendation. recently met with representatives of the De- 1995, you requested an analysis of certain Director Fiechter: I’ll so move. partment of the Interior (‘‘DOI’’), who in- issues pertaining to the viability of obtain- Chairman Helfer: And a second. formed us that they are negotiating with ing a transfer of the Headwaters Forest from Mr. Steinbrink: I’ll second it. Hurwitz about the possibility of swapping Chairman Helfer: All in favor of the mo- Pacific Lumber ( a corporation controlled by various properties, plus possibly the FDIC/ Charles Hurwitz) to the United States. tion? OTS claim, for the redwood forest. They Vice Chairman Hove: Aye. This memorandum states the issues and stated that the Administration is seriously summarizes the answers. More detailed re- FEDERAL DEPOSIT INSURANCE interested in pursuing such a settlement. We sponses are attached. These responses were CORPORATION, plan to follow up on these discussions with prepared by representatives of the Federal Washington, DC. DOI in the coming weeks. All of our discus- Deposit Insurance Corporation, the Office of sions with DOI are strictly confidential. Management and Budget, and the Depart- CERTIFICATION In response to numerous letters from the ment of the Interior. I, Leneta G. Gregorie, Counsel and Special environmental community and members of Assistant to the Executive Secretary, Office Congress about the possibility of the FDIC Issues and Answers of the Executive Secretary, Federal Deposit pursuing a debt for nature swap, we have Issue 1: It is feasible for Hurwitz to trans- Insurance Corporation, do certify that the started that: fer the Headwaters Forest to the FDIC in ex- attached is an excerpt taken from the Tran- ‘‘although such a swap almost certainly change for a settlement of the FDIC’s law- script of a Board of Directors Meeting held would raise numerous difficult questions, if suit and/or other assets?

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00151 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.387 pfrm07 PsN: E20PT1 E2490 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 Answer: Yes. While Hurwitz does not di- Next Steps Epic court fights, regulatory skirmishing rectly own the Headwaters Forest, he con- It appears appropriate to arrange a meet- and disputes over its value, have kept com- trols the boards of directors and the business ing as soon as possible to decide upon what, pany chainsaws from cutting Headwaters’ decisions of the corporate entity that owns if any, action is appropriate. Hurwitz has re- 3,000 acres of towering redwoods, some dat- the land. Hurwitz is the majority stock- cently signaled—both directly and through ing back to the time of Christ. holder of Maxxam, Inc. which, through its his personal and corporate representatives— DIFFERENT APPRAISALS wholly owned subsidiaries, owns the Head- his desire to discuss the Headwaters Forest Pacific Lumber contends Headwaters’ fair waters Forest. He is also the Chairman of with representatives of the Government. For market value is nearly $600 million, but gov- the Board of Directors, President and Chief example, in a recent newspaper interview ernment appraisals have ranged as low as Executive Officer of Maxxam and through (attached), Hurwitz endorsed the possibility $400 million. Because of normal regulatory these capacities has controlled the business of a transfer of the Headwaters forest in ex- constraints surrounding harvesting of old- and financial decisions of Maxxam and its change for assets of equivalent economic growth trees, preservation proponents say subsidiaries. Most important, the FDIC law- value. Furthermore, in recent discussions Headwaters’ true value is much less, perhaps suit against Hurwitz may well ultimately be with FDIC after the publication of the inter- around $200 million. a liability of Maxxam because Maxxam’s by- view, Hurwitz’s lawyers have indicated their Whatever value may be set, Hurwitz said laws contractually obligate it to indemnify client’s interest in discussing a resolution of he doesn’t necessarily expect taxpayers to Hurwitz for liability in connection with acts the Headwaters Forest issue. Similar state- come up with that kind of cash. He once performed while serving in any capacity on a ments have been made by other Hurwitz rep- again said he would favor offsetting some of Maxxam subsidiary such as United Savings resentatives to the Department of the Inte- the cost by swapping the big trees for aban- Association of Texas or its holding compa- rior. doned U.S. government property. nies. Hurwitz, through his control over There appears to be little downside in re- ‘‘You know, if I could get someone who was Maxxam’s and its subsidiaries’ boards of di- sponding to these overtures at an early date. very serious about resolving this, and who rectors, has previously influenced the trans- If everyone else agrees, it would be necessary had some authority, to sit down with me, I fer of Pacific Lumber’s assets to resolve to decide the following: think we could work out a Headwaters solu- other liabilities, including lawsuits. Finally, 1. Which person(s) should be authorized to tion in half a day,’’ said Hurwitz. the FDIC’s Chairman has stated that in the contact Hurwitz; Hurwitz warned, however, that a deal event the Headwaters Forest is offered to the 2. Through which Hurwitz representative needs to be struck soon. He said he believes FDIC as part of a settlement of the FDIC’s (e.g., Maxxam, Pacific Lumber, Hurwitz’s de- a Republican majority in Congress, and its claims against Hurwitz, the FDIC Board of fense lawyers) should such contact be made; zeal for private property rights, creates a Directors would consider accepting such as- 3. The substantive authority of the negoti- better political climate for Pacific Lumber’s sets to resolve the claims against Hurwitz. ating person or group for its discussions with efforts to either be fairly compensated for Issue 2: It is feasible for FDIC to transfer Hurwitz; and Headwaters, or be allowed to log the swath the Headwaters Forest to the Department of 4. A mechanism for the negotiating person of old trees tucked in the coastal ridges east the Treasury? or group to regularly consult and coordinate of Fortuna. Answer: The FDIC could legally transfer its discussions with the respective federal ‘‘I want to tell you that this is America, title to the Headwaters Forest out of the agencies and offices that are involved in this and that this land is zoned for timber cut- FDIC’s FSLIC Resolution Fund (‘‘FRF’’) to effort. ting,’’ said Hurwitz defiantly. Treasury, if the FDIC determined that the Please let me know if the FDIC can be of ‘‘We are going to move forward. Somebody state of the FRF at the time of transfer were further assistance. My phone number is (202) is going to pay us fair market value, or we’re such that the value of the Headwaters Forest 898–3706 and William F. Kroener, III, FDIC going to cut it. And we’re not embarrassed to was not better retained in the fund for dis- General Counsel, can be reached at 898–3680. say that,’’ he said. A federal court recently charge of FRF liabilities. It is unclear Attachments. has put on hold company plans to remove whether the FDIC Board of Directors would dead or dying trees from Headwaters pending be able to make the requisite determination [From the Press Democrat, Oct. 22, 1995] trial of the latest in a series of lawsuits filed in the near term given uncertainties as to by the grass-roots group Environmental pro- PACIFIC LUMBER: 10 YEARS AFTER contingent liabilities, although a plausible tection Information Center in Garberville. (By Mike Geniella) case might be made in favor of such a deter- DEAL OF CENTURY mination in light of the present condition of SCOTIA.—Ten years after pulling off a near- Departing from his usual stance of no FRF’s balance sheet. We note, too, that ly $1 billion hostile takeover of Pacific Lum- interviews, Hurwitz spoke for nearly an hour Treasury would have to be willing to receive ber Co., Texas Financier Charles Hurwitz is by phone from a Puerto Rico resort being de- the Headwaters Forest (if only as part of an seething because his most prized asset re- veloped by his Houston-based Maxxam Inc. instantaneous transfer on to the Department mains off-limits. The conglomerate also owns Kaiser Alu- of the Interior or another federal agency), Hurwitz believes a continuing controversy minum, and substantial real estate holdings and an interagency memorandum of under- about Headwaters Forest, the largest stand nationwide. The conference call interview in- standing would therefore seem desirable in of ancient redwoods left in private hands— cluded Pacific Lumber President John Camp- order to flesh out this plan. In the event that worth $600 million today by company esti- bell, who was a P-L executive before the the FDIC Board were unwilling in the near mates—not only hinders business, but denies Hurwitz takeover. term to make the requisite determination him and managers of the 127-year-old North Hurwitz talked freely about controversies for a transfer to Treasury, a feasible alter- Coast timber giant the recognition he feels that erupted after Pacific Lumber’s old native might be for the FDIC as manager of they deserve. board of directors capitulated 10 years ago the FRF to hold the Headwaters Forest, ‘‘We’ve stuck around for 10 years. We’ve re- today, and voted to sell the aristocrat of under an interagency agreement whereby it invested $100 million in new facilities, added West Coast timber companies to Maxxam. It would be managed by the Department of the more *** and expanded our timber base. We became the timber deal of the century be- Interior, until such time as conditions for a rebuilt *** town after an earthquake and cause Pacific Lumber’s under-valued assets determination for outright transfer to Treas- fire,’’ said Hurwitz. were probably worth closer to $2 billion, ac- ury (and then on to Interior) are satisfied. ‘‘And still we’re the bad guys,’’ he said. Issue 3: What legislative mechanisms exist ‘‘My God, the way the critics beat the hell cording to estimates in some shareholder that may facilitate a transfer of the Head- out of this company, you would think we lawsuits filed to the aftermath of the waters Forest to the U.S. Department of the have slaves working there or something,’’ Hurwitz takeover. Interior with minimal financial outlay? complained Hurwitz. At the time of Hurwitz’s takeover, Pacific Answer: Three legislative authorizations In a rare interview, Hurwitz told The Press Lumber was touted by the Sierra Club and provide a mechanism for an inter-agency Democrat that Pacific Lumber is willing to Save the Redwoods League for its respon- transfer of title to the Headwaters Forest to have an independent party determine a value sible logging practices. Generations of Hum- the Department of the Interior. They are for Headwaters if that helps bring an end to boldt County residents have worked for Pa- The Transfer of Real Property Act; The the North Coast’s most tenacious environ- cific Lumber and lived in Scotia, the West’s Coastal Barriers Improvement Act; and The mental battle. last real mill town. Until the takeover, they Base Closure and Realignment Act of 1990. Andy McLeod, spokesman for Secretary of were comforted by a paternalistic manage- Each Act presents particular legal and polit- Resources Douglas Wheeler, welcomed ment that gave them a lifestyle once charac- ical considerations that require special con- Hurwitz’s offer. terized as ‘‘Life in the Peace Zone.’’ sideration. ‘‘Without doubt, determining a value for Pacific Lumber’s buyout by an outsider Issue 4: What would be the likely budg- the forest is key to finding solutions to the was a stunning development for hundreds of etary impact from an acquisition or transfer complexities surrounding Headwaters,’’ he workers and their families, and a region that of the Headwaters Forest through the FDIC? said. depends on the company for its economic Answer: Any budgetary impact, including However, McLeod said the state will not well-being. The takeover ignited a decade of ‘‘scoring,’’ is dependent on the particular negotiate ‘‘other than directly with the par- environmental activism in the streets and in structure of the transaction and whether ties involved.’’ the courts, and reshaped the face of North particular legislation is necessary to facili- ‘‘Any further discussion on any value for Coast politics. Logging controversies have tate the acquisition or transfer of the Head- Headwaters will have to be done directly,’’ played a role in almost every major election waters Forest. he said. since the takeover.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00152 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.391 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2491 In the beginning, Hurwitz was largely un- Bosco said he no longer has any ties to ‘‘But that isn’t what you hear on the known. At the time, he was a small-time in- Hurwitz, or Pacific Lumber. But he said he streets, or read in the newspapers,’’ said ventor with alleged ties to convicted Wall agrees with Hurwitz that most of the blame Hurwitz. ‘‘I’ve had people tell me they went Street wheeler-dealers Michael Millken and for the Headwaters statement is with the po- to Scotia expecting to see a Palm Springs; Ivan Boesky, and a failed Texas savings and litical process. no trees and all sand. They were amazed to loan that cost taxpayers $1.6 billion. Today ‘‘It should have been resolved in the public see forests everywhere they looked.’’ his personal portfolio is worth an estimated arena, but it wasn’t,’’ said Bosco. CHARLES HURWITZ $180 million. Hurwitz said the bad rap he and Pacific After snagging sleepy Pacific Lumber for Lumber receive about wanting to log the last Age: 65 $800 million during the takeover craze of the of the ancient redwoods in private ownership Born: 1940, Kilgore, Texas 1980s. Hurwitz ordered the cut doubled to is unfair. College: University of Oklahoma meet the company’s cash flow needs, and pay ‘‘I get all these letters every day from high Career: Started work as a stockbroker for up to $90 million a year in interest payments school and junior high kids saying, ‘Please Bache & Co. in 1952 in New York, later San on about $550 million in junk bonds he used don’t cut down the Headwaters,’’’ said Antonio. to finance the takeover. Hurwitz later was to Hurwitz. First deal: At age 27, Hurwitz got investors use early profits from Pacific Lumber’s ac- ‘‘I write them back and give them our to put up $54 million to launch the Hedge celerated cut to help fund a takeover of an- version of this thing, and then I tell them Fund of America. In 1967, it was the second- other venerable Northern California indus- they should write their senators, write the largest public offering ever on Wall Street. trial giant, Kaiser Aluminum. Congress, and write the president if they The Hurwitz Decade: want to save the Headwaters,’’ he said. As his empire grew, Hurwitz was attacked May 1982: Hurwitz’s MCO Holdings and Hurwitz rejected environmentalists’ clam- as a ruthless raider whose targets, including Federated Development buy Simplicity Pat- or for a so-called ‘‘debt-for-nature’’ swap in- Pacific Lumber, were asset-rich companies. tern Co. for $48 million, and later change volving a $250 million claim a federal agency His dealings involving Pacific Lumber came name to Maxxam. has filed against the Houston investor for his under scrutiny by the Securities and Ex- October 1985: Pacific Lumber board capitu- alleged role in the collapse of United Savings change Commission, the U.S. Labor Depart- lates, and agrees to sell North Coast timber ment and a congressional oversight com- and Loan Association of Texas. Hurwitz contended the Federal Deposit In- giant to Hurwitz. mittee, none of which took any action. A May, 1988: Maxxam acquires Kaiser Tech. probe by the Federal Deposit Insurance Corp, surance Corporation claims is in the form of a personal lawsuit against him, and cannot corporate parent of Kaiser Aluminum for into Hurwitz’s role in a failed Texas savings about $930 million. and loan resulted in a $250 million claim be linked to Maxxam or Pacific Lumber op- erations. December 1988: Another Hurwitz Invest- being filed against him. ment—United Savings Association of ACCUSATIONS NOT TRUE LAND SWAP Texas—fails, eventually costing taxpayers Hurwitz dismissed his critics. The possibility of swapping Headwaters for $1.6 billion. ‘‘Their accusations are just not true, and surplus government property dominated July 1992: Maxxam bids $350 million for a anybody who will spend the time looking Hurwitz’s thoughts during the interview. controlling interest in Continental Airlines, into them will find that out,’’ said Hurwitz. Hurwitz cited as an example a closed mili- but offer rejected. Soon after the Pacific Lumber takeover tary base in Texas between Galveston and Hurwitz ordered the sale of a tool company Houston, where he lives. ISSUE 1. IS IT LEGALLY FEASIBLE FOR subsidiary of Pacific Lumber for $300 mil- ‘‘It’s 15,000 acres of land, and it’s doing CHARLES HURWITZ TO ARRANGE THE lion. He sold Pacific Lumber’s former San nothing but drawing dust and rattlesnakes. TRANSFER OF MAXXAM’S ASSETS SUCH AS Francisco headquarters building for another Wouldn’t it be great if someone like our- THE HEADWATERS FOREST TO THE GOV- $30 million, moving all corporate operations selves took it over and built new homes and ERNMENT IN EXCHANGE FOR A SETTLE- to Scotia and fueling speculation he in- a shopping center and created new jobs rath- MENT OF THE FDIC LAWSUIT AND/OR tended to dismantle the timber giant and er than have this land just sit there and do OTHER ASSETS? sell all of its assets. Critics predicted Scotia nothing?’’ SHORT ANSWER: YES. BY HIS DOMI- would be a ghost town within 10 years. Hurwitz described such a possibility as a Hurwitz said the years have proven the ‘‘win-win for everyone.’’ NANT POSITION AS MAXXAM, INC.’S critics wrong. ‘‘Everyone thinks we’re the stumbling CHAIRMAN OF THE BOARD, PRESIDENT ‘‘We’re still here, and we’re still growing,’’ block (to a Headwaters solution), and that’s AND CHIEF EXECUTIVE OFFICER, AND he said. just not the case,’’ said Hurwitz. AS ITS MAJORITY (60%) STOCKHOLDER, Hurwitz said his rogue image is a carry- Hurwitz insisted the future is bright for HURWITZ CONTROLS MAXXAM AND PA- over from the 1980s, ‘‘When everybody who Pacific Lumber. CIFIC LUMBER (a wholly owned subsidiary did takeover was cast in a bad light. But Pacific Lumber, whose annual sales top $20 of MAXXAM, INC.) AND THE BUSINESS contrary to a lot of those kind of people, million, is not for sale despite Wall Street DECISIONS OF THEIR BOARDS OF DIREC- we’re builders. We’re happy with our invest- Journal reports earlier this summer to the TORS. THROUGH HIS POSITIONS, ments.’’ contrary, said Hurwitz. HURWITZ CAN ARRANGE FOR MAXXAM Hurwitz said in fact, Pacific Lumber under Still his reputation persists. TO EXCHANGE ITS PROPERTY FOR ‘‘I warned Hurwitz early on that his take- Campbell’s guidance is looking to the North OTHER ASSETS AND/OR THE DISCHARGE over of Pacific Lumber would become the ab- Coast, and around the globe to expand its OF MAXXAM LIABILITIES. THE FDIC solutely perfect symbol of what everyone timber operations. LAWSUIT AGAINST HURWITZ MAY WELL ‘‘We’ve been to South America, Africa and doesn’t like about American business,’’ re- ULTIMATELY BE A LIABILITY OF even Russia,’’ he said. called former Rep. Doug Bosco, D- MAXXAM BECAUSE MAXXAM’S BYLAWS ‘‘We’re builders. We don’t buy and sell,’’ Sebastopol. After his defeat to Rep. Frank OBLIGATE IT TO INDEMNIFY HURWITZ said Hurwitz about Maxxam’s investment Riggs, R-Windsor, Bosco for a year was paid FOR LIABILITY IN CONNECTION WITH strategies. $15,000 a month by Hurwitz to try to forge a ACTS PERFORMED WHILE SERVING IN Hurwitz said he likes the timber business. consensus in Congress, where a bill had been ANY CAPACITY ON A MAXXAM SUB- ‘‘Just last week, we had discussions about a introduced for the public acquisition of SIDIARY SUCH AS UNITED SAVINGS AS- potential acquisition within the industry,’’ Headwaters. SOCIATION OF TEXAS OR ITS HOLDING he said. ‘‘We’re very much in the growth Those efforts failed, and so have a series of COMPANIES. MOREOVER, IF THE OTS mode,’’ said Hurwitz. others in the state Legislature and at the BRINGS CHARGES AGAINST MAXXAM DI- Hurwitz said he’s offended that Pacific federal level. RECTLY THIS WOULD ALSO BECOME A Lumber has been cast as an environmentally Hurwitz said he’s disgusted with the polit- MAXXAM LIABILITY. (Answer prepared by insensitive company under his stewardship. ical ‘‘circus.’’ He recalled in 1988 when he FDIC). ‘‘What bothers me more than anything else went to Sacramento with Bosco, who was DISCUSSION ANSWER: is that people think we’re hurting the envi- then still a congressman, to meet with key ronment. It’s simply not the case. We’ve I. Hurwitz’s Control of Pacific Lumber legislative leaders. They asked Hurwitz to hired the best foresters, the best biologists Hurwitz controls Pacific Lumber’s cor- agree to a voluntary logging moratorium on to chart the company’s course into the next porate activities, including a sale or transfer Headwaters, an agreement Pacific Lumber century,’’ said Hurwitz. of its assets, through his equity ownership in stuck to until this year, when Hurwitz said Hurwitz and Campbell said Pacific Lum- and domination of the board of directors of he’d had enough. ber’s timberlands, even after a decade of ac- Maxxam, Pacific Lumber’s parent corpora- NOTHING HAPPENED celerated cutting, still have the most timber tion. ‘‘I was told by these guys that they were volume per acre than anywhere else in Cali- a. Hurwitz’s Control of Maxxam going to step in and solve this issue,’’ said fornia, and perhaps Oregon and Washington. 1. Controlling Stockholder: Hurwitz and var- Hurwitz. ‘‘But they didn’t do a damn thing. They said the company will be able to sus- ious family interests own a controlling block We sat around for two years twiddling our tain current production and job levels indefi- of stock in Maxxam. Hurwitz and his family thumbs waiting for something to happen, nitely by acquiring more timberland, and de- currently own and control, directly and and nothing ever did.’’ veloping new product lines. through wholly owned personal and family

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00153 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.394 pfrm07 PsN: E20PT1 E2492 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 investment companies and trusts, approxi- August 1, 1988, . . . by reason of the fact that old growth trees over the last few years, a mately 60.4 percent of the voting stock inter- he or she is or was a director, officer, em- temporary restraining order was recently ests of Maxxam. Through this majority ployee or agent . . . or is or was at any time granted further prohibiting Pacific Lumber stock ownership, Hurwitz controls the elec- serving at the request of [Maxxam], any from harvesting in the Headwaters Forest. tion of candidates to Maxxam’s board of di- other corporation . . . or other enterprise in As a result, the cash starved company con- rectors and the financial and business deci- any capacity, against all expenses, liability tinues to lose its best source of income. sions of Maxxam and its numerous wholly and loss . . .’’ Maxxam refers to these indem- ISSUE 2: IS IT FEASIBLE FOR FDIC TO owned subsidiaries, including Pacific Lum- nification obligations in connection with a TRANSFER THE HEADWATERS FOREST ber. description of the FDIC lawsuit against TO TREASURY? 2. Controlling Director and Officer: Hurwitz Hurwitz in its most recent SEC filing, stat- SHORT ANSWER: THE FDIC COULD LE- is Maxxam’s Chairman of the Board, Presi- ing that Hurwitz has not yet made a formal GALLY TRANSFER TITLE TO HEAD- dent, and Chief Executive Officer, and has claim for indemnification from Maxxam. See, WATERS FOREST FROM THE FSLIC RES- held these positions since he acquired Maxxam, Inc. 10–Q, June 30, 1995. OLUTION FUND (‘‘FRF’’) TO TREASURY IF Maxxam. b. Although Hurwitz was not an elected di- THE FDIC DETERMINED THAT THE b. Maxxam’s Control of Pacific Lumber. rector of United Savings Association of STATE OF THE FRF AT THE TIME OF Maxxam is engaged in forest products oper- Texas (‘‘USAT’’), and Hurwitz—not TRANSFER WERE SUCH THAT THE ations through its wholly owned subsidiary, Maxxam—is a defendant in the FDIC’s law- VALUE OF HEADWATERS FOREST WAS Maxxam Group, Inc. (‘‘MGI’’), and MGI’s suit, the suit alleges that Hurwitz was a ‘‘de NOT BETTER RETAINED IN THE FRF FOR wholly owned subsidiary, Pacific Lumber facto’’ director of the thrift through his as- DISCHARGE OF FRF LIABILITIES. A CASE Company, which Hurwitz acquired in a hos- sertion of actual control over its operations COULD BE MADE IN FAVOR OF SUCH A tile tender offer in October 1985. Pacific and decisionmaking, that he was an elected DETERMINATION AT PRESENT, AL- Lumber owns, either in its own name or board member of United Financial Group THOUGH THE FDIC BOARD OF DIREC- through subsidiaries, approximately 189,000 (‘‘UFG’’) (USAT’s first-tier holding com- TORS MIGHT PREFER TO FOSTER ALL acres of commercial timberlands in Hum- pany), and was a member of the joint USAT/ FRF ASSETS IN VIEW OF CONTINGENT boldt County in northern California. UFG Strategic Planning Committee. LIABILITIES. ABSENT SUCH A DETER- 1. 179,000 acres of Pacific Lumber’s c. Moreover, the FDIC’s suit alleges that MINATION, AN ALTERNATIVE MIGHT BE timberlands, including approximately 6,000 Hurwitz breached his fiduciary duty to FOR THE FDIC TO HOLD THE HEAD- acres of virgin old growth redwood and bor- USAT by placing his and Maxxam’s financial WATERS FOREST FOR THE TIME BEING, der areas known as the Headwaters Forest, interests above the interests of USAT and its UNDER MANAGEMENT BY THE DEPART- have been transferred to Scotia Pacific Hold- depositors by choosing to refuse to cause MENT OF THE INTERIOR. (Answer prepared ing Company, a wholly owned subsidiary of Maxxam to infuse new capital into USAT, as by FDIC). Pacific Lumber. was required by a capital maintenance DISCUSSION ANSWER: Assuming a settlement of professional li- 2. Title in the Headwaters Forest was in agreement with the Federal Home Loan ability claims in which the Headwaters For- turn transferred to Salmon Creek Corpora- Bank Board, that would have replenished est is transferred from a Hurwitz-related tion, a wholly owned subsidiary of Scotia Pa- USAT’s depleted capital. cific. Salmon Creek’s only asset is the Head- d. Maxxam currently possesses sufficient company to the FDIC as manager of the waters Forest; it has been reported that the assets to pay a substantial liability, includ- FSLIC Resolution Fund (‘‘FRF’’), the ques- debt and other liabilities undertaken in con- ing indemnifying Hurwitz for the amount of tion becomes how best to then transfer the nection with Hurwitz’s acquisition of Pacific a judgment or settlement. Maxxam is a pub- redwood forest from the FDIC to another Lumber were maintained with Pacific Lum- licly traded company with market capital- agency with an ultimate view toward dedi- ber and were not transferred to Salmon ization of $233 million and total assets of $3.7 cating it to wilderness purposes for the ben- efit of the United States. We believe that the Creek. Moreover, Hurwitz has deliberately billion. See, Maxxam, Inc. 10–Q, June 30, 1995. avoided pledging any part of the Headwaters most efficient way of doing this—and per- III. Related Litigation Which Could be Settled haps the only way with a clear enough legal Forest timber as collateral for Pacific Lum- in a Global Settlement With Hurwitz ber’s or its subsidiaries’ financing arrange- framework not requiring new legislation— In addition to the FDIC’s lawsuit, there ments, thereby making a transfer of title to would be for the FDIC to transfer Head- are at least three other lawsuits which have the Headwaters Forest from Salmon Creek waters out of the FRF to Treasury, utilizing value and could be exchanged in a global set- to the U.S. relatively easier. unique authority existing under the FRF en- tlement involving the Headwaters Forest. c. Hurwitz’s Ability to Transfer Pacific Lum- abling statute, and for Treasury thereafter a. In early 1994, Robert Martel, a private ber’s Assets: Hurwitz has demonstrated his to transfer the forest to the Department of citizen, supported and funded by numerous ability to control the actions of the board of the Interior or other federal agency pursuant environmental organizations, filed a lawsuit directors of Maxxam, Pacific Lumber, and to other, more general statutory authority against Hurwitz, Maxxam, and other persons its subsidiaries in connection with the reso- concerning inter-agency transfers of prop- and entities that alleges that Hurwitz ille- lution of claims against the assets of erty. gally used USAT funds for the benefit of With regard to transfer out of the FRF, it Maxxam, Pacific Lumber, and other subsidi- himself and Maxxam, and that such trans- should be noted that section 11A(f) of the aries. Through his domination of Maxxam’s actions diverted money from USAT and re- FDI Act, 12 U.S.C. § 1821a(f), provides that board of directors, Hurwitz has influenced sulted in its insolvency. The complaint seeks the FRF ‘‘shall be dissolved upon satisfac- the financial and business decisions of Pa- damages against Hurwitz, Maxxam, and oth- tion of all debts and liabilities and sale of all cific Lumber and its two subsidiaries, Scotia ers under the False Claims Act which au- assets. Upon dissolution any remaining funds Pacific and Salmon Creek. After the acquisi- thorizes a damage award of three times the shall be paid into the Treasury.’’ Treasury is tion of Pacific Lumber, numerous lawsuits alleged actual damages of $250 million. thus, in effect, the residual beneficiary of the were filed against Hurwitz, Pacific Lumber, b. The Office of Thrift Supervision, a de- FRF—a fund which is supported by appro- Maxxam, MGI, and others involving partment of the Treasury, has been inves- priated monies from Treasury (see section Hurwitz’s tender offer and hostile takeover tigating the conduct of Hurwitz, other 11A(c) of the FDI Act, 12 U.S.C. § 1821a(c)), of Pacific Lumber. In November 1994, former USAT directors and officers, Maxxam and which logically (as well as statutorily) Hurwitz attended a conference in U.S. Dis- and other USAT holding companies. On No- should therefore go back into Treasury. To trict Court, Southern District of New York, vember 1, 1995, OTS notified Hurwitz, date approximately $46 billion has been ap- where the consolidated cases were pending. Maxxam and other potential respondents of propriated to support the FRF and it is only As a result of that meeting, Hurwitz, acting its intention to file claims against them in equitable that any funds remaining be re- on behalf of Pacific Lumber, Maxxam, and early December 1995. An OTS suit is likely to turned to the Treasury. Furthermore, al- other Maxxam subsidiaries, agreed to settle include a direct claim against Maxxam and though section 11A(f) by its terms speaks of the cases for $52 million, with $14.8 million may seek monetary damages that exceed FRF funds going to Treasury only upon FRF paid by Pacific Lumber, $33 million paid by $350 million. dissolution, the entire statutory framework insurance carriers of Pacific Lumber, c. Pacific Lumber has been unable to re- of the FRF has previously been interpreted Maxxam and MGI, and the balance from duce the substantial debt Hurwitz burdened to allow the return of FRF funds to Treasury other defendants. See, Maxxam, Inc. 10–K, it with as a result of his successful takeover under appropriate circumstances prior to December 31, 1994. Moreover, two weeks ago effort. The company is in need of cash to such dissolution. In particular, as stated in Hurwitz said he could ‘‘work out a Head- service its operations. As harvestable another context: waters solution in half a day’’ if he could get timberland, the virgin old growth redwoods ‘‘it may asserted generally that Congress the government to talk to him. that comprise the Headwaters Forest are could not have intended for excess funds to II. Maxxam May Well Ultimately Be Obligated among Pacific Lumber’s most valuable as- remain indefinitely in the FRF in the event to Indemnify Hurwitz for FDIC Lawsuit sets. To date, however, Pacific Lumber has that the FDIC as manager were to determine a. Maxxam’s indemnification provisions been unable to log these trees, and has suf- in later years that the amount of such funds are contained in the amended Bylaws dated fered financially as a result. In addition to exceeded the FRF’s needs estimated as of August 1, 1988, and provide indemnity to numerous lawsuits filed by various environ- that time—especially since any liabilities ‘‘each person who is or was a director or offi- mental organizations against Pacific Lum- unpaid by the FRF as a result of an early cer [of Maxxam] . . . at any time on or after ber that prevented the logging of the virgin transfer to the Treasury would have to be

