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Global Warning - Feb 16, 2005 - Printable Version
- Hurwitz Who?
by Robin Buckallew
"Growth for the sake of growth is the ideology of the cancer cell" Edward Abbey
I want to tell you a tale about a lonely, brave Texas businessman, underappreciated and unsung. His name is Charles Hurwitz. Yes, I know, you will probably say Hurwitz? Hurwitz who? I never heard of him. This lonely, brave man, with a heart bigger than all Texas, who has selflessly fought the establishment and the powers that be to ensure that men could feed their families, and families could stay together. A man who has stood up to those who would see him fail, who single-handedly saved a failing mom-and-pop enterprise by sinking money into it just as it was about to fail, turning it into a profit making enterprise in spite of all the obstacles that were thrown in his way. A man who wants only the best for America and for Americans, and who is now facing the ignominy and defeat of bankruptcy and impending collapse, as those ruthless folks who oppose him laugh in delight at his descent into the depths of humiliation and indignity. Charles Hurwitz, savior and saint, riding to the rescue of the poor and downtrodden.....
Oops, wrong story. For a minute there, I had a lapse of reality, and thought I was writing for the mainstream media. I was starting to buy into the story that Hurwitz wants told for the public. I will admit, there is some truth to the story above. There is a man named Charles Hurwitz, and he is a Texas businessman, based out of Houston. But now, let's look at the rest of the story. Pacific Lumber Company was a small, family owned business, engaged in the practice of sustainable forestry. They treated their employees well, paid them well, and gave them good benefits. They logged the trees in a sustainable manner, taking only small portions each year. In this way, Pacific Lumber was able to carry on in the area for 140 years, and could look to a continuing future of sustainable logging as long as they wished. Except for one thing - it is absolutely impossible to maintain a company like that in the market mentality of the past 20 years. Unfortunately for the company (and the forest), the more board-feet you take out per year, the more you are able to sell, thus maximizing your short term profits. So, because this company could be shown to be failing to fulfill their obligation to make lots of money right now, they were subject to a hostile takeover bid. And that is just what happened in 1985, when Charles Hurwitz, owner of the Houston-based Maxxam, staged a leveraged buyout of Pacific Lumber, financed with junk bonds. He then proceeded to begin clear-cutting in order to pay off the junk bonds, tripling the rate of logging of the world's largest privately-held stand of ancient redwood forests. Goodbye, forest.
So, you ask, if this all happened in 1985, why am I bringing it up now? Because this is a long and complicated story that didn't end with the LBO of Pacific Lumber. It didn't end with the clear-cutting. It didn't end when the Earth First! gang decided to sit in the trees to prevent these old redwoods from being turned into patio furniture. This saga continues today, a story of greed and corruption, of fraud and blackmail, of government impotence corporate malfeasance. This is a story straight from the "Greed is good" decade, that demonstrates just how far one man can go and get away with it (the answer: a long, long way).
The story begins in Texas, where Charles Hurwitz and Michael Milken were involved in one of the larger savings-and-loan scandals of the 1980s. They looted United Savings Association of Texas, and when it crashed, the federal government had to bail it out. It cost the United States taxpayers $1.6 billion. After the savings and loan crash, Hurwitz moved on to purchase the above mentioned Pacific Lumber Company in a hostile takeover. In addition to increasing the rate of logging in ancient forests, Hurwitz also raided the lumber company's worker pension fund. This cost the retired loggers and millworkers $55 million. He sold off most of the company's other assets for quick cash to make the payments on the junk bonds. (This was simply repeating a pattern from earlier ventures, when he looted the worker pension fund for the Simplicity Pattern workers, which reduced the benefits payable to the workers by $4000/year). Throughout his years in business, Hurwitz has set a pattern for corporate irresponsibility and rapacious behavior, leading to numerous out of court settlements for insurance fraud, securities violations and even a land swindle which cheated his own company's shareholders. He has been on the losing end of seven environmental lawsuits based on his illegal and incessant logging of the northern California ancient redwood forests. Nice guy.
Now to deviate a little bit from Hurwitz to give you a little background that will help you understand the current situation in California. Headwaters Forest Reserve is a 7400-acre property in Humboldt County, California. It is home to several endangered species, such as the coho salmon and the marbled murrelet. This land was acquired by the United States government and the state of California in 1999 for $495 million, and is currently managed by the Bureau of Land Management and the state of California Department of Fish and Game, with a mandate to protect ecological and wildlife values. And just who do you think owned this property before it was purchased by the taxpayers? Why, Pacific Lumber. This purchase, touted by the Clinton administration and the mainstream environmental community as a marvelous coup, has actually created a huge controversy bordering on scandal among many environmentalists. Why? Well, it could be we're just obstructionists and whiney-babies, and nothing is ever enough for us. We just can't be happy unless we're mad. Or it could be the fact that the government paid $50,000 an acre (several times what the land was worth) to obtain this piece of property that could have been protected simply by enforcing the existing laws. In addition, the government allowed increased logging on the surrounding 200,000 acres of ancient forests, and agreed to purchase another 8000 acres of forest in Humboldt county that it would turn over to the company for logging. The company achieved this sweetheart deal in the honest, hardworking, time honored tradition of corporate wheeler-dealers: through extortion. In order to ensure they got the price they insisted on, Maxxam promised they would totally annihilate the forest. The president of Maxxam vowed publicly to cut every last old-growth redwood by 2010 if they weren't given what they wanted. And they were well on their way to reaching that goal. They were given what they wanted. And the money was paid out to Charles Hurwitz, in spite of the fact that he owes the federal government $1.6 billion. Sounds like blackmail to me.
