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Tuesday, April 28, 2009

Hurwitz Settles Fed Suit Over Pacific Lumber Fraud

Whistleblower Fraud Trial Against Maxxam Corp. and Charles Hurwitz Ends in Settlement

feds take pennies on the dollar in deal over $250 Million Fraud case

Hurwitz Slithers Back to Houston, Dodging Accountability Once Again

an alert from the Bay Area Coalition for Headwaters April 28, 2009

The whistleblower fraud trial of Texas-based Maxxam Corp. and its CEO Charles Hurwitz, filed by two California Dept. of Forestry staff reached a settlement agreement today after six days before a jury in federal court in Oakland. The federal government will receive $2.5 million from defendants Maxxam Corp. and Charles Hurwitz; the State of California $500,000., and $1 million in costs and fees were awarded to plaintiffs. The case was brought under the False Claims Act. The settlement agreement is, of course, a pittance compared to the profits reaped from the Headwaters Deal for Maxxam and Hurwitz, and also the two-decade milking of the Pacific Lumber cash cow, as northern California's redwood forests were overlogged, hillsides stripped bare and salmon runs depleted.

Although it became clear outside the courtroom after settlement discussion this morning that a number of jurors were solidly behind the plaintiffs, Judge Claudia Wilken had disallowed evidence that would have shown a clear chain of command from Texas to Scotia, California, where Pacific Lumber operated. Exclusion of that information presented a hurdle in the plaintiff's case to show that indeed, Maxxam and its CEO Charles Hurwitz were responsible for decisions to increase logging rates to unsustainable levels. SEC filings uncovered in December 2008 show that Charles Hurwitz, due to testify next week, had spent $13.9 million on this case at the close of 2008.

Our hats off to the courageous whistle-blower CDF forester Chris Maranto, and to former CDF head Richard Wilson for bringing this lawsuit, first filed in 2006. It was a major accomplishment to bring this case before a jury in federal court, despite Maxxam and Hurwitz's monumental efforts at getting it dismissed. It is also significant that Charles Hurwitz, rarely seen in public, has been seated in court daily with his wife Barbara, only several feet away from activists who have been fighting for the redwood forests for many years. Though there were abundant moments of humor in court, Hurwitz never cracked a smile, mostly looking pale and frowning.

Plaintiff's case showed fraud via manipulation of data in computer models used by Maxxam subsidiary Pacific Lumber in their "Sustained Yield Plan"(SYP) for logging on their redwood forest property in northern California. Submission of the SYP to the state cleared the way for the payment to Maxxam and Hurwitz of nearly half a billion dollars in exchange for less than 7,500 acres of redwood forest in the 1999 Headwaters Forest Agreement. The purchase included $380 million in public funds being paid to Maxxam, in addition to several thousand acres of additional timberland being transferred to Maxxam/Pacific Lumber. Hurwitz and Maxxam could have been liable for damages equal to three times the government's losses in the Deal, had plaintiffs prevailed.

The settlement was disappointing, but it remains significant that it came to court and brought Charlie to Oakland. The testimony has been exciting. Congressman George Miller gave strong testimony last week, and former State Senator Byron Sher was due on the stand this week.

Bay Area Coalition for Headwaters 2530 San Pablo Ave. Berkeley, California 94702 510-548-3113

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