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Headwaters Heats Up
TAXPAYER ASSETS PROJECT - NATURAL RESOURCES POLICY ADVISORY
(please distribute freely)
September 10, 1996
The battle to save the largest privately owned stand of old
growth redwoods has recently heated up, not coincidently it seems, just
before the presidential election. The Clinton Administration has been
looking at a number of ways to bring the Headwaters Forest into federal
Unfortunately, Clinton's point man on this issue, John Garamendi,
has shown no interest in long-term worker and ecosystem protection plans
nor in pursuing the possibility of a debt-for-nature swap for the
Headwaters. The present owner of the Headwaters Forest, corporate raider
Charles Hurwitz, has two suits pending at the Federal Deposit Insurance
Corporation (FDIC) and the Office of Thrift Supervision (OTS) regarding a
failed Savings and Loan which Hurwitz controled. The failure of United
Savings Association of Texas (USAT) cost taxpayers $1.6 billion dollars.
The savings and loan launched many of Hurwitz's takeover ventures
including Pacific Lumber, the previous owner of the Headwaters Forest.
Many community and forest activists working on this issue would like to
see the government take Headwaters as payment for the S&L debt.
In their haste to get a quick environmental victory (for both
Clinton before the election and Garamendi who will likely run for
Governor in California), the Administration has overlooked important
criteria for a plan that would truely protect Headwaters Forest. These
issues are summarized in the following letters to President Clinton and
Deputy Secretary of Interior John Garamendi from Ralph Nader.
If you would like some background on the Headwaters issue, check out:
* * * * * * * * * *
William Jefferson Clinton September 9, 1996
President of the United States
1600 Pennsylvania Ave.
Washington, DC 20500
Thank you for your response to my letter regarding the Headwaters Forest
in California. I would like to reiterate my concerns about certain
government negotiations with Mr. Hurwitz and, in response to some
misconceptions expressed by Deputy Secretary Garamendi, suggest several
ways to safeguard the Headwaters Forest.
Publicly owned assets like national forests or Treasure Island are
beneficial to citizens for a variety of reasons. Whether it is a new
lifesaving cancer drug developed at the National Institutes of Health
from a plant found on public lands or recreational opportunities
available in our national forests, these public assets improve the
quality of life for local residents and visitors, offer communities
economic opportunity and diversity, and greatly benefit our society.
An important element in the equitable acquisition of the Headwaters
Forest is a full review of the financial proceedings against Mr. Hurwitz
at the FDIC, OTS and any other relevant agencies. It was this point which
Mr. Garamendi had the most difficulty understanding. There are many
recommendations and inquiries your Administration can make regarding the
proceeding at the FDIC and the possibility of a debt for nature exchange.
The concept of two agencies working together cooperatively to solve a
problem is certainly not unique (see attached letter to Deputy Secretary
John Garamendi), and such an approach would clearly benefit the public
interest in this case. Such inquiries and recommendations should be made
simultaneously with any other plans for acquisition of the Headwaters
The economic future of the region's workers must also be taken into
account when considering any action on the Headwaters Forest. Like so
many changing economies in the West, the opportunity to diversify and
strengthen local economies in Northern California while protecting land,
resources and recreational opportunities has never been greater. With the
help of the Department of Labor, an economic diversification strategy
should accompany plans to acquire the Headwaters Forest.
Along with economic diversification, a long term strategy for the
protection of the entire redwoods ecosystem-- one of our country's most
magnificent and most endangered public assets is necessary. Saving a
portion of the Headwaters Forest will certainly serve some aesthetic
value, but your actions should also address the broader ecological
requirements of keeping this asset intact for future generations.
And perhaps most importantly, any agreement entered into with Mr.
Hurwitz, whether to obtain or swap publicly owned assets, must have full
public disclosure regarding appraisals and other environmental
ramifications, and the agreement should be subject to a public comment
period. There are time pressures presently in place, but surely Mr.
Hurwitz would not damage the redwoods and diminish the value of the
property during a public comment period. Mr. Hurwitz may be the "Houdini
of High Finance" as he has been called, but he has shown himself
vulnerable to environmental regulation, conservation lawsuits, and the
volatility of the timber market, all reasons which make Mr. Hurwitz a
willing seller. Your Administration should use all the tools available to
make sure that taxpayers' interests are served in the acquisition of
Thank you for you attention to this matter.
