Ancient Trees Could Be Saved In New Debt-for-Nature Swap
WHEN billionaire financier Charles Hurwitz turned his legendary acquisitive energies toward northern California's magnificent ``redwood empire,'' he found what looked to him like easy prey: the world's largest unprotected ancient redwood forest, privately owned by Pacific Lumber (PL), a 117-year-old company still run as a genial extended-family business.
Though hardly an environmental or philanthropic operation, PL had retained an old-fashioned, almost paternalistic attitude toward both the woods and its workers, cutting no more than the forest grew back, funding a generous employee pension fund, and even painting workers' homes in Scotia, the immaculate company-run community it had constructed around its mill. A quaint throwback to a less rapacious era, PL had balanced healthy profits with a concern for the company's and community's long-term viability.
Not so Mr. Hurwitz. The Houston-based financier had quietly amassed a larger fortune than his fellow Texan, the more flamboyant T. Boone Pickens. During the 1980s he gained control of corporations worth more than $12 billion (including Kaiser Aluminum) through a scorched-earth campaign of junk-bond deals that left in their wake a host of bitter shareholders and suspicious government regulators. The 1987 collapse of Hurwitz-controlled United Savings Association of Texas, the fifth-most-expensive sell-off in S&L history, cost United States taxpayers at least $1.6 billion.
Hurwitz's $750 million takeover of PL in 1985 was financed by a complex series of maneuvers involving, among others, convicted junk-bond king Michael Milken. So shaky were the deal's legal foundations that the New York Stock Exchange reported ``significant evidence of insider trading.'' Now a Securities and Exchange Commission investigation is closing in on Hurwitz and his holding company, Maxxam, after six years of pressure from Congress and environmental groups angered at his treatment of the ancient redwoods.
Like a conquistador, Hurwitz cut a wide swath through his new domain, tripling the harvest of redwood and fir and plundering the employee pension fund in order to cover the massive debts he incurred in buying PL. Since 1988, the company has logged more than 40,000 acres of residual old growth and has been prevented from taking the rest only by a litany of lawsuits from environmental groups.
When Hurwitz first took control of PL, almost no one outside the company knew what magnificent trees grew in the hills southeast of Eureka. But some were curious. Using published surveys of the region, four young forest activists entered the property by cover of night and found a still-untouched 3,000-acre grove they named Headwaters and several smaller ``islands'' containing trees as old as 2,000 years and as large as 12 feet in diameter. They also found a variety of rare and endangered species, including the marbled murrelet, Northern spotted owl, Olympic salamander, and tailed frog.
To publicize their discovery, local activists launched a direct-action campaign, adopting the high-spirited monkey-wrench tactics that have become a trademark of Earth First!, a grass-roots environmental group.
In 1987, Greg King and Jane Cope packed planks, ropes, and sleeping gear into the remote region at night, quietly built platforms, and hoisted themselves into the upper reaches of the forest. When PL security guards arrived in the morning, they found Cope and King cozily ensconced 150 feet up in adjoining giants, a banner proclaiming ``Save the Old Growth!'' stretched between them and a cordless phone in hand for interviews with local radio stations. Furious at their media-savvy antics, PL stationed 24-hour guards beneath the couple and kept a generator roaring all night to floodlight their protest.
Meanwhile, the Environmental Protection and Information Center (EPIC), a tiny shoestring environmental group based in nearby Garberville, began an eight-year legal battle to curb the cutting and establish permanent protection for the Headwaters forest. Operating with volunteers, pro bono attorneys, and a budget of $100,000 a year, they took on the legal legions of Charles Hurwitz and won six major lawsuits.
Since the Headwaters forest is a private holding, rather than public land, it has been a new kind of challenge for environmentalists to defend, for it has required that they overcome deeply held beliefs about the inviolability of private property rights. But in a recent decision involving the Headwaters' Owl Creek grove, EPIC attorneys were able to persuade a court to enforce the Endangered Species Act on PL's private lands, a judgment now being appealed.
EPIC's efforts, with growing support from mainstream environmental groups, have substantially slowed the harvest and turned the heat on Hurwitz's suspect financial dealings. Spearheaded by Rep. Dan Hamburg (D) of California, a freshman congressman who represents the Headwaters area, a bill (HR 2866) passed the House by a hefty margin that would acquire not only the Headwaters grove but its entire surrounding ecosystem of some 44,000 acres. Mindful of resistance to new spending, Representative Hamburg set a $200 million cap on acquisition costs and emphasized the possibility of a trade for ``excess'' federal lands. Despite strong support in the Senate and from the White House, the bill died in the logjam of legislation abandoned when Congress recessed for the November elections.
But the most intriguing possibility, one being treated with increasing seriousness, is a ``debt-for-nature-swap'' similar to those that have saved third-world forests in return for first-world forgiveness of national debts. In this case, the federal government's $548 million pending claim against Hurwitz and his United Financial Group for losses arising from the failure of his S&L would be forgiven in return for his forfeiture of the Headwaters forest. If completed, it would be the first debt-for-nature swap in this country. Many in Congress would welcome a way to acquire the Headwaters without dipping into the US Treasury. Hurwitz, however, dismisses the idea, offering only to sell the 3,000-acre old-growth core of the forest and a 1,500-acre buffer zone for ``fair market value,'' which he estimates at $500 million, a figure others dispute as too high given restrictions on logging the parcel.
When he first strode into Humboldt County fresh from other fiscal conquests, Hurwitz seemed invincible. But he greatly underestimated the grit, persistence, and ingenuity of local citizens with no clout other than their own convictions and few resources other than a passion for the trees. This time, just maybe, he will walk away released from a costly debt and the trees will remain standing to inspire future generations.
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