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00154 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.397 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2493 satisfied by subsequent appropriations for ment, although if the assessment is made in erties to Federal and state agencies through which an authorization of appropriations is favor of Headwaters Forest preservation, the public benefit conveyances, if the property provided in § 11A(c) of the FDI Act.’’ FDIC may assist in its implementation by supports a primary mission of the agency. FDIC Memorandum, dated October 5, 1995, the means discussed above. The Department of the Interior is specifi- from Henry R. F. Griffin, Assistant General ISSUE 3: WHAT LEGISLATIVE MECHA- cally provided opportunities to acquire base Counsel, through William F. Kroener, III, NISMS EXIST THAT MAY FACILITATE A closure property at no cost for any one of General Counsel, to William A. Longbrake, TRANSFER OF THE HEADWATERS FOREST three purposes: parks and recreation, wildlife Deputy to the Chairman & Chief Financial TO THE U.S. DEPARTMENT OF THE INTE- conservation, or historic monuments. Officer. RIOR WITH MINIMAL FINANCIAL OUTLAY? Attached are materials relative to these Thus, if the FDIC as manager of the FRF SHORT ANSWER: THREE LEGISLATIVE authorities. were to conclude at any time that the AUTHORIZATIONS PROVIDE A MECHA- amount of assets in the FRF exceeds the NISM FOR AN INTER-AGENCY TRANSFER FDIC’s then estimate of FRF liabilities, the OF TITLE TO THE HEADWATERS FOREST Attachment amount of such excess or any portion thereof TO THE DEPARTMENT OF INTERIOR. § 667a. Omitted could be turned over to Treasury prior to THEY ARE THE TRANSFER OF REAL Historical Note dissolution of the FRF. (We stress, however, PROPERTY ACT; THE COASTAL BAR- Codification. Section, Act June 8, 1940, c. that any such early transfer out of the FRF RIERS IMPROVEMENT ACT; AND THE DE- 295.§§ 1 to 4, 54 Stat. 261, authorized compacts would be within the FDIC’s sole discretion.) FENSE BASE CLOSURE AND REALIGN- or agreements between or among the States Furthermore, although the statute speaks in MENT ACT OF 1990. EACH ACT PRESENTS bordering on the Atlantic Ocean with respect terms of FRF funds going back to Treasury, PARTICULAR LEGAL AND POLITICAL to fishing in the territorial waters and bays and the previous opinion concerned FRF CONSIDERATIONS THAT REQUIRE SPE- and inlets of the Atlantic Ocean on which funds, we do not perceive a legal bar to the CIAL CONSIDERATION. (Answer prepared such States border. FDIC’s making an early transfer of FRF as- by the Department of the Interior). Act May 4, 1942, c. 283, §§ 1 to 4, 56 Stat. 267, sets in kind (such as Headwaters, if it were DISCUSSION ANSWER: granted the consent and approval of Con- obtained by the FRF in settlement with There are three specific legislative author- gress to an interstate compact relating to (Hurwitz), provided the other conditions for izations which permit acquisitions of real the better utilization of the fisheries (ma- an early transfer were satisfied. property through a transfer from Federal rine, shell, and anadromous) of the Atlantic This approach would have the decided ad- Agencies to the U.S. Department of the Inte- seaboard and creating the Atlantic States vantage, from the FDIC’s viewpoint, of rior at no cost, at less than Fair Market Marine Fisheries Commission. avoiding the necessity for the FDIC to liq- Value, or with special considerations. These Act Aug. 19, 1950, c. 763, §§ 1 to 4, 64 Stat. uidate the Headwaters Forest at its fair mar- provisions could possibly assist in the acqui- 467, granted the consent and approval of Con- ket value. So long as the FDIC had obtained sition of Federal properties to support a land gress to an amendment to the Atlantic fair value from Hurwitz and related compa- exchange with Maxxam Corporation for the States Marine Fisheries Compact and re- nies in return for settlement of its profes- Headwaters Forest lands. pealed limitation on the life of such com- sional liability lawsuit (i.e., assuming the es- The Transfer of Real Property Act (16 U.S.C. pact. timated value of the Headwaters Forest § 667b) § 667b. Transfer of certain real property for would exceed the FDIC’s settlement value of This statute allows real property, which is wildlife conservation purposes; reservation the case), then the FDIC could hand the no longer required by the agency exercising of rights property over to Treasury without any ques- jurisdiction over the property, to be trans- tion as to whether the FDIC had fulfilled its Upon request, real property which is under ferred to state wildlife agencies for wildlife the jurisdiction or control of a Federal agen- fiduciary duty of maximizing (Headwaters) conservation purposes or to the Secretary of value to the FRF. Treasury as ‘‘residual ben- cy and no longer required by such agency, (1) the Interior in instances where the property can be utilized for wildlife conservation pur- eficiary‘‘ could itself maximize that value, has particular value in carrying out the na- applying its own policy and other judgments poses by the agency of the State exercising tional migratory bird management program. administration over the wildlife resources of to the matter—presumably by effecting a If the Administrator of General Services de- further transfer to the Department of the In- the State wherein the real property lies or termines that such real property is available by the Secretary of the Interior; and (2) is terior or another federal agency for wilder- for conservation purposes then he may, not- ness preservation purposes to the ultimate valuable for use for any such purpose, and withstanding any other provisions of law, which, in the determination of the Adminis- benefit of the United States. transfer said property ‘‘without reimburse- In short, the FDIC could legally transfer trator of General Services, is available for ment or transfer of funds’’ to a state or the such use may, notwithstanding any other title to the Headwaters Forest out of the Department of the Interior as appropriate. FRF to Treasury, if the FDIC determined provisions of law, be transferred without re- The Coastal Barrier Improvement Act (Pub. L. that the state of the FRF at the time of imbursement or transfer of funds (with or 101–591, § 10) transfer were such that the value of Head- without improvements as determined by said waters was not better retained in the FRF Section 10 of the Coastal Barrier Improve- Administrator) by the Federal agency having for discharge of FRF liabilities. We believe ment Act, 12 U.S.C. § 1441a–3 et seq., provides jurisdiction or control of the property to (a) that a plausible case for such a determina- that certain ‘‘covered’’ properties held by such State agency if the management there- tion may be possible at present or in the the Resolution Trust Corporation (RTC) or of for the conservation of wildlife relates to foreseeable future, given that the FRF cur- the Federal Deposit Insurance Corporation other than migratory birds, or (b) to the Sec- rently has assets and appropriated funds in (FDIC) cannot be sold or transferred by those retary of the Interior if the real property has excess of its liabilities. However, there can agencies until notice of availability is made particular value in carrying out the national be no assurance that the FDIC Board of Di- in the Federal Register, and the opportunity migratory bird management program. Any rectors would be willing to make the req- is given for a Federal Agency or ‘‘qualified such transfer to other than the United uisite determination given uncertainties as organization,’’ to submit a serious letter of States shall be subject to the reservation by to contingent liabilities of the FRF. We intent to acquire the property for the pur- the United States of all oil, gas, and mineral note, too, that Treasury would have to be pose of preserving it for wildlife refuge, sanc- rights, and to the condition that the prop- willing to receive the Headwaters Forest (if tuary, open space, recreational, historical, erty shall continue to be used for wildlife only as part of an instantaneous transfer on cultural, or natural resource conservation conservation or other of the above-stated to the Department of the Interior or another purposes. Covered properties include those purposes and in the event it is no longer used federal agency), and an inter-agency memo- which the RTC, FDIC or former Federal Sav- for such purposes or in the event it is needed randum of understanding would therefore ings and Loan Insurance Corporation for national defense purposes title thereto seem desirable in order to flesh out this plan. (FSLIC) have acquired in their corporate ca- shall revert to the United States. Finally, it is crucial to this approach that pacity and that is either located within the (May 19, 1948, c. 310, § 1, 62 Stat. 240; June 30, Treasury, as residual beneficiary of the FRF Coastal Barrier Resources System or is unde- 1949, c. 288, Title I, § 105, 63 Stat. 381; Sept. 26, and standing in lieu of taxpayers of the veloped, greater than 50 acres in size, and ad- 1972, Pub.L. 92–432, 86 Stat. 723.) United States, will have to make the assess- jacent or contiguous to any lands managed Historical Note ment (in consultation with other appropriate by a governmental agency primarily for the 1972 Amendment. C1. (2). Pub.L. 92–432 de- Federal governmental entities) that trans- preservation purposes stated above. If a Fed- leted ‘‘chiefly’’ preceding ‘‘valuable for use’’. ferring the Headwaters Forest for the con- eral agency or qualified organization sub- Transfer of Functions. The functions, templated purposes is, as a policy and legal mits such a letter of intent, the corporation records, property, etc., of the War Assets Ad- matter, the right thing to do, all factors con- concerned may not transfer the property to ministration were transferred to the General sidered. This assessment amounts to a judg- any other party for ninety days, unless the Services Administration, the functions of ment call as to the relative value of pre- letter of intent is withdrawn. the War Assets Administrator were trans- serving the Headwaters Forest for wilderness Defense Base Closure and Realignment Act of ferred to the Administrator of General Serv- purposes as opposed to settling the claim 1990 (Pub. L. 101–510, Section XXIX), as ices, and the War Assets Administration, and against Hurwitz for cash in order to reduce amended the office of War Assets Administrator were the federal deficit to that extent. It is not in The Base Closure Act authorizes the De- abolished by section 105 of the Act June 30, any event for the FDIC to make that assess- partment of Defense (DOD) to transfer prop- 1949.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00155 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.399 pfrm07 PsN: E20PT1 E2494 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 Effective Date of Transfer of Functions. business and development component into The following criteria and factors will be Transfer of functions effective July 1, 1949, their overall base reuse planning process as a used, as appropriate, to determine whether a see Effective Date note set out under section basis for receiving and managing the real community is eligible for an EDC and to 471 of Title 40, Public Buildings, Property property. This supplemental effort will assist evaluate the proposed terms and conditions and Works. LRAs in identifying necessary implementa- of the EDC, including price, time of payment Legislative History. For legislative history tion resources and establish a community- and other relevant methods of compensation and purpose of Act May 19, 1948, see 1948 U.S. based proposal for the Military Department’s to the Federal Government. Code Cong. Service, p. 1553. See, also, Act consideration. The Military Departments Adverse economic impact of closure on the June 30, 1949, 1949 U.S. Code Cong. Service, p. and the Office of Economic Adjustment will region and potential for economic recovery 1475; Pub.L. 92–432, 1972 U.S. Code Cong. and continue to work closely with the affected after an EDC. Adm.News, p. 3366. LRA to ensure that an adequate planning ef- Extent of short- and long-term job genera- fort is undertaken. tion. [From the Federal Register, Vol. 59, No. 20G, What must an application contain? Consistency with the overall Redevelop- October 26, 1994] The application should explain why an ment Plan. EDC is necessary for economic redevelop- Financial feasibility of the development, DEPARTMENT OF DEFENSE ment and job creation. They application including market analysis and the need and Office of the Secretary should contain the following elements. extent of proposed infrastructure invest- 32 CFR Parts 90 and 91 1. A copy of the adopted Redevelopment ment. RINs 0790–AF61 and 0790–AF62 Plan. Extent of State and local investment and Revitalizing Base Closure Communities and 2. A project narrative including the fol- level of risk incurred. Community Assistance lowing: Current local and regional real estate mar- —A general description of property re- ket conditions. AGENCY: Department of Defense, DoD. quested. Incorporation of other Federal agency in- ACTION: Interim final rule: amendments. —A description of the intended uses. SUMMARY: The interim final rule amend- terests and concerns, and applicability of, —A description of the economic impact of and conflicts with, other Federal property ment promulgates guidance required by Sec- closure on the local communities. tion 2903 of the National Defense Authoriza- disposal authorities. —A description of the financial condition Relationship to the overall Military De- tion Act for Fiscal Year 1994. This guidance of the community and the prospects for rede- clarifies the application process and the cri- partment disposal plan for the installation. velopment of the property. Economic benefit to the Federal Govern- teria that will be used to evaluate an appli- —A statement of how the EDC is con- ment, including protection and maintenance cation for property under this section. sistent with the overall Redevelopment Plan. cost savings and anticipated consideration DATES: This document is effective October 3. A description of how the EDC will con- 26, 1994. Any pending written request for eco- from the transfer. tribute to short- and long-term job creation Compliance with applicable Federal, State, nomic development Economic Adjustment. and economic redevelopment of the base and and local laws and regulations. Consequently, application submitted by enti- community, including projected number, and What are the guidelines for determining ties other than LRAs will not be considered. type, of new jobs it will assist in creating. When should an application for an Eco- the terms and conditions of consideration? 4. A business and development plan for the The individual circumstances of each com- nomic Development Conveyance be made? EDC parcel, including such elements as: munity and each base mean that the amount First, an LRA must be organized and a re- —A development timetable, phasing plan and type of consideration may vary from development plan created. The Department and cash flow analysis. base to base. This amendment gives greater of Defense’s Office of Economic Adjustment —A market and financial feasibility anal- discretion and flexibility to the Military De- can provide guidance and technical and fi- ysis describing the economic visibility of the partments to negotiate with the LRA to ar- nancial support in these efforts, Once a rede- project, including an estimate of net pro- rive at an appropriate arrangement. Due to velopment plan has been developed and ceeds over a fifteen-year period, the proposed the circumstances of a particular site, the adopted, the LRA can then submit an EDC consideration or payment to the Department base’s value may be high or low, and the application to the Military Department re- of Defense, and the estimated fair market range of the estimated present fair market sponsible for the property. The application value of the property. should be submitted by the lRA after con- —A cost estimate and justification for in- value may be broad or narrow. Where there sultation with the Military Department frastructure and other investments needed is value, the Department of Defense has an which shall establish a reasonable time pe- for the development of the EDC parcel. obligation under Title XXIX of the National riod for submission of the application. —Local investment and proposed financing Defense Authorization Act for FY 1994 to ob- The LRA always has the option of acquir- strategies for the development. tain consideration within the estimated ing property under the FPASA and thus it 5. A statement describing why other au- range of present fair market value, or to jus- may not be necessary to complete an appli- thorities—as negotiated sale and public ben- tify why such consideration was not realized. cation for a EDC within the stated time- efit transfer for education, parks, public Taking into account all information pro- tables. LRSs can discuss the various transfer health, aviation, historic monuments, pris- vided in the EDC application and any addi- options with the Military Department. ons, and wildlife conservation—cannot be tional information considered relevant, the How much property should be included in used to accomplish the economic develop- Military Department will contract for or an Economic Development Conveyance ap- ment and job creation goals. prepare an estimate of the fair market value plication? 6. If a transfer is requested for less than of the property, which may be expressed as a The EDC should be used by LRAs to obtain the estimated fair market value—with or range of values. The Military Department large parcels of the base rather then merely without initial payment at the time of trans- shall consult with the LRA on valuation as- individual buildings. The income received fer—then a statement should be provided jus- sumptions, guidelines and on instructions from some of the higher value property tifying discount. The statement should in- given to the person(s) making the estimation should be used to offset the maintenance and clude the amount and form of the proposed of value. marketing cost of the less desirable parcels. consideration, a payment schedule, the gen- As stated above, the EDC application must In order for this conveyance to spur redevel- eral terms and conditions for the convey- contain a statement that proposes general opment, large parcels must be used to pro- ance, and projected date of conveyance. terms and conditions of the conveyance, as vide an income stream to assist the long- 7. A statement of the LRA’s legal author- well as the amount and type of the consider- term development of the property. ity to acquire and dispose of the property. ation, a payment schedule, and projected Why is an application necessary? Additional information may be requested date of conveyance. After reviewing the ap- This Amendment to the interim final rule by the Military Departments to allow for a plication, the Military Department has the prescribes that an application be prepared by better evaluation of the application. LRAs discretion and flexibility to enter into one of an LRA as the formal request for property, are encouraged to use site information avail- two types of agreements: to better assist the Military Department in able from the Military Departments, includ- 1. Consideration within the estimated considering requests for property under the ing maintenance and caretaking expenses. range of present fair market value, as deter- Economic Development Conveyance (EDC). What criteria will be used to make a deter- mined by the Secretary of the Military De- This information also will provide the basis mination on the application? partment. The Military Department can be for the Military Department to respond to After receipt of an application for an EDC, flexible about the terms and conditions of its obligation under Title XXIX, taking into the Secretary of the Military Department payment, and can provide financing on the account the best community-based informa- will determine whether an EDC is appro- property. The payment can be in cash or in- tion on the proposed conveyance action. A priate to spur economic development and job kind, and can be paid at time of transfer or great deal of information necessary for an creation and examine whether the terms and at a time in the future. The Military Depart- application is readily available to the LRA conditions proposed are fair and reasonable. ments will have the discretion and flexibility through the community planning process The Military Department may also consider to enter into agreements that specify the and supported through existing DoD tech- information independent of the application, form and amount of consideration and en- nical and financial resources. such as views of other Federal agencies, ap- sures that consideration is within the esti- Beyond the standard planning information praisals, caretaker costs and other relevant mated range of fair market value at the time collected to date. LRAs should incorporate a information. of application. Such methods of payment

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00156 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.402 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2495 could include: participation in the gross or tives. Conveyances to the LRA will be made ment Conveyance. Specific attention will be net cash flow, deferred payments, mortgages under terms and conditions designed to fa- placed on the business and development plan or other financing arrangements. cilitate local economic redevelopment and submitted as part of the EDC application and 2. Consideration below the estimated range job creation, and may be made at less than the criteria listed in section 91.7(e)(8) will be of fair market value, where proper justifica- fair market value, with proper justification. used. tion is provided: If a discount is found by the * * * * * (4) In those instances in which an EDC is Secretary of the Military Department to be made for consideration below the range of necessary to foster local economic redevelop- PART 91—REVITALIZING BASE CLOSURE the estimated present fair market value of ment and job creation, the amount of consid- COMMUNITIES—BASE CLOSURE COM- the property—or if the estimated fair market eration can be below the estimated range of MUNITY ASSISTANCE value is expressed as a range of values, below fair market value. Again, the terms and con- 4. The authority citation for part 91 con- the lowest value in that range—the Military ditions of payment will be negotiated be- tinues to read as follows: Department shall prepare a written expla- tween the Military Department and the Authority: 10 U.S.C. 2687 note. nation why the estimated fair market value LRA. 4A. Section 91.4 is revised to read as fol- was not obtained. Additionally, the Military (a). Justification. Proper justification for a lows: Departments must prepare a written state- discount shall be based upon the findings in § 91.4 Policy. ment explaining why other Federal property the business and development plan contained It is DoD policy to convey property to a transfer authorities could not be used to gen- in the EDC application. Local Redevelopment Authority (LRA) to erate economic redevelopment and job cre- Development economics, including absorp- help foster economic development and job ation. tion schedules and legitimate infrastructure creation when other federal property dis- costs, would provide a basis for such jus- posal options cannot achieve such objectives. Dated: October 20, 1994. tification. The ability to pay at time of con- Conveyances to the LRA will be made under L.M. Bynum, veyance or to obtain financing would not be terms and conditions designed to facilitate Alternate OSD Federal Register Liaison Offi- a proper justification, since payment terms local economic redevelopment and job cre- cer, Department of Defense. and conditions can be negotiated. ation, and may be made at less than fair In negotiating the terms and conditions of market value, with property justification. consideration with the LRA, the Secretary This regulation does not create any rights Revision Notes and Legislative Reports of the Military Department must determine and remedies and may not be relied upon by 1989 Act. House Report No. 101–54 and that a fair and reasonable compensation to any person, organization, or other entity to House Conference Report No. 101–209, see 1989 the Federal Government will be realized allege a denial of any rights or remedies U.S. Code Cong. and Adm.News, p. 86. from the EDC. Where property is transferred other than those provided by Pub. L. 103–160. References in Text under an EDC at an amount less than the es- Title XXIX. timated range of fair market value, the Mili- The Housing and Urban Development Act (x) Compliance with applicable Federal, of 1968, as amended, referred to in par. (2), is tary Department shall prepare a written ex- State, and local laws and regulations. planation of why the consideration was less Pub.L. 90–448, Aug. 1, 1968, 82 Stat. 476, as (l) Consideration. amended. Title IX of the Housing and Urban than the estimated range of present fair (1) For conveyances made pursuant to sec- Development Act of 1968, as amended, is clas- market value. tion 91.7(d). Economic Development Convey- sified principally to chapter 49 (§ 3931 et seq.) D. Executive Order 12866 ances, the Secretary of the Military Depart- of Title 42, The Public Health and Welfare. ment will review the application for an EDC It has been determined that these amend- Title IV of the Housing and Urban Develop- and negotiate the terms and conditions of ments are a significant regulatory action. ment Act, which was classified to chapter 48 each transaction with the LRA. The Military The amendments to the rule raise novel pol- (§ 8901 et seq.) of Title 42, was repealed, with Departments will have the discretion and icy issues arising out of the President’s pri- certain exceptions which were omitted from flexibility to enter into agreements that orities. the Code, by Pub.L. 98–181, Title IV, § 474(e), specify the form, amount, and payment E. Regulatory Flexibility Act Nov. 30, 1983, 97 Stat. 1239. For complete clas- schedule. The consideration may be at or sification of this Act to the Code, see Short This rule amendment is not subject to the below the estimated fair market value, with Title of 1968 Amendment note set out under Regulatory Flexibility Act (5 U.S.C. 601 et or without initial payment, in cash or inkind section 1701 of this title and Tables. seq.) because the amendment will not have a and paid over time. An EDC must be one of significant economic impact on a substantial the two following types of agreements: Codifications number of small entities. The primary effect (i) Consideration within the estimated Section was enacted as part of the Finan- of this amendment will be to reduce the bur- range of present fair market value, as deter- cial Institutions Reform, Recovery, and En- den on local communities of the Govern- mined by the Secretary of the Military De- forcement Act of 1989 and not as part of the ment’s property disposal process at closing partment. Payments must be made to ensure Federal Home Loan Bank Act, which com- military installations and to accelerate the consideration is within the estimated range prises this chapter. economic recovery of the relatively small of fair market value at the time of applica- Separability of Provisions number of communities that will be affected tion. If any provisions of Pub.L. 101–73 or the ap- by the closure of nearby military installa- (ii) Consideration can be below the esti- plication thereof to any person or cir- tions. mated range of fair market value, when cumstance is held invalid, the remainder of F. Paperwork Reduction Act proper justification is provided. The amount Pub.L. 101–73 and the application of the pro- of consideration can be below the estimated The Rule amendment is not subject to the vision to other persons not similarly situ- range of fair market value, if the Secretary Paperwork Reduction Act because it imposes ated or to other circumstances not to be af- of the Military Department determines that no obligatory information requirements be- fected thereby, see section 1221 of Pub.L. 101– a discount is necessary for economic redevel- yond internal DoD use. 73, set out as a note under section 1811 of this opment and job creation. List of Subjects in 32 CFR Parts 90 and 91. title. Community development, Government em- (2) The amount of consideration paid in the § 1441a–2. Authorization for State housing fi- ployees, Military personnel, Surplus Govern- future shall equal the present value of the nance agencies and nonprofit entities to ment property. agreed-upon fair market value or discounted fair market value. Additional provisions purchase mortgage-related assets PART 90—REVITALIZING BASE CLOSURE may be incorporated in the conveyance docu- (a) Authorization COMMUNITIES ments to protect the Department’s interest Notwithstanding any other provision of 1. The authority citation for 32 CFR part 90 in obtaining the agreed upon consideration. Federal or State law, a State housing fi- continues to read as following: Also, the standard GSA excess profits clause, nance authority or nonprofit entity may Authority: 10 U.S.C. 2687 note. appropriately tailored to the transaction, purchase mortgage-related assets from the § 90.4 [Removed and Reserved] will be used in the conveyance documents to Resolution Trust Corporation or from finan- 2. Section 90.4(a)(1)(iii) is removed and re- the LRA. cial institutions with respect to which the served. (3) In a rural area, as defined by this rule, Federal Deposit Insurance Corporation is 3. Section 90.4(b) is revised to read as fol- any EDC approved by the Secretary of the acting as a conservator or receiver (includ- lows: Military Department shall be made without ing assets associated with any trust busi- consideration when the base closure will ness), and any contract for such purchase § 90.4 Policy. have a substantial adverse impact on the shall be effective in accordance with its * * * * * economy of the communities in the vicinity terms without any further approval, assign- (b) In implementing Title XXIX of Public of the installation and on the prospect for ment, or consent with respect to that con- Law 103–160, it is DoD policy to convey prop- their economic recovery. The Secretary of tract. erty to a Local Redevelopment Authority the Military Department concerned will de- (b) Investment requirement (LRA) to help foster economic development termine if these two conditions are met Any State housing finance authority or and job creation when other federal property based on all the information considered in nonprofit entity which purchases mortgage- disposal options cannot achieve such objec- the application for an Economic Develop- related assets pursuant to subsection (a) of

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00157 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.404 pfrm07 PsN: E20PT1 E2496 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 this section shall invest any net income at- (4) Offers and permitted transfer among the presidents of the Federal Home tributable to the ownership of those assets in If a notice of serious interest in a covered Loan Banks. financing, refinancing, or rehabilitating low- property is timely submitted pursuant to (2) Terms and moderate-income housing within the ju- paragraph (2), the corporation concerned Of the 2 members appointed under para- risdiction of the State housing finance au- may not sell or otherwise transfer such cov- graph (1)(B), 1 shall be appointed for an ini- thority or within the geographical area ered property during the 90-day period begin- tial term of 2 years and 1 shall be appointed served by the nonprofit entity. ning upon the expiration of the period under for an initial term of 3 years. Thereafter, (Pub.L. 101–73, Title XIII, § 1302, Aug. 9, 1989, paragraph (2) except to a governmental agen- such members shall be appointed for a term 103 Stat. 548.) cy or qualified organization for use pri- of 3 years. HISTORICAL AND STATUTORY NOTES marily for wildlife refuge, sanctuary, open (3) Vacancy Revision Notes and Legislative Reports space, recreational, historical, cultural, or If any member leaves the office in which natural resource conservation purposes, un- 1989 Act. House Report No. 101–54 and such member was serving when less all notices of serious interest under House Conference Report No. 101–209, see 1989 *** paragraph (2) have been withdrawn. U.S.Code Cong. and Adm. News, p. 86. (B) the successor to the office of such (c) Definitions member shall serve the remainder of such Codifications For purposes of this section: member’s term. Section was enacted as part of the Finan- (1) Corporation concerned The term ‘‘corporation concerned’’ (4) Equal representation of banks cial Institutions Reform, Recovery, and En- No president of a Federal Home Loan Bank forcement Act of 1989 and not as part of the means— (A) the Federal Deposit Insurance Corpora- may be appointed to serve an additional Federal Home Loan Bank Act, which com- term on the Directorate until such time as prises this chapter. tion, with respect to matters relating to the Federal Deposit Insurance Corporation; and the presidents of each of the other Federal Definitions (B) the Resolution Trust Corporation, with Home Loan Banks have served as many For definitions of terms used in this sec- respect to matters relating to the Resolution terms as the president of such bank. tion see section 1441a–1 of this title. Trust Corporation. (5) Chairperson LIBRARY REFERENCES (2) Covered property The Thrift Depositor Protection Oversight American Digest System The term ‘‘covered property’’ means any Board shall select the chairperson of the Di- property— rectorate from among the 3 members of the Supremacy of federal law as to banking, (A) to which— see States § 18.19. Directorate. (i) the Resolution Trust Corporation has (6) Staff Encyclopedias acquired title in its corporate or receivership (A) No paid employees Concurrent of conflicting state legislation, capacity; or The Funding Corporation shall have no (ii) the Federal Deposit Insurance Corpora- see C.J.S. States § 24. paid employees. tion has acquired title in its corporate ca- WESTLAW ELECTRONIC RESEARCH (B) Powers pacity or which use acquired **** States cases: 360k [add key number]. (B) that— The Directorate may, with the approval of § 1441a–3. RTC and FDIC properties (i) is located within the Coastal Barrier the Federal Housing Finance Board author- (a) Reports Resources System; or ize the officers, employees, or agents of the (1) Submission (ii) is undeveloped, greater than 50 acres in Federal Home Loan Banks to act for and on The Resolution Trust Corporation and the size, and adjacent to or contiguous with any behalf of the Funding Corporation in such Federal Deposit Insurance Corporation shall lands managed by a governmental agency manner as may be necessary to carry out the each submit to the Congress for each year a primarily for wildlife refuge, sanctuary, open functions of the Funding Corporation. report identifying and describing any prop- space, recreational, historical, cultural, or (7) Administrative expenses erty that is covered property of the corpora- natural resource conservation purposes. (A) In general tion concerned as of September 30 of such (3) Governmental agency All administrative expenses of the Funding year. The report shall be submitted on or be- The term ‘‘governmental agency’’ means Corporation, including custodian fees, shall fore March 30 of the following year. any agency or entity of the Federal Govern- be paid by the Federal Home Loan Banks. (2) Consultation ment or a State or local government. (B) Pro rata distribution In preparing the reports required under (4) Undeveloped The amount each Federal Home Loan Bank this subsection, each corporation concerned The term ‘‘undeveloped’’ means shall pay under subparagraph (A) shall be de- (A) containing few manmade structures may consult with the Secretary of the Inte- termined by the Thrift Depositor Protection and having geomorphic and ecological proc- rior for purposes of identifying the prop- Oversight Board by multiplying the total ad- esses that are not significantly impeded by erties described in paragraph (1). ministrative expenses for any period by the (b) Limitation on Transfer any such structures or human activity; and percentage arrived at by dividing— (B) having natural, cultural, recreational, (1) Notice (i) the aggregate amount the Thrift De- or scientific value of special significance. The Resolution Trust Corporation and the positor Protection Oversight Board required Federal Deposit Insurance Corporation may (Pub.L. 101–591, § 10, Nov. 16, 1990, 104 Stat. 2939.) such bank to invest in the Funding Corpora- not sell or otherwise transfer any covered tion (as of the time of such determination) HISTORICAL AND STATUTORY NOTES property unless the corporation concerned under paragraphs (4) and (5) of subsection (e) causes to be published in the Federal Reg- Revision Notes and Legislative Reports of this section (computed without regard to ister a notice of the availability of the prop- 1990 Act. House Report No. 101–657(I) and paragraphs (3) or (6) of such subsection); by erty for purchase or other transfer that iden- (II), see 1990 U.S.Code Cong. and Adm.News, (ii) the aggregate amount the Thrift De- tifies the property and describes the loca- p. 4190. positor Protection Oversight Board required tion, characteristics, and size of the prop- Codifications all Federal Home Loan Banks to invest (as of erty. Section was enacted as part of the Coastal the time of such determination) under such (2) Expression of serious interest Barrier Improvement Act of 1990 and not as paragraphs. During the 90-day period beginning on the part of the Federal Home Loan Bank Act, (8) Regulation by Thrift Depositor Protec- date that notice under paragraph (1) con- which comprises this chapter. tion Oversight Board cerning a covered property is first published, § 1441b. Resolution Funding Corporation es- The Directorate of the Funding Corpora- any governmental agency or qualified orga- tion shall be subject to such regulations, or- nization may submit to the corporation con- tablished (a) Purpose ders, and directions as the Thrift Depositor cerned a written notice of serious interest Protection Oversight Board may prescribe. for the purchase or other transfer of a par- The purpose of the Resolution Funding Corporation is to provide funds to the Reso- (9) No compensation from Funding Cor- ticular covered property for which notice has poration been published. The notice of serious interest lution Trust Corporation to enable the Reso- lution Trust Corporation to carry out the Members of the Directorate of the Funding shall be in such form and include such infor- Corporation shall receive no pay, allowance, mation as the corporation concerned may provisions of this chapter. (b) Establishment or benefit from the Funding Corporation for prescribe. There is established a corporation to be serving on the Directorate. (3) Prohibition of transfer (d) Powers of the Funding Corporation During the period under paragraph (2), a known as the Resolution Funding Corpora- The Funding Corporation shall have only corporation concerned may not sell or other- tion. (c) Management of Funding Corporation the powers described in paragraphs (1) wise transfer any covered property for which (1) Directorate through (9), subject to the other provisions notice has been published under paragraph The Funding Corporation shall be under of this section and such regulations, orders, (1). Upon the expiration of such period, the the management of a Directorate composed *** corporation concerned may sell or otherwise of 3 members as follows: transfer any covered property for which no- (A) The director of the Office of Finance of tice under paragraph (1) has been published if the Federal Home Loan Banks (or the head ISSUE 4: WHAT WOULD BE THE POS- a notice of serious interest under paragraph of any successor office). SIBLE BUDGETARY IMPACT FROM AN AC- (2) concerning the property has not been (B) 2 members selected by the Thrift De- QUISITION OF THE HEADWATERS FOREST timely submitted. positor Protection Oversight Board from THROUGH THE FDIC?

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00158 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.406 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2497 SHORT ANSWER: ANY BUDGETARY IM- (or, for that mater, from an individual) 10/11/95. PACT, INCLUDING ISSUES OF ‘‘SCORING,’’ would not be scored, since no resources Continued to talk to environmentalists, IS DEPENDENT ON THE PARTICULAR would actually become available for the pur- surrounding landowners STRUCTURE OF THE TRANSACTION AND chase until a separate appropriations law is Katie McGinty head of Council. WHETHER SPECIFIC LEGISLATION WAS enacted. If an appropriations act provides V.P. met with environmentalist when he NECESSARY TO FACILITATE THE ACQUI- funding to an agency to purchase the prop- was out there. SITION OR TRANSFER OF THE HEAD- erty, then the budget impact would be scored 10/12—Dave Felt. Monty Tuesday. WATERS FOREST. as discretionary. DISCUSSION ANSWER: 10/20/95 The interagency group has discussed sev- RECORD 31 May. At OMB re Hurwitz/Redwoods. eral potential mechanisms for accomplishing Assume it would go to Forest Service— the proposed ‘‘debt for nature’’ swap. The ENVIRONMENTAL PROTECTION only $30 mil in our land acquisition fund—We following discussion addresses the budgetary INFORMATION CENTER, have no particular interest—very small area impact of several possible ways of acquiring Garberville, CA. to manage/very remote—would be a manage- the Headwaters Forest, putting aside the 3,000 core acres—redwoods. ment problem. question of whether there is substantive au- 1,700 acres buffer zone. May make more sense to give it to BLM, thority for FDIC, Treasury, or Interior/ Calif is now talking downward $50 to 70 Park Service might want it. USDA to execute any of these transactions million. How much money from the state—$70 m in under existing law. CECELIA LANMAN, timber. First, we have discussed a possible trans- Biodiversity Network Project Director. Exchanges—a gigantic exchange of land action in which the FSLIC Resolution Fund would alienate citizens of neighboring states. (FRF) would gain title to the land and trans- DOD—forestry says consider military Base. fer it to Treasury, possibly considering the NATURAL HERITAGE INSTITUTE, If there there cash, we have higher prior- value of the land as an ‘‘advance payment’’ Washington, DC. ities. on funds that will eventually be returned to 3,000 core acres—redwoods. Minority shareholders—suit against Treasury when the FRF dissolves. Treasury 1,700 acres buffer zone. Hurwitz. would then transfer/sell the land to the ap- Calif is now talking downward $50 to 70 Can H settle a suit by trading MAXXAM’s propriate agency. If it is determined that the million. assets authority to execute this transaction exists JULIA A. LEVIN, -Can FDIC do it, what would Treasury have under current law, then the transaction can- Staff Attorney. to do. not be ‘‘scored’’ under the Budget Enforce- Further—states interest—whether there ment Act (only legislation may be scored). On or about 11/30/95. are DOD possibilities. However, there would be a budget impact. If Jill R * * * refer to J. Williams * * * Don’t plan on cutting trees—Forest Serv- FRF gained title to the land and did not re- ice said that’s why it may be better to send cover cash for it, FRF would have fewer re- it to Park Service. ceipts. In more technical terms, the failure On or about 12/7/95. Reconvene in about 2 wks. to recover cash for the land would be a fore- /12/3:00 closed. Alan McReynolds * * * Jill Budget scorekeeping problem. gone receipt to FRF. This foregone receipt R * * * Maxxan motion to dismiss—get it Coastal Barrier Improvement Act. increases FRF’s outlays, increases total Fed- from Ct—not from us—H manuf. consp. issues. eral outlays, and increases the deficit. The 10/31/95—Alan McReynolds, DOD—Steve— budget effect is the same regardless of Base Closure Cmtee. whether the transfer is to Treasury as an On or about 2/13/96. Revenue from closed bank goes into Bank intermediary or directly to the Park Serv- How FDIC holds properties list of high Closure Acct—Revenues fund for other clo- ice. value prop. in Calif./Texas. sures and improvements. Revenues fund Second, there may be a possibility of trad- other closure actions including environ- ing other U.S. government property (such as 10/19/95. mental cleanups. A host of other public in- surplus military property) for the land. This Gore’s Chief of Staff—Ann. terest conveyances prisons, hospitals, FAA transaction would not necessarily need to in- Chairperson CEO, Katie McGinty. airport, etc. 100% public benefit discount. volve the FRF, which could receive any set- Elizabeth Blaug * * * Red Emerson own, Homeless, port conveyance—Charlestown, tlement of its claims in cash. Again, if no Sierra Lumber—buffer zone, Earth firsters Fish & Wildlife, BLM— legislation is required, then the transaction chaining themselves to * * *. Dept. of Interior had a notion they could cannot be scored under the Budget Enforce- Why was the appraisal done? claim land and swap it for protected land. ment Act. In general, barter transactions are How much area did it cover? Admin. opposes that kind of deal. Commu- not recorded in the budget. However, if the When was it done? nity revitalization—in the past just sold surplus property that is used in the exchange Did it include the 1000 acres buffer zone? em—didn’t get proper value—no zoning, no would have otherwise been sold, the agency Kate Anderton * * * New G.C. Save The community support—BRAC (Base Reallign which owned the property would be foregoing Redwoods League, Appraisal Valuation Jan- and Closure, acct didn’t get much money: receipts. These foregone receipts would in- uary 1, 1993. Better to work with community now. Com- crease that agency’s outlays, increase total 1992 Bush received * * * as an appraisal munity based programs Sept. 28, 95’ Base clo- Federal outlays, and increase the deficit. * * * for headwaters. Interior subcommittee sures approves by Cong. Fitzsimmons—Den- Third, it may be the case that legislation said do appraisal Rep. Stark * * *, Cali- ver. Hurwitz would be able to work with is needed to authorize the transaction or to fornia/Pacific Lumber did forest cruise (est. Redev. Auth.—88, 91, 93, 95 Communities appropriate funds to complete the debt-for- Boardfeet). Neither state nor Pacific Lumber want control of the property. Can’t bypass nature swap. If legislation is needed, then paid—so they don’t have appraisal. Basis of the process of Redev. Auth. the Congressional Budget Office and OMB cruise challengeable. If VP wanted to do it, we could structure a would be responsible for estimating the (1) Get Forest Service to share cruise and way to make it happen. But DOD would lose budgetary effect of the transaction. Legisla- appraisal; (2) independent review by forester receipts. Calif. would have to look at outrage tion that increases direct spending (i.e., credible with both environment and indus- of local community. If we need spec. legis, spending that is not under the control of try. Save the Redwoods League Hammon we’ll figure that out. Not aware of any har- Congressional appropriators) is scored under Jennsen Wallen & Associates out of Oak- vestable timber land. the ‘‘pay-as-you-go’’ (PAYGO) rules of the land—well known to work for Pacific Lum- Wanda didn’t try to help Alan McReynolds. Budget Enforcement Act. An example of di- ber a lot. Appraisal assumed cutting 96 to Can’t trade whole Mendencino forest. rect spending legislation that is relevant to 97% of all trees on property. Estimate only 3 Possible—Naval OC Station 36 acres. Any- the case at hand would be if the legislation to 4% set aside to meet California Regula- thing less than 300 civilians may not be part directed FDIC to hand over the property to tions. Basis of environmentalists attack in of BRAC process—may be easier. another Federal agency without reimburse- hearings. 4,488 acres for bottom line—head- Calif deleg. believes S.F. Bay area Harbor. ment; this legislation would be considered to waters grove. Rep. Brown, Stark, Feinstein. be direct spending since it forces the FRF to Old growth grove 3,000. Buffer to W, S, lit- GSA controls mainly of Bldgs. Gordon has forgo receipts (and therefore increases FRF’s tle E 15000 (owned by Pacific Lumber) to N asked his staff to list possib. in Bay area. outlays and total Federal outlays). Simi- buffer is owned by Sierra Lumber. Ellington AFB in Texas not a BRAC prop. larly, legislation that requires the exchange Department of Energy—oil leases on public Naval Station, Ground Prairie B/W Dallas of excess Government property that would lands or BLM. and Arlington Interior might be part of otherwise have been sold for the Headwaters Defense Lands—DOD screening process with GSA. Forest would also be scored as foregone re- Make it part of 6 Rivers National Forest Economic Development conveyance—DOD ceipts under the PAYGO rules. managed by Agriculture. Options BLM man- gets receipts back over time. Legislation that simply authorizes an ap- age, Fish & Wildlife manage as a refuge. 2nd Round postings propriation for an agency (e.g., the Park $499 million appraisal—3000 acres head- USAT—RIO conf on environment included Service) to buy the property from the FRF waters, 1500 acres buffer * * * a contel to reduce Greenhs gasses by yr. 2000.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00159 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.408 pfrm07 PsN: E20PT1 E2498 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001

