Cal State Chief Straddles Business World, Academia : Chancellor: Munitz well fit for the job, trustees say. But others note his ties to logging and a failed S&L;.

A 20-minute drive across this humid, urban sprawl separates the two sides of Barry Munitz’s professional life.

On the East Side of town, surrounded by old working-class neighborhoods is the University of Houston’s main campus where Munitz, clearly a fast-tracker, became chancellor in 1977 at age 35. It’s a down-to-earth state school mainly for commuter students attracted by its low tuition and improving reputation in business, engineering, sciences and the arts.

On Houston’s wealthier West Side, near the enormous Galleria shopping mall and luxury condominiums, is Munitz’s current office, a spacious spot on the 27th floor of a sleek high-rise. There, as vice chairman of Maxxam Inc. and in related jobs in the financial empire of Charles E. Hurwitz since 1982, Munitz was connected to such big deals as Maxxam’s acquisitions of Kaiser Aluminum and Pacific Lumber Co.

Those two sides of Munitz appealed to the businessmen who dominate the California State University’s Board of Trustees and pushed for his recent selection as the next chancellor of the 20-campus, 369,000-student system. The choice pleased many in the university community who see the educator-businessman as the perfect leader for the current budget crisis. Munitz can talk literature with faculty, tax law with legislators and donations with millionaires.

Yet the choice upset others critical of Pacific Lumber’s redwood logging policies and skeptical of Munitz because of his position on the board of a Texas savings and loan that failed in 1988. That collapse cost taxpayers $1.4 billion, federal officials say. A year later, Munitz received a $98,000 buyout of his multi-year executive contract with the holding company that had owned the savings and loan.

A Federal Deposit Insurance Corp. lawsuit filed in January alleges that financier Michael Milken, now in prison for securities violations, influenced the thrift to buy more than $1.4 billion in high-risk junk bonds underwritten by his firm. “In exchange,” the suit states, Milken raised about $1.8 billion for Hurwitz’s other business activities, including the 1986 Pacific Lumber takeover. Neither Hurwitz nor Munitz are defendants in that civil suit and other federal complaints suggest that Milken may have duped Maxxam on deals.

Expects Scrutiny

Munitz, 49, said he expects his corporate career to be scrutinized before he takes office Aug. 1 as head of the second-largest state university system in the nation. But he and his supporters insist he has no unethical business practices to hide and that he quickly will win over most skeptics.

“I think there will be some concern for awhile, some conversation. I fully expect that. And my belief is that I will talk to anybody, at any time about these issues,” he said in his Maxxam office, decorated with his family’s collection of antique chess sets and rare books about the game. “All I ask is a fair hearing and I think in a reasonable amount of time people will know who I am and how I think and what my values are.”

As for the fact some environmentalists are urging Cal State to reconsider his appointment, Munitz remarked: “It’s ‘Take a Shot at Maxxam Through Barry Day.’ ” Munitz, with a bushy mustache, tennis-court tan and soft Texas drawl, spoke easily and confidently during a three-hour interview.

He has reason to be confident, said J. Gary Shansby, a San Francisco businessman and the Cal State trustee who led the chancellor search. The trustees used a private investigator to look into candidates’ backgrounds and special attention was paid to Securities and Exchange Commission filings and Maxxam audits, Shansby said.

“I really feel comfortable about Barry and stand behind him,” Shansby said, adding, however, that controversy over Munitz’s Maxxam connection probably will not end “until he proves himself” as chancellor.

According to supporters, Munitz is smart, dedicated and knows how to manage universities well.

He helped extract the University of Houston from an investments scandal, which was not of his making, that led to the successful prosecution of a school official for misuse of endowment funds. In addition, Munitz helped change the campus image from that of a sports-obsessed, insular school to that of a 33,000-student university with nationally recognized programs, for example, in drama (playwright Edward Albee teaches there) and physics (superconductivity expert C. W. Paul Chu has his physics lab there).

“It was during Barry’s tenure that the community was unable to ignore the excellence of parts of the university. Of course, it’s uneven, but at least Barry set things in motion,” said Cynthia Macdonald, a poet who teaches at the University of Houston and works with Munitz to raise private funds for the writing program there.

Donald Lutz, a political science professor, was faculty Senate president when the investment scandal broke just after Munitz took over. Munitz “was open, calm and rational. He didn’t whitewash it. He helped uncover it and helped clean it up,” Lutz said, adding that “Barry Munitz is a manager who is extremely good at very large institutions.”

