Top Cal State Official Denies Wrongdoing in Failure of S&L; : Banking: Lawsuit seeks $100 million in damages against the ex-Maxxam official and others.
California State University Chancellor Barry Munitz said Wednesday that he faces no personal financial risk in a lawsuit filed this week by federal regulators, which seeks more than $100 million in damages in connection with the failure of a Texas savings and loan.
The suit, by the federal Office of Thrift Supervision, accuses Munitz, Maxxam Corp., Maxxam Chairman Charles Hurwitz and others of contributing to the failure of a Texas savings and loan in the late 1980s, which cost a federal insurance fund more than $1.6 billion.
Before he became Cal State chancellor in 1991, Munitz served as vice chairman of Maxxam, which owned a big stake in the thrift, Houston-based United Savings Assn. of Texas. Munitz also had served as a director of the thrift and was chairman and chief executive of its holding company, United Financial Group.
In an interview, Munitz denied any wrongdoing and said he faces no personal financial liability because Maxxam agreed to indemnify him for any legal claims. Walter B. Stuart, a Houston lawyer representing Munitz, said he would try to get the civil charges against Munitz dropped, adding that Munitz “categorically denies any negligence or wrongdoing.”
Munitz contended that despite years of investigation, thrift regulators failed to turn up evidence of self-dealing by executives.
United Savings, which was taken over by regulators and sold in 1988, was one of many thrifts in Texas and nationwide that failed in the 1980s. The OTS suit charges that Munitz, Hurwitz and four others engaged in “unsafe and unsound” banking practices, including improper real estate lending, and paying tens of thousands of dollars in allegedly improper bonuses to Munitz and others.
Also at the heart of the suit are allegations that the thrift engaged in risky, speculative investments by buying high-risk junk bonds from Drexel Burnham Lambert. Drexel, now defunct, had earlier helped Hurwitz acquire his stake in the thrift, and Drexel held a smaller investment itself.
The suit, which would be tried before an administrative law judge in Washington, also seeks to ban Munitz and the others from working in the banking industry.
Munitz said he and other defendants had signed temporary waivers of a statute of limitations so that the OTS could continue to investigate the case. But he said the charges were filed when the defendants recently decided to force the OTS’ hand and refused to sign further waivers. The OTS then had to file a case by Dec. 30 or drop the investigation.
“We decided to say: ‘If you think there’s something there put it on the table,’ ” Munitz said. The suit “will not in any way disrupt” his work as chancellor, he added.
The Federal Deposit Insurance Corp. earlier had filed a suit in federal court in Texas solely against Hurwitz in connection with the failure of the thrift. But legal experts said the broader OTS suit had a better chance of succeeding because it is only governed by federal law. The FDIC suit, even though filed in a federal court, is limited by Texas state laws, including a shorter statute of limitations.
