Chancellor of Cal State Investigated

Federal savings and loan regulators are investigating whether California State University Chancellor Barry Munitz “may have committed criminal violations” by giving false statements to investigators looking into the $1.6-billion failure of a Texas savings bank, court documents show.

The federal Office of Thrift Supervision filed the papers in U.S. District Court in Washington in June, seeking to force former lawyers for Munitz to turn over their notes of a September 1992 meeting in which Munitz was interviewed by the Federal Deposit Insurance Corp.

The thrift office contends that Munitz’s statements to FDIC lawyers at the meeting were inconsistent with sworn testimony he gave more than two years later to investigators.

Before he was named chancellor in 1991, Munitz had been a director of the Houston-based thrift, United Savings Assn. of Texas, and vice chairman of its parent company. As reported, the parent company, Maxxam Corp., its chairman, Charles Hurwitz, and Munitz were named in a civil suit filed in December by the thrift office.

The suit accuses them of self-dealing and causing the thrift’s failure in 1988. It seeks recovery of money a federal insurance fund had to pay.

Munitz has denied any wrongdoing and said he faces no personal financial liability because Maxxam has agreed to indemnify him. In an interview Thursday, Munitz said he told the truth under oath and contended that the threat of a criminal investigation was intended to frighten him and his lawyers into turning over documents the government isn’t entitled to.

He also contended that any inconsistencies in his account occurred because, in the 1992 interview, he was asked to speculate informally about why Hurwitz might have taken certain steps. In the later testimony, he said, he was asked to state only what he knew had happened.

In June, the thrift office filed a subpoena enforcement action before U.S. District Judge Thomas Penfield Jackson, alleging that lawyers from the Texas law firm of Vinson & Elkins who represented Munitz failed to comply with a subpoena for the notes issued last September. The lawyers contend that the notes are protected by attorney-client privilege.

The issue that led to the subpoenas stems from the investigators’ inquiry into United Savings’ heavy purchases of high-risk junk bonds from the defunct investment house Drexel Burnham Lambert.

The thrift office has attempted to determine to what extent Hurwitz’s close business relations with Drexel and its former junk bond chief, Michael Milken, created a conflict of interest that led to financial decisions harmful to the thrift. Drexel held a minority stake in United Savings.

Notes by FDIC lawyers who debriefed Munitz during the September 1992 meeting indicate that Munitz said Hurwitz’s relationship with Milken was a big factor. No court reporter, however, took down Munitz’s statements at the meeting, and the thrift office subpoenaed the notes of Munitz’s lawyers, who were also present, to see if they corroborate the FDIC lawyers’ account.

Later, in sworn testimony before a court reporter in 1995, Munitz denied to investigators that he had any knowledge that United Savings’ purchase of junk bonds was influenced by Hurwitz’s business ties to Drexel.