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A Donor Who Had Big Allies
DeLay and two others helped put the brakes on a federal probe of a
businessman. Evidence was published in the Congressional Record.
By Richard A. Serrano and Stephen Braun
Times Staff Writers
01/08/06 "Los
Angeles Times" -- -- WASHINGTON — In a case that
echoes the Jack Abramoff influence-peddling scandal, two Northern
California Republican congressmen used their official positions to
try to stop a federal investigation of a wealthy Texas businessman
who provided them with political contributions.
Reps. John T. Doolittle and Richard W. Pombo joined forces with
former House Majority Leader Tom DeLay of Texas to oppose an
investigation by federal banking regulators into the affairs of
Houston millionaire Charles Hurwitz, documents recently obtained by
The Times show. The Federal Deposit Insurance Corp. was seeking $300
million from Hurwitz for his role in the collapse of a Texas savings
and loan that cost taxpayers $1.6 billion.
The investigation was ultimately dropped.
The effort to help Hurwitz began in 1999 when DeLay wrote a letter
to the chairman of the FDIC denouncing the investigation of Hurwitz
as a "form of harassment and deceit on the part of government
employees." When the FDIC persisted, Doolittle and Pombo — both
considered proteges of DeLay — used their power as members of the
House Resources Committee to subpoena the agency's confidential
records on the case, including details of the evidence FDIC
investigators had compiled on Hurwitz.
Then, in 2001, the two congressmen inserted many of the sensitive
documents into the Congressional Record, making them public and
accessible to Hurwitz's lawyers, a move that FDIC officials said
damaged the government's ability to pursue the banker.
The FDIC's chief spokesman characterized what Doolittle and Pombo
did as "a seamy abuse of the legislative process." But soon
afterward, in 2002, the FDIC dropped its case against Hurwitz, who
had owned a controlling interest in the United Savings Assn. of
Texas. United Savings' failure was one of the worst of the S&L
debacles in the 1980s.
Doolittle and Pombo did not respond to requests for interviews last
week. They publicly defended Hurwitz at the time, saying the inquiry
was unfair. Hurwitz's lawyer said Friday that the FDIC had been
overzealous. This summer, a judge in Texas agreed and awarded
Hurwitz attorney fees and other costs in a civil suit he filed.
"They sought to humiliate him," U.S. District Judge Lynn N. Hughes,
said in the ruling. The government is appealing the decision.
In key aspects, the Hurwitz case follows the pattern of the Abramoff
scandal: members of Congress using their offices to do favors for a
politically well-connected individual who, in turn, supplies them
with campaign funds. Although Washington politicians frequently try
to help important constituents and contributors, it is unusual for
members of Congress to take direct steps to stymie an ongoing
investigation by an agency such as the FDIC.
And the actions of the two Californians reflect DeLay's broad
strategy of cementing relationships with individuals, business
interests and lobbyists whose financial support enabled Republicans
to extend their grip on Congress and on government agencies as well.
The system DeLay developed and Abramoff took part in went beyond
simple quid pro quo; it mobilized whatever GOP resources were
available to help those who could help the party.
In the Hurwitz case, Doolittle and Pombo were in a position to
pressure the FDIC and did so. Pombo received a modest campaign
contribution. In another case, Pombo helped one of Abramoff's
clients, the Mashpee Indians in Massachusetts, gain official
recognition as a tribe; the congressman received contributions from
the lobbyist and the tribe in that instance.
Andrew Wheat, research director for Texans for Public Justice, a
nonpartisan electoral reform group based in Austin, put it this way:
"DeLay and Hurwitz seem like natural allies in that they have
geographic and ideological proximity. Mr. Hurwitz is a guy who has a
reputation of being willing to pay to play. And DeLay likes to play
that game too, so there's a natural affinity."
DeLay announced Saturday that he was giving up his efforts to regain
the majority leader position. He was majority whip when he first
became involved in helping Hurwitz.
In the Abramoff scandal, members of Congress allegedly did favors
for the politically connected lobbyist's clients — including Indian
casinos — and received campaign contributions and lavish free
entertainment. Last week, the lobbyist pleaded guilty in separate
cases in Miami and Washington in a deal that government
investigators hope will lead to more prosecutions. Others involved
have also made deals to cooperate, and Washington is braced for new
criminal charges to come.
The episode involving Hurwitz and the two California congressmen
took place with little public notice just before the Abramoff
scandal began to escalate. The Sacramento Bee published a story when
Doolittle inserted FDIC investigative documents into the
Congressional Record, noting that it occurred at a time when
Congress was distracted by the Sept. 11 terrorist attacks and the
anthrax episode.
But what lay behind Doolittle's action, and the actions of Pombo and
DeLay, did not become clear until recently, when the government
documents and copies of letters between the congressmen and FDIC
officials were obtained by The Times.
J. Kent Friedman, the general counsel for Hurwitz's vast
Houston-based holding company, said last week that the FDIC was
overzealous in its dealings with his boss.
"Their case was weak from the start. They had a terrible case,"
Friedman said. He said anyone trying to connect the congressmen to
the fact that the case fell apart would be "attempting to put a bow
on a pig."
The Texas S&L in which Hurwitz held a controlling interest of about
25% collapsed in 1988 as part of a financial fiasco that took
federal regulators years to untangle. The investigation of Hurwitz
began in 1995 and continued for about seven years before it was
dropped.
After DeLay's 1999 letter attacking the investigation failed to
dissuade the FDIC, Doolittle weighed in with a statement on the
House floor in 2001, saying the FDIC investigators were "clearly out
of control" and should have "dropped the case, period."