Program in Dept of envy to implement. Iden- er in Pelosi’s office who worked on the Head- DISCUSSION POINTS tify carbon offset projects. Scientific model waters forest legislation for five years, I now I. Background develop carbon sink capacity—preserve of believe it is incorrect to describe the $499 1. United Savings Association of Texas, trees perm. carbon sink—formulas—vehicle million as the result of an ‘‘appraisal.’’ It Houston, Texas, (‘‘USAT’’) was acquired in for corp—carbon offsets. Political need for was not performed by any independent per- 1983 by Charles E. Hurwitz. Hurwitz lever- U.S. to make progress. son and was an estimate based on public in- aged the institution through speculative and formation prepared by the Forest Service uncontrolled investment and trading in large and asserted by the Director of the Forest 11/28/95—Headwaters mtg. CEQ go GSA mortgage-backed securities portfolios, with- Service in testimony before the Sub- out reasonable hedges, to $4.6 billion in as- route to transfer from Trea to Interior. committee on National Parks & Public Land. ‘‘Coastal Barriers Mgt Act’’—‘‘12 U.S.C. sets. Investments lost value and USAT was The testimony demonstrated that the value declared insolvent and placed into FSLIC re- 1441a–3’’—RTC, FDIC property. was seriously flawed and that those that KM—extremely accurate reports came ceivership on December 30, 1988. Loss to the were involved in calculating the value never back from environmentalists—keep con- FSLIC Resolution Fund is $1.6 billion. saw the land. 2. While Hurwitz was a controlling share- fidentiality. He said no one takes the $499 million seri- holder and de facto director of USAT he ac- Physical assets may not ‘‘count as money ously anymore, particularly since Hurwitz quired, through a hostile takeover and with for scoring’’ bought PacLumber for $500 million total the strategic and financial assistance of Treasury cannot give FRF credit for the that included all the company’s assets which Drexel Burnham Lambert, Inc., Pacific Lum- trees. included a large downtown San Francisco of- ber Company, a logging business based in If policymakers make decision to accept fice building and tens of thousands of acres northern California. As a result, Hurwitz trees—increases Fed. deficit—Insurmount- of other land and buildings. came to control the old growth, virgin red- able issue—there is a hole here if you take As the 3500 acres has never been formally woods that are the principal focus of the trees. Interior disagrees w/FDIC analysis of appraised, you are correct that the time has Headwaters Forest. Coastal Barriers—they think it does work. come to commission such valuation. II. FDIC Litigation Eliz—our group will meet again to sift thru PacLumber knows the $499 million is too 1. On August 2, 1995, FDIC as Manager of remaining questions. No formal contacts high, that’s why, according to Pelosi’s staff- the FSLIC Resolution Fund filed a lawsuit until OTS files. er, it is using it too its advantage and not against Mr. Hurwitz seeking damages in ex- John G.—we are leaning toward FDIC challenging it. True value may be half that cess of $250 million. opening discussions. according to Pelosi’s office. Lois—scoring problems were the biggest a. Complaint contains three claims: Count 1 alleges breach of fiduciary duty by difficulties. Hurwitz as de facto director and controlling John G.—after admin suit is filed is time EXECUTIVE OFFICE OF THE PRESI- shareholder of USAT by failing to comply for opening any discussions—prior to that we DENT, COUNCIL ON ENVIRONMENTAL with a Net Worth Maintenance Agreement to get back to K.M. to see if there’s any reason QUALITY, Washington, DC, October 25, 1995. maintain the capital of USAT; not to go forward with negotiations. Counts 2 and 3 allege gross negligence and Alan McReynolds To: Dave Sherman, Forest Service; Allen McReynolds, DOI; Larry Mellinger, DOI; aiding and abetting gross negligence in es- Investment properties tablishing, controlling and monitoring two About 2/26/96 RTC prop—in the past Inte- Bruce Beard, OMB; Jack Smith, FDIC; David Long, DOJ; John Bowman, Treas- large mortgage-backed securities portfolios. rior had to pay. Has that changed. 2. FDIC has authorized suit against three ury. $124m—Oak Valley, Beaumont, Calif, 6700 other former directors of USAT that we have From: Elisabeth Blaug, Associate General acres of under land in Riverside Cty.; Kock not yet sued; a tolling agreement with these Counsel. property—La Quinta, Calif—1200 acres near potential defendants expires on December 31, Subj: Headwaters Forest Meeting October 26. Palm Springs, Wildlife Refuge Rancho San 1995. The court may order FDIC to decide to Diego—already Most of you attended a meeting this past add them as defendants prior to that date. Buckley—failure to advise clients—Ken Friday at CEQ Chair Katie McGinty’s office, 3. Status of FDIC Litigation: Pursuant to Walker. Call admin. atty to talk about case. at which we initiated discussions on a poten- the Federal Rules of Civil Procedure, the tial debt-for-nature swap. As you will recall, parties—through counsel—have met and ex- the DIC recently filed a $250 million suit Nov/Dec 1995 changed disclosure statements that list all against Charles Hurwitz for his role in the relevant persons and documents that support Jeff Wms—11:40, Thur 60648 Nov 14, 11:00 722 failure of the United Savings Association of Jackson Place CEQ Conf Rm. our respective positions. Moreover, the par- Texas (in addition, there is a private False ties have agreed to a scheduling order that Rick Sterns: Re Judge Hughes Claims challenge pending). Mr. Hurwitz is a Ross Delston: Parker James, Jack reflects a quick pre-trial period. All dis- major stock owner in Maxxam, which ac- covery is to be concluded by July 1, 1996. The Sherkma. * * * Pat Bak, M. Palen, Ann quired Pacific Lumber Company, which owns Shopet. Judge Hughes—use of overlapping court has set a scheduling conference to dis- and logs the Headwaters Forest. Because this cuss all unresolved scheduling issues for Oc- auth. Hanass, Thur. order. Carolyn talked to forest contains approximately 3,000 acres of Kim Thur. tober 24, 1995; and a follow-up conference on virgin redwoods, there is great interest to November 28, 1995. preserve it. Among a number of options to III. Settlement Discussions 1/19/96. Told Alan McReynolds that I had consider for ensuring this happens is a poten- 1. FDIC has had several meetings and dis- talked to Carolyn Buck after lunch on 7/17/96. tial debt-for-nature swap, by which FDIC would seek to acquire Headwaters from Mr. cussions with Hurwitz’ counsel prior to the I asked whether OTS wanted to be involved filing of the lawsuit. Hurwitz has never, how- in discussions led by CEQ to respond to Hurwitz in exchange for release of its claims. At our meeting last Friday, a number of ever, indicated directly to FDIC a desire a ne- Hurwitz’ suggestion about Headwaters. She gotiate a settlement of the FDIC’s claims. said curtly, ‘‘No.’’ I asked if she had any ob- complex legal issues were raised concerning this proposed swap, which relate in some 2. As result of substantial attention to Pa- jection to FDIC participating—she said that cific Lumber’s harvesting of the redwoods by was not for her to decide. I concluded from part to your agency. Essentially, we need to examine if and how there might be a chain of the environmental community, media in- her manner that she did not intend to ex- quiries, Congressional correspondence, and press an opinion and didn’t want to talk ownership from FDIC to Treasury to a land management agency. Hence, there is a fol- the state of California, Pacific Lumber has about it anymore so we parted without fur- issued various press releases stating it would low-up meeting tomorrow (Thursday) at 10:00 ther discussion. I advised Elizabeth Blauger consider various means of preserving the red- a.m. at FDIC, 550 17th Street, room 3036. We about this yesterday afternoon. I said that if woods. will attempt to identify the legal issues that Hurwitz wanted to have global settlements IV. OTS Investigation with OTS and FDIC involved he would have need to be addressed to determine whether a 1. Since July 1994, the Office of Thrift Su- to ask for them just as happened with Ey and debt-for-nature swap is feasible. I look for- pervision has been investigating the failure Deloitte ward to seeing you or your designate(s) to- morrow. Please contact me at 395–7420 if you of USAT for purposes of initiating an admin- have any questions. The FDIC contact is istrative enforcement action against Why consider giving these other prop- Jack Smith, Deputy General Counsel, at 898– Hurwitz, five other former directors and offi- erties, when there 1.6 B in losses. 3706. cers, and three Hurwitz-controlled holding companies. The OTS may allege a violation To: Jack D. Smith@LEGAL OGC RECORD 32 of the Net Worth Maintenance Agreement Hdq@Washington Tell Me—about 3/4/96. and unsafe and unsound conduct relating to From: Jeffrey Williams@LEGAL the two MBS portfolios and USAT’s real es- PLS2@Washington tate lending practices. If OTS files its ad- RECORD 33 Subject: re: Meeting with Gore Today (Re- ministrative lawsuit, if many allege damages vised) DRAFT that total more that $250 million. Date: Friday, October 20, 1995 9:27:23 EDT To: William F. Kroener, III, General Counsel 2. OTS has met with Hurwitz’ counsel; no Per my recent voice mail message to you Subj: Meeting with Vice President Gore on interest in settlement has been expressed to regarding my conversations with a key staff- Friday, Oct. 20, 1995, at 11:00 a.m. OTS.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00160 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.412 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2499 3. OTS is likely to formally file the charges larly a guy named Joe Sikes. They are inter- b. OTS has been investigating Hurwitz, within 45 days. ested in talking with us to educate them- other former directors of USAT and UFG, 4. Appears to FDIC inappropriate to in- selves and us (and other appropriate folks/ Maxxam, and Federated Development Com- clude OTS representatives in the meeting to agencies) on the possibilities and difficulties pany (a Hurwitz entity that owned part of discuss possible settlement of its claims of including a closed military facility in a UFG). We do not know when OTS will com- against Hurwitz since OTS has not yet ap- transaction with Hurwitz. mence proceedings against Hurwitz and oth- proved any suit against Hurwitz or his hold- He is discussing it with his folks and I ers. ing companies and OTS’ participation at think they would be an asset to tomorrow’s c. However, FDIC and OTS claims alone such meeting may be perceived by others as meeting, making the key point even more are insufficient to exchange with Hurwitz in an effort by the Executive Branch to influ- clear that it will take more than FDIC’s settlement for the Headwaters Forest. ence OTS’s independent evaluation of its in- claims to get the trees and that FDIC re- vestigation. mains an important part of exploring cre- III. Factors That Could Enhance Likelihood of V. FSLIC Resolution Fund (‘‘FRF’’ Issues ative solutions to the issue. Settlement 1. The Financial Institutions Reform, Re- Let me know if they should be invited to a. New appraisal of Headwaters Forest. Old covery and Enforcement Act of 1989 the meeting. appraisal may be inadequate in light of re- (‘‘FIRREA’’) (enacted Aug. 9, 1989), accord MOSEL THOMPSON, cent environmental, economic, and other de- special treatment to certain savings & loan Department Assistant Treasury, 632–2032. velopments; and Hurwitz suggests need for associations that failed prior to its enact- new appraisal in 10/22/95 interview. ment. The FRF obtains its funds from the RECORD 35 b. Identification of whether and how Treas- Treasury and all recoveries from the assets ury can hold and transfer asset to Interior. CONFIDENTIAL/PRIVILEGED COMMUNICATION or liabilities of all FRF institutions are re- c. Identification of other consideration quired to be conveyed to Treasury upon the ISSUES FOR 10/26 MEETING from the Government that may be of inter- conclusion of all FRF activities. The statute I. FDIC Transfer of Assets Obtained in Settle- est to Hurwitz. does not establish a date for the termination ment to Treasury 1. Closed military facility in Texas. of the FRF. FRF fund always in the red due a. FDIC lawsuit against Hurwitz filed on Hurwitz already has indicated interest in fa- to huge cost of these thrift failures. behalf of the FSLIC resolution Fund cility between Houston and Galveston, 2. To date, FRF owes the Treasury approxi- (‘‘FRF’’), which was created by Financial In- Texas. FDIC has begun to discuss with De- mately $46 billion. stitution Reform, Recovery and Enforcement partment of Defense Base Closures Com- 3. FDIC has decided that if Hurwitz offered Act of 1989 as successor to Federal Savings & the redwoods to settle the FDIC claims, we mittee staff. Interior has apparently identi- Loan Insurance Fund. The FRF is to be man- would be willing to accept that proposal. Be- fied some possible land. aged by the FDIC and separately maintained cause any assets recovered from FRF insti- 2. State of California has stated its inter- and not commingled with any other FDIC tutions are required to eventually be turned est in participating in transaction by pro- properties and assets. 12 U.S.C. sec. 1821a(1). over to Treasury, the trees (i.e. the land con- viding harvestable timber land valued at be- b. Assets and liabilities of the FRF are not veyance) could conceivably be transferred to tween $40–60 million. Need to contact Gov- the assets and liabilities of the FDIC and are Treasury. ernor Wilson’s office to pursue discussions not to be consolidated with the assets and li- 4. May need legislation to assist in transfer with us. abilities of the Bank Insurance Fund or the of land and other details of such a convey- 3. Evaluation of effect of tax losses to Pa- Savings Association Insurance Fund for ac- ance. The mechanics of such a transfer is not cific Lumber and Maxxam for transfer of counting, reporting or for any other purpose. a focus of FDIC’s current efforts which are to Headwaters Forest at less than fair market Id. at 1821a(3). persuade Hurwitz of liability and to seri- value. Tax losses may be viewed by Hurwitz c. The FRF is to be dissolved upon satisfac- ously consider settlement. as advantageous to Pacific Lumber and tion of all debts and liabilities. Upon dissolu- Maxxam, and may indirectly result in minor- VI. Impediments to FDIC Direct Action Against tion, any remaining funds shall be paid to ity shareholders acquiescence to transaction. Trees Treasury. Id. at 1821a(f). 1. FDIC has no direct claim against Pacific d. There are no creditors of United Savings 4. California congressional delegation has Lumber through which it could successfully Association of Texas, including uninsured shown significant interest in Headwaters obtain or seize the trees or to preserve the depositors, that have a priority over Treas- Forest and have been receptive to efforts to Headwaters Forest. Neither Maxxam, Inc. ury in any assets recovered by FRF. Cur- conclude a ‘‘debt for nature’’ transaction. (which owns Pacific Lumber and is con- rently, FRF owes Treasury about $46 billion. Delegation may act as liaison between in- trolled by Hurwitz) nor Pacific Lumber are e. Coastal Barrier Improvement Act of 1990 volved parties and may be interested in pro- defendants in FDIC’s suit. There is no direct (Pub.L. 101–591) imposes certain restrictions posing any legislation needed to facilitate relationship between Hurwitz’ actions in- and procedures on the FDIC’s ownership and such transaction. volving the insolvency of USAT and the ability to transfer property that is within 5. No direct discussions have yet occurred Headwaters Forest owned by Pacific Lumber. the statute. 12 U.S.C. sec. 1441a–3. May en- between Hurwitz and any involved agency Pacific Lumber was acquired by Maxxam but hance FDIC’s ability to transfer to other over the Headwaters Forest transaction. His does not appear to have owned any interest Federal agency. recent interview suggests his interest in in USAT or United Financial Group, USAT’s 1. Unclear whether Headwaters Forest is such discussions with such representatives. first-tier holding company. Moreover, nei- within the scope of the Act. ther USAT nor UFG ever owned an interest 2. Moreover, for the Act to apply to FDIC, in Pacific Lumber. title to land must be held by FDIC in its cor- RECORD 36 2. FDIC’s claims alone are not likely to be porate capacity. The lawsuit and any poten- To: Jack D. Smith@LEGAL OGC sufficient to cause Hurwitz to offer the Head- tial recovery is in the capacity of FDIC as Hdq@Washington water Forest, because of their size relative Manager of the FSLIC Resolution Fund, and From: John V. Thomas@LEGAL to recent Forest Service appraisal of the not in FDIC’s corporate capacity. FDIC must PLS@Washington value of the Headwaters Forest ($600 mil- determine whether and, if so, how, FRF can Subject: re: lion); because of very substantial litigation transfer title of assets to FDIC corporate. If Date: Friday, January 5, 1996 17:21:07 EST risks including statute of limitations, Texas FRF can transfer title to Headwaters Forest Certify: N negligence—gross negligence business judg- to FDIC corporate, and Forest is within Top 5 (for the top 10 list as well, I hope). ment law, and Hurwitz’s role as a de factor scope of the Act, the Act provides mecha- 4. United Savings. OTS has filed their no- director; and the indirect connection noted nism for FDIC to transfer title of assets di- tice of charges. The statute has been allowed above, including the risk of Hurwitz facing rectly to Interior. to run by us on everyone other than Hurwitz. suit from Pacific Lumber securities holders II. Factors that Impede Settlement We have moved to stay our case in Houston, if its assets were disposed of without Pacific a. FDIC has no direct claim against Pacific and are awaiting a ruling. Two people, Lumber being compensated by either out- Lumber through which it could successfully Munitz and Gross (I think), have moved to siders or Hurwitz or entities he controls. obtain or seize the Headwaters Forest. Nei- intervene. And there is the question of ther Maxxam, Inc. nor Pacific Lumber are whether a broad deal can be made with Pa- RECORD 34 defendants in FDIC’s suit. Neither Pacific cific Lumber. To: Jack D. Smith@LEGAL OGC Lumber nor Maxxam ever owned any inter- Hdq@Washington est in USAT or UFG, its holding company. RECORD 36A From: Jeffrey Williams@LEGAL Hurwitz has not discussed directly with PLS2@Washington FDIC any settlement of the FDIC’s claims; 1/19/96.—Told Alan McReynolds that I had Subject: Hurwitz although he has endorsed, through Pacific talked to Carolyn Buck after lunch on 7/17/96. Date: Wednesday, October 25, 1995 11:51:51 Lumber’s spokesperson and an October 22, I asked whether OTS wanted to be involved EDT 1995, interview published in The Press Demo- in discussions led by CEQ to respond to Certify: N crat of Santa Rosa, California, the concept of Hurwitz suggestion about Headwaters. She JACK: I’ve talking with my DOD contacts a transaction with the Government that said curtly, ‘‘No’’. I asked if she had any ob- in the Base Closures Committee, particu- would include a land exchange. jection to FDIC participating—she said that

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00161 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.417 pfrm07 PsN: E20PT1 E2500 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 was not for her to decide. I concluded from (i) Status of ALJ proceeding. VII. Recent Developments her manner that she did not intend to ex- III. Pacific Lumber Company 1. Hurwitz, on behalf of Pacific Lumber and press an opinion and didn’t want to talk a. Maxxam its subsidiaries, filed ‘‘takings’’ cases against about it any more, so we parted without fur- 1. Hurwitz as 60% owner, controlling share- the U.S. and State of California alleging that ther discussion. I advised Elizabeth Blaug holder of public company. the designation of Headwaters Forest and about this yesterday afternoon. I said that if 2. Maxxam’s assets (Kaiser Aluminum; Owl Creek (both owned by Pacific Lumber) Hurwitz wanted to have global settlements Sam Houston Race Track; Real estate sub- as ‘‘critical habitat’’ for the endangered spe- with OTS and FDIC involved he would have sidiaries; Pacific Lumber). cies Marbled Murrelet prevented Pacific to ask for them just as happened with EY b. Hurwitz acquisition of Pacific Lumber Lumber from logging and resulted in sub- and Deloitte. 1. During Hurwitz’s USAT involvement. stantial lost revenue. The complaint seeks 2. Relationship with Drexel Burnham Lam- more than $460 million in losses resulting RECORD 37 bert and Michael Milkin. from prohibition on logging on 50,000 acres of c. Ownership of Headwaters Forest Pacific Lumber land. The case is being han- NOV/DEC 1995 1. Northern Spotted Owl and Marbled dled by the Justice Department. The filing of Jeff Wms.—11:40 Thur 60648 Murrelet. the lawsuit is viewed by Interior and Justice Nov 14 11:00 c. Hurwitz management and logging policies as an attempt by Hurwitz to nullify the 722 Jackson Place, CEQ Conf Rm. of Pacific Lumber FDIC and OTS lawsuits for purposes of the Rick Sterns: Re Judge Hughes, 906–7966. IV. Headwaters Forest ongoing discussion. Ross Delston: Parker Jane, Jack Shetman, VIII. CEQ’s Projected Time Frame 362–2260. a. Description—Northern California, near Pat Bak: 60664. Eureka; 3,300 acres of Pacific Lumber’s 1. Discussions between Hurwitz and Gov- M. Palen: 60363. 195,000 acres; unlogged, inaccessible, no ernment ongoing; Hurwitz now making site Ann Shopek: 212–973–3215. roads; endangered species; Pacific Lumber’s visits to DOD and GSA properties. 2. Interior’s land exchange negotiations Judge Hughes—use of overlapping auth only remaining valuable asset. proceeding with numerous parties. Harness b. Previous legislative initiatives—since 3. CEQ negotiators not discussing FDIC and Thur. order 1983. OTS lawsuits as part of Headwaters Forest Carolyn talked to Ken Thur. c. Hurwitz’s relationship with environ- mental community—always tense. transaction; Hurwitz representatives from 1. Numerous picketing; spiking of trees; Patton Boggs law firm indicated their expec- RECORD 38 Earth First! and others. tation that ‘‘all Government lawsuits’’ will 11/28/95—Headwaters mtg CEQ go GSA d. Department of Interior’s prior efforts to be resolved as part of transaction. route to transfer from Tres to Interior save Headwaters Forest. 4. Hurwitz’s counsel in FDIC litigation not raise settlement, but have tangibly slowed ‘‘Cystal Barriers mgt Act’’— V. FDIC and Headwaters Forest ‘‘12 U.S.C. 1441a–3’’—RTC, FDIC property— pace of suit. a. Pacific Lumber not a direct asset of 5. Interior projects transactions can close KM—extremely accurate reports came USAT’s. in September 1996. back from environmentalists—keep con- b. Environmental community focused at- fidentiality physical assets may not count as tention of Congress on existence of FDIC’s money for ‘‘scoring.’’ ongoing investigation of USAT’s failure. RECORD 40 Treasury cannot give FRF credit for the c. Chairman Helfer indicated in letter to CEQ trees. The Rose Foundation that FDIC would con- 722 Jackson Place, NW, Washington, DC If policymakers make decision to accept sider a proposal that includes the Head- 20503, Phone (202) 395–5750, FAX (202) 456– trees—increases Fed. deficit— waters Forest in a settlement of claims 6546 Insurmountable issue—there is a hole here against Hurwitz if Headwaters asset was of- FAX TRANSMISSION if you take trees. fered. Interior disagrees with FDIC analysis of Date 8/8/96 VI. Status of Headwaters Forest Initiative Costal Barriers and they think it does work. To: Jack Smith Eliz.—our group will meet again to sift a. FDIC working with CEQ, Interior, other Phone Number: thru remaining questions. No formal con- agencies in exploring viability of ‘‘debt for FAX Number: 898–7394 tacts until OTS files. nature’’ settlement. Dated US Dept. of Agri- Subject of Material: 4 Questions on Head- John G—we are leaning toward FDIC open- culture, Forest Service appraisal valued waters. Thank you so much, this will ing discussions Headwaters Forest at $499 million. really help in clearing up major Lois—scoring problems were the biggest b. FDIC made clear to all involved Govern- misperceptions! How quickly can you difficulties. ment principals that settlement value of turn this around? (I ask for so little, FDIC [and OTS] lawsuits insufficient to ob- don’t I?) EB 60342 D.G. tain Headwaters Forest, and US will have to From: Elisabeth Blaug John G—after admin suit is filed it is time find additional assets to provide Maxxam. No. of Pages (including Cover Sheet) 2 for opening any discussions—prior to that we c. Under auspices of CEQ and Interior, nu- 736–0577—Bob D. fax get back to K.M. to see if there’s any reason merous meetings with Hurwitz exploring the 456–0753—Elizabeth B. fax not to go forward with negotiations. concept that includes a swap of other gov- QUESTIONS ernment-owned properties held by GAO as Q1. Why is the Administration willing to excess or surplus land, and approved for sale RECORD 39 swap land with Charles Hurwitz when his under authority of Department of Defense ATTORNEY-CLIENT/WORK PRODUCT very actions in acquiring Pacific Lumber Base Realignment and Closure Commission. Company led to lawsuits filed against him by CONFIDENTIAL COMMUNICATION 1. Interior exploring various transactions the FDIC and Office of Thrift Supervision? DRAFT OUTLINE OF HURTWITZ/REDWOODS that include swaps of Pacific Lumber land Why doesn’t the Administration forget the BRIEFING with other private land owners; providing land exchanges and get Hurwitz to settle his Hurwitz with timber rights on other govern- I. Introduction debts in exchange for the trees? Significant development involving multi- ment owned land; State of California to pro- A1. would be inappropriate because of inde- Agency initiative led by Office of the Vice vide funds or timber rights on state-owned pendent status of regulators, pending litiga- President to obtain title to last privately land. tion/administrative proceeding. . . . owned old growth virgin redwoods and place d. Hurwitz recently agreed to provide Dept. Q2. In light of question 1, why can’t FDIC under protection of Department of Interior’s of Interior with access to conduct new, con- or OTS bring up a debt-for nature settlement National Park Service. FDIC plays promi- fidential appraisal of Headwaters Forest. with Charles Hurwitz? nent role in this Government initiative. e. Hurwitz also expressed interest in ex- A2. ?? ploring availability of FDIC properties to Q3. Charles Hurwitz’s purchase of Pacific II. Background—United Savings Association of ‘‘bridge the gap’’ between value of Head- Lumber led to a $1.6 billion collapse of a Texas, Houston, TX waters Forest and lawsuits. Texas Savings & Loan; that amount is likely a. USAT failure—December 30, 1988—cost to 1. FSLIC FRF assets—few potentially valu- more than enough to cover the acquisition of FSLIC $1.6 billion able properties; scraping bottom of barrel all the old growth redwoods on Palco prop- b. FDIC as Receiver for USAT since properties from 1989 and earlier fail- erty. Why then is the Administration look- 1. Investigation. ures. ing for excess property to exchange? 2. Litigation. 2. RTC FRF assets—more valuable prop- A3. ?? (i) Status of litigation. erties in regions Hurwitz/Maxxam currently Q4. If the regulations are not actually c. OTS—separate statutory enforcement au- conduct real estate operations. seeking $1.6 billion, what monetary damages thority (i) Can FDIC swap assets of similar aggre- are they seeking against Hurwitz? 1. ‘‘Arrangement’’ with FDIC. gate value between funds to enhance liquida- A. ?? 2. Investigation. tions of assets and likelihood of resolution of 1. There is no direct relationship between 3. Administrative enforcement action. receivership claim? the Headwaters Forest and the actions of Mr.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00162 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.420 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2501

Hurwitz with respect to the insolvency of RECORD 42 negotiations for an out-of-court agreement United Savings Association of Texas To: Henry R.F. Griffin@LEGAL to the F.D.I.C. legal team. They called Katie (‘‘USAT’’). Moreover, Pacific Lumber Com- ASIS@Washington, Jeffrey Wil- McGinty last week and requested that Inte- pany is not a defendant in either lawsuit. Al- liams@LEGAL PLS@Washington, Robert rior’s attorneys be a part of any meetings though Pacific Lumber was acquired by DeHenzel@LEGAL PLS@Washington, and negotiations with Hurwitz/Maxxam ar- Maxxam, it does not appear that Pacific John V. Thomas@LEGAL ranged to test Maxxam’s interest in a global Lumber owned any interest in USAT or PLS@Washington settlement. They argue that F.D.I.C. does United Financial Group, Inc. (‘‘UFG’’), Cc: not know the asset (Headwaters Forest) or USAT’s first-tier holding company. Bcc: the current efforts by the environmentalists/ The Administration cannot dictate a debt From: Jack D. Smith@LEGAL OGC FWS/State of California to halt timber har- for nature settlement with Mr. Hurwitz be- Hdq@Washington vesting on E.S.A. grounds (the marbled cause the FDIC and OTS are independent Subject: Headwaters murrelet habitat) as well as Interior. regulatory agencies with separate and dis- Date: Monday, September 16, 1996 18:10:50 I believe that Katie may contact you about tinct statutory and fiduciary responsibil- EDT the appropriateness of the Department’s in- ities. The Administration is prohibited by Attach: volvement to get the meetings off of the law from directing the outcome of any ac- ground. tion commenced by FDIC or OTS in the per- Certify: N Thank you for your attention to these formance of either agency’s official duties. Forwarded by: issues. 2. The statutory framework for action I am advised that the draft settlement pro- commenced by FDIC and OTS require the posal we received from Patton Boggs has Attachments (3). agencies to seek recovery for losses incurred been discarded by Interior so we need not re- cc: John Garamendi, George T. Frampton, to the insurance funds and appropriate civil view it in detail. Jr., Bob Armstrong, Bonnie Cohen, John money penalties. The agencies are chartered As to the Qui Tam case, my understanding Leshy, Bob Baum, Jay Ziegler to recover money, not to establish national is that it will not be part of this deal, and parks. They often initiate settlement discus- may proceed even if there is a government sions to recover money or assets which can settlement. We will continue on our separate DOCUMENT DOI–B be converted to money. For example, the settlement track only if OTS is able to reach UNITED STATES DEPARTMENT OF THE OTS has already settled some issues related an understanding with Hurwitz about re- INTERIOR, OFFICE OF THE SEC- to the USAT failure for a $9.4 million pay- moval and prohibitions. RETARY, ment from USAT. Nevertheless, the FDIC is Washington, DC, August 2, 1995. open to any appropriate settlement of its APPENDIX 3 MEMORANDUM claims including a debt for nature swap DOCUMENT DOI–A To: George T. Frampton, Jr., Assistant Sec- should Mr. Hurwitz make such a proposal. 3. Neither the FDIC or the OTS are suing UNITED STATES DEPARTMENT OF THE retary, Fish and Wildlife and Parks Mr. Hurwitz for $1.6 billion. Although the INTERIOR, OFFICE OF THE SEC- From: Allen McReynolds, Special Assistant agencies believe that Mr. Hurwitz’ conduct RETARY, to the Secretary resulted in significant losses to USAT, both Washington, DC, January 23, 1995. Subject: California Headwaters Forest Ac- suits seek damages and restitution for mis- MEMORANDUM quisition Recently, the Secretary received a letter management and gross negligence that are To: Anne Shields, Chief of Staff from the Congressional delegation from directly attributed to specific acts and trans- From: Allen McReynolds, Special Assistant northern California requesting assistance in actions within the applicable statute of limi- to the Secretary the acquisition of a 44,000 acre parcel of tim- tations. Subject: Update on Headwaters Forest bered lands owned by Maxxam Corporation 4. The FDIC suit against Mr. Hurwitz seeks I am forwarding three (3) pieces of infor- of Texas (see attached). You may remember damages in excess of $250 million. The OTS mation which will provide an update on the that Hamburg and Boxer attempted to ap- administrative enforcement proceeding Maxxam/Pacific Lumber Company—owned propriate funds in 1994 (see H.R. 2866 at- seeks reimbursement for losses to the insur- Headwaters Forest in northern California. ance funds in an unspecified amount to be 1. OTS Filing. The U.S. Office of Thrift Su- tached). Maxxam, owned by Charles Hurwitz proven at trial. pervision of the Department of the Treasury of Houston, conducted a leveraged buyout of filed their lawsuit against United Savings Pacific Lumber in the late 1980’s to acquire 184,000 acres of timber for $900,000,000. You RECORD 41 Association of Texas and related Maxxam will recognize that these tracts are a part of To: John V. Thomas@LEGAL parties on December 26, 1995. Maxxam’s at- torneys have requested 60 days in order to the habitat for the marbled murrelet (see at- PLS@Washington, Stephen N. tached article). Graham@DAS Ops@Washington, Richard respond to the charges; the deadline is Feb- ruary 19. The next step will be for the judge To repay the bonds secured for the pur- T. Aboussie@LEGAL ASIS@Washington, chase, Mr. Hurwitz has stepped up the cut- Henry R.F. Griffin@LEGAL to schedule a hearing to review the charges and responses. ting schedule worked out with P.L.’s former ASIS@Washington, Robert owners. On September 15, 1995, the morato- DeHenzel@LEGAL PLS@Washington, 2. Houston Chronicle Editorial. Attached is the editorial written by Charles Hurwitz, rium on logging the old-growth portion of Jeffery Williams@LEGAL Maxxam’s un-logged tracts will expire. Thus, PLS@Washington C.E.O. of Maxxam, which appeared in the Houston Chronicle on January 14. In his edi- the Congressional delegation and the envi- Cc: William F. Kroener III@LEGAL OGC ronmental community are inquiring if Inte- Hdq@Washington, Leslie A. torial, he describes the environmentalists’ activities as hostile and inappropriate ac- rior can devise some creative acquisition Woolley@Washington, Robert Russell strategies. They also wrote to the Forest Detail@EO@Washington tions. The Debt-for-Nature swap concept is discussed on page 3. Service, but the Forest Service had no sug- Bcc: gestions on how to acquire the property. From: Jack D. Smith@LEGAL OGC 3. H.R. 2712—Acquisition of Headwaters For- Hdq@Washington est. Congressman Frank Riggs of Eureka in- I. Acquisition Strategy Subject: USAT troduced a bill on December 5, 1995 for the In response to the delegation’s request, Date: Friday, September 6, 1996 9:05:59 EDT acquisition of Headwaters Forest through a several staff from Interior began to review Attach: land exchange and timber exchange on the possibilities that exist for acquiring the Certify: N BALM lands in northern California. My con- 40,000 acre tract through creative land ex- Forwarded by: tact on the committee tells me that no ac- changes. A summary of these follows: tion has occurred thus far, but that it is like- John Douglas called and we are going to A. Governor’s Headwaters Task Force have a settlement meeting Monday or Tues- ly that this bill will be pushed by Mr. Riggs day with Douglas and OTS. Douglas indi- and his colleagues later this month. Governor Wilson created a Headwaters cates that he will propose that the FDIC 4. Next Step. You may recall that the filing Task Force several months ago to look at take certain redwood trees which we will ex- by O.T.S. of their suit was the step which strategies for acquiring these acres. Rep- change for other marketable property from would release O.T.S. and F.D.I.C.’s legal resenting Interior are Ed Hasty, BLM State perhaps Interior. FDIC would then be able to staffs to initiate a meeting with Mr. Hurwitz Director, and Phil Detrick, FWS. The Gov- sell the property it gets from Interior. and/or his counsel. I have spoken to O.T.S. ernor’s Office has decided to seek State leg- Douglas says there are tight deadlines and attorneys managing this suit, and they con- islation to trade approximately $70,000,000 in he wants to try and wind up the negotiations tinue to insist on an arms-length relation- lands owned by The California State Lands by Wednesday. The FDIC settlement delega- ship with any public efforts to acquire Head- Commission for Headwaters tracts. The Gov- tion will be the General Counsel, myself, waters through a Debt-for-Nature Swap. ernor’s Office would like for Interior to put Steve Graham and Jeff Williams. If a real- They are of the opinion that it would dis- lands up for trade to match their strategy. istic proposal is submitted approvals. There- advantage their chances of a fair and legal Terry Gorton, the Governor’s negotiator, has fore, Jeff is blocking out a settlement au- proceeding if they were to be engaged in met with Hurwitz and thinks the acreage thorization memo with the terms to be filled high-level discussions with Administration could be had for a sum less than the Forest in later. staff. Thus, that leaves the meeting and any Service’s appraisal of $500,000,000.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00163 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.423 pfrm07 PsN: E20PT1 E2502 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 B. DOI Acquisition by Land Exchange fair market value of the 40,000 acres of old Thank you for your attention to this The California Desert Protection Act and growth redwood timber that the Department project. It appears to represent an oppor- the Natural Communities Conservation Pro- is seeking to protect. Thus, there has been tunity for the Department to resolve long- gram (NCCP) have consumed all of BLM’s some support for a debt-for-nature swap for standing problems on the Headwaters Forest. FDIC and OTS’s claims for the 40,000 acres. lands which were available for disposal in Attachments California. Thus, BLM, nor FWS for that FDIC and OTS are amenable to this strategy —March 24, 1995 Letter to Secretary Babbitt matter, has any trading stock within Cali- if the Administration supports it. —Headwaters Forest Act, H.R. 2866 fornia which is available for such a trans- Attached is a copy of the Complaint and —Briefing Paper on the History of the Act action. Jury Demand on behalf of the FDIC. The —FDIC Action Board of the FDIC approved this action late C. Military Base Closure Land Exchanges —Wall Street Journal Clipping yesterday. The OTS is expected to take simi- —The Oregonian Clipping The American Lands Conservancy (ALC), lar action no later than mid-October. also a member of the Governor’s Task Force, —BLM Statement on Old Growth Reserve has reviewed with the Governor’s Office the III. Next Steps System potential of acquiring small acreages at clos- Those of us working on this (Jay Ziegler, cc: Jay Ziegler, Geoff Webb, Tom Tuckman, ing military bases in northern California. Tom Tuckman, Geoff Webb, and me) are Larry Mellinger Hamilton AirField, located in the Bay Area, seeking guidance from you on how to pro- Following is a list of individuals with recently sold a tract for $10,000,000 to a local ceed. The possible next steps are as follows: whom I have worked in the recent past on developer. The Governor would like to cap- Request a group meeting (Interior, FDIC, projects for the Secretary’s Office who I con- ture these funds and others as bases are sold OTS) with the Department of Justice to sider very trustworthy. I cannot say that piecemeal across the area. Because of our un- learn their view on a Debt-for-Nature Swap they have a specific background in base con- successful efforts at El Toro Marine Corps concept for FDIC and OTS’s claims. version sites, but they are certainly well Air Station, we have made it clear that Inte- Annoint a DOI Team to represent the De- schooled in commercial real estate develop- rior will not front this concept for consider- partment in the negotiations with Hurwitz ment, hotel development, and residential de- ation. It is anticipated that ALC will provide (should FDIC and OTS wish to have us at the velopment in California. a report to the delegation regarding the op- table). Bruce Karatz, President, Chairman & CEO, portunities at Bay Area military base clo- Determine which Interior agency would be Kaufman and Broad, 10877 Wilshire Bou- sures. the most appropriate for the long-term own- levard, 12th Floor, Los Angeles, CA 90024, II. Debt for Nature Swap ership and restoration of the acreage. (BLM 310/443–8000, 310/443–8090(fax) The Federal Deposit Insurance Corporation has suggested that they are in the best posi- Richard M. Ortwein, President, Koll Real Es- and the Office of Thrift Supervision have tion to do so. A similar argument can be tate Group, 4343 Von Karman Avenue, claims against Charles Hurwitz and United made for the Park Service. The Forest Serv- Newport Beach, CA 92660, 714/833–3030, Savings of Texas which they are preparing to ice may have notions that they are most ap- ext. 249, 714/474–1084 (fax) pursue (see attached article). The FDIC propriate.) Your recommendation early will William (Bill) D. Sanders, Chairman, Secu- claims result from mortgage-backed securi- reduce conflict about expectations. rity Capital Group, Inc., 125 Lincoln Ave- ties trading. The OTS claims result from Determine what Interior’s involvement nue, 3rd Floor, Santa Fe, New Mexico networth-maintenance claims. The total of may mean for the Department from a policy 87501, 505/820–8214 these two claims is in excess of the appraised perspective. TABLE 27—TIMBER FOREST LAND AND HARVESTED BY STATE—FISCAL YEAR 1996 1

