North Coast Journal

PEOPLE - DECEMBER 1995


Hurwitz speaks!

An exclusive interview with Texas financier Charles Hurwitz

(Reprinted with permission of the Santa Rosa Press Democrat)

by Mike Geniella

Persistance -- plus a timely recommendation from Pacific Lumber Co. Pres. John Campbell -- finally landed reporter Mike Geniella a rare interview with press-shy Charles Hurwitz.

It took 10 years.

"I used to run computer checks regularly just to see if he was giving interviews to anyone else, like the Wall Street Journal," said Geniella, who is the Mendocino bureau chief for the Santa Rosa Press Democrat.

Why Geniella? Why now?

"In this case, it was simply a matter of covering an issue long enough -- since the takeover, really," he said.

That, and a memo from John Campbell to Hurwitz saying, "If you're going to talk to someone in the press, it might as well be Geniella."

The veteran reporter said he took some heat from the "Green" community (environmentalists), who said, "You let him speak!"

Geniella replied, "Isn't it our job to get people on the record, and then you can draw your own conclusions?"

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Ten years after pulling off a nearly $1 billion hostile takeover of Pacific Lumber Co., Texas financier Charles Hurwitz is seething because his most prized asset remains off-limits.

Hurwitz believes a continuing controversy about Headwaters Forest, the largest stand of ancient redwoods left in private hands -- worth $600 million today by company estimates -- not only hinders business, but denies him and managers of the 127-year-old North Coast timber giant the recognition he feels they deserve.

"We've stuck around for 10 years. We've re-invested $100 million in new facilities, added more jobs and expanded our timber base. We rebuilt the town (Scotia) after an earthquake and fire," said Hurwitz.

"And still we're the bad guys," he said.

"My God, the way the critics beat the hell out of this company, you would think we have slaves working there or something," complained Hurwitz.

In a rare interview, Hurwitz told The Press Democrat that Pacific Lumber is willing to have an independent party determine a value for Headwaters if that helps bring an end to the North Coast's most tenacious environmental battle.

Andy McLeod, spokesman for Secretary of Resources Douglas Wheeler, welcomed Hurwitz's offer.

"Without a doubt, determining a value for the forest is key to finding solutions to the complexities surrounding Headwaters," he said.

However, McLeod said the state will not negotiate "other than directly with the parties involved."

"Any further discussion on any value for Headwaters will have to be done directly," he said.

Epic court fights, regulatory skirmishing and disputes over its value, have kept company chainsaws from cutting Headwaters' 3,000 acres of towering redwoods, some dating back to the time of Christ.

Pacific Lumber contends Headwaters' fair market value is nearly $600 million, but government appraisals have ranged as low as $400 million. Because of normal regulatory constraints surrounding harvesting of old-growth trees, preservation proponents say Headwaters' true value is much less, perhaps around $200 million.

Whatever value may be set, Hurwitz said he doesn't necessarily expect taxpayers to come up with that kind of cash. He once again said he would favor offsetting some of the cost by swapping the big trees for abandoned U.S. government property.

"You know, if I could get someone who was very serious about resolving this, and who had some authority, to sit down with me, I think we could work out a Headwaters solution in half a day," said Hurwitz.

Hurwitz warned, however, that a deal needs to be struck soon. He said he believes a Republican majority in Congress, and its zeal for private property rights, creates a better political climate for Pacific Lumber's efforts to either be fairly compensated for Headwaters, or be allowed to log the swath of old trees tucked in the coastal ridges east of Fortuna.

"I want to tell you that this is America, and that this land is zoned for timber cutting," said Hurwitz defiantly.

"We are going to move forward. Somebody is going to pay us fair market value, or we're going to cut it. And we're not embarrassed to say that," he said. A federal court recently has put on hold company plans to remove dead or dying trees from Headwaters pending trial of the latest in a series of lawsuits filed by the grass-roots group Environmental Protection Information Center in Garberville.

Departing from his usual stance of no interviews, Hurwitz spoke for nearly an hour by phone from a Puerto Rico resort being developed by his Houston-based Maxxam Inc. The conglomerate also owns Kaiser Aluminum, and substantial real estate holdings nationwide. The conference call interview included Pacific Lumber President John Campbell, who was a P-L executive before the Hurwitz takeover.

Hurwitz talked freely about controversies that erupted after Pacific Lumber's old board of directors capitulated 10 years ago, and voted to sell the aristocrat of West Coast timber companies to Maxxam. It became the timber deal of the century because Pacific Lumber's under-valued assets were probably worth closer to $2 billion, according to estimates in some shareholder lawsuits filed in the aftermath of the Hurwitz takeover.

At the time of Hurwitz's takeover, Pacific Lumber was touted by the Sierra Club and Save the Redwoods League for its responsible logging practices. Generations of Humboldt County residents have worked for Pacific Lumber and lived in Scotia, the West's last real mill town. Until the takeover, they were comforted by a paternalistic management that gave them a lifestyle once characterized as "Life in the Peace Zone."

Pacific Lumber's buyout by an outsider was a stunning development for hundreds of workers and their families, and a region that depends on the company for its economic well-being. The takeover ignited a decade of environmental activism in the streets and in the courts, and reshaped the face of North Coast politics. Logging controversies have played a role in almost every major election since the takeover.

In the beginning, Hurwitz was largely unknown. At the time, he was a small-time investor with alleged ties to convicted Wall Street wheeler-dealers Michael Milken and Ivan Boesky, and a failed Texas savings and loan that cost taxpayers $1.6 billion. Today his personal portfolio is worth an estimated $180 million.