Pombo, in his own 2001 floor statement, suggested that the banking
regulators were using strong-arm methods against Hurwitz, or what
Pombo called "tools equivalent to the Cosa Nostra — a mafia tactic."
Doolittle, 55, an eight-term congressman, represents California's
fourth district, the Sierra Foothills region and the eastern suburbs
of Sacramento. He has a consistent conservative voting record,
opposing gun control and abortion and siding with property rights,
timber and utility interests against environmental groups.
By 2000, he had grown close to DeLay, working with the Republican
leader to oppose proposed changes to campaign finance law and
restrictions on fundraising. When DeLay was indicted in Texas last
year, Doolittle distributed about 100 lapel pins in the shape of
tiny hammers as a tribute to the man nicknamed the "Hammer" for his
ability to pound congressional Republicans into line.
Doolittle also was closely aligned with Abramoff. Records show that
Abramoff gave Doolittle tens of thousands of dollars in
contributions and employed the congressman's wife for other
fundraising activities.
Pombo, the son of cattle ranchers, plays up his cowboy roots, often
appearing in his district wearing a ranch-hand's hat and
ostrich-skin boots. Forty-five years old, a seven-term congressman,
he represents the fertile farming expanse of the Central Valley.
He had impressed DeLay with his fundraising prowess, garnering about
$1 million for his 2002 House reelection, which he won easily.
And not long after his role in helping Hurwitz, the GOP House caucus
— led by DeLay — helped get Pombo elected chairman of the Resources
Committee over several more senior Republicans.
Hurwitz has been a prolific campaign donor since the early 1990s.
He has contributed personally and with funds provided by his
Houston-based flagship company, Maxxam Inc., through subsidiaries
such as Kaiser Aluminum, and through a company political action
committee, Maxxam Inc. Federal PAC.
In the last three federal elections cycles, those entities have
given about $443,000 in political contributions — most of it to
conservative politicians, including President Bush, for whom Hurwitz
pledged to raise $100,000 in the 2000 campaign and also helped
during that year's vote tally deadlock in Florida.
Hurwitz has been generous with DeLay too.
Starting in the 2000 election cycle, the businessman and his
committees have distributed at least $30,000 to DeLay and his
federal causes, including $5,000 for his current legal defense fund
in the Texas money-laundering case.
Hurwitz also contributed $1,000 to Pombo for his 1996 reelection
campaign. And through the Maxxam PAC, Hurwitz gave Doolittle $5,000
for his 2002 reelection campaign and then followed up with $2,000
more for his 2004 race.
When DeLay went to bat for Hurwitz, he was particularly critical of
reported internal government discussions that would have pressed
Hurwitz to settle his obligations for the collapsed S&L by selling
the government vast forest areas and redwood trees in Northern
California near Scotia. The forest land was owned by Hurwitz's
Pacific Lumber company
"I am extremely concerned," DeLay told then-FDIC Chairwoman Donna A.
Tanoue, "about the apparent abuse of governmental power and what
appears to be misconduct in the form of harassment and deceit on the
part of government employees."
Tanoue responded by telling DeLay "we can assure you that the FDIC
lawsuit against Mr. Hurwitz was not filed for political reasons."
The investigation pressed on, and a year later the House Resources
Committee, which had jurisdiction because of the forest area, set up
a special Headwaters Forest Task Force and launched its own review.
Doolittle was appointed task force chairman, and Pombo one of its
members.
Duane Gibson, the committee's general counsel who later went to work
for Abramoff, was named the chief investigator. They immediately
subpoenaed internal records from the FDIC and the Office of Thrift
Supervision, which also had responsibilities for S&Ls.
Both agencies were wary and, although complying with the subpoenas,
repeatedly urged the lawmakers not to make the documents public or
share them with Hurwitz.
William F. Kroener III, general counsel at the FDIC, warned the
committee that Hurwitz and his lawyers were not entitled to see many
of the documents.
Kroener told the panel that, should the material end up in their
hands, it "could significantly injure our ability to litigate this
matter and reduce damages otherwise recoverable to reimburse
taxpayers."
Carolyn J. Buck, chief counsel at the Office of Thrift Supervision,
also wrote the committee emphasizing that "we note our objection to
any publication or release of these documents."
The task force was set up for six months, and disbanded in December
2000. It held one hearing, and called FDIC and Office of Thrift
Supervision officials as witnesses.
At that hearing, Tanoue defended the FDIC's investigation.
"I have listened to and considered the arguments made directly to me
by representatives of Mr. Hurwitz," she testified. "However, I have
found no compelling reason to take the extraordinary step of …
taking this case out of the hands of the judicial system."
Kroener testified that the FDIC was not interested in a
trees-for-debt swap, saying his agency "has expressed its preference
for a cash settlement."
Six months later, in June 2001, Pombo submitted a portion of the
subpoenaed documents that filled 14 pages in the Congressional
Record.
Six months after that, in December 2001, Doolittle did the same,
even though he was no longer a member of the committee. And his
submission was much larger — filling 111 pages.
The documents were so voluminous that Doolittle and Pombo had to pay
a total of about $20,000 from their congressional accounts to cover
the extra printing costs.
The FDIC was outraged over the documents' release.
Its chief spokesman, Phil Battey, said in a statement to the
Sacramento Bee at the time that the publication of the materials was
a "subordination … and a seamy abuse of the legislative process."
Not long afterward, the FDIC dismissed its case, and the Office of
Thrift Supervision settled with Hurwitz for about $200,000 in
administrative costs.
Times staff writer Ted Rohrlich contributed to this report.
Copyright 2006 Los Angeles Times
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