Timber sold Timber harvested 2 State or Commonwealth 3 4 Bid value (Actual 4 Receipts Sales Volume (MBF) dollars) Volume (MBF) (Actual dollars)

Alabama ...... 738 58,25516 5,220,330.40 60,244,36 5,490.493.12 Alaska ...... 73 96,221.17 3,193,047.40 223,085.32 12,720,486.11 Arizona ...... 12,949 52,419.49 2,170,611.75 69,106.74 7,446,270.20 Arkansas ...... 2,660 185,103.51 26,013,244.60 151,300.05 18,005,184.88 California ...... 49,576 379,258.44 38,576,576.44 451,087.80 104,815,692.01 Colorado ...... 12,9918 53,941.20 8,138,155.95 95,977.22 9,423,741.94 Florida ...... 111 49,981.98 4,234,629.90 86,472.94 4,306,776.06 Georgia ...... 711 31,016.23 2,820,821.23 28,347.81 2,664,177.27 Idaho ...... 22,380 222,615,72 41,560,133.94 341,691.81 52,130,728.74 Illinois ...... 102 105,00 1,060.00 2,706.85 50,545.45 Indiana ...... 28 901.11 18,032,23 318.81 10,711.33 Kentucky ...... 627 10,593,61 1055,056.30 12,161.61 950,831.40 Louisiana ...... 545 63,634.92 10,207.970.60 64.283.28 7,495,880.81 Maine ...... 10 1,058,00 36,312.80 1,838,32 119,770.03 Michigan ...... 788 156,494,94 9,926,226.26 209,024.84 8,771,130.09 Minnesota ...... 226 134,345,76 9,002,381.02 158,784.20 5,700,740.60 Mississippi ...... 2,187 210,914.00 29,003,000.99 193,481.18 27,144,509,31 Missouri ...... 1,008 49,428.74 5,276,548.68 55,220.06 4,521,709.80 Montana ...... 13,673 129,802.01 22,743,183.11 165,720.79 34,919,522.78 Nebraska ...... 6 9.00 90.00 9.00 90.000 Nevada ...... 1,976 2,398.45 31,964.90 5,185.33 91,550.48 New Hampshire ...... 167 24,061.86 1,305,896.26 18,074.46 806,351.80 New Mexico ...... 15,325 33,125.53 1,063,826.41 50,450.45 1,212,648.08 New York ...... 2 350.00 37,986.04 130.00 1,212,648.08 North Carolina ...... 2 359.00 37,985.04 130.00 15,951.23 North Dakota ...... 31 44.00 440.00 44.00 440.00 Ohio ...... 81 1,506.59 145,7737.84 749.00 15,270.01 Oklahoma ...... 86 13,123.41 2,061,781.43 17,661.37 2,185,716.19 Oregon ...... 31,667 287,530.27 46,025,886.49 890.346.37 190.049.139.70 Pennsylvania ...... 116 48,266,54 19,267,848.09 53,969.00 19,416,426.38 South Carolina ...... 422 42,326,28 4,494,402.00 40,421.87 4,337,908.67 South Dakota ...... 1,975 80,038.14 20.797.208.22 64,769.22 10,233,556.00 Tennessee ...... 3389 10,708.10 682,872.16 17,646,38 1,104,127.42 Texas ...... 271 71,145.50 14,440,168.25 85,313.13 10,571,472.23 Utah ...... 7,193 35,800.38 3,823,404.79 32,032.53 2,031,590.20 Vermont ...... 100 4,240.23 848,496.94 4,779.77 413,084.25 Virginia ...... 2,849 35,161.57 2,720,811.90 49,923.65 3,125,306.77 Washington ...... 9,541 113,490.23 13,777,6336.51 186,719.57 39,451,797,22 West Virginia ...... 453 25,957.23 6,354,919.12 27,547.01 4,522,428.71 Wisconsin ...... 627 96,12.35 5,570,711.41 129,645.84 4,628,848.22 Wyoming ...... 627 98,121,35 5,570,711.41 129.645.54 4,522,448.71

Total ...... 216.272 2,885,261.53 280,736,06 3,985,912.03 616,117,347.02

1 Excludes nonconvertible products such as Christmas, trees, cones, burls etc. 2 States no listed had no timber sold or harvested in fiscal year 1996. 3 Includes reforestations and stand improvement costs and timber salvage. Does not include value of roads or brush disposal. 4 MBF = thousand board feet.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00164 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.427 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2503

UNITED STATES DEPARTMENT OF AGRI- I shared this information with Mr. deLuca. DOCUMENT DOI–D CULTURE: REPORT OF THE FOREST SERVICE, The Congressman intends to call Mr. Emer- UNITED STATES DEPARTMENT OF THE FISCAL YEAR 1995 son to follow up and explore options. Also, INTERIOR, OFFICE OF THE SEC- Conservation Leader . . . sustained health, the staff will investigate if Mr. Emerson’s RETARY, diversity, and productivity of all forest lands holdings were included in Hamburg’s Head- Washington, DC, August 23, 1995. waters legislation. I will call Ed Hasty and DUN & MARTINEK LLP, MEMORANDUM attempt to learn more about BLM’s relation- ATTORNEYS AT LAW, ship with Mr. Emerson and whether we have To: George T. Frampton, Jr., Assistant Sec- Eureka, CA, July 17, 1996. a resource evaluation of these holdings. retary, Fish and Wildlife and Parks Hon. J. MICHAEL BROWN, From: Allen McReynolds, Special Assist- Judge of the Superior Court, Humboldt County 2. Telephone Conference Call With OTS and ant—Land Exchanges Superior Court, Eureka, CA. FDIC. Subject: Headwaters Forest Acquisition Re: Epic v. California Department of For- In the past several weeks, the staff at Inte- estry, Humboldt County Superior Court Yesterday afternoon we held a telephone rior have continued to receive telephone Case No. 96CR0420 conference call with staff of the Federal De- calls from the Northern California delega- DEAR JUDGE BROWN: We just received a posit Insurance Corporation and Office of tion encouraging Interior to pursue strate- copy of your minute order dated July 15, Thrift Supervision to share information. gies for acquisition of the old growth acreage 1996. We have been advised by the Clerk of Participating in the call were Richard Sterns owned by Charles Hurwitz and the Maxxam the Appellate Court that Petitioners applied and Bruce Renaldi of OTS, Jack Smith of Corporation. Among those considered, the for a temporary stay from the Appellate FDIC, Larry Mellinger and me of DOI. Also Debt-for-Nature Swap strategy is the con- Court and were denied. The Appellate Court, invited but not joining in were Tom Jensen cept which their telephone calls focus on according to the Clerk, has denied any and of CEQ, Jay and Geoff. most. all injunctive relief on this Plan. The OTS staff were reluctant to share Today, Congressman Stark’s staff for- It would therefore seem that there is no their work on a claim against Hurwitz/ warded copies of the letters which they are need for the Superior Court to issue a tem- Maxxam because of the appearance that In- generating for their colleagues in the North- porary stay because there will be no stay terior might be attempting to influence pol- ern California delegation to forward to the forthcoming from the Appellate Court. icy at OTS. We applauded them for that fore- F.D.I.C. In addition, the LA Times notified Workers have been on site since Monday, their office today that it will publish an edi- July 15, 1996. sight and did not press for information. They did state that OTS has not filed a claim yet; torial (see attached) on the subject penned Please advise immediately as to whether by Mr. Stark and Mr. Brown as early as to- however, if they decide to file, it will be we must now suspend operations until July morrow or Monday. soon. As soon as that decision is made, they 22, 1996. While we continue to downplay our role in offered to notify DOI and FDIC. I requested Very truly yours, these efforts with the delegation’s staff, they that they continue to seek information from DAVID H. DUN. continue to call upon us to play a leadership us should it be useful. role. I sense that because Interior might own The FDIC reminded all of us that their any land acquired through negotiations, DOCUMENT DOI–C claim against Maxxam is ‘‘owned’’ by they feel that Interior should be orches- UNITED STATES DEPARTMENT OF THE FSLIC’s Resolution Account. This account trating the solution. My impression is that INTERIOR, OFFICE OF THE SEC- has $48B already on deposit from claims. there is an expectation by the delegation RETARY, Therefore, it might be viewed positively by that Interior is the most appropriate agency Washington, DC, August 16, 1995. Congress for Treasury to accept redwood for- to negotiate the Federal Government’s case MEMORANDUM est property in lieu of cash payment and, with Maxxam, instead of the F.D.I.C. or To: Jay Ziegler, Geoff Webb, Tom Tuckman then, redirect title of the acreage to DOI. O.T.S. or even Justice. In fact, the delega- tion may soon expect Interior to arrange a From: Allen McReynolds, Special Assist- The OTS staff would not comment on such meeting with Maxxam—a rather bold move. ant—Land Exchanges a strategy for their claim against Maxxam. Subject: Update on California Headwaters I would enjoy an opportunity to visit with Forest Project There was some interest in the notion that you about this issue at your earliest conven- A couple of new developments have the delegation would request acreage at ience to avoid any confusion about the pres- emerged in the past several days. The fol- northern California military base closures to sure that we are receiving and can expect to lowing is an update on these issues: offer as land swaps to Hurwitz. No matter continue to receive. how much caution I expressed on this topic, 1. Red Emerson Acreage. Thank you for your attention. the FDIC and OTS staff encouraged support. Attachments: Update on Project, Analysis of I believe that I shared a letter with you I explained that the American Lands Conser- Red Emerson’s Property, U.S. Forest that I received on August 4 from EPIC re- vancy would probably present a proposal to Service Report, LA Times Editorial, Del- garding logging in Headwaters Grove. The the delegation soon, but that DOI would not egation Letter to F.D.I.C. letter requests assistance in resolving the be a party to it. cc: Tom Tuchmann, Jay Ziegler, Geoff Webb conflict of the current logging of S.P.I.’s holdings in the grove, which is permissible I shared the conversation that I had re- under Timber Harvest Plan 1–93–096, and cently with Terry Gorton of Governor Wil- TALKING POINTS OF HEADWATERS FOREST preservation of the watershed protection son’s office. FDIC and OTS are wondering Headwaters Forest is a 3,000 acre stand of along the Little South Fork of the Elk why DOI is not being more aggressive with old growth redwood forest, near Humboldt, River. I left for vacation before looking into Hurwitz and is permitting Wilson’s Task CA. Pacific Lumber Company and its subsidi- the issue so I was unprepared with a response Force to take the lead. Based on this, per- aries, which is owned by MAXXAM, Inc, when Perry deLuca of Congressman Stark’s haps we should revisit DOI’s position and our owns Headwaters, and the additional 195,000 office called on Monday requesting assist- participation in the negotiations. Because acres of timberland which surround Head- ance. He requested that I call Mr. Red Emer- Patton/Boggs attorneys are reaching out to waters. Headwaters was appraised several son of Sierra Pacific Industries and question DOI for a meeting, DOI could meet with years ago at $499 million. Many believe the him about any possible opportunity to ac- them for exploratory purposes. figure is inflated, due to other cir- quire this land. cumstances, including injunctions in connec- 3. Meeting with Justice. In brief, Mr. Emerson and his children are tion with marbled murrelet habitat, which the sole owners of Sierra Pacific Industries. You will recall that Tom Epstein encour- until recently precluded any logging of S.P.I. owns over 1,200,000 acres of timber aged DOI staff to meet with Justice officials Headwaters. lands in California and 10 sawmills ranging to insure no potential conflict on DOI’s side Charles Hurwitz is a major owner in from the Tahoe Basin north and west. Cur- of this issue. Larry Mellinger visited with MAXXAM; the FDIC and Office of Thrift Su- rently, S.P.I. is working on three land ex- Jack Smith at some length about this. He pervision both filed lawsuits (now pending) changes with BLM and the Forest Service learned that FDIC does not intend for Jus- in the hundreds of millions of dollars against across northern California to consolidate tice to represent them on this case. Most Hurwitz and MAXXAM, alleging, among checkerboard holdings. At Little South Fork likely, OTS will also keep their claim inter- other things, a connection between the fail- (about which EPIC is concerned), there are nally also. Therefore, Mr. Smith wonders if ure of United Savings Association of Texas, 9,600 acres under ownership personal of Mr. DOI really needs to be concerned about this. a MAXXAM subsidiary, and the purchase of Emerson, not S.P.I. He has a 56% ownership; Larry has offered to confer with Bob Baum Pacific Lumber. his partner has a 44% stake. The acreage is and John Leshy and relate their sense of Headwaters is of great importance to Cali- timbered by second and third growth. He whether a meeting or concern is warranted. fornians (particularly northern California), would be willing to either sell or exchange including Governor Wilson. Over the last 6–8 the acreage if we wish to do so. However, he Thanks for your attention. Please call me months or so, the Democratic congressional did state that, in his opinion, the land has no if you want further elaboration on any of delegation (individually and collectively) resource value because it does not contain these points. and environmentalists have called on the Ad- any old growth attributes. cc: Larry Mellinger, Solicitor’s Office ministration to acquire Headwaters.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00165 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.428 pfrm07 PsN: E20PT1 E2504 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001

In February Katie McGinty and John DOCUMENT DOI–F From: Allen McReynolds, Adm, Special As- Garamendi met with Hurwitz and his Wash- UNITED STATES DEPARTMENT OF THE sistant—Land Exchanges ington representative, Tommy Boggs. Sev- INTERIOR, OFFICE OF THE SEC- Subject: Update on Headwaters Forest eral ideas for Headwaters acquisitions or RETARY, Project conservation were discussed, including a Washington DC, September 25, 1995 The following is a brief update on the ac- land swap, which could potentially incor- Memorandum For: Katie McGinty, Council tivities of the local environmental groups porate a ‘‘debt-for-nature’’ piece in which on Environmental Quality, T.J. and Congressional delegation to bring atten- pending litigation against Hurwitz could be Glauthier, Office of Management and tion to the Headwaters Forest Project. settled. Budget A. Congressional Delegation From: Assistant Secretary for Fish & Wild- 1. Letter to Panetta. Five members of the In April a confidentiality agreement was life & Parks Delegation forwarded a letter (see attached) signed between the Department of Justice Subject: Proposed Meeting. to Leon Panetta yesterday requesting the and Hurwitz’s representatives; subsequently News media and congressional attention Administration’s support for a Debt-for-Na- representatives from CEQ, FDIC, Depart- will likely focus on the Headwaters Grove in ture Swap for Pacific Lumber Company’s ments of Justice and Interior, and White Northern California this week as Pacific holdings at Headwaters Forest. House Counsel have been meeting with Lumber (Maxxam Corp.) is likely to gain 2. Support of Vice President. Jill Ratner, Hurwitz and his representatives to identify court approval for its a timber salvage oper- President of The Rose Foundation of San potential government surplus properties ation there. The U.S. Fish and Wildlife Serv- Francisco, met with the Vice President last which could be part of the deal. Hurwitz has ice and State Fish and Game biologists have week in California to request his support for expressed particular interest in Treasure Is- been working closely with P–L at their re- a Debt-for-Nature Swap. land, and several military bases in California quest to ensure that this harvest program 3. F.D.I.C. and O.T.S. As you know, we have and Texas. California tentatively offered to will not cause the ‘‘take‘‘ of marbled engaged in bi-weekly telephone conference throw into the ‘‘pot’’ the timber rights to murrelets which would trigger enforcement calls with staff handling the cases at the LaTour state forest, in the Sierra Range under the Endangered Species Act. This par- F.D.I.C. and the Office of Thrift Supervision. north of Redding. ticular salvage operation involves only the FDIC’s case was filed in August; OTS has not removal of fallen trees (primarily through specified when they would file their claims. In recent weeks several key decision have helicopter logging) and does not encompass 4. Policy Support. The Delegation continues occurred: (1) 9th Circuit ruled timber salvage any cutting of standing trees. Nonetheless, to call me almost every day to inquire what can now take place on Headwaters; logging we anticipate substantial protests in the for- we have done to move this along within the can proceed on September 15, the last day of est and the surrounding area. (Approxi- previous 24 hours. They continue to press In- the marbled murrelet mating season; (2) mately 2,000 environmental protesters orga- terior to take a more proactive approach However, the lifting of the Endangered Spe- nized a demonstration outside of a marbled with the Administration about a policy call cies Act moratorium means the marbled murrelet critical habitat hearing last week of using Headwaters Forest as a negotiable murrelet will be listed in the next couple in Eureka, CA.) asset for F.D.I.C. claims against Maxxam. weeks. Hurwitz must prepare a timber har- Since it is very unlikely that there will be 5. Federal Assets. We have agreed to review ‘‘take’’—based on the willingness of P–L to the list of possible Federal assets that can be vest plan and a Habitat Conservation Plan work with State and Federal biologists—we made available to purchase lands from Pa- before logging. are in a position where we need to carefully cific Lumber. Last week Hurwitz filed a takings claim weigh our options for future actions relating B. State Legislature against the U.S. Fish and Wildlife Service, to the Headwaters. The Wilson Administra- 1. State Legislation. The Headwaters Bill arguing the ESA is reducing the value of his tion has maintained a public position that sponsored by Scher was killed in the Senate property. The lawsuit inexplicably values they are very interested in acquiring the by Governor Wilson’s staff last week. The Headwater at only $166 million. An appraisal Headwaters Forest, but to date have not Governor had requested authorization to ex- until now be acquired by Department of Jus- been able to structure a purchase or land ex- change up to $70M of timber for Pacific Lum- tice, which was previously being initiated by change package that attracts much interest ber holdings at Headwaters. Because the Bill from Maxxam. Since two of these suits the Bureau of Land Management and Cali- did not spell out specific sources and author- (FDIC and False Claims challenge) have been fornia. ization amounts, it has been said that the publicly filed within the last few weeks, I be- Governor was embarrassed by the legisla- Katie McGinty and John Garamendi con- lieve that we have reached a juncture where tion, and, therefore, directed that it be vened an interagency meeting yesterday to we need to consider whether it is prudent to killed. discuss strategies in light of the lawsuit. utilize this legal leverage in the context of a 2. Letter to Pacific Lumber. As a followup to Discussions between Hurwitz and Adminis- Headwaters acquisition strategy. the Bill’s demise, Doug Wheeler wrote a let- Two recent lawsuits have been filed tration representatives have ceased pending ter to Pacific Lumber’s Chairman requesting against Maxxam and Hurwitz arising out of a hard look at key issues, including a De- a meeting to review creative strategies for the failure of his United States Association partment of Justice review of the litigation acquisition between the State and Maxxam/ aspects, and a meeting between Hurwitz and of Texas:—A $250 million claim by the FDIC; and an even larger private lawsuit under the Pacific Lumber. It is our understanding that Garamendi is scheduled, in order to ascer- the State has no assets to make readily tain Hurwitz’s intent. False Claims Act seeking restitution for fed- eral taxpayers in the billions of dollars. available for a proposal such as this. In In light of increased calls for a ‘‘debt for short, the Governor’s staff continue to want nature swap in which the federal government to score a victory here but have no specific DOCUMENT DOI–E would seek to acquire Headwaters in ex- assets or acquisition strategies. change for release of the FDIC claims (see C. Local Environmental Groups NOTE TO GEOFF, JAY, AND TOM: I visited yesterday’s San Francisco Chronicle edi- 1. E.P.I.C. Lawsuit. The San Francisco Fed- briefly with George yesterday as he was run- torial, attached), I think we need to consider eral District Court lifted the seal on the law- ning out of town to go on vacation about whether the Administration can and should suit (see attached) initiated by E.P.I.C. Headwaters. He said that he had quickly take coordinated action to evaluate and pos- against Charles Hurwitz and Maxxam. The looked over my memo and had a few sibly consider such an approach. suit calls for claims under the False Claims thoughts about it. First, he was comfortable I propose that one of you convene inter- Act and spells out specific wrong doing in that we would continue to look for options ested Federal parties including the U.S. For- structuring the use of United Savings Asso- to purchase the property, including the FDIC est Service, FDIC, Office of Thrift Super- ciation of Texas to purchase Pacific Lumber. and OTS lawsuits. He does not have a prob- vision, U.S. Fish and Wildlife Service, CEQ, There are strong references to Ivan Boesky lem with us attending meetings to pursue DOJ and OMB to analyze options that might and Michael Milken and insider trading in- the Debt-for-Nature Swap concept as long as be available to us. Given the crescendo of fluences. we do not attempt to take the lead on such public attention that is ahead of us, I sug- 2. Demonstrations. The local environmental a proposal. Second, he feels that the Debt- gest we try to do this ASAP albeit consistent groups, including E.P.I.C., and EarthFirst, for-Nature Swap has such a low likelihood of with your incredibly busy schedules. continue to host weekly demonstrations. success that he would encourage us to not in- GEORGE T. FRAMPTON, Jr. They hope that Interior will roll out a spe- vest a great deal of time on it. Having said Attachment. cific program soon so that efforts can turn that, he hoped that the situation would not more friendly. have moved much while he was on vacation. DOCUMENT DOI–G 3. Court Hearing. This Thursday a court hearing is scheduled to review the merits of UNITED STATES DEPARTMENT OF THE Attached is a copy of the letter that I re- the harvest plan submitted by Sierra Pacific INTERIOR, OFFICE OF THE SEC- ceived from EPI yesterday. I know little Lumber on their acreage adjacent to Pacific about our relationship with Sierra Pacific RETARY, Lumber’s holdings. The recovery plan calls Industry and its subsidiary Elk River Tim- Washington, DC, September 26, 1995. for aerial reconnaissance (helicopters) and ber. What suggestions do you all have about MEMORANDUM other technologically advanced ways of re- our response? To: George T. Frampton, Jr., Assistant Sec- moving the fallen trees from within the ALLEN. retary, Fish and Wildlife and Parks murrelet habitat.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00166 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.433 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2505 4. Elk River Timber Company. The Elk River memorandum to Kathleen McGinty, dated were referring to the inclusion of a settle- holdings total 9,600 acres of land adjacent to November 6, 1995, there are two other prac- ment for both the FDIC and Office of Thrift Pacific Lumber and Sierra Pacific’s hold- tical statutory means by which Interior Supervision (OTS) lawsuits in the negotia- ings. The property owners are Red could administer the Headwaters forest, tions for the land acquired. Emmerson and Jim Lehar, two local inves- should either FDIC or Treasury acquire the This process raises certain legal and finan- tors. E.P.I.C. has requested our support to property as part of a debt-for-nature trans- cial questions regarding the ability of the acquire these acres as they are a critical action. Administration to include settlement of linkage and habitat sources. Mr. Emmerson The Refuge Administration Act these two lawsuits within the current nego- has expressed interest by telephone to me in tiations. In the past several months, the The Refuge Administration Act con- conducting a land exchange with Interior/FS, issues relating to the FDIC lawsuit were ana- templates the inclusion of areas within the but I need direction to proceed. BLM does lyzed by the headwaters multi-agency work- National Wildlife Refuge System which are not own any land that we want to dispose of ing group and a formal response was pre- established pursuant to a cooperative agree- in this region of California. Forest Service pared (see attached). The OTS was not will- ment with any state of local government, does have lands which could be appropriate. ing to participate in open discussions with any Federal Department or agency, or any Thank you for your attention. I look for- the working group so none of the issues re- other governmental entity (16 U.S.C. ward to the opportunity to visit with you garding the OTS lawsuit are known at this § 668dd(a)(3)(B)). Further, provisions of this about the options which we have been ana- time. Restated briefly, the answers are as subsection allow the specific terms of such a lyzing for interior’s role in this project. follows: cooperative agreement to direct the course Question 1. Is it feasible for Hurwitz to cc: Jay Ziegler, Tom Tuchmann, Geoff Webb of any future disposition of the property sub- transfer the Headwaters Forest to the FDIC ject to the agreement, notwithstanding in exchange for a settlement of the FDIC’s DOCUMENT DOI–H other restrictions governing the transfer of lawsuit and/or other assets? Yes. Hurwitz, lands within the System. through his control over Maxxam’s and its EXECUTIVE OFFICE OF THE Presumably such a cooperative agreement subsidiaries’ boards of directors, has pre- PRESIDENT, COUNCIL ON for the management of Headwaters could be viously influenced the transfer of Pacific ENVIRONMENTAL QUALITY, entered into between DOI and the Treasury Lumber assets to resolve other liabilities. Washington, DC, October 25, 1995. Department or FDIC, assuming FDIC at The FDIC’s Chairman has stated that in the To: Dave Sherman, Forest Service, 205–1604; least falls within the definition of a ‘‘govern- event the Headwaters Forest is offered to the Allen McReynolds, DOI 208–2681; Larry mental entity.’’ While management of Head- FDIC as part of a settlement of the FDIC’s Mellinger, DOI 208–3877; Bruce Beard, waters by the FWS, through a cooperative claims against Hurwitz, the FDIC Board of OMB, 395–6899; Jack Smith, FDIC, 898– agreement would probably be the most sim- Directors would consider accepting such as- 7394; David Long, DOJ, 514–0280; John plified process for attaining DOI manage- sets to resolve the claims against Hurwitz. Bowman, Treasury, 622–1974 ment of the area, the FDIC or Treasury (Page 3, Issue 1) From: Elisabeth Blaug, Associate General would retain underlying jurisdiction over the Question 2. Can the F.D.I.C. transfer Head- Counsel lands. waters Forest to Interior under existing au- Subj: Headwaters Forest Meeting October 26 The Antiquities Act of 1906 thorities, without legislation? Yes. The Most of you attended a meeting this past F.D.I.C. could legally transfer title to the Friday at CEQ Chair Katie McGinty’s office, The Antiquities Act of 1906 (16 U.S.C. § 431) Headwaters Forest from the FSLIC Resolu- at which we initiated discussions on a poten- provides: ‘‘The President . . . is authorized, tion Fund (FRF) to Treasury if the F.D.I.C. tial debt-for-nature swap. As you will recall, in his discretion, to declare by public procla- determined that the state of the FRF at the the FDIC recently filed a $250 million suit mation historic landmarks, historic and pre- time of transfer were such that the value of against Charles Hurwitz for his role in the historic structures, and other objects of his- Headwaters was not better retained in the failure of the United Savings Association of toric or scientific interest that are situated FRF for discharge of FRF liabilities. A case Texas (in addition, there is a private False upon lands owned or controlled by the Gov- could be made in favor of such a determina- Claims challenge pending). Mr. Hurwitz is a ernment of the United States to be national tion at present, although the FDIC Board of major stock owner in Maxxam, which ac- monuments, and may reserve as a part there- Directors might prefer to foster all FRF as- quired Pacific Lumber Company, which owns of parcels of land, the limits of which in all sets in view of contingent liabilities. Absent and logs the Headwaters Forest. Because this cases shall be confined to the smallest area such a determination, an alternative might forest contains approximately 3,000 acres of compatible with the proper care and manage- be for the FDIC to hold the Headwaters For- virgin redwoods, there is great interest to ment of the objects to be protected.’’ est for the time being, under management by preserve it. Among a number of options to President Jimmy Carter declared two such the Department of the Interior. (Page 8, consider for ensuring this happens is a poten- National Monuments by Presidential Procla- Issue 2) tial debt-for-nature swap, by which FDIC mation on December 1, 1978. The Yukon- Question 3. What legislative mechanisms would seek to acquire Headwaters from Mr. Charley National Monument encompassed exist that may facilitate a transfer of the Hurwitz in exchange for release of its claims. 1,720,000 acres, while the Yukon Flats Monu- Headwaters Forest to the U.S. Department At our meeting last Friday, a number of ment encompassed 10,600,000 acres. Within of the Interior with minimal financial out- complex legal issues were raised concerning such proclamations the President has the lay? Three (3) legislative authorizations pro- this proposed swap, which relate in some discretion to set forth responsibility for vide a mechanism for an inter-agency trans- part to your agency. Essentially, we need to management of the National Monument. fer of title to the Headwaters Forest to the examine if and how there might be a chain of Thus, presumably, regardless of whether Department of the Interior. The three origi- ownership from FDIC to Treasury to a land Headwaters was under the jurisdiction of nal citations have since been analyzed and management agency. Hence, there is a fol- FDIC or the Treasury Department, the Presi- two different authorities have been found to low-up meeting tomorrow (Thursday) at 10:00 dent could declare it a National Monument, provide better legal authority. The three au- a.m. at FDIC, 550 17th Street, room 3036. We under the administration of the Secretary of thorities now considered appropriate are the will attempt to identify the legal issues that the Interior. Such Presidential proclama- Transfer of Real Property Act (16 U.S.C. need to be addressed to determine whether a tions are not subject to the provisions of the 667b); Federal Property and Administrative debt-for-nature swap is feasible. I look for- Federal Land Policy and Management Act, Services Act (40 U.S.C. 484); and the Surplus ward to seeing you or your designate(s) to- 43 U.S.C. § 1701, nor are they subject to Property Act of 1944 (50 U.S.C. App. 1622g). morrow. Please contact me at 395–7420 if you NEPA, since NEPA does not apply to Presi- (Page 12, Issue 3) have any questions. The FDIC contact is dential action. Question 4. Can Interior accept Pacific Jack Smith, Deputy General Counsel, at 898– Lumber assets from Treasury/F.D.I.C. with- 3706. out triggering a ‘‘scoring’’ claim? Any budg- DOCUMENT DOI–J etary impact, including ‘‘scoring,’’ is depend- UNITED STATES DEPARTMENT OF THE ent on the particular structure of the trans- DOCUMENT DOI–I INTERIOR, OFFICE OF THE SEC- action and whether particular legislation is UNITED STATES DEPARTMENT OF THE RETARY, necessary to facilitate the acquisition or INTERIOR, OFFICE OF THE SOLIC- Washington, DC, March 26, 1996. transfer of the Headwaters Forest. (Page 14, ITOR, MEMORANDUM Issue 4) Washington, DC, December 1, 1995. Attached for your consideration is the full To: John Garamendi, Deputy Secretary response drafted by F.D.I.C. and full cita- MEMORANDUM Allen McReynolds, Special Assistant to the tions involved in resolving the legal, legisla- To: Bob Baum Secretary tive, and financial obstacles involved. From: Larry Mellinger Subject: Exchange Issues on Headwaters Enclosure. Subject: Headwaters—Alternative Methods Project for DOI Management You recently stated that you have reason In addition to the methods in which the to believe that Charles Hurwitz and Maxxam DOCUMENT DOI–K Headwaters Forest could possibly be trans- Corporation officials will most likely want a LAW OFFICES OF THOMAS N. LIPPE, ferred from the Treasury Department to In- global settlement through the negotiation San Francisco, CA, June 5, 1996. terior, which were outlined in the FDIC process for Headwaters Forest. By that, you To: Robert Baum, Department of Interior

