It's Over: U.S. vs Maxxam Corp. and Charles Hurwitz Fraud Trial Ends

(04-28-2009) 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.

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