----------- ATTACHED LETTER TO DEPUTY SEC. JOHN GARAMENDI -----------
Mr. John Garamendi
Department of the Interior
Having had a good things to say about your past work as Insurance
Commissioner of California, I regret having to express my dismay at your
behavior yesterday following receipt of President Clinton's letter
responding to my communication regarding the Headwaters Forest Area.
It is as if you planned the whole sequence. You called Monday
afternoon and I returned your call shortly thereafter. You kept repeating
that a "debt for nature" swap involving the Federal Deposit Insurance
Corporation (FDIC) could not occur at the _demand_ or _order_ of the Clinton
Administration because it would be "inappropriate, illegal and wrong."
You stated this was the case because the FDIC is an independent agency.
Again and again I responded that I was not urging the Department of
Interior, in its negotiations with Charles Hurwitz, et. al. over the
stand of redwoods, to order or demand that the FDIC settle with Hurwitz,
et. al. so as to include a debt for nature swap. No matter how many ways
I attempted to have you drop this "straw man," you kept repeating the phrase.
For example, I indicated that Interior could consult and cooperate with
FDIC as the FDIC was pursuing its own litigation and negotiations with
Hurwitz, et. al. regarding the failed savings and loan which cost
taxpayers over a billion dollars. Then I cited the letter which the
acting chairman of the FDIC sent to Congressman Ronald Dellums (attached)
on January 12, 1994 wherein the FDIC _itself_ stated:
"Although there is no direct relationship between the USAT failure and
the redwood forest currently owned by the Pacific Lumber Company, we are
mindful of the possibility that, if Pacific Lumber's parent companies can
be held liable for USAT losses, issues involving the redwood forests
might be brought into play. You may be assured that we are following this
My words were going into John Garamendi's one ear and out the other
because you had another agenda-- namely a telephone press conference from
Chicago with California reporters to once again deliver the "straw man."
Unfortunately, these reporters did not call me to hear my account of our
conversation-- that neither in my letter nor in my exchange with you did
I suggest, as you claim, that the president "direct negotiations of a
settlement" of the suits pending against Hurwitz.
What I asked was that the President ask the FDIC to consider seeking the
Headwaters from Hurwitz if the litigation is to be settled. To claim that
such a request by the President would be "wrong and illegal" is just silly.
Your brief time in Washington may explain your lack of familiarity with
how the government works in such areas. Yes, the independent agencies are
insulated from direct Presidential control in that their heads typically
can be removed only for "just cause" and not on the presidents whim, but
historically the insulation was thought necessary because the independent
agencies served dual roles as both law enforcement and adjudicatory
entities. To be sure, for that reason, it might be inappropriate (but
hardly illegal) for President Clinton to insist that the FDIC go after
the Headwaters forest in its action against Hurwitz.
But you confuse adjudicatory "orders" with guidance. Nothing in the
Constitution or any other law suggests that federal agencies must remain
hermetically sealed and avoid contact with one another or the President.
Since the creation of the independents, every president has guided their
actions through OMB
Letter from Ralph Nader
to Deputy Secretary John Garamendi
directives, guidance documents and other instructions. Moreover, every
day in Washington, the so-called "independent" agencies like the FDIC
work together on problems of mutual interest. For example, the
Federal Trade Commission (FTC) (another independent agency) coordinates
all of its enforcement cases against food and drug companies that engage
in false advertising with the Food and Drug Administration (FDA) (an
"executive branch" agency). No one would be foolish enough to suggest
that cooperation of that kind is wrong.
My proposal to the President took the same tack. He should ask-- not
order-- all federal agencies with potential claims against Hurwitz to
consider the possibility of seeking the Headwaters property in lieu of
cash. The decision as to the remedy to seek would remain precisely where
the law puts it-- with the FDIC. The notion that the President is
powerless to advise the independent agencies of his views would so
emasculate the presidency that I can't imagine that President Clinton
would be happy with your position.
John, clearly you work better when you are essentially your own boss
elected by the populace, as was the case with the Insurance Commissioner's
position after Proposition 103. A transparent, coordinated maneuver that
you were asked to conduct on Monday is not becoming of you, even though
you slipped one past what must have been several astonished reporters
that you networked so suddenly. I am sending them this letter so that
they can be informed about what happened on Monday.
P.O. Box 19312
Washington, D.C. 20036
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