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00167 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.437 pfrm07 PsN: E20PT1 E2506 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 Your Fax No: 202–208–3877 (103rd Congress). This area is composed of: in California, an accomplishment that would From: Thomas N. Lippe (a) approximately 44,000 acres of land, most be historic in scope. Toward this end, Julia CONFIDENTIALITY NOTE of which has been designated as critical habi- will contact John Garamendi’s office to ar- The documents accompanying this cover tat for the marbled murrelet by the U.S. range a meeting with us soon as possible. sheet contain information from the law of- Fish & Wildlife Service and which belongs Thank you for your careful consideration fices of Thomas N. Lippe which may be con- primarily to Pacific Lumber Company (ap- of this. fidential or privileged. The information is in- proximately 33,000 acres) and other compa- Very truly yours, tended to be for the use of the individual or nies (approximately 11,000 acres including THOMAS N. LIPPE. Enclosure. entity named on this transmission sheet. If approximately 6,300 acres of Elk River Tim- you are not the intended recipient. Be aware ber Company land); and (b) a 13,000 acre area cc: Cecelia Lanman, Doug Thron, Jill that any disclosure, copying, distribution or north of the critical habitat area, which is Ratner, Kathy Bailey, Julie Levin use of the contents of this faxed information identified in HR 2866 as a Coho Salmon Study Area. The HFCC is mapping the pre- may be prohibited. If you have received this DOCUMENT DOI–L facsimile in error. Please notify us by tele- cise boundaries of these areas. UNITED STATES DEPARTMENT OF THE phone immediately so we can arrange for the 2. Federal acquisition should not be accom- INTERIOR, OFFICE OF THE DEPUTY return of the original documents to us. panied by any ‘‘sufficiency language’’ relat- SECRETARY, Other: Fax does not include map; Original ing to any timber owner’s compliance with Washington, DC, July 8, 1996. with enclosed map to follow in the mail. environmental laws or restricting judicial Date: June 5, 1996. review of logging elsewhere. MEMORANDUM Case: HD–ACQ. 3. The federal government should seek in- To: Jim Brookshire, Bob Baum terim protection for these areas by (a) in- From: John Garamendi forming Elk River Timber Company that it Subject: Weekend Discussions with Hurwitz LAW OFFICES OF THOMAS N. LIPPE, is considering acquiring Elk River’s land San Francisco, CA, June 5, 1996. and Boggs north of the Headwaters Grove; and (b) in- Friday night I attended Boggs’ barbecue at By Facsimile and By mail: (202) 208–3877 sisting that Pacific Lumber Company cease his home, and talked to him and to Robert L. Baum, logging in the old growth groves within the Maxxam’s Corporation Vice President from Associate Solicitor for Division of Conservation Palco owned areas described above. Washington. I laid out our four demands. & Wildlife, Solicitor’s Office, Department of 4. The federal government should contact They were not responsive, and it was obvious Interior, Washington, DC. and share with the HFCC appraisals of the that they had no instructions to negotiate. DEAR BOB: I am writing on behalf of the following areas: From the discussion, it was clear that Headwaters Forest Coordinating Committee (a) The areas described in (a) and (b) of to follow up on your meeting with Julia Charles Hurwitz had two concerns. The first paragraph 1 above, was that we are not serious and that we are Levin on May 31, 1996. I understand from (b) The 33,000 acre area described in Palco’s just stringing him out. The second is that Julia that you expressed a high degree of dis- federal inverse condemnation complaint, our appraisal will be so far off the mark that appointment and frustration with your (c) All of the old-growth groves that are no deal can be made, and that the properties meeting with the HFCC representatives, in- depicted on the enclosed map as being within that we are putting forth are not good. These cluding myself, in Burlingame on May 15, the critical habitat area. 1996. We are puzzled by this since your char- 5. Federal land acquisition should be ac- concerns seemed to be the reasons that they acterization of our discussions at that meet- companied by forest worker retraining meas- did not want to do the four demands. I finally told them that if they did not be- ing does not reflect many of the most impor- ures. lieve that we were serious, then Charles tant elements of our communications. 6. Federal acquisition should not be accom- Hurwitz should phone me on Saturday. By Therefore, in order to avoid any ambiguity plished by trading other old growth forest the time we returned home, Mr. Hurwitz had or misunderstanding, we are writing now to lands. phoned. We talked later Saturday afternoon. memoralize the most important elements of 7. The HFCC will assist with identifying Mr. Hurwitz confirmed my suspicions as re- what we said at the meeting. surplus federal property that may be suit- The Headwaters Forest Coordinating Com- able for a land swap; but the Department of lated above. He went on and on about the mittee (HFCC) is composed of representa- Interior should share its information on properties not having real value because en- tives of the following organizations: Bay these properties with the HFCC to enable us titlements were not assured. He dismissed Area Coalition for Headwaters Forest to assist. Yerba Buena and Treasure Island as worth- (BACH), Earth First!, Environmental Protec- 8. The HFCC has established a process to less. The same was said about all other prop- tion Information Center (EPIC), Forests For- attempt to reach consensus on how to re- erties that he had heard about. He demanded ever, Mendocino Environmental Center spond to any eventual land acquisition. We to have the appraisal and the list before de- (MEC), Rose Foundation for Communica- believe that it is now premature to attempt ciding what to do about the demands. I said, ‘‘no, we would not negotiate and tions and the Environment, Sierra Club, to define what is feasible or realistic and litigate at the same time.’’ He needed to de- Trees Foundation. that such determinations must depend on The HFCC has in turn selected the five in- the information gained from the appraisals cide which he would do . . . the four demands dividuals you met with (i.e., Cecelia and surplus property surveys described would have to be met, I said. I suggested Lanman, Kathy Bailey, Jill Ratner, Doug above. In addition, the federal government’s that the following steps occur: 1. Charles Hurwitz meets our demands; Thron and myself) to represent the HFCC in reluctance to discuss, either with us or with 2. On receipt of the confirming letters, we discussions with the Administration and in Maxxam, the possible settlement of the FDIC will give him a complete list of properties; and OTS lawsuits (the so-called ‘‘debt for na- any negotiations with Pacific Lumber Com- 3. We will enter into discussions with him ture’’ swap) also makes any meaningful as- pany. on the value of Headwaters with the goal of These organizations have been working for sessment of what is feasible impossible at agreeing to a value; and, many years, through litigation, community this time. 4. We will then determine how to pay the We believe that if the federal government education, government and private acquisi- price with land swaps, etc. tion, etc., to protect the ecology and bio- pursues acquisition with the intent of maxi- He said he’d get back to us on Monday. diversity of the redwood region of California. mizing ecological conservation, limited by Later Saturday evening he called again As a result, the organizations are recognized actual financial and political constraints, and asked to have all of the State of Cali- by the national environmental community and with open communication and sharing of fornia properties at Lake Tahoe put on the as the most knowledgeable about what is re- information with the HFCC (within legal table. I said I’d think about it. quired to achieve meaningful protection for constraints), that the end result of this proc- Sunday, Mr. Boggs phoned and asked me to this dwindling resource. ess will be understood and supported by the think about the wording of a letter he would All of these organizations and their mem- environmental community in California and send me on Monday. Here it is: they would bers very much appreciate the Administra- nationwide. meet the four demands with modifications. I tion’s interest in exploring the possibility of Given these considerations, it is unreal- think the letter will come in like this. federal acquisition of privately owned red- istic for the Administration to expect sup- A stay of the takings case until September wood forests for conservation purposes. Both port, now, for a proposal which may fall far 15, with extensions if mutually agreeable; you and John Garamendi have, quite under- short of what could be accomplished after all An agreement not to log until ‘‘x’’ date; standably, inquired of the HFCC organiza- the facts are in. In addition, the existing Three-party agreement on confidentiality; tions how they would view certain acquisi- murrelet listing and recent designation of and, tion scenarios. The HFCC’s response to this murrelet critical habitat, as well as the No double dealing. query at our May 15, 1996 meeting, which has forthcoming coho listing by your Depart- You are to review the letter and determine apparently caused your current frustration, ment highlight the need to take affirmative if it meets our minimum requirements. If is as follows: steps now to protect these species, which not, then call Mr. Boggs and suggest im- 1. The federal government should explore HFCC’s approach to designed to accomplish. provements. Call me in Alaska to review the acquiring the approximately 57,000 acres of In conclusion, we hope the Administration letter if it meets minimum requirements. private redwood forest land that is roughly will work with us to acquire a significant Do not proceed on showing or discussing equivalent to the area identified in HR 2866 portion of the old growth redwood ecosystem any property deals Mr. Hurwitz or his people.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00168 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.441 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2507 Do order an appraisal of the Emerson prop- tection for the Headwaters ecosystem. Rath- dating the map may result in modification of erty. I want that piece in place as soon as er we are attempting to make suggestions the information it portrays.) possible. for a feasible starting point. Our priorities TIMBER VOLUME PER ACRE IS HIGHER IN MAIN Good luck to us all. for protection are: GROVE THAN IN THE OTHER VIRGIN GROVES All the virgin old-growth groves within the The question of valuation immediately USFWS-designated murrelet critical habitat DOCUMENT DOI–M comes to mind. Therefore, we asked Dr. Rob- area and their adjacent residual old-growth ert Hrubes, an independent consulting for- QUESTIONS REGARDING HEADWATERS GROVE, groves. ester, to analyze the Pacific Lumber maps to JULY 19, 1996 Within the critical habitat area, the resid- determine whether there was any quantifi- 1. Please provide an area map showing the ual old-growth groves which are ‘‘occupied.’’ able difference between the timber stand property’s location. Describe the Headwaters A buffer on the north of the main grove characteristics in the main grove compared Grove property and its physical sur- consisting of the 3700 acres designated as to the other virgin groves. He concluded that roundings. What other areas surround it that murrelet critical habitat within the Elk there was a very significant difference. Ac- involve Pacific Lumber? River Timber property. cording to Hrubes, the PL maps indicate 2. What is the significance of the marbled A minimum 300 foot buffer around every that the size of the trees is larger and the murrelet and other threatened/endangered occupied grove. density of the canopy is heavier in the main species for the property? What ESA or other Watercourse protection within the 60,000 grove than in the other groves, indicating a potential development limitations from Fed- acre Headwaters Forest and the remainder of likely greater timber volume and value. You eral or State law affect the Grove and sur- the Elk River Timber Company (approxi- will receive his report by August 23. rounding area? What current limitations af- mately 5400 acres) similar to the Standards TIMBER VOLUME AND VALUE IN RESIDUAL fect the property? and Guidelines for Management of Habitant STANDS IS 10–15% OF VIRGIN GROVES 3. Explain the takings lawsuit that for Late-Successional and Old-Growth Forest Maxxam has filed. What are the grounds for Related Species Within the Range of the Pacific Lumber itself has used and pub- the lawsuit? What is the status of the suit? Northern Spotted Owl, published jointly by lished at least two rules of thumb to esti- Is the claim credible? Interior and other departments in April 1994. mate the relative timber volume of residual 4. Provide a history/chronology of the ne- No limitation on the application of the En- stands compared to virgin groves. In its re- gotiations to exchange the Grove from dangered Species Act or other modification cent suit Pacific Lumber v. United States, Maxxam and its predecessors. When and how of current law applicable to the Headwaters on page 16, paragraph 31, line 10–12 the com- did Maxxam become involved? What volume area. pany states: ‘‘About 10 acres of residual old of timber (green or salvage) has been cut We are in the process of producing another growth is required to produce the volume that would be produced from one acre of vir- from the Grove and surrounding area owned map which outlines these areas. Until it is gin old growth.’’ by Pacific Lumber thus far? complete we hope the following information Another estimate of relative value was 5. What are all the elements of the DOI will be useful. provided in Timber Harvest Plan 89–793 Hum, proposed exchange? Does the exchange in- ACREAGE OF OCCUPIED MURRELET NESTING the last THP submitted (never approved) volve the FDIC? IRS? Forest Service? Other GROVES which proposed full scale logging within the agencies? Are tax incentives or FDIC/OTS All the virgin old-growth groves within the main grove. This THP proposed logging 77% claims involved? USFWS-designated murrelet critical habitat of the stand volume in 399 acres of the grove 6. Have formal appraisals on the property area, adjacent residual old-growth groves, to produce 49.5 million feet of logs. In its involved in the exchange been done? What is and other residual old-growth groves which analysis of alternatives, Robert Stevens, the basis for the Maxxam estimates? DOI’s? are ‘‘occupied’’ by marble murrelets: PL’s Head Forester at the time, states on 7. Does DOI contemplate needing legisla- Although we would like to clearly identify page 60: ‘‘If TPL Co. is prevented from log- tion for this deal to occur, or do necessary these habitat categories, the acreage figures ging its virgin timber, it will have no choice authorities exist? If so, list these authorities which Pacific Lumber has provided in its except to replace this old growth timber vol- and how they apply. draft murrelet HCP appear to be unrealisti- ume with trees from previously logged 8. What is the timetable for a transaction? cally low when compared with the timber stands. Producing 49.5 million feet of logs What is the significance of September 15th? type map which it has provided EPIC as part would require 2,500 acres or more to be What legal options are involved for the Fed- of the exemption litigation. According to the logged.’’ The 399 acres of virgin timber from eral Government in terms of protecting the HCP, the company claims: the main grove proposed for logging by THP property (specifically with regards to the 793 is 15% of the 2500 acres minimum which ESA)? Does Maxxam believe it has leverage 4768: Virgin occupied nesting within critical Stevens estimates would provide alternative in this transaction and if so, what are the habitat area (includes main grove) old growth timber for harvest. Thus the com- circumstances that leads it to believe that? 1346: Residual occupied nesting within crit- pany has provided over a seven year period 9. What have been the public positions on ical habitat area two similar estimates of relative value: The a Headwaters exchange by Maxxam, DOI, 6114 acres: Total occupied nesting habitat company believes its residual timber stands State of California, and other national and within critical habitat area. contain between 10 and 15% of the volume of local groups? The PL draft HCP also claims that there a virgin stand. 10. Have the FDIC/DOJ/IRS been involved are 1550 acres of occupied nesting habitat in DOI’s discussions with Maxxam? Have outside the designated critical habitat area. WATERCOURSE PROTECTION FOR FISH AND these agencies been involved in separate dis- During discovery associated with EPIC’s WILDLIFE cussions with Maxxam? federal exemption litigation, Pacific Lumber One of our top priorities is watercourse has provided a map which shows timber protection within the 60,000 acre Headwaters types and stand densities on its property. Forest and the residual portion of the Elk DOCUMENT DOI–N This map shows that there are significant River Timber Company similar to the Stand- SIERRA CLUB CALIFORNIA, areas of residual timber adjacent to the vir- ards and Guidelines for Management of Habi- Philo, CA, August 21, 1996. gin nesting groves. Murrelet surveys in this tat for Late-Successional and Old-Growth Re: Headwaters Forest acreage have not been systematic, although Forest Related Species Within the Range of Assistant Secretary JOHN GARAMENDI, murrelet occupied behavior has been ob- the Northern Spotted Owl, published jointly U.S. Department of the Interior, served in residual stands. by Interior and other departments in April Washington, DC Using PL’s timber type map, we estimate 1994. When reviewing the Standards and DEAR ASSISTANT SECRETARY GARAMENDI: I that there could be as much as 17,113 acres Guidelines it is important to keep in mind am writing you on behalf of the Headwaters occupied by murrelets in the 60,000 Head- that they were designed to provide impor- Forest Coordinating Committee. We thank waters Forest, including the stands where tant habitat for a broad variety of species you for your willingness to continue the ne- surveys have demonstrated occupancy north not limited to fish. gotiations which will lead to protection for of the designated critical habitat area. How- Standards and Guidelines specifies a no cut Headwaters Forset. We appreciate that the ever, this figure does not include the 1550 zone on each side of a fish-bearing (Class I) issue is complex and the potential price tag acres mentioned above that PL has identi- watercourse measured along the ground is large. fied as occupied, which is located south of (slope distance) equal to two site potential To assist you in defining areas which we Headwaters, outside the critical habitat trees or 300 feet, whichever is greater. With- believe to be priorities for protection, the area. Of the 17,113 figure, approximately out reviewing company information, site po- Headwaters Forest Coordinating Committee 14,000 acres fall within the critical habitat tential tree size can only be estimated. I met last week. We all agree that acquisition boundary. It is crucial to keep in mind that have estimated 250 feet per tree, which would or permanent protection at this time for the only about 5000 acres of either figure is vir- yield 500 feet each side. However it is also following areas would constitute a signifi- gin. difficult to estimate ground-slope distance cant step toward protection for Headwaters (An additional uncertainty which we are from a map so I have used the 300 foot stand- Forest, the sixty thousand acre area which is attempting to clarify is whether some of the ard (total 600 feet on both sides of water- our primary concern. By listing these prior- residual groves identified on the timber type course) applied to the (horizontal) map dis- ities we do not intend to imply that these map have already been logged. Although tance. Greater precision will obviously be steps would constitute full and complete pro- their map is dated March 1996 we believe up- needed before finalizing any agreement.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00169 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.443 pfrm07 PsN: E20PT1 E2508 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 Measuring by hand the watercourses with- our effort to prioritize the need to protect action (filed approximately 4 months after in the 60,000 acre Headwaters Forest as indi- specific habitat features within Headwaters the FDIC action) when the FDIC paid the cated on U.S.G.S. topographical maps has Forest will be helpful in you negotiations OTS to pursue its administrative action in a yielded the estimate that there are 334,950 with Pacific Lumber Company. We remain forum more favorable to the banking regu- linear feet of Class I, blue-line watercourses. willing to provide information to support lators. This is the equivalent of 63.44 miles. I applied your efforts. (5) The FDIC and the OTS repeatedly in- the 600 foot standard to this figure, divided Sincerely, sisted in writing that Charles Hurwitz was by the number of square feet in an acre KATHY BAILEY, the first to raise the issue of a ‘‘global settle- (43,560), and determined that proposed Class I State Forestry Chair, on behalf of the HFCC. ment’’ involving debt-for-nature and red- no-cut watercourse zones would total ap- woods with them. This notion is contrary to proximately 4612 acres: 600′ × 334,950′ = DOCUMENT DOI–O the bulk of evidence presented at the hear- 200,970,000 sq.ft/43,560 = 4612 acres. ing. The record shows that months prior to FOIA REQUEST Although I originally believed that the dis- Mr. Hurwitz broaching the redwoods as part tance of Class II (presence of water-depend- 1. GSA July memo to Hurwitz/notebook. of a settlement involving the banking ent non-fish life) streams could equal as 2. Forest Service maps, memo to Dep. claims, the FDIC secretly plotted to ensure much as four times the distance of Class I Secy. that Mr. Hurwitz was baited into ‘‘first’’ streams (which I reported separately regard- 3. Base Closure. 4. BLM Lands Humboldt, Trinity, raising the issue with the banking regu- ing Elk River Timber Company), additional Mendocis. lators. time spent mapping has led me to conclude 5. GSA printout. (6) The records also show a much broader that twice the distance is a closer estimate, 6. Oil & gas. government-wide effort involving the CEQ, and still likely to be high. Look for memos, etc. in file re: surplus the OMB, the DOI, and the banking regu- The Standards and Guidelines for Class II property. lators to create ‘‘leverage’’ through filing is one site-potential tree or 150 feet no cut banking claims and to use ‘‘leverage’’ of the zone each side of the watercourse. Using the banking claims to obtain redwoods, precisely same logic as outlined above, I have used the APPENDIX 4 as outlined by early 1993 communications 50 foot standard. Applying 50% of the Class I HOUSE OF REPRESENTATIVES, from the eco-terrorist group Earth First! and zone to twice the distance yields the same COMMITTEE ON RESOURCES, other ‘‘environmental’’ interest groups. number. Therefore I believe protection for Washington, DC. (7) The records show three days prior to Class II streams would likely be no more MEMORANDUM AND STAFF REPORT the July 27, 1995, ATS memo, the staff would than an additional 4612 acres. To: Chairman John Doolittle, Members of have used ‘‘ordinary’’ procedures to close out Without close inspection it is impossible to the Headwaters Task Force the case against Mr. Hurwitz regarding feel confident about estimating the distance From: Committee on Resources Staff USAT, but pressure from Members of Con- of Class III (ephemeral) streams. However, I Date: January 5, 2000 gress and environmental special interest still believe that as a working assumption Re: Documents regarding groups were cause enough to bring the mat- we can guesstimate that there are twice as Pursuant to the motion of Chairman Doo- ter of pursuing Mr. Hurwitz for USAT claims many Class III (ephemeral) streams as Class before the FDIC board of directors. That II. The Standards and Guidelines for Class III little at the December 12, 2000, hearing, the attached documents are included in the memo was finalized in draft, but never are one site potential tree or 100 foot no-cut signed or sent. zone each side of watercourse. However, we record of the hearing. The motion was as fol- lows: ‘‘I move that all the documents we uti- (8) The FDIC board of directors discussed have chosen to depart from the Standards the topic of the redwoods and meetings be- and Guidelines in this instance and simply lized in today’s hearing be included in the hearing record and that all of the documents tween FDIC staff and Department of Interior ask for a 50 foot equipment exclusion zone on staff about the debt-for-nature scheme at each side of all Class IIIs with retention of at produced by the Department of the Interior be included as part of today’s hearing record; their board meeting when determining least 50% overstory and understory canopy whether to bring the action against Mr. within that zone. Over the estimated 254 and I furthermore move that any documents not included in the above categories that are Hurwitz. Those subjects were consequently a miles of Class III, an equipment exclusion factor in the board’s determination to pro- zone totaling 3076 acres should be applied. necessary to document a staff report or anal- ysis of the situation be released with such a ceed with the action involving USAT against Class I=4612 ac staff report.’’ Mr. Hurwitz. Class II=4612 ac There was no objection to the motion. The The staff makes the observation records Total=9224 ac no harvest watercourse protec- attached documents (A–X) and certain DOI examined by the task force document the tion zones labeled and unlabeled documents, along with conclusions above. The staff makes the addi- Class III=3076 ac equipment exclusion with all documents produced by the Department tional observation that more material docu- 50% canopy retention of the Interior, are therefore part of the offi- menting these conclusions, including the PRE-EXISTING WATERCOURSE CONSTRAINTS cial record of the Committee on Resources, wider government agenda to obtain the red- MUST BE ANALYZED Task Force on Headwaters Forest and Re- woods owned by Mr. Hurwitz using banking Existing California Board of Forestry regu- lated Issues. Committee records are avail- claims by the FDIC and OTS as leverage, is lations require 50% of the stream canopy to able for public dissemination. Consequently, available in the committee records. be retained for Class I streams and a Water- they, along with the Stenographic Minutes of the hearing (and the official printed tran- course and Lake Protection Zone (WLPZ) HOUSE OF REPRESENTATIVES, script when available) were part of the offi- ranging from 75–150 feet depending on side- COMMITTEE ON RESOURCES, cial Task Force hearing record and were pub- hill slope. Class II zones are smaller. Equip- Washington, DC, December 8, 2000. lically available at the close of the hearing. ment exclusion zones for Class III streams Mr. William F. Kroener, III with or without canopy standards are often The staff reaches the following conclusions regarding the information gathered by the General Counsel, Federal Deposit Insurance specified in current THPs. Protection meas- Corporation, Washington, DC ures are likely to increase when coho salmon Task Force: (1) The record and information produced at DEAR MR. KROENER: Thank you for your are listed this year. December 7, 2002, letter about the December THP 96–059 Hum on the neighboring Elk the hearing (and the attached documents) support the conclusion that the debt-for-na- 12, 2000, hearing of the Task Force on the River Timber property included mitigation Headwaters Forest and Related Issues. You measures beyond standard rule prescriptions ture agenda was a large, if not integral part of the rationale for proceeding with the raise misplaced concerns about the hearing including: retention of approximately 75% of and possible use of records by the Task Force the existing conifer overstory in the Class I FDIC professional liability action against Charles Hurwitz for the USAT failure. in furtherance of very legitimate oversight WLPZ and a 150 foot WLPZ. The value of activities authorized under the U.S. Con- purchasing a riparian corridor should take (2) The debt-for-nature agenda was first ad- vanced through the outside counsel of the stitution and the Rules of the United States existing regulatory constraints and oper- House of Representatives. ational practices into consideration. FDIC (Hopkins & Sutter) which coordinated Please refer to page two of the June 16, Additionally, it will be necessary to con- numerous meetings and other communica- 2000, letter from Chairman Young to Chair- duct an evaluation of the existing harvest- tions for environmental interest groups and man Tanoue, which outlines a parameter of able timber volume in the proposed water- foundations about obtaining redwoods owned the oversight project: the FDIC’s ‘‘advance- course protection zones. A significant pro- by one of Charles Hurwitz’s companies ment of claims against private parties to ul- portion of the proposed no-cut zones will through ‘‘leverage’’ that would be exercised timately obtain additional parcels of the have very little immediately merchantible via a ‘‘high profile’’ lawsuit. Headwaters Forest owned by the Pacific timber remaining. (3) The debt-for-nature agenda to obtain redwoods had nothing to do with legitimate Lumber Company.’’ This issue is not at all CONCLUSION banking rationales for bringing the FDIC (or should not be) part of the underlying We continue to believe that protection for legal action regarding USAT. banking claim of the FDIC (or the OTS). In the full 60,000 acre Headwaters Forest should (4) The FDIC debt-for-nature agenda was fact, the issue of redwoods, debt-for-nature, be achieved as soon as possible. We hope that advanced by the Office of Thrift Supervision and the Headwaters Forest should have no

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00170 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.446 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2509

place in FDIC, or OTS investigations, pro- FEDERAL DEPOSIT INSURANCE cerning pursuance of claims like those ceedings, claims, court filings, or even inter- CORPORATION, against USAT. nal communication—yet production of such Washington, DC, December 7, 2000. Indeed, a primary thrust of the inquiry material from your agency was massive. HON. JOHN T. DOOLITTLE, (which examines debt-for-nature and Head- waters) should have nothing to do with the The banking laws certainly do not author- Chairman, Task Force on Headwaters Forest and Related Issues, Committee on Re- legitimate pursuit of the administrative pro- ize agendas associated with redwoods, debt- sources, House of Representatives, Wash- ceeding against USAT. Therefore, it is incon- for-nature, or expansion of the Headwaters ington, DC. ceivable that the inquiry could adversely in- Forest. In fact, other Acts of Congress pro- DEAR MR. CHAIRMAN: This letter responds fluence ‘‘due process and fairness’’ for the re- hibit any expenditure whatsoever related to to your recent letters and subpoena to Chair- spondent (USAT or any of its prior owners), acquiring lands or interests in lands from man Tanoue for her appearance and testi- the concern you expressed. Pacific Lumber’s land base to enlarge the mony before a meeting of the Task Force, It was explained by Chairman Young in the Headwaters Forest redwood grove. The letter previously scheduled for November 13, 2000, letter to the Director initiating the over- also explains the authority to conduct this which is now scheduled for December 12, 2000. sight review that Congress acting through oversight project, and it explains the back- According to your letter of November 8, 2000, the Committee on Resources (and now ground of this issue so that it is very clear to the hearing will relate to the FDIC’s pending through a duly authorized Task Force), has everyone. Indeed, it is a duty of Congres- litigation against Charles E. Hurwitz arising the authority to conduct the inquiry. The sional committees to ‘‘review and study on a out of the 1988 failure of United Savings As- House Ethics Manual to which you refer ac- continuing basis the application, administra- sociation of Texas (USAT). knowledges the plenary authority of Con- tion, and effectiveness of laws * * *’’ and The FDIC has produced a large number of gress and its Committees to conduct this ‘‘any conditions or circumstances that may documents to the House Committee on Re- oversight review concerning the Headwaters. indicate the necessity or desirability of en- sources in response to its previous request The ethics manual states: ‘‘No other statute acting new or additional legislation.* * *’’ and the subpoena duces tecum issued on or rule restrains Members of Congress from (House Rule X 2.(b)) June 30, 2000. As we previously informed communicating with agency decision-mak- This is precisely what the Task Force will Chairman Young, our prior productions in- ers.’’ The ultimate form of communication do. The June 16, 2000, letter to Chairman clude sensitive, highly confidential material in a formal sense will be at the hearing that Tanoue from Chairman Young makes this that is covered by attorney client and/or at- we have scheduled. clear and cites the applicable provisions of torney work product privileges in the ongo- Therefore, Director Seidman’s attendance law and rules that define our oversight. Your ing litigation against Mr. Hurwitz, including is required at the hearing. You and appro- agency was informed six months ago about documents that Mr. Hurwitz and his rep- priate staff should be available to assist her the thrust of the oversight project. resentatives are not entitled to review with answers to Task Force Questions that through the court proceedings. We have iden- she may not have the detailed knowledge Merely because ongoing litigation ‘‘re- tified the documents containing confidential and background to answer. While the Direc- lates’’ to a matter under review by a Task information with a stamp bearing the des- tor may not have been involved with the fil- Force is not legal justification that fore- ignation ‘‘CONFIDENTIAL.’’ ing of the OTS charges because she came to closes Congress’ ability to determine and Among the documents provided to the the agency subsequently , she still has ulti- test facts by using records in a Congressional Committee is the FDIC’s Authority To Sue mate responsibility for OTS actions, so I ex- review or hearing. It will certainly be no ex- memorandum, which remains under a court pect your staff to be available to assist here cuse for failing to answer questions at our seal, pursuant to two orders of the United in providing needed information to the Task hearing. Often Congressional Committees States Court of Appeals for the Fifth Circuit. Force. Thank you. hear that notion when records are embar- Because of these two court orders, the FDIC, Sincerely, rassing to a Federal agency for one reason or as a party to the litigation, could be subject JOHN T. DOOLITTLE, another, rather than when records are sub- to contempt of court by discussing the spe- Chairman. ject to a valid claim of privilege in a court. cific contents of the authority to sue memo publicly. Therefore, the FDIC will not be If litigation or potential litigation were a OFFICE OF THRIFT SUPERVISION, able to answer specific questions about the bar to Congressional oversight, Congress DEPARTMENT OF THE TREASURY, conclusions and recommendations contained would rarely be able to conduct any over- Washington, DC, December 6, 2000. in the sealed document itself. However, we sight. You must also be aware that because Hon. JOHN T. DOOLITTLE, believe we can assist the Task Force to ful- records are compelled to be produced to a Chairman, Task Force on Headwaters Forest fill its oversight responsibilities and respond Committee, means that an otherwise legiti- and Related Issues, Committee on Re- to any questions about the decision to bring mate privilege that shields them from dis- sources, House of Representatives, Wash- the case without referring to the sealed doc- covery in a court of law is not automatically ington, DC. ument by discussing the unredacted portions lost. Your concern, therefore, about possible DEAR CHAIRMAN DOOLITTLE: This responds of the Board’s deliberations, the underlying disclosure of ‘‘sensitive’’ or ‘‘confidential’’ to your December 5, 2000, letter to Director facts, the case law and the agency’s stand- records related to ongoing litigation is over- Ellen Seidman, which references your No- ards for bringing suit. stated, especially in light of the tangential vember 6, 2000, letter and the November 4, Please do not hesitate to contact me if you nature of the primary subject of our over- 2000, subpoena for her appearance and testi- have any further questions. sight to the underlying banking claims mony before a meeting of the Task Force, Sincerely, brought by the FDIC (and OTS). The Con- acting on behalf of the Committee on Re- WILLIAM F. KROENER, III, stitutionally authorized oversight functions sources. General Counsel. of Congress to collect information for over- As I stated in my June 23, 2000, and August sight make your concern even less valid. 24, 2000, letters to Chairman Young of the Furthermore, with respect to the ATS HOUSE OF REPRESENTATIVES, Committee on Resources (copies enclosed), memorandum to which you refer, it has been COMMITTEE ON RESOURCES, the Office of Thrift Supervision (OTS) has publically available for months on the Hous- Washington, DC, December 7, 2000. substantial concerns that the Task Force’s ton Chronicle web site (http://www.chron.com/ CAROLYN J. BUCK, inquiry could compromise the pending adju- dicatory proceeding brought by the agency, content/chronicle/special/hurwitzdocs/), so it is Chief Counsel, Office of Thrift Supervision, De- pursuant to 12 U.S.C. § 1818, against Mr. a stretch to think that your Chairman would partment of the Treasury, Washington, DC. DEAR MS. BUCK: Thank you for your De- Charles Hurwitz and Maxxam Corporation be held in contempt of court for being com- cember 6, 2000, letter requesting that you be concerning their involvement with the pelled to discuss the contents of such a docu- substituted as a witness for Director former United Savings Association of Texas ment at a Congressional hearing. This is par- Seidman at the hearing regarding debt-for- (USAT). This proceeding is now in the post- ticularly true given the fact that the record nature and the Headwaters Forest scheduled trial stage before an administrative law was independently subpoenaed and produced for December 12, 2000. judge (ALJ), who will submit a recommended to the Committee outside of the court pro- I understand Ms. Seidman’s role in the ad- decision to Director Seidman. After a further ceedings, and your Chairman is compelled by ministrative proceeding (In the Matter of opportunity for the parties to submit briefs, subpoena to testify at the hearing. While an- United Savings Association of Texas et al., OTS Director Seidman will issue the final deci- swers to specific questions may prove to be Order No. AP 95–40 (December 26, 1995)). I un- sion in the case. very embarrassing to the FDIC and OTS, derstand the sensitivity you expressed re- The subpoena to Director Seidman, which Chairman Tanoue will be expected to answer lated to the Director’s participation in our calls for her to testify concerning such mat- questions concerning that record and other hearing; however, Ms. Seidman has other re- ters as the reasons why the OTS brought the records should such questions be asked. sponsibilities as the Director of the OTS. She administrative action, and OTS’s objectives I hope that this clears up the concerns that is responsible for the matters including con- in the litigation, has the real potential of you raised. Thank you for your attention to duct of employees in the OTS, the office’s interfering with her ability to decide the this matter. interface with the FDIC on the Headwaters case on the basis of the record presented at Sincerely, matter (the FDIC has paid the OTS to pursue trial to the ALJ. In so doing, the actions of JOHN T. DOOLITTLE. the claims), and the general policies con- the Committee and the Task Force may be