After snagging sleepy Pacific Lumber for $900 million during the takeover craze of the 1980s, Hurwitz ordered the cut doubled to meet the company's cash flow needs, and pay up to $90 million a year in interest payments on about $550 million in junk bonds he used to finance the takeover. Hurwitz later was to use early profits from Pacific Lumber's accelerated cut to help fund a takeover of another venerable Northern California industrial giant, Kaiser Aluminum.

As his empire grew, Hurwitz was attacked as a ruthless raider whose targets, including Pacific Lumber, were asset-rich companies. His dealings involving Pacific Lumber came under scrutiny by the Securities and Exchange Commission, the U.S. Labor Department and a congressional oversight committee, none of which took any action. A probe by the Federal Deposit Insurance Corp. into Hurwitz's role in a failed Texas savings and loan resulted in a $250 million claim being filed against him.

Hurwitz dismisses his critics.

"Their accusations are just not true, and anybody who will spend the time looking into them will find that out," said Hurwitz.

Soon after the Pacific Lumber takeover Hurwitz ordered the sale of a tool company subsidiary of Pacific Lumber for $300 million. He sold Pacific Lumber's former San Francisco headquarters building for another $30 million, moving all corporate operations to Scotia and and fueling speculation he intended to dismantle the timber giant and sell all of its assets. Critics predicted Scotia would be a ghost town within 10 years.

Hurwitz said the years have proven the critics wrong.

"We're still here, and we're still growing," he said.

Hurwitz said his rogue image is a carryover from the 1980s, "When everybody who did takeovers was cast in a bad light. But contrary to a lot of those kind of people, we're builders. We're happy with our investments."

"I warned Hurwitz early on that his takeover of Pacific Lumber would become the absolutely perfect symbol of what everyone doesn't like about American business," recalled former Rep. Doug Bosco, D-Sebastopol. After his defeat to Rep. Frank Riggs, R-Windsor, Bosco for a year was paid $15,000 a month by Hurwitz to try to forge a consensus in Congress, where a bill had been introduced for the public acquisition of Headwaters.

Those efforts failed, and so have a series of others in the state Legislature and at the federal level.

Hurwitz said he's disgusted with the political "circus." He recalled in 1988 when he went to Sacramento with Bosco, who was then still a congressman, to meet with key legislative leaders. They asked Hurwitz to agree to a voluntary logging moratorium on Headwaters, an agreement Pacific Lumber stuck to until this year, when Hurwitz said he'd had enough.

"I was told by these guys that they were going to step in and solve this issue," said Hurwitz. "But they didn't do a damn thing. We sat around for two years twiddling our thumbs waiting for something to happen, and nothing ever did."

Bosco said he no longer has any ties to Hurwitz or Pacific Lumber. But he said he agrees with Hurwitz that most of the blame for the Headwaters stalemate is with the political process.

"It should have been resolved in the public arena, but it wasn't," said Bosco.

Hurwitz said the bad rap he and Pacific Lumber receive about wanting to log the last of the ancient redwoods in private ownership is unfair.

"I get all these letters every day from high school and junior high kids saying, 'Please don't cut down the Headwaters,'" said Hurwitz.

"I write them back and give them our version of this thing, and then I tell them they should write their senators, write the Congress, and write the president if they want to save the Headwaters," he said.

Hurwitz rejected environmentalists' clamor for a so-called "debt-for-nature" swap involving a $250 million claim a federal agency has filed against the Houston investor for his alleged role in the collapse of United Savings and Loan Association of Texas.

Hurwitz contended the Federal Deposit Insurance Corp. claim is in the form of a personal lawsuit against him, and cannot be linked to Maxxam or Pacific Lumber operations.

The possibility of swapping Headwaters for surplus government property dominated Hurwitz's thoughts during the interview.

Hurwitz cited as an example a closed military base in Texas between Galveston and Houston, where he lives.

"It's 15,000 acres of land, and it's doing nothing but drawing dust and rattlesnakes. Wouldn't it be great if someone like ourselves took it over and built new homes and a shopping center and created new jobs rather than have this land just sit there and do nothing?"

Hurwitz described such a possibility as a "win-win for everyone."

"Everyone thinks we're the stumbling block (to a Headwaters solution), and that's just not the case," said Hurwitz.

Hurwitz insisted the future is bright for Pacific Lumber.

Pacific Lumber, whose annual sales top $200 million, is not for sale despite Wall Street Journal reports earlier this summer to the contrary, said Hurwitz.

Hurwitz said, in fact, Pacific Lumber under Campbell's guidance is looking to the North Coast and around the globe to expand its timber operations.

"We've been to South America, Africa and even Russia," he said.

"We're builders. We don't buy and sell," said Hurwitz about Maxxam's investment strategies.

Hurwitz said he likes the timber business. "Just last week, we had discussions about a potential acquisition within the industry," he said. "We're very much in the growth mode," said Hurwitz.

Hurwitz said he's offended that Pacific Lumber has been cast as an environmentally insensitive company under his stewardship.

"What bothers me more than anything else is that people think we're hurting the environment. It's simply not the case. We've hired the best foresters, the best biologists to chart the company's course into the next century," said Hurwitz.

Hurwitz and Campbell said Pacific Lumber's timberlands, even after a decade of accelerated cutting, still have the most timber volume per acre than anywhere else in California, and perhaps Oregon and Washington. They said the company will be able to sustain current production and job levels indefinitely by acquiring more timberland and developing new product lines.

"But that isn't what you hear on the streets or read in the newspapers," said Hurwitz.

"I've had people tell me they went to Scotia expecting to see a Palm Springs: no trees and all sand. They were amazed to see forests everywhere they looked."

This article first appeared in the Santa Rosa Press Democrat on Oct. 22.


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