Judge Awards $72M in Legal Fees to Defendant in S&L Suit

WASHINGTON-NCUA is not the only financial services insurer getting bad new from a Texas judge. Texas U.S. District Court Judge Lynn N. Hughes awarded $72 million to a man to cover his legal fees stemming from a lawsuit against the Federal Deposit Insurance Corporation involving his relationship with a failed savings and loan. According to an article in the Washington Post, the FDIC sued Charles E. Hurwitz in 1995 for over $800 million because he “indirectly controlled” a savings association that failed back in 1988. Following a number of setbacks, the FDIC dropped its suit in 2002, the article said, and Hurwitz asked to be reimbursed for his legal expenses arguing that the agency should never have brought the suit. Hughes issued a lengthy decision, accusing the FDIC of bowing to political pressure from environmental groups, lawmakers, and the Clinton administration because Hurwitz’s Pacific Lumber Co. owned thousands of acres of endangered redwoods in Northern California the environmentalists wanted to preserve. The performance of the FDIC officials and lawyers involved in depositions “ranged from manipulative evasiveness to plain perjury,” the Post quoted from the decision. He said the FDIC tried to squeeze the trees out of Hurwitz in a “debt-for-nature” swap in exchange for liability in the failure of the United Savings Association of Texas. Hughes’ decision reportedly stated that FDIC officials “discarded the mantle of the American Republic for the cloak of a secret society of extortionists. If the vice president called, they responded. If a congressman called, they responded. If a lobbyist called, they responded. They heeded every call but that of duty and honor.” FDIC plans to appeal the ruling. Spokesman David Barr said that Hughes had been overturned twice by the circuit court in this suit regarding internal FDIC documents and expected the same again.