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00171 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.450 pfrm07 PsN: E20PT1 E2510 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 later viewed as having deprived the parties amount and source of Federal grants or con- ticable include with his or her written testi- to the administrative proceeding of due proc- tracts received with the current or prior two mony a current resume summarizing edu- ess and fairness and could result in the final fiscal years. If the witness represents an or- cation, experience and affiliations pertinent administrative determination in this pro- ganization, he or she must provide the same to the subject matter of the hearing. In addi- ceeding being nullified by a court of law. See, information with regard to the organization. tion, to the extent practicable, each non- e.g., Pillsbury Co. v. FTC, 354 F.2d 952, 963–64 The information disclosed must be relevant governmental witness must disclose the (5th Cir. 1966); Koniag, Inc. v. Andrus, 580 F.2d to the subject matter of the hearing and the amount and source of Federal grants or con- 601, 610 (D.C. Cir.), cert. denied, 439 U.S. 1052 witnesses representational capacity at the tracts received with the current or prior two (1978); cf., The Ethics Manual of the House of hearing. Witnesses are not required to dis- fiscal years. If the witness represent an orga- Representatives, pages 244–45. close federal entitlement payments such as nization, he or she must provide the same in- Apart from legal concerns, we note that social security, medicare, or other income formation with regard to the organization. Director Seidman was not involved in the support payments (such as crop or com- The information disclosed must be relevant agency’s filing of the charges in the case modity support payments). In order to assist to the subject matter of the hearing and wit- (which occurred two years before her ap- in meeting the requirement of the rule, we nesses representational capacity at the hear- pointment). To maintain her impartiality as have attached a form which you may com- ing. Witnesses are not required to disclose final decision-maker, she has not been in- plete to aid in complying with this rule. volved in reviewing or presenting the evi- Should you wish to fulfill the disclosure re- federal entitlement payments such as social dence in the case, and has not participated in quirement by submitting the information in security, medicare, or other income support settlement discussions. Therefore, it would some other form or format, you may do so. payments (such as crop or commodity sup- be unlikely that she would have any infor- In order to fully prepare for this hearing, port payments). In order to assist in meeting mation relevant to the Task Force’s inquiry 25 copies of your testimony along with your the requirement of the rule, we have at- regarding the debt for nature campaign con- disclosure should be submitted to Debbie tached a form which you may complete to cerning the Headwaters Forest referred to in Callis, Deputy Chief Clerk, Committee on aid in complying with this rule. Should you your December 5, 2000, letter. Resources, Room 1328 Longworth House Of- wish to fulfill the disclosure requirement by To avoid compromising the Director’s role fice Building, no later than 48 hours prior to submitting the information in some other as adjudicator, OTS proposes to substitute the date of the scheduled hearing. In addition, form or format, you may do so. my appearance and testimony as the Chief consistent with the Americans with Disabil- In order to fully prepare for this hearing, Counsel for the agency. While we continue to ities Act, if your staff requires any reason- 25 copies of your testimony along with your believe that the inquiry creates the potential able accommodations for a disability to fa- disclosure should be submitted to Debbie for interfering with the administrative pro- cilitate your appearance, please contact the Callis, Deputy Chief Clerk, Committee on ceeding, and should be postponed until after Clerk mentioned above. Should you or your Resources, Room 1328 Longworth House Of- the Director issues a final decision in the staff have any questions or need further in- fice Building, no later than 48 hours prior to case, the substitution of witnesses will less- formation regarding the substance of the the date of the scheduled hearing. In addition, en the potential for serious harm. hearing, please contact Duane Gibson, Gen- consistent with the Americans with Disabil- Sincerely, eral Counsel, Oversight and Investigations ities Act, if your staff requires any reason- CAROLYN J. BUCK, on (202) 225–1064. able accommodations for a disability to fa- Chief Counsel. Sincerely, cilitate your appearance, please contact the Enclosures. JOHN T. DOOLITTLE, Clerk mentioned above. Should you or your Chairman, Task Force staff have any questions or need further in- HOUSE OF REPRESENTATIVES, on Headwaters For- est and Related formation regarding the substance of the COMMITTEE ON RESOURCES, hearing, please contact Duane Gibson, Gen- Washington, DC, November 8, 2000. Issues. Attachments. eral Counsel, Oversight and Investigations MR. BILL ISAAC, on (202) 225–1064. Sarasota, FL. Sincerely, DEAR MR. ISAAC: The Committee on Re- HOUSE OF REPRESENTATIVES, JOHN T. DOOLITTLE, sources, Task Force on Headwaters Forest COMMITTEE ON RESOURCES, Chairman, Task Force and Related Issues, will hold an oversight Washington, DC, November 8, 2000. on Headwaters For- hearing on the subjects listed in my Novem- HON. DONNA A. TANOUE, est and Related ber 6, 2000, letter to you. The time and date Chairman, Federal Deposit Insurance Corpora- Issues. of the hearing will be announced later, so tion, Washington, DC your appearance pursuant to the subpoena DEAR MS. TANOUE: The Committee on Re- Attachments. that was issued for your testimony on Mon- sources, Task Force on Headwaters Forest day, November 13, 2000, will be delayed until and Related Issues, will hold an oversight the time set for the re-scheduled hearing. So hearing on the subjects listed in my Novem- HOUSE OF REPRESENTATIVES, that you may properly prepare for that hear- ber 6, 2000, letter to you. The time and date COMMITTEE ON RESOURCES, ing, I offer you the following information. of the hearing will be announced later, so Washington, DC, November 8, 2000. This hearing will focus on your agency’s your appearance pursuant to the subpoena Hon. ELLEN SEIDMAN, role and involvement in the debt for nature that was issued for your testimony on Mon- Director, Office of Thrift Supervision, Wash- campaign concerning the Headwaters Forest. day, November 13, 2000, will be delayed until ington, DC. Any comments you might have with respect the time set for the re-scheduled hearing. So DEAR MS. SEIDMAN: The Committee on Re- to this subject would be appreciated, as that you properly prepare for that hearing, I sources, Task Force on Headwaters Forest would your written testimony. It is my un- offer you the following information. and Related Issues, will hold an oversight derstanding that your organization has expe- This hearing will focus on your agency’s hearing on the subjects listed in my Novem- rience with this subject matter and has in- role and involvement in the debt for nature ber 6, 2000, letter to you. The time and date formation that would be most helpful to the campaign concerning the Headwaters Forest. Committee. Any comments you might have with respect of the hearing will be announced later, so Your oral testimony should not exceed five to this subject would be appreciated, as your appearance pursuant to the subpoena minutes and should summarize your written would your written testimony. It is my un- that was issued for your testimony on Mon- remarks. You may introduce into the record derstanding that your organization has expe- day, November 13, 2000, will be delayed until any other supporting documentation you rience with this subject matter and has in- the time set for the re-scheduled hearing. So wish to present in accordance with the at- formation that would be most helpful to the that you may properly prepare for that hear- tached guidelines. You should bring appro- Committee. ing, I offer you the following information. priate staff with knowledge of the subject Your oral testimony should not exceed five This hearing will focus on your agency’s matter of the hearing who can assist you minutes and should summarize your written role and involvement in the debt for nature with answers required by the Task Force. I remarks. You may introduce into the record campaign concerning the Headwaters Forest. reserve the right to place any witness under any other supporting documentation you Any comments you might have with respect oath. If you are sworn in, you may be accom- wish to present in accordance with the at- to this subject would be appreciated, as panied by counsel to advise on the witness’ tached guidelines. You should bring appro- would your written testimony. It is my un- rights under the Fifth Amendment to the priate staff with knowledge of the subject derstanding that your organization has expe- Constitution. matter of the hearing who can assist you rience with this subject matter and has in- The Rules of the Committee on Resources with answers required by the Task Force. I and of the U.S. House of Representatives re- formation that would be most helpful to the reserve the right to place any witness under Committee. quire that all witnesses appearing before the oath. If you are sworn in, you may be accom- committee must to the greatest extent prac- panied by counsel to advise on the witness’ Your oral testimony should not exceed five ticable include with his or her written testi- rights under the Fifth Amendment to the minutes and should summarize your written mony a current resume summarizing edu- Constitution. remarks. You may introduce into the record cation, experience and affiliations pertinent The Rules of the Committee on Resources any other supporting documentation you to the subject matter of the hearing. In addi- and of the U.S. House of Representatives re- wish to present in accordance with the at- tion, to the extent practicable, each non- quire that all witnesses appearing before the tached guidelines. You should bring appro- governmental witness must disclose the committee must to the greatest extent prac- priate staff with knowledge of the subject

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00172 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.453 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2511 matter of the hearing who can assist you and XI of the Rules of the House of Rep- We very much appreciate your cooperation with answers required by the Task Force. I resentatives, and Rule 6(a) of the Rules of with this inquiry and the production of reserve the right to place any witness under the Committee on Resources. A copy of the records to date. The matters under review oath. If you are sworn in, you may be accom- rules is enclosed. Note Rule 4(f) regarding are very important, and your assistance may panied by counsel to advise on the witness’ the swearing of witnesses, which is my pol- prove to be indispensable. Should you have rights under the Fifth Amendment to the icy for hearings. Therefore, you may bring a any questions about your appearance and Constitution. counsel to advise you of any constitutional testimony, please contact Mr. Duane Gibson, The Rules of the Committee on Resources rights if you desire. General Counsel, Oversight and Investiga- and of the U.S. House of Representatives re- Because of your agency’s role in the mat- tions, at 202–225–1064. quire that all witnesses appearing before the ter, you may possess information that will Sincerely, committee must to the greatest extent prac- be helpful in the deliberations of the Task JOHN T. DOOLITTLE, ticable include with his or her written testi- Force and the Committee. Therefore, you Chairman, Task Force mony a current resume summarizing edu- will be receiving a subpoena for your appear- on Headwaters For- cation, experience and affiliations pertinent ance and testimony before a meeting of the est and Related to the subject matter of the hearing. In addi- Task Force. The subpoena schedules your ap- Issues. tion, to the extent practicable, each non- pearance for November 13, 2000, at 10:00 AM. governmental witness must disclose the The nature of this subpoena is continuing, so amount and source of Federal grants or con- the date and time may change after final SUBPOENA DUCES TECUM (HEARING) schedules for the post-election session of the tracts received with the current or prior two BY AUTHORITY OF THE HOUSE OF REPRESENTA- House are known. Committee staff will in- fiscal years. If the witness represents an or- TIVES OF THE CONGRESS OF THE UNITED form you in advance should scheduling ganization, he or she must provide the same STATES OF AMERICA changes be necessary. information with regard to the organization. We very much appreciate your cooperation To The Honorable Ellen Seidman, Director, The information disclosed must be relevant with this inquiry and the production of Office of Thrift Supervision to the subject matter of the hearing and the records to date. The matters under review You are hereby commanded to be and ap- witnesses representational capacity at the are very important, and your assistance may pear before the Committee on Resources, hearing. Witnesses are not required to dis- prove to be indispensable. Should you have Task Force on the Headwaters Forest and close federal entitlement payments such as any questions about your appearance and Related Issues of the House of Representa- social security, medicare, or other income testimony, please contact Mr. Duane Gibson, tives of the United States, of which the Hon. support payments (such as crop or com- General Counsel, Oversight and Investiga- John Doolittle is chairman, in Room 1324 of modity support payments). In order to as- tions, at 202–225–1064. the Longworth Building, in the city of Wash- sists in meeting the requirement of the rule, Sincerely, ington, on November 13, 2000, at the hour of we have attached a form which you may JOHN T. DOOLITTLE, 10:00 AM, then and there to produce the complete to aid in complying with this rule. Chairman, Task Force things identified on the attached schedule Should you wish to fulfill the disclosure re- on Headwaters For- and to testify touching matters of inquiry quirement by submitting the information in est and Related committed to said Committee; and you are some other form or format, you may do so. Issues. not to depart without leave of said Com- In order to fully prepare for this hearing, mittee. 25 copies of your testimony along with your HOUSE OF REPRESENTATIVES, To authorized staff of the Committee on disclosure should be submitted to Debbie COMMITTEE ON RESOURCES, Resources or the U.S. Marshals Service to Callis, Deputy Chief Clerk, Committee on Washington, DC, November 6, 2000. serve and make return. Resources, Room 1328 Longworth House Of- Hon. ELLEN SEIDMAN, Witness my hand and the seal of the House fice Building, no later than 48 hours prior to Director, Office of Thrift Supervision, Wash- of Representatives of the United States, at the date of the scheduled hearing. In addition, ington, DC. the city of Washington, this 4th day of No- consistent with the Americans with Disabil- DEAR MS. SEIDMAN: The House Committee vember, 2000. ities Act, if your staff requires any reason- on Resources, acting through the Task Force DON YOUNG, Chairman. able accommodations for a disability to fa- on the Headwaters Forest and Related Attest: Jeff Trandahl, Clerk. cilitate your appearance, please contact the Issues, is pursuing an inquiry into matters Clerk mentioned above. Should you or your related to the Headwaters Forest (which is SCHEDULE OF RECORDS staff have any questions or need further in- managed by the Bureau of Land Management All records not priorly produced pursuant formation regarding the substance of the and was purchased pursuant to Title V of to the subpoena and Schedule of Records hearing, please contact Duane Gibson, Gen- P.L. 105–83). Those matters include (1) the dated 30 June 2000 issued to you by Chairman eral Counsel, Oversight and Investigations Federal Deposit Insurance Corporation’s Don Young. on (202) 225–1064. (FDIC) and the Office of Thrift Supervision’s All records created in response to this sub- Sincerely, (OTS) advancement of claims against private poena and the subpoena dated 30 June 2000 JOHN T. DOOLITTLE, parties to ultimately obtain additional par- issued to you by Chairman Don Young. Chairman, Task Force cels of land near or adjacent to the Head- on Headwaters For- waters Forest owned by the Pacific Lumber HOUSE OF REPRESENTATIVES, est and Related Company; (2) the potential impact of ad- COMMITTEE ON RESOURCES, Issues. vancement of such claims to expand the Headwaters Forest; and (3) the matters out- Washington, DC, November 6, 2000. lined in a June 16, 2000, letter initiating an Hon. DONNA A. TANOUE, HOUSE OF REPRESENTATIVES, oversight review concerning the Headwaters Chairman, Federal Deposit Insurance Corpora- COMMITTEE ON RESOURCES, Forest. The subject matter of the inquiry tion, Washington, DC Washington, DC, November 6, 2000. falls under the jurisdiction of this Com- DEAR MS. TANOUE: The House Committee Mr. BILL ISAAC, mittee pursuant to Articles I and IV of the on Resources, acting through the Task Force Sarasota, FL. U.S. Constitution, Rules X and XI of the on the Headwaters Forest and Related DEAR MR. ISAAC: The House Committee on Rules of the House of Representatives, and Issues, is pursuing an inquiry into matters Resources, acting through the Task Force on Rule 6(a) of the Rules of the Committee on related to the Headwaters Forest (which is the Headwaters Forest and Related Issues, is Resources. A copy of the rules is enclosed. managed by the Bureau of Land Management pursuing an inquiry into matters related to Note Rule 49f) regarding the swearing of wit- and was purchased pursuant to Title V of the Headwaters Forest (which is managed by nesses, which is my policy for hearings. P.L. 105–83). Those matters include (1) the the Bureau of Land Management and was Therefore, you may bring a counsel to advise Federal Deposit Insurance Corporation’s purchased pursuant to Title V of P.L. 105–83). you of any constitutional rights if you de- (FDIC) and the Office of Thrift Supervision’s Those matters include (1) the Federal De- sire. (OTS) advancement of claims against private posit Insurance Corporation’s (FDIC) and the Because of your agency’s role in the mat- parties to ultimately obtain additional par- Office of Thrift Supervision’s (OTS) advance- ter, you may possess information that will cels of land near or adjacent to the Head- ment of claims against private parties to ul- be helpful in the deliberations of the Task waters Forest owned by the Pacific Lumber timately obtain additional parcels of land Force and the Committee. Therefore, you Company; (2) the potential impact of ad- near or adjacent to the Headwaters Forest will be receiving a subpoena for your appear- vancement of such claims to expand the owned by the Pacific Lumber Company; (2) ance and the testimony before a meeting of Headwaters Forest; and (3) the matters out- the potential impact of advancement of such the Task Force. The subpoena schedules lined in a June 16, 2000, letter initiating an claims to expand the Headwaters Forest; and your appearance for November 13, 2000, at oversight review concerning the Headwaters (3) the matters outlined in a June 16, 2000, 10:00 AM. The nature of this subpoena is con- Forest. The subject matter of the inquiry letter initiating an oversight review con- tinuing, so the date and time may change falls under the jurisdiction of this Com- cerning the Headwaters Forest. The subject after final schedules for the post-election mittee pursuant to Articles I and IV of the mater of the inquiry falls under the jurisdic- session of the House are known. Committee U.S. Constitution, Rules X and XI of the tion of this Committee pursuant to Articles staff will inform you in advance should Rules of the House of Representatives, and I and IV of the U.S. Constitution, Rules X scheduling changes be necessary. Rule 6(a) of the Rules of the Committee on

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00173 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.456 pfrm07 PsN: E20PT1 E2512 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001

Resources. A copy of the rules is enclosed. P.L. 105–83). Those matters include (1) the OFFICE OF THRIFT SUPERVISION, Note Rule 4(f) regarding the swearing of wit- Federal Deposit Insurance Corporation’s DEPARTMENT OF THE TREASURY, nesses, which is my policy for hearings. (FDIC) and the Office of Thrift Supervision’s Washington, DC, October 6, 2000. Therefore, you may bring a counsel to advise (OTS) advancement of claims against private DUANE GIBSON, you of any constitutional rights if you de- parties to ultimately obtain additional par- General Counsel, Oversight and Investigation, sire. cels of land near or adjacent to the Head- Committee on Resources, House of Rep- Because of your agency’s role in the mat- waters Forest owned by the Pacific Lumber resentatives, Washington, DC. ter, you may possess information that will Company; (2) the potential impact of ad- DEAR MR. GIBSON: Set forth below are the be helpful in the deliberations of the Task vancement of such claims to expand the OTS’s responses to the questions contained Force and the Committee. Therefore, you Headwaters Forest; and (3) the matters out- in your letter to me dated October 3, 2000. will be receiving a subpoena for your appear- lined in a June 16, 2000, letter initiating an 1. Question: ‘‘Did Mr. Hurwitz, Maxxam, ance and testimony before a meeting of the oversight review concerning the Headwaters Pacific Lumber Company or any representa- Task Force. The subpoena schedules your ap- Forest. The subject matter of the inquiry tive of this individual or these companies pearance for November 13, 2000, at 10:00 AM. falls under the jurisdiction of this Com- ever raise with OTS or any of its representa- The nature of this subpoena is continuing, so mittee pursuant to Articles I and IV of the tives the notion of a debt-for-nature swap re- the date and time may change after final U.S. Constitution, Rules X and XI of the lated to Headwaters?’’ schedules for the post-election session of the Rules of the House of Representatives, and OTS Response: Yes. Question: ‘‘On what date did Mr. Hurwitz, House are known. Committee staff will in- Rule 6(a) of the Rules of the Committee on Resources. A copy of the rules is enclosed. Maxxam, Pacific Lumber Company or any form you in advance scheduling should Note Rule 4(f) regarding the swearing of wit- representative of this individual or these en- changes be necessary. nesses, which is my policy for hearings. tities first raise the debt-for-nature [swap] We very much appreciate your cooperation Therefore, you may bring a counsel to advise related to Headwaters? When was the subject with this inquiry and the production of you of any constitutional rights if you de- subsequently raised?’’ records to date. The matters under review sire. OTS Response: According to our records, are very important, and your assistance may Because of your agency’s role in the mat- the first debt-for-nature proposal made by prove to be indispensable. Should you have ter, you may possess information that will Mr. Hurwitz’s representatives to the OTS any questions about your appearance and be helpful in the deliberations of the Task was on August 13, 1996. See OTS Doc. 00546 testimony, please contact Mr. Duane Gibson, Force and the Committee. Therefore, you (notes of OTS Deputy Chief Counsel for En- General Counsel, Oversight and Investiga- will be receiving a subpoena for your appear- forcement Richard Stearns, dated August 13, tions, at 202–225–1064. ance and testimony before a meeting of the 1996, of a telephone conversation with Mr. Sincerely, Task Force. The subpoena schedules your ap- Tommy Boggs). Our records reflect the sub- JOHN T. DOOLITTLE, pearance for November 13, 2000, at 10:00 AM. ject was subsequently raised by representa- Chairman, Task Force on Headwaters Forest The nature of this subpoena is continuing, so tives for Mr. Hurwitz and MAXXAM on the and Related Issues. the date and time may change after final following dates: schedules of the post-election session of the September 6, 1996, OTS Doc. 00547–49 (letter SUBPOENA DUCES TECUM (HEARING) House are known. Committee staff will in- from Mr. John Douglas, counsel for Mr. form you in advance should scheduling Hurwitz, to Richard Stearns and FDIC Dep- BY AUTHORITY OF THE HOUSE OF REPRESENTA- changes be necessary. uty General Counsel Jack Smith, dated Sep- TIVES OF THE CONGRESS OF THE UNITED We very much appreciate your cooperation tember 6, 1996). STATES OF AMERICA with this inquiry and the production of September 10, 1996, OTS Doc. 00550–51 To the Honorable Donna Tanoue, Chairman, records to date. The matters under review (meeting notes prepared by Richard Stearns, FDIC are very important, and your assistance may dated September 10, 1996). You are hereby commanded to be and ap- prove to be indispensable. Should you have September 24, 1996, OTS 00556–60 (hand- pear before the Committee on Resources, any questions about your appearance and written notes taken by OTS Associate Chief Task Force on the Headwaters Forest and testimony, please contact Mr. Duane Gibson, Counsel Bruce Rinaldi of a meeting held on Related Issues of the House of Representa- General Counsel, Oversight and Investiga- September 24, 1996), and OTS Doc. 00561–63 tives of the United States, of which the Hon. tions, at 202–225–1064. (typewritten notes of the same meeting pre- John Doolittle is chairman, in Room 1324 of Sincerely, pared by Mr. Rinaldi on the following day). the Longworth Building, in the city of Wash- JOHN T. DOOLITTLE, August 27, 1997, OTS Doc. 00567–68 (type- ington, on November 13, 2000, at the hour of Chairman, Task Force on written notes prepared by Mr. Rinaldi of 10:00 AM, then and there to produce the Headwaters Forest and Related Issues. telephone conversations with Richard things identified on the attached schedule Keeton and J.C. Nickens, attorneys for Mr. and to testify touching matters of inquiry Hurwitz and MAXXAM, August 27, 1997). SUBPOENA DUCES TECUM (HEARING) February 17, 1998, OTS Doc. 00899–904 (Let- committed to said Committee; and you are BY AUTHORITY OF THE HOUSE OF REPRESENTA- ter from MAXXAM Senior Vice President not to depart without leave of said Com- TIVES OF THE CONGRESS OF THE UNITED and Chief Legal Officer Byron L. Wade to mittee. STATES OF AMERICA FDIC and OTS, dated February 17, 1998, with To authorized staff of the Committee on To The Hon Donna Tanoue, Chairman, FDIC attached draft Memorandum of Agreement); Resources or the U.S. Marshals Service to You are hereby commanded to be and ap- and serve and make return. pear before the Committee on Resources, October 27, 1998, OTS Doc. 00906–11 (type- Witness my hand and the seal of the House Task Force on the Headwaters Forest and written notes of settlement discussion be- of Representatives of the United States, at Related Issues of the House of Representa- tween OTS and counsel for Mr. Hurwitz and the city of Washington, this 4th day of No- tives of the United States, of which the Hon. MAXXAM, prepared by Mr. Rinaldi, October vember 2000. John Doolittle is chairman, in Room 1324 of 27, 1998). DON YOUNG, Chairman. the Longworth Building, in the city of Wash- Although the first time Mr. Hurwitz’s rep- Attest: Jeff Trandahl, Clerk. ington, on November 13, 2000, at the hour of resentatives raised a proposed debt-for-na- SCHEDULE OF RECORDS 10:00 AM, then and there to produce the ture settlement of the OTS’s potential All records not priorly produced pursuant things identified on the attached schedule claims with the OTS was in August 1996, see to the subpoena and Schedule of Records and to testify touching matters of inquiry above, the OTS was informed in July 1995 by dated 30 June 2000 issued to you by Chairman committed to said Committee; and you are the FDIC that Mr. Hurwitz, MAXXAM, and Don Young. not to depart without leave of said Com- Pacific Lumber Company, and the United All records created in response to this sub- mittee. States Department of the Interior, for the poena and the subpoena dated 30 June 2000 To authorized staff of the Committee on sale of a portion of the Headwaters Forest to issued to you by Chairman Don Young. Resources or the U.S. Marshals Service to the federal government. See OTS Doc. 00929– serve and make return. 33 (handwritten notes of a meeting between Witness my hand and the seal of the House OTS and FDIC representatives, July 26, 1995). HOUSE OF REPRESENTATIVES, of Representatives of the United States, at 3. Question: ‘‘Who first raised the subject of COMMITTEE ON RESOURCES, the city of Washington, this 4th day of No- [a] a debt-for-nature [swap] related to Head- Washington, DC, November 6, 2000. vember, 2000. waters raised?’’ Hon. DONNA A. TANOUE, DON YOUNG, Chairman. OTS Response: The first time a representa- Chairman, Federal Deposit Insurance Corpora- Attest: Jeff Trandahl, Clerk. tive of Mr. Hurwitz raised a debt-for-nature tion, Washington, DC. SCHEDULE OF RECORDS swap with OTS was when Mr. Tommy Boggs, DEAR MS. TANOUE: The House Committee All records not priorly produced pursuant a Washington lobbyist and attorney who rep- on Resources, acting through the Task Force to the subpoena and Schedule of Records resented Mr. Hurwitz and MAXXAM, raised a on the Headwaters Forest and Related dated 30 June 2000 issued to you by Chairman debt-for-nature settlement of OTS’s poten- Issues, is pursuing an inquiry into matters Don Young. tial claims with Richard Stearns, OTS Dep- related to the Headwaters Forest (which is All records created in response to this sub- uty Chief Counsel for Enforcement. managed by the Bureau of Land Management poena and the subpoena dated 30 June 2000 4. Question: ‘‘What was the context in and was purchased pursuant to Title V of issued to you by Chairman Don Young. which it was raised? In what medium was it

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00174 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.459 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2513 first raised (e.g., in writing, by phone, in per- then General Counsel of Maxxam, made a has been no further discussion of the debt- son)?’’ number of calls over several months to FDIC for-nature option between the parties. OTS Response: The context in which Mr. Counsel Jeffrey Williams attempting to per- 3. Question: Who first raised the subject of Boggs raised a debt-for-nature swap on Au- suade the FDIC to include settlement of its debt-for-nature related to Headwaters on be- gust 13, 1996, was his proposal to include a claims as part of the larger government ne- half of Mr. Hurwitz? To whom was the sub- settlement of OTS’s potential claims as part gotiations regarding the Headwaters Forest. ject of debt-for-nature related to Headwaters of the negotiations then underway between On August 12, 1996, Mr. Thomas Boggs of the raised? Mr. Hurwitz, MAXXAM, and Pacific Lumber law Patton Boggs, representing Mr. Hurwitz, FDIC Response: As stated in our response Company, and the United States Department met with me and Deputy General Counsel to Question 2, John Martin with the law firm of the Interior, for the sale of a portion of Jack Smith and proposed to settle the FDIC of Patton Boggs first raised the subject of a the Headwaters Forest to the federal govern- and the Office of Thrift Supervision claims debt-for-nature settlement on behalf of Mr. ment. Mr. Boggs raised this matter in a tele- as part of an agreement to trade the Head- Hurwitz and Maxxam indirectly with the phone call to Richard Stearns. waters Forest for other government prop- FDIC in a telephone call to Allen I hope this fully responds to the questions erty, contingent on favorable tax rulings McReynolds, on or about July 13, 1995. Mr. contained in your letter. from the Internal Revenue Service. At that McReynolds subsequently raised the subject Sincerely yours, meeting, Mr. Boggs indicated that Mr. with the FDIC during a meeting on July 21, CAROLYN J. BUCK, Hurwitz expected to minimize the financial 1995. This is confirmed by the depositions Chief Counsel. impact of a settlement on Maxxam by ob- under oath of Mr. McReynolds and Mr. Rob- taining favorable tax advantage. I advised ert DeHenzel, an attorney for the FDIC. Mr. Boggs that his proposal was unaccept- 4. Question: What was the context in which FEDERAL DEPOSIT able because it did not provide sufficient it was raised? In what medium was it first INSURANCE CORPORATION, value to the FDIC. raised (e.g. in writing, by phone, in person)? Washington, DC, October 6, 2000. On September 6, 1996, the FDIC received a FDIC Response: As stated in our response DUANE GIBSON, letter from Mr. John Douglas of the law firm to Questions 2 and 3, the subject of a debt- General Counsel, Oversight and Investigations, of Alson & Bird, also representing Mr. for-nature settlement of FDIC’s claims was House of Representatives, Committee on Re- Hurwitz, requesting a settlement meeting initially raised in an after hours telephone sources, Washington, DC. with the FDIC and OTS to discuss a proposal call to the home of Mr. McReynolds by John DEAR MR. GIBSON: This letter responds to that certain timber acreage by contributed Martin of the law firm of Patton Boggs, on your letter of October 3, 2000, requesting the to the FDIC and OTS to settle our pending behalf of Mr. Hurwitz and Maxxam. The con- Federal Deposit Insurance Corporation to re- claims as part of a larger Headwaters deal. text of this and following communications spond to specific questions and provide sup- At the meeting on September 11, 1996, Mr. was an effort by representatives of Mr. porting documentation regarding the ‘‘debt- Douglas proposed giving the FDIC and OTS Hurwitz to include settlement of the FDIC’s for-nature’’ discussions between the FDIC land in settlement of pending claims. On this claims as part of a negotiated transfer by and Charles Hurwitz. and several other occasions representatives Mr. Hurwitz and Maxxam to the U.S. Gov- 1. Question: Is the quote of Mr. Kroener of Mr. Hurwitz indicated that they could ernment. cited in the August 17, 2000 American Banker offer more value of the FDIC in trees than I have enclosed copies of relevant docu- accurate? cash. Also on September 11th, the FDIC re- ments already produced to the Committee in FDIC Response: A story in the August 17, ceived a ‘‘Draft of Proposed Headwaters For- response to your subpoena that support this 2000 American Banker included a quotation est Exchange Agreement’’ from Patton response. Please do not hesitate to contact from me that stated, ‘‘The so-called debt-for- Boggs that proposed settlement of all FDIC me if you have any further questions. nature swap was first offered by Mr. claims as part of the larger government Sincerely, Hurwitz’s counsel, not the FDIC. While the Headwaters exchange agreement. On Sep- WILLIAM F. KROENER, III FDIC has said it remained open to any ap- tember 12, 1996, the FDIC received a letter General Counsel. Enclosures. propriate settlement, including a debt-for- from Mr. Douglas specifically authorizing nature swap, it has also told Mr. Hurwitz’s the FDIC to discuss this proposal with other HOUSE OF REPRESENTATIVES, lawyers that the FDIC’s preference is for a agencies, including ‘‘representatives of the COMMITTEE ON RESOURCES, cash payment.’’ This quotation is an accu- White House, the Department of the Treas- Washington, DC, October 3, 2000. rate statement. ury, the Department of Interior, the Depart- WILLIAM F. KROENER III, 2. Question: On what date did Mr. Hurwitz, ment of Agriculture and the Justice Depart- General Counsel, Federal Deposit Insurance Maxxam, Pacific Lumber Company or any ment [who] may all be involved in such dis- Corporation, Washington, DC. Representatives of this individual or these cussions.’’ CAROLYN J. BUCK, entities first raise the debt-for-nature related All proposals that linked the FDIC and Chief Counsel, Office of Thrift Supervision, to Headwaters? When was the subject subse- OTS cases with separate negotiations Mr. Washington, DC. quently raised? Hurwitz was having with the federal govern- DEAR MR. KROENER AND MS. BUCK: On June FDIC Response: Although the debt-for-na- ment over the Headwaters Forest were re- 16, 2000, Chairman Young opened the over- ture swap concept had been the subject of jected by the FDIC and OTS, despite Mr. sight review described in a letter to Ms. press stories and letters to the FDIC by Hurwitz’s insistence that the FDIC/OTS Tanoue, and Ms. Seidman, and assigned me members of the public and Congress for some claims be resolved as part of the overall as the lead staff investigator for the project. time, there had been no discussion of this agreement. The FDIC declined to participate On behalf of Chairman Young and Task issue between FDIC and Mr. Hurwitz or his in the negotiations regarding the Head- Force Chairman Doolitte, thank you for pro- representatives. In fact, the FDIC was pur- waters Agreement and its implementing leg- viding the records that you have sent to suing a substantial all-cash settlement islation to transfer the Headwaters Forest to date. I want to update you on the status of which it proposed to Mr. Hurwitz’s attorney the U.S. government. Mr. Hurwitz eventually the oversight project. We are now reviewing in a letter dated July 16, 1993. dropped his demand that the Headwaters the material that you provided, and will On or about July 13, 1995, John Martin of Agreement contain a resolution of the FDIC have follow-up questions for certain individ- the law firm Patton Boggs, on behalf of Mr. and OTS claims. The acquisition of much of uals soon. The Task Force for this oversight Hurwitz and Maxxam, called Allen the Headwaters Forest was authorized by project has expanded. Enclosed you will find McReynolds, Special Assistant to the Sec- Congress in November 1997. a letter that added Representative George retary of Interior, at his home at 8 p.m., urg- On February 17, 1998, Byron Wade on behalf Radanovich as a member. I thought you ing him to contact the FDIC to begin a dia- of Maxxam, sent a letter to the FDIC pro- would like to have a copy. logue to resolve the FDIC’s claims as part of posing a settlement of all OTS and FDIC In commenting about the ‘‘debt-for-na- a larger land transaction involving the Head- claims by transferring old growth redwoods ture’’ as it relates to Headwaters and the waters Forest that was being considered by to the FDIC. On February 19, 1998, the FDIC FDIC and OTS matters, Mr. Kroener was Mr. Hurwitz and the Department of Interior. responded by restating its longstanding posi- quoted in the August 17, 2000, American Mr. McReynolds followed up this request by tion that FDIC’s preference was to receive a Banker as follows: ‘‘The so-called debt-for- calling the FDIC and met with staff of the cash payment. In March 1998, the FDIC in- nature swap was first offered by Mr. FDIC Legal Division on July 21, 1995. It was formed Mr. Hurwitz’s attorneys that the Hurwitz’s counsel, not the FDIC.’’ In discus- during this meeting that the FDIC first FDIC could not accept old growth redwoods sions with OTS, I was told the same thing at- learned of Mr. Hurwitz’s interest in includ- to resolve the FDIC claims without addi- tributed to Mr. Kroener in American Banker. ing FDIC claims as part of the larger Head- tional legislation. His attorneys proposed This information and verification of it is im- waters negotiations. After the FDIC suit was ideas to solve the problem, but eventually portant to the oversight review, so the filed in August 1995, the feasibility of Mr. that effort dissolved. Chairman requests prompt answers (by Fri- Hurwitz’s proposal was discussed in several In summary, the possibility of a debt-for- day October 6, 2000) to the questions con- meetings between the FDIC, the Council on nature swap involving the FDIC was initi- tained in this letter, along with all supporting Environmental Quality, the Department of ated and pursued by representatives of Mr. documentation that verifies the answer from the Interior and others. Hurwitz beginning with an indirect contact perspective of the FDIC and the OTS. In addition, after the filing of the FDIC’s in July 1995 and continuing into 1998. The ef- 1) (FDIC only) Is the quote of Mr. Kroener lawsuit on August 2, 1995, Mr. Byron Wade, fort dissolved in 1998 and since then there cited above accurate? If not, what did Mr.