Yet that management emphasis at the University of Houston also earned Munitz critics who wanted a more scholarly leader to pay more attention to their work. Larry Judd, a speech communication professor who also was a faculty president during that era, said he “doesn’t remember that time fondly. My perception was that (Munitz) wasn’t very responsive to sharing governance with the faculty.”

Despite a doctorate in comparative literature from Princeton University, Munitz says he never presented himself as a president-scholar and he denies any inattention to faculty.

“Obviously there are some faculty who can look at my background and say, ‘Well this is a problem. This is not a person who has spent 20 years as a distinguished member of the faculty, of any faculty.’ That’s clearly true,” Munitz said. He taught at UC Berkeley for two years before becoming an assistant to former UC President Clark Kerr on a commission studying higher education and then moving to a vice presidency at the University of Illinois system.

“But what I’ve done for my whole professional life is learn how to find and keep faculty, how to take care of them, how to raise money for them, how to improve their working conditions,” Munitz said. “Were I a faculty member, I’d care a lot more about that than whether I’ve got the same distinguished publishing record as they do.”

During his five years as Houston chancellor, he tired of being part of a four-campus system and having to report to a system chief, some of his allies say. Meanwhile, through Houston civic and social circles, Munitz became friends with Hurwitz, then on the brink of a reputation as one of the country’s most prominent corporate take-over artists. In 1982, Munitz was a candidate for the Cal State job he just won, but withdrew to take the job with Hurwitz. (W. Ann Reynolds became chancellor in 1982 and remained so until a controversy over salary and other issues forced her resignation last year.)

“I felt very, very strongly that to be a truly effective leader going into the 21st Century, you should know from firsthand experience how both the private and public sectors worked,” Munitz said. He was young enough to take a detour, always intending, he said, to return to academia.

Rancho Mirage Hotel

Munitz became president and chief operating officer of Federated Development Co., a Hurwitz trust that, among other projects, successfully fought local officials to build a luxury hotel and housing in Rancho Mirage. He also became vice chairman at Maxxam, another Hurwitz-controlled company, which grew enormously with the Kaiser Aluminum and Pacific Lumber takeovers. Maxxam’s 1990 annual report shows $2.9 billion in revenues and $162 million in net income.

According to Munitz and other sources, his positions involved government relations, personnel matters, corporate contributions and overseeing the Rancho Mirage project. Hurwitz handled all finances and deal-making.

Rancho Mirage Mayor Jeffrey Bleaman remains bitter about the hardball lawsuits Federated brought against the City Council and he is caustic about Hurwitz. Yet Bleaman recently recommended Munitz to the Cal State trustees. He credits Munitz with forging the compromise that allowed the hotel construction while setting aside about 1,000 acres as a bighorn sheep preserve.

“I think he is a good guy,” Bleaman said. “I felt he was a gentleman who always tried to find a conciliatory solution.”

But detractors say Munitz is a glib man who skillfully played the “good cop” role to Hurwitz’s “bad cop” for an annual salary of about $400,000. The anti-Munitz theory contends that he is leaving Maxxam now that the ‘80s boom has collapsed and because even a financially strapped university that will pay its chancellor $175,000 looks more attractive.

“The Maxxam company has been there just for fattening Mr. Hurwitz’s pocketbook and, I’m sure, others’ on the payroll. Their whole history and projects outraged people from Rancho Mirage to the Pacific Lumber takeover,” said Robert Sutherland, founder of Environmental Protection Information Center, a California group that has opposed Maxxam on lumber issues.

Of Munitz, he said: “I can’t see someone who has been in that general train of ethics as the person we want instilling values in a California educational system. It’s mind-boggling.”

Assemblyman Tom Hayden, (D-Santa Monica), chairman of the Assembly Higher Education committee who also fought Maxxam on logging practices, originally questioned what he called “a symbol of corporate raiding” heading the university. But After talking with Munitz and others, including the mayor of Rancho Mirage, Hayden said his worst fears were allayed. Now he is urging Munitz to get immediately involved in Sacramento budget debates, a step trustees don’t want Munitz to take until August.

“I’m not so much focused on the past as the present,” Hayden said. “If he is not to press a vision of reform and renewal and the university gets bloodied in the budget process, the question is whether he will use his corporate experience to simply downsize the institution.”

Many leaders in the environmental movement say they never heard of Munitz before his Cal State selection. Munitz contends he had no direct say in Pacific Lumber policies, including its controversial moves to increase redwood logging sharply in Northern California, with some clear-cutting, after Maxxam’s buyout. Critics say the logging increase was to pay off the acquisition debt; Maxxam officials, while acknowledging the need to pay debt, contend that a new inventory found there were more trees than thought that could be cut down without harming the environment.