Further background. Even as the deal was being negotiated and signed, the company had loggers deep in the woods, cutting down ancient trees that were already officially off-limits in terms of the agreement. As soon as the pact was signed (the very next day, in fact), their loggers were once again out in force, cutting down trees that they were not allowed to cut. In fact, since the signing of the Headwaters deal in 1999, Maxxam/PL has accumulated more than 325 violations, according to EPA reports. The activities engaged in are said to "result in irreversible harm to fish and wildlife habitat". The company has caused degradation of sensitive water bodies that are relied on by the endangered coho-salmon. They have caused loss of habitat used by the protected marbled murrelet and the northern spotted owl. In addition, the clear-cutting of forests on slopes in the Pacific northwest is believed to contribute not only to the siltation of the local water supplies, but also to frequent, devastating mudslides that have destroyed the homes of many of the local citizenry - many of whom do not have the vast economic resources to fall back on that Maxxam/PL can tap into. In spite of all the citations, Maxxam/PL continues the activities that violate federal and state restrictions. Why? Because the penalties they end up paying are a great deal smaller than the profits they accumulate by cutting illegally.
Fast forward to 2005. The Bush administration is in the White House. The state of California is being governed by Arnold Schwarzenegger. Headwaters Forest Reserve is federally protected property. And Charles Hurwitz is still a greedy bastard with blackmail on his mind. After all, it has worked for him in the past - why stop now? Pacific Lumber Company is threatening to file bankruptcy if they are not allowed to cut more trees. They state that this bankruptcy filing would terminate environmental safeguards that were promised as a result of the Headwaters deal. If the state does not issue permits the company has requested to log in flood-prone watersheds, the company will begin closing mills and laying off hundreds of workers. They claim they have been exemplary environmental citizens (see paragraph above - 325 EPA violations is, according to the EPA, a "staggering" number of cases). They blame the environmental degradation on the former owners, who had been logging the area for 140 years. They claim they have run out of marketable wood. According to Gary Clark, a vice president of Maxxam, "There is nowhere else for us to log. We need these plans to.keep our people going and feeding their families". They refer to the fight for the permits as a life and death struggle.
I am not qualified to issue any opinion regarding the company's financial situation. Others closer to the situation than I have expressed doubts about the dire financial straits of the corporation, and believe it is exaggerating its financial condition to pressure the state of California into giving it what it wants. Throughout his business history, Charles Hurwitz has been used to getting what he wants. This is a pattern he has no intention of seeing end. But just for a minute, let's take a good, close look at the reality of logging, and the reality of logging in the way that Hurwitz has done. Let's leave the surreal world of corporate finance and media spin behind.
For 140 years, Pacific Lumber Company managed to log in the Pacific northwest. At the time of the hostile takeover in 1985, they were carefully selecting and cutting only those trees that were useable, saleable, and whose removal would not lead to devastation of the forest. Their workers were well paid and reportedly happy. They had enough trees to continue logging this way indefinitely. Enter Maxxam, who felt they could (and should) maximize their short-term profit. Within a mere 20 years of acquiring this corporation, they have managed to "run out of logs". They need more and constantly more to feed the hungry beast of their chainsaws and mills. So why would anyone log this way, when it plainly makes little sense in the long term? Because it is cheaper to clear cut. You simply go in with big equipment and cut down all the trees, then sort them out later. Sustainable logging requires much more careful planning, and the big earth-shaking equipment is not as useful, since it tends to destroy everything in its path. It also requires more loggers, as it is more labor-based and less technology-based. It does cost a company more to hire people and pay them every month, year after year, than to buy a machine once, use it for years and then replace it when it wears out. A company engaging in clear-cutting practices will make a great deal more profit (and provide a great many fewer jobs) than a company practicing sustainable logging on the same patch of ground. In the 1980s, we entered the era of maximization of short-term benefits for shareholders who often held stake in the company only for a short period of time, and only with the idea in mind of making a great deal of money very rapidly. This mindset has continued to the present day, as we see stocks and shares being bought and sold at tremendous rates, often with very short turnover times. Shareholders are no longer interested in the long term survival of the company. They are not involved with the day to day workings of the business. They get theirs and get out. Or, if they don't get out quick enough, they lose their shirts. But either way, decisions are all too often made with little regard for the future, and with no regard whatsoever for the planet and its less wealthy (or non-human) inhabitants. No regard whatsoever even for our own children and grandchildren, who will be left in the unenviable position of cleaning up the mess we have left them.
Today, we stand at a crossroads. We have done a great deal of damage to our planet with short-term, profit-maximizing thinking. But there is still time. We still have about 4% of the ancient redwood forests left uncut. We still have some portion of our air and water that actually are air and water. We still have some endangered species that exist in large enough numbers to be saved, if we quit destroying their habitat. We still have some unpaved, unplowed, unbulldozed, unburned land left in little patches around the world. We can choose at this time to continue with "business as usual", or we can choose to say "Enough is enough". The time has come to pay the piper. We must show our corporations that we have had enough of greed, callous disregard for human life, thievery, bullying, fraud, and blackmail. In the beginnings of our country, our laws provided for the death penalty for corporations that failed to operate in the best interests of the public. I suggest it is time we start demanding that penalty be assessed. And Maxxam/PL is as good a place as any to begin.
A list of Maxxam/PL's history of violations can be found at www.wildcalifornia.org
To let your voice be heard, contact:
John Enbring
US Fish and Wildlife Service
2800 Cottage Way, Rm W-2605
Sacramento, CA 85825
Or
Director Broddrick
California Department of Fish & Game
1416 Ninth Street
Sacramento, CA 95814
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