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00175 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.463 pfrm07 PsN: E20PT1 E2514 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 Kroener say in his comments to the Amer- poena, we believe that they were inadvert- vancement of claims against private parties ican Banker? ently omitted from the several boxes of doc- to ultimately obtain additional parcels of 2) (OTS only) Did Mr. Hurwitz, Maxxam, uments produced by the FDIC on July 7, 2000. land near or adjacent to the Headwaters For- Pacific Lumber Company or any representa- We regret the mistake that delayed the pro- est owned by the Pacific Lumber Company.’’ tives of this individual or these companies duction of these documents to the Com- The claims referred to involve a pending ad- ever raise with OTS or any of its representa- mittee. ministrative proceeding initiated in 1995 by tives the notion of a debt-for-nature swap re- This document production should satisfy the OTS, In the Matter of United Savings Asso- lated to Headwaters? our obligations under the subpoena. As with ciation of Texas et al., OTS Order No. AP 95– 3) On what date did Mr. Hurwitz, Maxxam, our prior document productions to the Com- 40 (December 26, 1995), against Charles E. Pacific Lumber Company or any representa- mittee, the enclosed documents include sen- Hurwitz and others in connection with the tives of this individual or these entities first sitive, highly confidential material that is 1988 failure of United Savings Association of raise the debt-for-nature related to Head- covered by attorney client and/or attorney Texas (USAT). waters? When was the subject subsequently work product privileges in the ongoing liti- According to Chairman Young’s memo- raised? gation against Mr. Hurwitz, including docu- randum, dated August 15, 2000, that accom- 4) Who first raised the subject of debt-for- ments that Mr. Hurwitz and his representa- panied the task force charter, several mem- nature related to Headwaters on behalf of tives are not entitled to review through the bers of the Resources committee requested Mr. Hurwitz? To whom was the subject of court proceedings. The FDIC does not waive that the Committee conduct oversight ‘‘on debt-for-nature related to Headwaters any privileges belonging to the FDIC or any attempts to break the Headwaters Forest raised? other agency as a result of providing these agreement by adding more acreage to the 5) What was the context in which it was documents to the Committee pursuant to the forest through a debt for nature swap.’’ As raised? In what medium was it first raised subpoena. detailed in the documentation provided by (e.g. in writing, by phone, in person)? In addition, we are producing documents OTS pursuant to the Committee’s June 30, Please provide all documentation supporting under the subpoena that are especially sen- 2000, subpoena, the OTS matter is an admin- answers to these questions (for example, copies sitive. These documents state the FDIC’s in- istrative proceeding brought by a federal of meeting notes or an affidavit verifying the ternal valuation of the case for settlement banking regulatory agency to address viola- answers). purposes. Because disclosure of this informa- tions of the banking laws. The proceeding If you have any questions, please contact tion would be extremely harmful to the was initiated nearly two years prior to the me at 225–1064. Thank you. FDIC’s litigation and settlement position, passage of the Public Law 106–180 (the Sincerely, we are providing the full document for the ‘‘Headwaters Forest Legislation’’) and, thus, DUANE GIBSON, Committee’s review, but have redacted the its initiation could not ‘‘run contrary to the General Counsel, actual valuation. This will allow the Com- Headwaters acquisition statute.’’ In addi- Oversight and Inves- mittee to review any material in the docu- tion, the pending OTS administrative pro- tigations. ment regarding the stated subjects of the in- ceeding was known to Charles Hurwitz (a re- cc: The Honorable John Doolittle. vestigation while ensuring against an inad- spondent in the proceeding), and to the Pa- vertent release of this highly sensitive infor- cific Lumber Company, at the time the Headwaters Forest agreement was approved HOUSE OF REPRESENTATIVES, mation. If the Committee has any concerns by Congress. The legislation does not men- COMMITTEE ON RESOURCES, about the redactions, we will permit the tion the OTS proceeding nor purport to re- Washington, DC, September 20, 2000. Committee staff to inspect the unredacted solve the OTS’s claims against Mr. Hurwitz. Hon. GEORGE RADANOVICH, versions in our offices. This contrasts to the legislation’s express House of Representatives, Washington, DC. As we stated in our prior correspondence, reference to at least two then pending legal DEAR GEORGE: On August 15, 2000, the Task the FDIC would strongly object to the dis- actions in the United States Court of Federal Force on Headwaters Forest and Related semination of privileged and confidential Claims and the California Superior Court. Issued of the Committee on Resources was documents to parties other than Committee Additionally, the documentation that the established. At that time, I appointed Rep- Members and staff. We have identified the OTS has already turned over to the Com- resentatives Doolittle, Pombo, and Brady to documents containing confidential informa- mittee in response to its June 30, 2000, sub- serve on the Task Force, along with yet to tion with a stamp bearing the designation poena shows that the OTS case was brought be designated minority members. ‘‘CONFIDENTIAL.’’ The failure of USAT to address violations of banking laws. The I know that you have been to the Head- cost the American taxpayer approximately subject of a debt for nature swap was first in- waters Forest and are interested serving on $1.6 billion and the inappropriate release of jected into this matter when counsel for the Task Force as well. I expect that the these documents could significantly harm Charles Hurwitz proposed transferring bulk of review being undertaken by the Task the FDIC’s ability to litigate this matter and timberland to the OTS as a means of settling Force to be accomplished during the last redue damages otherwise recoverable to re- the claims for restitution asserted by this three months of this year, and it is likely to imburse taxpayers for the losses arising out agency. OTS has consistently responded to include at least one hearing at some junc- of this failure. these proposals by stating that it prefers ture. Because of your interest in this sub- If you have any questions regarding this that any settlement include cash payments ject, your experience concerning the Head- production of documents, please do not hesi- by respondents. waters, your desire to serve on this special tate to contact Eric Spitler of the FDIC’s Of- In my letter to the Resource Committee panel, and your willingness to participate in fice of Legislative Affairs at (202) 898–3837. dated June 23, 2000, responding to the Com- studying this matter at a future hearing, I Sincerely, mittee’s request for documents, OTS advised hereby appoint you to be a Member of the WILLIAM F. KROENER, III, the Committee of our concern that the re- Task Force. General Counsel. lease of confidential information regarding Sincerely, Enclosures the OTS administrative proceeding ‘‘might DON YOUNG, cc: Honorable George Miller. compromise our pending adjudicatory proc- Chairman. ess.’’ The Committee’s chartering of a task cc. The Honorable George Miller. force to investigate the OTS proceeding has The Honorable John Doolittle. Attachments Omitted and Included in an Appendix Where Necessary heightened that concern. There is the poten- tial that the actions by the Committee may FEDERAL DEPOSIT INSURANCE OFFICE OF THRIFT SUPERVISION, be later viewed as having deprived the par- CORPORATION, DEPARTMENT OF THE TREASURY, ties to the administrative proceeding of due Washington, DC, September 11, 2000. Washington, DC, August 24, 2000. process and fairness and could result in the Hon. DON YOUNG, Hon. DON YOUNG, final administrative determination in this Chairman, Committee on Resources, House of Chairman, Committee on Resources, House of proceeding being nullified by a court of law. Representatives, Washington, DC. Representatives, Washington, DC. See, e.g., Pillsbury Co. v. FTC., 354 F.2d 952, 963 DEAR MR. CHAIRMAN: The letter is in fur- Hon. GEORGE MILLER, (5th Cir. 1966); Koniag Inc. v. Andrus, 580 F2d ther response to the subpoena duces tecum Ranking Minority Member, Committee on Re- 601, 610 (D.C. Cir.) cert. denied, 439 U.S. 1052 received by the Federal Deposit Insurance sources, House of Representatives, Wash- (1978). Corporation on July 6, 2000 seeking produc- ington, DC. As I explained in my June 23, 2000, letter, tion of copies of documents regarding the Re: U.S. House of Representatives, Com- the OTS enforcement action against Charles Headwaters Forest, a possible ‘‘debt for na- mittee on Resources Task Force on the E. Hurwitz is still pending before this agen- ture swap’’ and pending litigation regarding Headwaters Forest and Related Issues of cy. At the present time, all evidence has the FDIC and Mr. Charles E. Hurwitz arising the Committee on Resources been presented to the trier of fact and the out of the failure of United Savings Associa- DEAR CHAIRMAN YOUNG AND CONGRESSMAN matter is under advisement before an Ad- tion of Texas (USAT). MILLER: The Office of Thrift Supervision ministrative Law Judge (‘‘ALJ’’). Once the The enclosed documents were identified (‘‘OTS’’) recently received a copy of the ALJ renders his recommended decision, the pursuant to the subpoena issued by the Com- above-referenced task force charter that au- matter will go before the Director of the mittee. Although these documents were thorizes an investigation into the alleged OTS for further briefing by the parties and a identified and copied in response to the sub- ‘‘Office of Thrift Supervisions’s (OTS) ad- final agency determination. To avoid any

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00176 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.466 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2515 claims of unfairness or denial of due process, your staff and the banking regulators in pur- ment of the Interior (including the Office of we urge the Committee to forbear from car- suing and continuing to pursue the above- the Secretary and the Bureau of Land Man- rying out its proposed investigation at least referenced actions to leverage yet more agement) and the FDIC or OTS (or any em- until the Director has issued a final agency Headwaters ‘‘nature’’ for a questionable and ployee of the OTS or FDIC) that relates to or decision in this matter. This would allow the uncertain ‘‘debt.’’ mentions the Headwaters Forest or ‘‘debt for Committee a full opportunity to investigate, We find disturbing that the Department of nature.’’ without risking an unintended interference the Interior documents that are now avail- 2. All records that relate in any way to the with the ongoing OTS administrative pro- able in the press clearly state that there is FDIC or OTS advancement of claims against ceeding. ‘‘support for a debt-for-nature swap for the Mr. Charles Hurwitz and/or MAXXAM that Thank you for your consideration of this FDIC and OTS claims . . .’’ and we are also in any way mention ‘‘debt for nature,’’ request. alarmed with what your Special Assistant, the Headwaters Forest, or the Pacific Lum- Sincerely, Mr. Allen McReynolds reports about the ber Company, including but not limited to CAROLYN J. BUCK, interaction between the Department and the any records relate to obtaining additional Chief Counsel. banking regulators. He unequivocally stated parcels of land referred to as of the Head- that, ‘‘FDIC and OTS are amendable to this waters Forest, which were or are owned by strategy [the debt for nature acquisition the Pacific Lumber Company. HOUSE OF REPRESENTATIVES, strategy] if the Administration supports it.’’ 3. All records that relate in any way to the COMMITTEE ON RESOURCES, The admission of coordination with banking FDIC or OTS advancement of claims against Washington, DC, August 16, 2000. regulators and backdoor lobbying may be Mr. Charles Hurwitz and/or MAXXAM that Hon. BRUCE BABBITT, common practice for your department. How- also in any way mention (or are to or from) Secretary, Department of the Interior, Wash- ever, your department, and perhaps others, the Rose Foundation, the Turner Foundation ington, DC. appears to have influenced the judgement of or any other grant-making organization and DEAR MR. SECRETARY: The legislative, banking regulators, who were ‘‘amenable’’ to that in any way relate to strategies or legal oversight, and investigative responsibilities creating a debt that could be swapped for na- theories for acquisitions or potential acqui- under Rule X and Rule XI of the Rules of the ture. sitions of the Headwaters Forest or the con- United States House of Representatives, Request for Records. As this oversight in- cept of ‘‘debt for nature’’. Rule 6(b) of the Rules for the Committee on quiry has evolved, the need for departmental 4. All records that relate in any way to the Resources (the Committee), 106th Congress, records related to the subject of the over- FDIC or OTS advancement of claims against and Article I and Article IV of the United sight review has become increasingly appar- Mr. Charles Hurwitz and/or MAXXAM that States Constitution, require that the Com- ent. The Committee and the Task Force re- also in any way mention (or are to or from) mittee on Resources oversee and review the quire the prompt production of all depart- Earth First! North Coast Earth First!, Bay laws, policies, and practices, and operation mental records by the FDIC and OTS that re- Area Coalition on Headwaters, Circle of Life of the Department of the Interior (the De- late to the matter under review as outlined Foundation, The Trees Foundation, The partment), the public domain lands and re- above. In addition, the attached Schedule of Humboldt Watershed Council, The National sources managed by the Department, and Records specifies certain records or cat- Audubon Society, and/or the Sierra Club. any other entity that relates to or takes ac- egories of records that are also requested and 5. All records to, from, or referring to Mr. tion to influence departments or matters and must be produced pursuant to the authority Allen McReynolds that also relate to or refer laws within the Committee’s jurisdiction and under deadlines in this letter. The sched- to the Headwaters Forest, the FDIC or the under rule X(l). ule also contains the definition that applies OTS, or debt for nature. This jurisdiction extends to Title V of P.L. to the term ‘‘records.’’ 6. All records to, from, or referring to Ms. 105–83 concerning the legislation that au- Interviews. In addition to the information Kathleen (Katie) McGinty that also relate to thorized the acquisition of the Headwaters listed above, this inquiry may include a re- or refer to the Headwaters Forest, the FDIC Forest (land that is now managed by the Bu- quest to interview you and those in the em- or the OTS, or debt for nature. reau of Land Management) from Pacific ploy of the Department who have knowledge 7. All records referring or related to a Lumber Company. We cooperatively worked of the matters under review. meeting that occurred on October 22, 1995, in on this legislation and agreed on the terms Deadline. We request that you strictly which the Council on Environmental Quality of Title V, which embodied the agreement to comply with the deadlines for production Chairperson attended and that also relate to acquire Headwaters. The law extends to any which are as follows: response to this letter or refer to the Headwaters Forest, the FDIC future additions of related parcels of the by August 22, 2000, and delivery of the or the OTS, or debt for nature. Headwaters Forest from Pacific Lumber records 4:00 p.m., Friday, August 25, 2000, to 8. All records to or from anyone in the Of- Company, including additions through ‘‘debt the attention of Mr. Duane Gibson, 1324 fice of the Secretary that also relate to or for nature.’’ Members of this Committee, in- Longworth House Office Building. We also refer to the Headwaters Forest and the FDIC cluding me, approved of the inclusion of this request that you provide two sets of all or the OTS. legislative language in the Department of In- records requested. Lead Investigator. This review will be led at 9. All records that relate to or refer to any terior and Related Agencies Appropriations the staff level by Mr. Duane Gibson, the contact or communication between any em- Act, 1998. Committee’s General Counsel for Oversight ployee of the Department of the Interior and The oversight outlined in this letter is and investigations. We request that your Mr. Bruce Rinaldi, Mr. Ken Guido, Mr. Rob- being conducted through the Task Force on staff contact him (202–225–1064) after your re- ert DeHenzel, or Mr. Jeff Williams. the Headwaters Forest and Related Issues, ceipt and review of this letter. Mr. Gibson 10. All records showing or related to any which commences today, under the author- can assist with any questions. Thank you for contact or communication between anyone ity of Rule 7 of the Rules for the Committee your cooperation with this review of matters employed by, assigned to, or associated with on Resources. under the jurisdiction of this Committee. the Department of the Interior and anyone Oversight Matters Under Review. We have Please be aware that the Committee has the employed by, assigned to, or associated with initiated and now expanded an oversight re- authority to compel production of the the White House (including the Council on view of the Department of the Interior’s in- records that are requested should they not Environmental Quality), The Office of the volvement in the Federal Deposit Insurance be produced by the deadline listed above. We Vice President that relate in any way to the Corporation’s (FDIC) and the Office of Thrift hope that we will not need to employ this FDIC or OTS claims against Mr. Charles Supervision’s (OTS) advancement of claims authority. We anticipate your cooperation, Hurwitz and/or MAXXAM that also in any against private parties to ultimately obtain just as we cooperated to write the statute way mention, refer to, or relate to ‘‘debt for additional parcels of the Headwaters Forest and appropriated the funds to purchase the nature,’’ the Headwaters Forest, or the Pa- owned by the Pacific Lumber Company. This Headwaters Forest. cific Lumber Company. advancement runs contrary to the Head- Sincerely, waters acquisition statute referenced above. Definitions DON YOUNG, For purposes of this inquiry, the term The advancement may be at the behest of Chairman, Committee ‘‘record’’ or ‘‘records’’ includes, but is not militant elements of the extreme environ- on Resources. mental community. The advancement is limited to, copies of any item written, typed, JOHN T. DOOLITTLE, printed, recorded, transcribed, filmed, being undertaken via a 1995 civil suit (and Chairman, Task Force graphically portrayed, video or audio taped, any subsequent OTS administrative action) on the Headwaters however produced or reproduced, and in- filed by the FDIC in the United States Dis- Forest And Related cludes, but is not limited to any writing, re- trict Court for the Southern District of Issues. Texas against Mr. Charles E. Hurwitz in con- cc: Members, Committee on Resources production, transcription, photograph, or nection with the 1988 failure of the United video or audio recording, produced or stored Savings Association of Texas (USAT). The in any fashion, including any and all com- oversight review includes these subjects. SCHEDULE OF RECORDS puter entries, accounting materials, memo- We have several Department records in our HEADWATERS FOREST ADDITIONS AND DEBT FOR randa, minutes, diaries, telephone logs, tele- possession that relate to the matters under NATURE phone message slips, electronic messages (e- review, and we are alarmed about the appar- 1. All records related to or referring to any mails), tapes, notes, talking points, letters, ent deep involvement between members of contact between any employee of the Depart- journal entries, reports, studies, drawings,

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00177 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.468 pfrm07 PsN: E20PT1 E2516 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 calendars, manuals, press releases, opinions, Hearings force, and will leave three positions open for documents, analyses, messages, summaries, Subject to the Rules of the House of Rep- Members that you select. Should you have bulletins, disks, briefing materials and resentative and the Rules of the Committee any questions, recommendations, or names notes, cover sheets or routing cover sheets or on Resources, the Task Force may hold hear- of Members who wish to serve on the task any other machine readable material of any ings on matters within its jurisdiction. The force, please ask that your staff direct them sort whether prepared by current or former Chairman of the Committee shall approve all to me through Mr. Duane Gibson (5–1064). employees, agents, consultants or by any hearings prior to their announcement. Thank you. non-employee without limitation and shall Staff Sincerely, also include redacted and unredacted DON YOUNG, The Chairman of the Committee shall des- versions of the same record. The term in- Chairman. cludes records that are in the physical pos- ignate professional and support staff to as- session of the Department of the Interior and sist the Task Force in carrying out its duties OFFICE OF THRIFT SUPERVISION, records that were formerly in the physical and functions. Consistent with the Rules of DEPARTMENT OF THE TREASURY, possession of the Department, as well as the House of Representatives, persons em- Washington, DC, August 1, 2000. records that are in storage. ployed by personal offices of Members may DUANE GIBSON, Esq., Furthermore, with respect to this request, not serve as staff to the Committee and its the terms ‘‘refer’’, ‘‘relate’’, and ‘‘con- subdivisions. The Ranking Minority Member General Counsel, Oversight and Investigations, cerning’’, means anything that constitutes, may also designate staff to assist the Task Committee on Resources, House of Rep- contains, embodies, identifies, mentions, Force. resentatives, Washington, DC. DEAR MR. GIBSON: Set forth below are deals with, in any manner that matter under Travel OTS’s responses to your questions, which review. All travel by Members and staff of the were e-mailed to Kevin Petrasic on July 21, ‘‘FDIC’’ means Federal Deposit Insurance Task Force shall be authorized pursuant to 2000. Corporation. Rule 12 of the Committee and other applica- 1. ‘‘What is the total budget of OTS for the ‘‘OTS’’ means Office of Thrift Supervision. ble rules and guidelines and shall be limited past five years?’’ ‘‘Department’’ means Department of the to funds allocated by the Chairman of the Interior. full Committee for that purpose. Committee Year Budget MAXXAM means MAXXAM Inc., Pacific funds may not be used to pay for travel by 1999 ...... $154,313,750 Lumber Company, and United Savings Asso- persons not employed by the Committee and 1998 ...... 147,253,450 ciation of Texas. all travel shall conform with applicable rules 1997 ...... 144,948,050 of the House of Representatives and the 1996 ...... 148,758,100 Committee. 1995 ...... 170,300,500 HOUSE OF REPRESENTATIVES, COMMITTEE ON RESOURCES, Rules 2. ‘‘What is the OTS authorizing statute? Washington, DC, August 15, 2000. A task force is a subdivision of the Com- Please send a copy.’’ Task Force on the Headwaters Forest and mittee and shall comply with all applicable 12 USC 1462a, 1464. A copy is attached. Related Issues of the Committee on Re- rules and guidelines of the House of Rep- 3. ‘‘How many cases are being pursued by sources resentatives, the Committee on Resources, the OTS for the FDIC in each of the last five years?’’ Authority and the Committee on House Oversight. The activities of the Task Force are subject to The OTS does not pursue cases for the Pursuant to Rule 7 of the Committee on addional directon and supervision as the FDIC. By way of background, the Financial Resources (Committee), the Chairman of the Chairman of the Committee may from time Institutions Reform, Recovery, and Enforce- Committee is authorized, after consultation to time impose. ment Act of 1989. Pub. L. 101–73 (August 9, with the Ranking Minority Member, to ap- DON YOUNG, 1989), created the OTS as the primary federal point task forces to carry out certain duties Chairman. regulator of savings associations and author- and functions of the Committee. The Chair- ized the OTS to pursue administrative en- man hereby appoints the Members listed forcement actions against individuals and HOUSE OF REPRESENTATIVES, below to the Task Force on the Headwaters entities to safeguard the thrift industry, its COMMITTEE ON RESOURCES, Forest and Related Issues to carry out the depositors and the federal deposit insurance oversight and investigative duties and func- Washington, DC, August 15, 2000. funds. 12 U.S.C. 1464 and 1818. One of the rem- To: Members, Committee on Resources tions of the Committee regarding the over- edies available to the OTS and other banking From: Don Young, Chairman sight review specified in the June 16, 2000, regulators in these administrative enforce- Re: Task Force letter (attached hereto), subject to the terms ment proceedings is to obtain restitution for Several Members have requested that the and conditions listed below. losses suffered by an insured depository in- Committee conduct oversight on attempts to Members stitution. 12 U.S.C. 1818(b)(6). If the OTS suc- break the Headwaters Forest agreement by ceeds in recovering restitution, it is returned Republicans—Doolittle (Chairman), adding more acreage to the forest through a to the institution. Pombo, Thornberry, Brady, and Young (ex debt for nature swap. I initiated an oversight When a savings association fails, the OTS officio). review of this matter in June, and today I Democrats—Three Members of the Com- must appoint the FDIC as receiver for the in- created a task force to further study the mittee recommended by the Ranking Minor- stitution. 12 U.S.C. 1464(d)(2). As the ap- issues outlined in the oversight review. A ity Member and Miller (ex officio). pointed receiver, the FDIC ‘‘steps into the copy of the task force charter is attached. shoes’’ of the failed institutions to manage Duration The task force will be chaired by John Doo- its assets. 12 U.S.C. 1821. The OTS would then The Task Force will commence on August little. Republican Members of the task force pay any restitution recovered in its adminis- 16, 2000, and will terminate on December 31, are listed in the charter, and I have reserved trative enforcement action to the FDIC as 2000, or on an earlier date that the Chairman three slots for Democrat Members to be receiver. of the Committee may designate. With a du- named by Mr. Miller. The task force will op- Whether an institution is open or being ration of less than six months, the task force erate much like a subcommittee and may run by FDIC as receiver, those running the will not count against the subcommittee hold hearings as needed to examine the institution may advise OTS of possible viola- limit under Rule X, clause 5(b)(2) of the issues for the oversight review. tions of law that may warrant action by Rules of the House of Representatives. OTS. As part of its investigation, OTS will Jurisdiction HOUSE OF REPRESENTATIVES, obtain information from the institution and The Task Force shall review and study the COMMITTEE ON RESOURCES, then make an independent determination following matters related to the Headwaters Washington, DC, August 14, 2000. under OTS’s statutory authority whether to Forest (which is managed by the Bureau of Hon. GEORGE MILLER, bring any enforcement action. Land Management and was purchased pursu- Committee on Resources, Longworth HOB, As receiver, FDIC has separate legal au- ant to Title V of P.L. 105–83): (1) the Federal Washington, DC. thority to pursue private legal actions for re- Deposit Insurance Corporation’s (FDIC) and DEAR GEORGE: On July 26, 2000, your staff covery of damages on behalf of the institu- the Office of Thrift Supervision’s (OTS) ad- was notified that I was considering estab- tion, its creditors and shareholders. The vancement of claims against private parties lishing a task force to examine the issues OTS’s statutory authority to pursue enforce- to ultimately obtain additional parcels of and subjects raised in the June 18, 2000, let- ment actions is separate from the FDIC’s au- land near or adjacent to the Headwaters For- ter that launched an oversight review about thority as receiver. The federal courts have est owned by the Pacific Lumber Company; matters related to the Headwaters Forest. consistently recognized this distinction be- (2) the potential impact of advancement of Our staffs discussed the task force and over- tween OTS’s administrative enforcement au- such claims to expand the Headwaters For- sight project prior to the August recess, and thority and the FDIC’s authority as receiver est; and (3) the matters outlined in the at- my staff requested that you name three to bring suit in federal court. See, e.g., Simp- tached June 16, 2000, letter initiating an Members to the Task Force. To date I have son v. OTS, 29 F.3d 1418, 1423 (9th Cir. 1994), oversight review concerning the Headwaters not received your selection of minority cert. denied, 513 U.S. 1148 (1995); Akin v. OTS, Forest. members. I intend to proceed with this task 950 F.2d 1180, 1185 (5th Cir. 1992). As in the

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00178 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.470 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2517 USAT matter, the courts have held that the 6. ‘‘How much has the FDIC reimbursed the This is not the amount sought by OTS in two agencies may pursue separate, but con- OTS for that work broken down by year?’’ the case. The $1.6 billion figure is the cost to current, legal proceedings in furtherance of FDIC has reimbursed the OTS for legal fees the federal deposit insurance fund from pay- their separate legal responsibilities. See Res- and out-of-pocket expenses in the USAT ad- ing of depositors due to the collapse of olution Trust Corp. v. Ryan, 801 F.Supp. 1545 ministrative action as follows: USAT. (S.D.Miss. 1992). Sincerely yours, With this as background, the OTS has Year Amount 1995 ...... $529,452 CAROLYN J. BUCK, issued fifteen orders in enforcement pro- 1996 ...... 455,895 Chief Counsel. ceedings in the last five years (plus the first 1997 ...... 435,867 Attachment. half of this year) that resulted in restitution 1998 ...... 663,403 obtained and paid to the FDIC as receiver, as 1999 ...... 857,182 follows: 2000 ...... 61,026 FEDERAL DEPOSIT INSURANCE CORPORATION, Year Institution Amount Total ...... 3,002,825 Washington, DC, July 7, 2000. Hon. DON YOUNG, 2000 (to date) ...... One order ...... $3,169,115 To date, the OTS has recovered 1999 ...... Three orders ...... 1,197,000 Chairman, Committee on Resources, House of 1998 ...... Three orders ...... 1,319,000 $10,876,426.98 in restitution in the USAT ad- Representatives, Washington, DC. 1997 ...... No orders. ministrative action, which has been paid to DEAR CHAIRMAN YOUNG: As requested in 1996 ...... Four orders ...... 29,050,000 the FDIC, through settlements with United 1995 ...... Four orders ...... 3,600,000 your June 20, 2000 letter as the Chairman of Financial Group, Inc., the holding company the House Committee on Resources, and the 4. ‘‘How many independent of the FDIC are for USAT, and with five individual former of- June 20, 2000 subpoena by the Committee on being pursued?’’ ficers and directors of USAT. Resources, we are providing the Committee As explained above, all OTS enforcement 7. ‘‘How has the FDIC been involved with with the enclosed material. It is my under- actions are independent of the half of this the OTS on the USAT case?’’ standing that pursuant to conversations be- year) by the OTS, either through administra- The FDIC is not a party in the USAT ad- tween Committee staff and staff of the Fed- tive proceedings or consent settlements, are: ministrative action brought by OTS. The eral Deposit Insurance Corporation, the FDIC has shared information and documents Committee has requested that two copies of Number of that the OTS has requested to prepare its the documents be produced to the majority, Enforcement Orders case, and the two agencies have consulted on and one to the minority. We are enclosing Year legal theories and other matters. two copies of responsive documents with this 2000 (to date) ...... 37 The respondents in the case have executed letter, and will provide an additional copy 1999 ...... 42 a joint defense agreement pursuant to which directly to Ranking Minority Member 1998 ...... 44 they shared information with each other, co- George Miller. 1997 ...... 80 ordinated discovery and motions, presented 1996 ...... 92 joint briefs and memoranda of law and An index to the documents and privilege 1995 ...... 132 shared counsel. In addition, Maxxam Cor- log is also enclosed. We are not withholding 5. ‘‘How many lawyers and non-lawyers are poration has agreed to pay legal expenses on any responsive document, regardless of working on the OTS/FDIC case against behalf of several of the respondents. whether it is privileged. Where privileged USAT?’’ 8. ‘‘Where in terms of dollar amount does documents are provided, they are so identi- There are not OTS lawyers or non-lawyers the USAT case fall compared to other fied and marked, and the applicable privi- working on the FDIC USAT case. It is an en- cases?’’ leges are identified in the accompanying tirely separate case pending in federal court OTS seeks $821,319,405 in restitution in the index and log. in Houston, TX, in which the OTS is not a case, which is the largest dollar amount In delivering these records, it is our inten- party. Maxxam Corporation filed a motion to sought by OTS in a litigated case. The next tion to preserve any and all privileges or ex- add OTS as an involuntarily plaintiff in that largest case involved Lincoln Savings and emptions from disclosure under the Freedom action, but Maxxam’s motion was denied by Loan Association, Irvine, CA case, where the of Information Act or other laws, rules and the federal court in 1997. OTS obtained $600 million, through orders regulations for those documents marked as During the trial of the OTS’s USAT admin- and settlements against several respondents, privileged should they be requested by any istrative case, OTS had five lawyers assigned to be paid to the FDIC as receiver for the person other than the Congress of the United full-time to the case. They were assisted by failed institution. In numerous other cases, States acting in its official capacity. We ap- between two and six paralegals at different including San Jacinto Savings, Bellaire, TX, preciate the efforts of the Committee and its times. The respondents were represented by Columbia Savings, Beverly Hills, CA, and staff to maintain the strict confidentiality more than 20 attorneys who appeared in the General Bank, Miami, FL, OTS has obtained of these documents. case of their behalf. These attorneys were as- more than $500 million through orders and Sincerely yours, sisted by attorneys, paralegals and support settlements to be paid to the FDIC. PATRICIA M. BLACK, staff from the four major law firms rep- 9. ‘‘How is the $1.6 billion figure derived for Counsel to the Inspector General. resenting respondents. the USAT case?’’ LOG OF PRIVILEGED DOCUMENTS PRODUCTION TO THE COMMITTEE ON RESOURCES, U.S. HOUSE OF REPRESENTATIVES, JULY 7, 2000

Bates numbered pages Date of documents Description of documents Privilege

000000–000018 October 13, 1998 ...... Hurwitz Motion to Remove Confidentiality Designation of FDIC Board Meeting Materials (Under Seal) ...... Deliberative Process. 000019–000034 ...... Federal Deposit Insurance Corporation’s Opposition to Hurwitz’s Motion to Remove Confidentiality Designation 000035–000053 May 11, 1998 ...... Hurwitz’s Request for Disposition of Motions Affecting Disclosure of the ATS Memo 000054–000070 May 8, 1998 ...... Hopkins & Sutter Letter Re: FDIC V. Hurwitz 000071–000074 November 15, 1995 ...... Clements, O’Neill, Peirce, & Nickens Letter Re: Federal Deposit Insurance Corporation, as manager of FSLIC Resolution v. Charles E. Hurwitz, Civil Action No. H–95–3956, United States District Court for the Southern District of Texas, Houston Divison 000075–000097 November 16, 1995 ...... FDIC as a manager of the FSLIC Resolution Fund v. Charles E. Hurwitz—Hearing Transcript 000098–000104 October 10, 1997 ...... FDIC v. Charles E. Hurwitz—Order to Produce 000105–000152 September 30, 1997 ...... Hurwitz’s Memorandum in Support of His Motions For Sanctions and Dismissal 000153–000185 October 19, 1997 ...... FDIC’s Memorandum in Response to Hurwitz’s Motion for Sanctions and Dismissal 000186–000189 Cross-Walk of Issues Raised By Attorney Work Product Deliberative Process. Congressman DeLay Regard- ing USAT Litigation To Objec- tives Outlined in OCRE’s Eval- uation Proposal. 000190–000196 April 19, 1999 ...... Memo from Schulz to Kroener, Subject: OIG Investigation of the Hurwitz Case ...... Attorney Client Privilege Attorney Work Product Deliberative Process 000197–000200 February 3, 1999 ...... Letter to Tanoue and Gianni re: Hurwitz from Congressman DeLay ...... 000201–000215 March 10, 1999 ...... Executive Summary—Authorization of Expenditures ...... Attorney Client Privilege Attorney Work Product Deliberative Process. 000216–000219 March 2, 1999 ...... Letter from Chairman Tanoue and Response to an Inquiry from the Honorable Tom DeLay 000220–000222 April 8, 1999 ...... Draft Letter to Congressman DeLay from Gianni re: Hurwitz ...... Deliberative Process. 000223–000258 ...... DeLay Allegation Spreadsheet (with notations) ...... Attorney Client Privilege Attorney Work Product Deliberative Process. 000259–000268 May 5, 1999 ...... Memorandum—Motions in the Hurwitz litigation raising issues that the Office of Inspector General proposes to inves- Attorney Client Privilege Attorney Work Product Deliberative tigate (Under Seal). Process. 000269–000271 ...... Hurwitz Case Summary ...... Attorney Client Privilege Attorney Work Product. 000272–000276 ...... Preliminary Comparison of Key Provisions in FDIC/PLS Guidelines With the July 27, 1995 Authority to Institute PLS Memo Attorney Client Privilege Attorney Work Product Deliberative Prepared for the USAT Litigation. Process. 000277–000284 ...... Evaluation Action Plan ...... Attorney Client Privilege Attorney Work Product Deliberative Process. 000285–000286 February 23, 1999 ...... FY2000 FDIC Inspector General VA–HUD Appropriations Subcommittee The Honorable Tom DeLay Questions for The Record