An Environmentalist

Friends portray Munitz as a closet environmentalist inside Maxxam.

“Barry was always the voice of moderation in the company. He tried very hard to persuade Hurwitz not to do some of the things he did,” said a prominent Hollywood movie industry figure who has been close to Munitz and asked not to be identified.

Munitz says his role was to warn Maxxam officials not to forget that “there are some legitimate environmental issues.” He said he was not involved in the financing of the Pacific Lumber acquisition, partly with bonds underwritten by Milken at Drexel Burnham Lambert Inc. But Munitz added: “I was a Maxxam board member and voted to approve the deal.”

That deal was investigated by the SEC and a congressional subcommittee for possible stock manipulation, but no charges were filed. The buyout is being challenged by some former stockholders.

Hurwitz, Maxxam chairman, did not answer a request for an interview for this story.

However, John M. Seidl, president of Maxxam, described Pacific Lumber as “a good steward of the land” and a socially responsible company that has been the victim of politics and inaccurate publicity. Such problems, Seidl said in Houston, “are going to complicate Barry’s life, no question. But clearly (Cal State) felt his background was worth the risk.”

Seidl said one of Munitz’s most important Maxxam roles was to smooth relationships with newly acquired companies: “He’s really good with people, making them comfortable. . . . Where there’s been a takeover, a change in peoples’ lives, there’s nervousness. He’s really good at calming the nervousness and getting people to work together.”

There was a lot of nervousness at the United Financial Group Inc., a holding company of which Hurwitz companies owned 23% and Drexel at one point owned 9%. In turn, UFG wholly owned United Savings Assn. of Texas, a thrift whose investments in Texas real estate and junk bonds soured. The thrift was taken over by federal authorities in December, 1988, and sold, costing taxpayers $1.4 billion.

Munitz was on the boards of directors of both UFG and the thrift from 1982-88 and became UFG chairman and chief executive officer in November, 1988, when the takeover of the thrift was in the works. He has no ties to the reconstituted thrift. Six months before the government takeover, Munitz signed a 3 1/2-year contract with UFG; in late 1989, Munitz received a $98,000 buyout of that contract, which he claimed was worth $885,000. Munitz remains UFG chairman without a contract and the firm has been studying reorganization under bankruptcy law protection.

The government at first wanted $534 million from the holding company to help cover the thrift’s losses, a claim UFG says was unjustified. Talks about a $10.25-million settlement stalled and, FDIC spokesman David Barr said, the whole matter “is still under consideration.” Barr said there were no allegations of fraud against UFG officials.

Munitz insists he was not involved in the thrift’s hands-on management before the takeover and said he saw no evidence of the strong Milken influence alleged in the FDIC lawsuit. Furthermore, in what Munitz says is a sign of government confidence, another federal agency is selling assets of other thrifts to Maxxam.

“I’m not trying to avoid responsibility but the point is that nothing bad was going on,” Munitz said. “Every financial institution (in Texas) had a problem. To me, what matters about United was that there was no self-dealing, no fraud.”

Munitz’s reputation in Houston business and social circles remains high. He and his wife, Anne, a former associate director of the Houston Grand Opera, are active in many charitable and cultural organizations. Their duplex condominium near the Maxxam office is the scene of parties that mix musicians, industrialists and academics.

Munitz says he could stay at Maxxam as long as he wanted but that he was geting “itchy” to make more of a direct impact on other people’s lives. He is planning to end his ties to the corporation, university officials say. His new challenge is to guide Cal State through large state cuts while trying to improve education.

“Behind every crisis, there’s an opportunity,” Munitz said. “It sounds like a cliche but it’s really true. When you’re in the hole this much, both as a system and as a state, it’s impossible to argue that just with a little minor tinkering, everything will be fine.

“Everybody realizes we had better sit down and ask about priorities and shifting of resources. It can be a very painful time. It can be an exciting time.”

Munitz’s Goals

Munitz said he wants to strengthen Cal State’s identity as a university that stresses teaching and undergraduate learning, as opposed to UC’s emphasis on research.

“Higher education in this country has a single standard for accruing prestige--advanced graduate education and research--and that hurts this country,” he said.

It is too early to propose specific plans, he said. And he realizes that academia changes more slowly than business, where lines of authority are clear and strong.

“One of the real dangers when I starting working here,” he said, half joking, of his Maxxam post, “was that you had to be very careful about what you said to people when they asked your advice because they actually tried to follow it. In a university, yes, you do have some sense of authority. But you know every decision is going to have 11 committees and 13 reviews. It doesn’t mean you compromise what you say. It’s just a very different world.”