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00179 Fmt 0666 Sfmt 9920 E:\CR\FM\A20DE8.473 pfrm07 PsN: E20PT1 E2518 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 LOG OF PRIVILEGED DOCUMENTS PRODUCTION TO THE COMMITTEE ON RESOURCES, U.S. HOUSE OF REPRESENTATIVES, JULY 7, 2000—Continued

Bates numbered pages Date of documents Description of documents Privilege

000287–000291 March 25–26, 1999 ...... Record of March 25, 1999 Meeting with OIG Counsel Regarding Modified Approach to United Savings Association of Attorney Client Privilege Attorney Work Product Deliberative Texas (USAT) Evaluation. Process. 000292–000295 ...... Summary of Review of Issues Raised by Congressman DeLay ...... Attorney Client Privilege Attorney Work Product Deliberative Process. 000296–000299 ...... Inventory of Legal Documents Received 2/24/99 from Bob Dehenzel ...... Attorney Work Product Deliberative Process. 000300–000309 May 5, 1999 ...... Memorandum to File from Dehenzel re: Motions in the Hurwitz litigation raising issues that the Office of Inspector Gen- Attorney Work Product. eral proposes to investigate. 000310–000317 Undated Draft ...... Action Plan ...... Deliberative Process. 000318–000329 ...... Congressman DeLay Allegation Spreadsheet (without notations) 000330–000333 ...... Evaluation Proposal I ...... Attorney Client Privilege Attorney Work Product Deliberative Process. 000334–000341 ...... Evaluation Proposal II ...... Attorney Client Privilege Attorney Work Product Deliberative Process. 000342–000345 February 3, 1999 ...... Letter to Tanoue and Gianni re: Hurwitz from Congressman DeLay 000346–000347 September 30, 1998 ...... Letter to Congressman Bentsen from Tanoue 000348–000349 October 18, 1996 ...... Letter to Congressman Gonzalez from Tanoue 000350–000351 ...... Auditor’s Plan ...... Deliberative Process. 000352–000365 Various ...... News Articles 000366–000384 August 1, 1995 ...... Minutes of the Board of Directors ...... Attorney Client Privilege Attorney Work Product Deliberative Process. 000385–000389 June 1998 ...... Case Review Summary ...... Attorney Client Privilege Attorney Work Product. 000390–000391 ...... 4th Quarter 98 Top Ten ...... Attorney Client Privilege Attorney Work Product. 000392–000394 June 17, 1997 ...... Memorandum to David Einstein from Jeffrey Williams re: United Savings Association of Texas, FDIC v. Hurwitz and Re- Attorney Work Product. lated Matters. 000395–000400 ...... FDIC Briefing Outline ...... Attorney Client Privilege Attorney Work Product. 000401–000411 February 4, 1994 ...... Letter to Carolyn Lieberman from Jack Smith ...... Attorney Work Product Deliberative Process. 000412–000425 March 10, 1999 ...... Executive Summary—Authorization of Expenditures United Savings Association of Texas Houston, Texas, FIN#1815 ...... Attorney Client Privilege Attorney Work Product Deliberative Process. 000426–000433 September 12, 1995 ...... Letter to Chairman Helfer from Kroener ...... Attorney Client Privilege Attorney Work Product Deliberative Process. 000434–000437 October 20, 1995 ...... Gore Meeting Draft Discussion Points ...... Attorney Work Product. 000438 October 20, 1995 ...... Headwater Meeting Attendees 000439 October 25, 1995 ...... Headwaters Forest Meeting October 26 ...... Deliberative Process. 000440–000444 October 25, 1995 ...... Headwaters Forest Meeting October 26 ...... Deliberative Process. 000445–000446 October 26, 1995 ...... USAT Meeting Attendee List 000447–000474 November 7, 1995 ...... Memorandum from Jeffrey Williams, Subject: USAT/Charles Hurwitz ...... Deliberative Process. 000475 November 28, 1995 ...... Attendee List 000476 ...... Attendee List 000477 February 9, 1998 ...... Memorandum to Jeff Williams from John Garamendi Subject: Headwaters 000478–000481 October 9, 1998 ...... PLS Top 10 Report ...... Attorney Work Product. 000482–000483 January 19, 1999 ...... PLS Top Ten ...... Attorney Work Product. 000484–000486 ...... Discussion Points Concerning the Qui Tam Action ...... Attorney Work Product Deliberative Process. 000487 ...... Essential Points ...... Attorney Work Product. 000488–000489 June 28, 2000 ...... Assignment Status Report ...... Privacy Act Material. 000490–000491 June 21, 2000 ...... E-mail re: Congressional Document Request 000492–000493 June 17, 1999 ...... Record of Meeting with Congressman DeLay on FDIC’s Litigation Against Charles Hurwitz 000494–000495 May 4, 1999 ...... E-mail from Pat Black/Steve Beard re: Evaluation 99–003E ...... Attorney Client Privilege. 00496 March 31, 1999 ...... E-mail from Beard re: Additional Documents from Legal 000497 ...... Draft Inventory of other USAT documentation not received on 2/24/99, 3/4/99 and 3/23/99 from the FDIC Legal Division as of 3/24/99 000498–000505 ...... Draft Inventory of Documentation Received 2/24/99, 3/4/99, and 3/23/99 from FDIC Legal Division: 3 Accordion Files. As Attorney Client Privilege Attorney Work Product Deliberative of 3/24/99. Process. 000506–000513 ...... Evaluation Action Plan ...... Attorney Work Product Deliberative Process. 000514–000518 March 29, 1999 ...... Draft USAT/Hurwitz Timeline 000519–000523 March 25–26, 1999 ...... Record of Meeting with OIG Counsel Regarding Modified Approach to USAT Evaluation ...... Attorney Client Privilege Attorney Work Product Deliberative Process. 000524–000530 ...... Evaluation Action Plan ...... Deliberative Process. 000531–000538 ...... Draft Inventory of Documentation Received 2/24/99, 3/4/99, and 3/23/99 from Bob DeHenzel, Counsel, Legal Division: 3 Attorney Client Privilege Attorney Work Product Deliberative Accordion Files. As of 3/24/99. Process. 000539–000542 ...... Evaluation Proposal ...... Deliberative Process. 000543–000544 March 24, 1999 ...... Draft letter to Congressman Delay from Gianni (unsigned) ...... Deliberative Process. 000545 March 23, 1999 ...... E-mail Additional documents from Legal 000546–000547 ...... Letters to the Editors the Washington Post 000548–000551 ...... Evaluation Proposal ...... Deliberative Process. 000552–000553 ...... E-mail from Tom Ritz—USAT Documents ...... Deliberative Process. 000554–000559 ...... Draft Inventory of Documentation Received 2/24/99 and 3/4/99 form Bob DeHenzel, Counsel, Legal Division: 2 Accordion Deliberative Process. Files. As of 3/18/99. 000560–000562 March 17, 1999 ...... Draft USAT/Hurwitz Timeline 000563–000566 ...... Evaluation Proposal ...... Deliberative Process. 000567–000569 March 16, 1999 ...... E-mail from Beard—Subject: My comments on the proposal ...... Deliberative Process. 000570–000572 ...... USAT 99–003 Evaluation Plan ...... Deliberative Process. 000573–000588 Various ...... Various E-mails ...... Deliberative Process. 000589–000592 ...... Evaluation Proposal ...... Deliberative Process. 000593–000606 Various ...... Various E-mails ......

representatives are not entitled to review FDIC’s internal valuation of the case for set- through the court proceedings. The FDIC tlement purposes. Because disclosure of this FEDERAL DEPOSIT does not waive any privileges belonging to information would be extremely harmful to INSURANCE CORPORATION, Washington, DC, July 7, 2000. the FDIC or any other agency as a result of the FDIC’s litigation and settlement posi- providing these documents to the Committee tion, we are providing the full document for Hon. DON YOUNG, pursuant to the subpoena. the Committee’s review, but have redacted Chairman, Committee on Resources, House of As we stated in our prior correspondence, the actual valuation. This will allow the Representatives, Washington, DC. the FDIC would strongly object to the dis- Committee to review any material in the DEAR MR. CHAIRMAN: This letter is in re- semination of privileged and confidential document regarding the stated subjects of sponse to the subpoena duces tecum received documents to parties other than Committee the investigation while ensuring against an by the Federal Deposit Insurance Corpora- Members and staff. We have identified the inadvertent release of this highly sensitive tion on July 6, 2000 seeking production of documents containing confidential informa- information. If the Committee has any con- copies of documents regarding the Head- tion with a stamp bearing the designation cerns about the redactions, we will permit waters Forest, a possible ‘‘debt for nature ‘‘CONFIDENTIAL.’’ The failure of USAT the Committee staff to inspect the swap’’ and pending litigation regarding the cost the American taxpayer approximately unredacted versions in our offices. FDIC and Mr. Charles E. Hurwitz arising out $1.6 billion and the inappropriate release of The second set of documents includes ma- of the failure of United Savings Association these documents could significantly harm terials that have been placed under court of Texas (USAT). the FDIC’s ability to litigate this matter and seal in the litigation, or are naturally impli- This document production should satisfy reduce damages otherwise recoverable to re- cated by the Court’s order. These documents our obligations under the subpoena. The en- imburse taxpayers for the losses arising out are placed in a separately marked box. closed documents include sensitive, highly of this failure. Finally, there are some oversized maps, an confidential material that is covered by at- We are producing two sets of documents to audio tape of music from an environmental torney client and/or attorney work product the Committee under the subpoena that are group and two tapes of two voice mail mes- privileges in the ongoing litigation against especially sensitive. These materials are seg- sages left by Mr. Hurwitz’s counsel that we Mr. Hurwitz. In many cases, the production regated from the rest of the production. The have been unable to duplicate within the includes documents that Mr. Hurwitz and his first set includes documents that state the timeframe of the subpoena because of their

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00180 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.476 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2519 unique nature. These materials are available Finally, the enclosed material includes Because we expressed reservations about to the Committee for Inspection at our of- documents regarding settlement discussions our ability to protect the privileged nature fices or we can make arrangements to have in the ongoing litigation. Although this ma- of these documents by voluntarily respond- them copied if that is the Committee’s pref- terial is considered sensitive and confiden- ing to the Committee’s request for docu- erence. tial, counsel for Mr. Hurwitz and Maxxam ments, Mr. Gibson indicated that we can ex- If you have any questions regarding this were contacted and did not object to the re- pect to receive a subpoena. production of documents, please do not hesi- lease of this material in response to the We are concerned that dissemination of tate to contact Eric Spitler of the FDIC’s Of- Committee’s request. In addition, pursuant confidential and sensitive documents outside fice of Legislative Affairs. to instructions from Mr. Gibson, the en- the agency might compromise our pending Sincerely, closed production includes a representative adjudicatory process. For that reason we WILLIAM F. KROENER, III, sample of the postcards, petitions and letters asked that a document handling protocol be General Counsel. received by the FDIC regarding this matter. in place to maintain their confidentiality by The FDIC generally did not respond to these limiting access to Members of Congress and types of communications. Responses, if any, their staff. Mr. Gibson advised us that the FEDERAL DEPOSIT to correspondence from outside parties re- Committee does not have a general docu- INSURANCE CORPORATION, garding this litigation, including responses ment protocol but that all record requests Washington, DC, June 29, 2000. to Members of Congress, are being provided from the Committee are for the official busi- Hon. DON YOUNG, in these voluntary productions. In addition, ness of the Committee. For the record, we Chairman, Committee on Resources, House of with regard to responsive documents that note our objection to any publication or re- Representatives, Washington, DC. may be in the possession of the FDIC Office lease of these documents beyond Members of DEAR MR. CHAIRMAN: This letter is in fur- of Inspector General (OIG), we have shared the Committee and the staff. ther response to your June 16, 2000 request The second category of documents involves for copies of documents regarding the Head- the Committee’s request with the OIG and it is our understanding that the OIG will com- confidential internal OTS memoranda con- waters Forest, a possible ‘‘debt for nature cerning the bases for its investigation and swap’’ and pending litigation between the municate with your staff directly regarding any responsive OIG documents in their pos- claims that resulted in the adjudicatory pro- Federal Deposit Insurance Corporation and ceeding. As we explained to Mr. Gibson, Mr. Charles E. Hurwitz arising out of the session. If you have any questions regarding this these are extremely sensitive internal com- failure of United Savings Association of production of documents, please do not hesi- munications and, for the time being, we are Texas (USAT). near agreement on another means of con- Your staff has requested that we detail our tate to contact Eric Spitler of the FDIC’s Of- veying any possibly relevant information efforts to identify responsive documents. fice of Legislative Affairs. Sincerely, that may be in those documents. Upon receipt of the Committee’s request, the You had indicated in your letter that the Senior Deputy General Counsel sent a copy WILLIAM F. KROENER, III, General Counsel. Committee might wish to interview OTS em- of the request by e-mail to all current em- ployees. If that is necessary, we ask that you ployees who have participated in the litiga- contact our Office of Congressional Affairs tion and might have responsive documents. OFFICE OF THRIFT SUPERVISION, to arrange the interviews. If you have any Copies of the Committee’s requests also were DEPARTMENT OF THE TREASURY, questions, please contact Kevin Petrasic, Di- provided to the FDIC’s Executive Offices and Washington, DC, June 23, 2000. rector of Congressional Affairs at (202) 906– to Division and Office Directors who were Hon. DON YOUNG, 6452. asked to forward the e-mail to any employ- Chairman, Committee on Resources, House of Sincerely, ees they believed might have responsive doc- Representatives, Washington, DC. CAROLYN J. BUCK. uments in their possession. Employees were Dear CHAIRMAN YOUNG: This is in response cc: Rep. George Miller asked to respond to the e-mail within 24 to your June 16, 2000 information request hours and to provide copies of any responsive concerning allegations of a ‘‘debt for nature’’ documents to the Legal Division within 48 swap involving the Headwaters Forest. We FEDERAL DEPOSIT hours. Any employees who did not respond to are engaged in a search for the documents INSURANCE CORPORATION, the initial e-mail were contacted directly requested and with this letter are delivering Washington, DC, June 23, 2000. and directed to provide documents. The copies of a portion of the responsive docu- Hon. DON YOUNG, Legal Division has been reviewing the docu- ments to your office. Pursuant to agreement Chairman, Committee on Resources, House of ments for responsiveness and identifying any with Mr. Duane Gibson of your staff, we are Representatives, Washington, DC. issues regarding attorney-client and attor- providing a sample of the postcards and let- DEAR MR. CHAIRMAN: This letter is in fur- ney work product that might have an impact ters from the public; the full complement is ther response to your June 16, 2000, request on the FDIC’s ongoing litigation. available for your review, if you desire. for copies of documents regarding the Head- On Friday, June 23, 2000, the FDIC made an As we have explained to Mr. Gibson, the waters Forest, a possible ‘‘debt for nature initial production of responsive non-privi- Office of Thrift Supervision (OTS) is in the swap,’’ and pending litigation between the leged documents to the Committee. The midst of a formal adjudicatory enforcement Federal Deposit Insurance Corporation and FDIC is continuing to search for material re- proceeding pursuant to 12 U.S.C. 1818 against Mr. Charles E. Hurwitz arising out of the sponsive to the Committee’s request and is Mr. Charles Hurwitz and Maxxam Corpora- failure of United Savings Association of today making a second production of respon- tion concerning their involvement with Texas. sive non-privileged documents. As Chairman United Savings Association of Texas (USAT). Since receiving the Committee’s request Tanoue stated in her June 23 letter to the A lengthy administrative trial was held be- for documents, the FDIC has initiated an ag- Committee, the FDIC’s search has identified fore an administrative law judge (ALJ). The gressive search for responsive documents. documents that are covered by attorney-cli- ALJ is now reviewing the evidence presented With this letter, I am transmitting the ent and/or attorney work product privileges and post-trial briefs to prepare a rec- FDIC’s first submission of documents respon- in the current ongoing litigation with Mr. ommended decision for the Director of OTS. sive to the Committee’s June 16, 2000, re- Hurwitz. Following our expression of concern After the ALJ submits his recommended de- quest. As we stated in our letter of June 20, that voluntarily responding to the Commit- cision to the Director, the parties will have we anticipate that additional documents will tee’s request for privileged documents could the opportunity to file briefs with the Direc- be identified during the week of June 26 significantly harm our legal position in the tor concerning her final decision in the mat- when we have the opportunity to review the ongoing litigation, Mr. Duane Gibson of your ter. If the Director decides to order an en- files of key individuals involved with this staff indicated that the Committee will pro- forcement action against Mr. Hurwitz or matter who have been on leave since receipt vide a subpoena for these documents. Maxxam, they have the right to file an ap- of the Committee’s request, including the The FDIC is deeply concerned that the dis- peal with the U.S. Court of Appeals. General Counsel. We will promptly copy and semination of privileged, confidential and Because an enforcement proceeding is still transmit to the Committee responsive docu- sensitive material to parties outside of the pending before the agency, we have signifi- ments that are identified in this continuing Corporation could significantly injure our cant concerns about protecting the confiden- search. In addition, we have identified docu- ability to litigate this matter and reduce tiality of certain documents which are re- ments that are covered by attorney-client damages otherwise recoverable to reimburse sponsive to your request. These documents and/or attorney work product privileges. taxpayers for losses arising out of the failure fall into two categories: 1) material relating Therefore, the FDIC respectfully requests a of United Savings Association of Texas. It is to settlement discussions between Mr. subpoena from the Committee for the pro- our understanding that the documents re- Hurwitz and Maxxam, and 2) internal OTS duction of these documents in order to pro- quested by the Committee are for the official memoranda about OTS’ claims in this pro- tect our privileges in the current litigation. business of the Committee, but that there is ceeding. As to the first category, counsel for In addition to the documents included in no formal protocol that governs the dissemi- Mr. Hurwitz and Maxxam and OTS signed a this production, the FDIC has in its posses- nation of requested material. The FDIC confidentiality agreement concerning settle- sion several boxes of postcards, letters, and would strongly object to the dissemination ment discussions. We have requested of their petitions from sources outside the FDIC re- of privileged and confidential documents to counsel, and have received, a non-objection garding subjects identified in the Commit- parties other than Committee Members and to releasing documents about those discus- tee’s request. While the FDIC did not re- staff. sions to the Committee. spond to these incoming documents and they

VerDate 112000 06:09 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00181 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.477 pfrm07 PsN: E20PT1 E2520 CONGRESSIONAL RECORD — Extensions of Remarks December 20, 2001 do not contain any FDIC analysis or input, oversight project and Members of Com- by the officers and directors of USAT.’’ The we believe that they are covered by the Com- mittee. Mr. Gibson also said that at some report also said that: ‘‘* * * the directors and mittee’s request. Because copying these vo- point the documents may become public if senior management found themselves trying luminous documents will involve consider- used, for example, in a memorandum to the to keep the institution afloat and play an en- able time and expense, we would propose to Chairman or in hearings. Mr. Gibson also in- tirely new ball game at the same time. While make them available immediately to the dicated that if the Chairman receives any the profit taking strategy is established, the Committee for inspection at our offices. prior notification of why an agency views a directors’ motivation was maintenance of If you have any question regarding this document as sensitive, that the Chairman the institution in compliance with the cap- production of documents, please do not hesi- gives it substantial weight and factors it italization requirements and not self gain or tate to contact Eric Spitler or our Office of into decision-making on release or excerpted violation of their duty of loyalty * * * The Legislative Affairs at (202) 898–3837. release of the sensitive document. preliminary conclusion from the initial in- Sincerely, vestigation as to officer’s, director’s and DONNA TANOUE, HOUSE OF REPRESENTATIVES, other professionals’ liability was that there Chairman. COMMITTEE ON RESOURCES, did not appear to be any intentional fraud, Enclosures. Washington, DC, June 16, 2000. gross negligence, or patterns of self-deal- cc: Honorable George Miller. Hon. DONNA A. TANOUE, ing.’’ Chairman, Federal Deposit Insurance Corpora- The Federal District Court Judge in the tion, Washington, DC. FEDERAL DEPOSIT FDIC v. Hurwitz case required the FDIC to Hon. ELLEN SEIDMAN, INSURANCE CORPORATION, produce its authority to sue (‘‘ATS’’) memo- Director, Office of Thrift Supervision, Wash- Washington, DC, June 20, 2000. randum. In analyzing the probability of suc- ington, DC. HON. DON YOUNG, cess, the ATS memorandum concluded that Chairman, Committee on Resources, House of VIA FAX FOR PERSONAL ATTENTION OF the suit against Mr. Hurwitz was unlikely to Representatives, Washington, DC. ADDRESSEES survive summary judgment and, even if it DEAR MR. CHAIRMAN: Thank you for your DEAR CHAIRMAN TANOUE and DIRECTOR did, would have only a ‘‘marginal-at-best’’ recent letter requesting certain documents SEIDMAN: The legislative, oversight, and in- chance of succeeding on its merits. As noted regarding the Federal Deposit Insurance Cor- vestigative responsibilities under Rule X and above, the FDIC’s outside counsel agreed Rule XI of the Rules of the United States poration’s pending litigation against Mr. with this analysis and its conclusions. Nev- House of Representatives, Rule 6(b) of the Charles E. Hurwitz. As you know, the FDIC’s ertheless, in violation of the FDIC’s own in- Rules for the Committee on Resources (the suit against Mr. Hurwitz arises out of the ternal policy guidelines governing the initi- 1988 failure of United Savings Association of Committee), 106th Congress, and Article I and Article IV of the United States Constitu- ation of litigation, the FDIC ultimately de- Texas (USAT), a savings and loan failure cided to file suit. that cost the American taxpayer more than tion, require that the Committee on Re- $1.6 billion. sources oversee and review the laws, policies, I find particularly disturbing the fact that Although the FDIC rejects the Commit- practices, and operation of the Department the ATS memorandum specifically ref- tee’s allegations that the basis for the suit of the Interior (the Department), the public erences what appears to be the only possible against Mr. Hurwitz is an attempt to obtain domain lands and resources managed by the motive behind the FDIC’s decision to bring additional parcels of the Headwaters Forest, Department, and any other entity that re- this suit. The ATS memorandum acknowl- the FDIC intends to cooperate with the Com- lates to or takes action to influence depart- edges that Mr. Hurwitz is the Chairman, mittee’s investigation. The Committee has ments or matters and laws within the Com- Chief Executive Officer, and indirectly the made a broad request for documents related mittee’s jurisdiction under Rule X(l). This largest stockholder of MAXXAM Inc., a pub- to this matter and asked that they be pro- jurisdiction extends to Title V of P.L. 105–83 licly held company, which owns The Pacific duced by Friday, June 23, 2000. The FDIC is concerning the legislation that authorized Lumber Company (‘‘Pacific Lumber’’). Pa- dedicating significant resources to the Com- the acquisition of the Headwaters Forest cific Lumber owned, among other things, an mittee’s request and we expect to be able to (land that is now managed by the Bureau of approximately 5,000 acre tract of old growth produce the bulk of the documents on that Land Management) from Pacific Lumber redwood forest in northern California com- date. However, it is anticipated that some Company. It extends to any future additions monly referred to as the ‘‘Headwaters For- documents will not be identified by the dead- of related parcels of the Headwaters Forest est.’’ Beginning in 1994, private sector envi- line. For example, a few key staff involved from Pacific Lumber Company, including ad- ronmental activists began to lobby the Con- with this matter have been on leave since ditions through ‘‘debt for nature.’’ Members gress and the Administration furiously to the request was received and a search of of this Committee, including me, drafted and ensure that as much of the Headwaters For- their files cannot be completed until they re- negotiated this law and approved of its inclu- est as possible, if not all of it, remain turn the week of June 26. With regard to any sion in the Department of Interior and Re- unharvested by the company. documents that are not produced by June 23, lated Agencies Appropriations Act, 1998. Oversight Matters Under Review. I have ini- Environmental activists—predominantly 2000, the FDIC will provide documents to the Earth First!—also began an extensive cam- Committee as quickly as they can be identi- tiated an oversight review of the Federal De- paign to use the FDIC and the Office of fied and copied. posit Insurance Corporation’s (FDIC) and the Thrift Supervision (OTS) and to employ With regard to prospective interviews of Office of Thrift Supervision’s (OTS) advance- their litigation powers to create a threat of FDIC employees, we request that such inter- ment of claims against private parties to ul- liability that would force MAXXAM to sur- views be arranged through the FDIC’s Office timately obtain additional parcels of the render its ownership of the Headwaters For- of Legislative Affairs. If you or your staff Headwaters Forest owned by the Pacific have any questions regarding this matter, Lumber Company. This advancement runs est in exchange for dismissal of the USAT please contact Eric Spitler of the FDIC’s Of- contrary to the Headwaters acquisition stat- claims. Such a swap would apparently, in the fice of Legislative Affairs (202) 898–3837. ute referenced above, contrary to FDIC’s eyes of environmental advocates and their Sincerely, mission to oversee the nation’s financial sys- supporters, enable public acquisition of the tem, contrary to the interests of the federal DONNA TANOUE, Headwaters Forest and other surrounding Chairman. department under the jurisdiction of my lands without having to buy them for mar- committee that would manage such addi- ket value from Pacific Lumber or MAXXAM. tional Headwaters holdings. The advance- This concept came to be known as a ‘‘debt- To: Carolyn Buck ment may be in coordination with militant for-nature’’ swap (even though the alleged This may help you, Carolyn. Call if you have elements of the extreme environmental com- ‘‘debt’’ was merely the threat of what the any questions. Duane. munity. The advancement is being under- FDIC’s ATS memo concluded was a mar- We are concerned that dissemination of taken via a 1995 civil suit (and any subse- ginal-at-best lawsuit.) certain sensitive documents outside the quent OTS administrative action) filed by agency might compromise our pending adju- the FDIC in the United States District Court I understand that in a lobbying campaign, dicatory process. For that reason we ask for the Southern District of Texas against hundreds of letters were sent directly to the that you maintain the confidentiality of sen- Mr. Charles E. Hurwitz in connection with highest levels of the FDIC and OTS encour- sitive documents we identify by limiting ac- the 1988 failure of the United Savings Asso- aging the agencies to file suit against cess to Members of the Committee and their ciation of Texas (USAT). The oversight re- MAXXAM to ‘‘create’’ a debt that could be staff. Mr. Gibson has advised us that the view includes these subjects. ‘‘swapped’’ for the Headwaters Forest. In Committee does not have a general docu- I am aware that the FDIC conducted a fact, the ATS memorandum advised FDIC ment protocol, but that all record requests seven-year investigation of USAT’s failure senior management that the Clinton Admin- from the Committee are for the official busi- prior to the filing of the suit. I review the istration was ‘‘seriously interested’’ in pur- ness of the Committee. The information in FDIC’s conclusion that claims against Mr. suing a ‘‘debt-for-nature’’ swap and warned documents is generally used for informing Hurwitz were unwarranted and understand that the agency would come under severe members of the Committee. The persons that it issued a report finding ‘‘* * * no di- criticism from the environmental commu- with general access to the sensitive docu- rect evidence of insider trading, stock ma- nity if it did not proceed against Mr. Charles ments are staff working on the Committee nipulation or theft of corporate opportunity Hurwitz and MAXXAM.

VerDate 112000 06:30 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00182 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.480 pfrm07 PsN: E20PT1 December 20, 2001 CONGRESSIONAL RECORD — Extensions of Remarks E2521 I have very serious concerns over the no- the authority and under deadlines in this let- 5. All records related to any contact be- tion that the FDIC somehow has the author- ter. The schedule also contains the definition tween the FDIC or OTS (or any employee of ity, let alone ‘‘the power and duty to protect that applies to the term ‘‘records.’’ the OTS or FDIC) and any group or indi- forest assets * * * and endangered and Interviews. In addition to the information vidual or group that relates to or mentions threatened species’’ as the extremist activ- listed above, this inquiry may include a re- the Headwaters Forest. quest to interview you and those in the em- ists told your office. I am not aware of FDIC 6. All records that relate in any way to the ploy of the FDIC and OTS who have knowl- or OTS authority or jurisdiction in these Federal Deposit Insurance Corporation’s edge of the matters under review. In addi- areas. However, the Committee on Resources (FDIC) Office of Thrift Supervision’s (OTS) tion, should the need for hearings arise, you does have the constitutional and jurisdic- advancement of claims against Mr. Charles and staff at the FDIC and OTS may be asked tional authority under the Rules of the Hurwitz and/or MAXXAM that also in any House of Representatives involving the to testify before the Committee. Deadline. I request that you strictly com- way mention ‘‘debt for nature’’ or the Head- Headwaters Forest, management of the waters Forest and are to, from, or involve Headwaters Forest, federal additions to the ply with the deadlines for production which are as follows: response to this letter by Mr. Bruce Rinaldi, Mr. Ken Guido, Mr. Rob- Headwaters Forest, and threatened and en- ert DeHenzel, or Mr. Jeff Williams. dangered species. June 20, 2000, and delivery of the records 4:00 In addition, as is evidenced in the fol- p.m., Friday, June 23, 2000, to the attention 7. All records showing or related to any lowing excerpt from a letter from an Earth of Mr. Duane Gibson, 1324 Longworth House contact or communication between anyone First! activist to the Federal District Court Office Building. I also request that you pro- employed by, assigned to, or associated with Judge overseeing the FDIC’s case against vide two sets of all records requested. the FDIC or the OTS and anyone employed MAXXAM, the environmental community Lead Investigator. This review will be led at by, assigned to, or associated with the White publicly claimed credit for manipulating the the staff level Mr. Duane Gibson, the Com- House (including the Council on Environ- mittee’s General Counsel for Oversight and FDIC and OTS into pursuing the ‘‘debt-for- mental Quality), The Office of the Vice Investigations. I request that your staff con- nature’’ course related to Headwaters: ‘‘As President, The Department of the Interior, tact him (202–225–1064) after your receipt and the initiator of the so-called ‘Debt-for-na- the Forest Service, or the Bureau of Land review of this letter. Mr. Gibson can assist ture’ campaign, I have decided to write you Management that relate in any way to the with any questions. Thank you for your co- prior to your making your final ruling FDIC or OTS claims against Mr. Charles operation with this review of matters under around this case. The campaign to encourage Hurwitz and/or MAXXAM that also in any the jurisdiction of this Committee. Please be the FDIC to sue Charles Hurwitz and the way mention, refer to, or relate to ‘‘debt for aware that the Committee has the authority MAXXAM Corporation was and is designed to nature,’’ the Headwaters Forest, or the Pa- to compel production of the records that are stand up on its own, regardless of whether a cific Lumber Company. requested should they not be produced by the debt for nature swap ensues . . . I have heard deadline listed above. I anticipate your co- DEFINITIONS it argued that the FDIC only filed this suit operation so that I will not need to employ to cave into pressure from citizens. Well may For the purposes of this inquiry, the term this authority. ‘‘record’’ or ‘‘records’’ includes, but is not I ask, de facto, what is wrong with pressure Sincerely, from citizens? (emphasis added) This is a limited to, copies of any item written, typed, DON YOUNG, printed, recorded, transcribed, filmed, strikingly candid admission and certainly Chairman. supports the conclusion that the pressure ex- graphically portrayed, video or audio taped, however produced, and includes, but is not erted was successful in prompting the FDIC SCHEDULE OF RECORDS—HEADWATERS FOREST limited to any writing, reproduction, tran- to file a suit that its internal policies would ADDITIONS AND DEBT FOR NATURE scription, photograph, or video or audio re- otherwise not have authorized. 1. All records that relate in any way to the Since the initiation of the litigation by the cording, produced or stored in any fashion, FDIC or OTS advancement of claims against FDIC and the OTS, the Federal and State of including any and all computer entries, ac- Mr. Charles Hurwitz and/or MAXXAM that California governments have purchased the counting materials, memoranda, minutes, also in any way mention ‘‘debt for nature,’’ Headwaters Forest. With the federal acquisi- diaries, telephone logs, telephone message the Headwaters Forest, or the Pacific Lum- slips, electronic messages (e-mails), tapes, tion, the issue was laid to rest. The purchase ber Company, including but not limited to notes, talking points, letters, journal en- was accomplished through legislation au- any records relate to obtaining additional tries, reports, studies, drawings, calendars, thored by Members of the Committee on Re- parcels of land referred to as of the Head- manuals, press releases, opinions, docu- sources, and is a subject within the jurisdic- waters Forest, which were or are owned by ments, analyses, messages, summaries, bul- tion of the Committee. The management of the Pacific Lumber Company. the Headwaters Forest is also within the ju- 2. All records that relate in any way to the letins, disks, briefing materials and notes, risdiction of the Committee. The legislation FDIC or OTS advancement of claims against cover sheets or routing cover sheets or any and agreement reached when Congress adopt- Mr. Charles Hurwitz and/or MAXXAM that other machine readable material of any sort ed Title V of P.L. 105–83 contemplated no ad- also in any way mention (or are to or from) whether prepared by current or former em- ditions to the Headwaters Forest over five the Rose Foundation (including Ms. Jill ployees, agents, consultants or by any non- acres. However, the extreme elements within Rattner), the Turner Foundation or any employee without limitation and shall also the environmental movement, the FDIC, and other grant-making organization and that in include redacted and unredacted versions of the OTS continue to pursue what appears to any way relate to strategies or legal theories the same record. The term includes records be an orchestrated agenda and cases against for acquisitions or potential acquisitions of that are in the physical possession of the MAXXAM and Mr. Charles Hurwitz to appar- the Headwaters Forest or the concept of FDIC or the OTS (as the case may be) and ently create a ‘‘debt’’ to be ‘‘swapped’’ for ‘‘debt for nature.’’ records that were formally in the physical additions to the Headwaters Forest owned by 3. All records that relate in any way to the possession of the FDIC or the OTS (as the Pacific Lumber. This idea is contrary to the FDIC or OTS advancement of claims against case may be), as well as records that are in agreement reached by Congress and the Ad- Mr. Charles Hurwitz and/or MAXXAM that storage. Furthermore, with respect to this ministration, contrary to the law, and con- also in any way mention (or are to or from) request, the terms ‘‘refer’’, ‘‘relate’’, and trary to the mission of the FDIC. Earth First!, North Coast Earth First!, Bay ‘‘concerning’’, means anything that con- As a result, I have initiated this oversight Area Coalition on Headwaters, Circle of Life stitutes, contains embodies, identifies, men- review and make the following request for Foundation, The Trees Foundation, The tions, deals with, in any manner the matter records in furtherance of the review. Humboldt Watershed Council, The National under review. Request for Records. The review requires the Audubon Society, and/or the Sierra Club. ‘‘FDIC’’ means Federal Deposit Insurance prompt production of all records by the FDIC 4. All records of any FDIC Board delibera- Corporation. and OTS that relate to the matter under re- tions, and any OTS deliberations, in which view as outlined above. In addition, the at- the decision to proceed with litigation ‘‘OTS’’ means Office of Thrift Supervision. tached Schedule of Records specifies certain against or claims against Mr. Charles MAXXAM means MAXXAM Inc., Pacific records or categories of records that are also Hurwitz and/or MAXXAM was considered or Lumber Company, and United Savings Asso- requested and must be produced pursuant to discussed. ciation of Texas.

VerDate 112000 06:30 Dec 28, 2001 Jkt 099060 PO 00000 Frm 00183 Fmt 0666 Sfmt 0634 E:\CR\FM\A20DE8.483 pfrm07 PsN: E20PT1