Maxxam Machinations Demand Local Solutions

My Word by Michael Twombly
Times Standard - February 8, 2005

The Los Angeles Times reported last week on a closed-door meeting between Charles Hurwitz, CEO of Maxxam (parent of Pacific Lumber) and Governor Arnold Schwarzenegger. They conferred on the likelihood of Pacific Lumber's impending bankruptcy. The meeting included Undersecretary of CAL-EPA James Branham, formerly of PL and “broker of the Headwaters deal.� The Times editorialized “Californians may get to see up close how well or ill the revolving door of public service/private industry serves the public's purpose.�

Hurwitz, through his myriads of shell companies, took many hundreds of millions of dollars from this once proud, sustainable and responsible company by mortgaging PL's vast timber assets. He intentionally burdened PL and its spin offs with so much debt that they cannot legally cut enough timber to pay off the approximately $100 million in annual interest on the debt while still covering operating costs, Rather than make up for this shortfall from the hundreds of millions he has taken from PL, Hurwitz has found it eminently more profitable and expedient to threaten PL's bankruptcy and the termination of hundreds of its loyal employees.Â

His strategy is win/win; if the North Coast Water Quality Control Board holds to the protections of the Headwater's agreement, PL goes bankrupt and Hurwitz walks away with his hundreds of millions (and probably sues the State). If the Water Quality Control Board gives in and allows the Eel and Freshwater cuts, Hurwitz takes the trees and prepares for bankruptcy a year later. Win/Win.What is clear is that CEO Hurwitz needs to keep our PL timber workers and their families anxiously advocating for Maxxam's interests while he engineers PL's bankruptcy and their termination.           Â
This paper chose to poke fun at �La La Land� in a subsequent editorial, rather than ring the Pacific Lumber bankruptcy alarm bell.  But more than 50 citizens, land-owners and even former PL employees spoke before the Board of Supervisors last Tuesday, clearly and eloquently detailing Maxxam's bankruptcy strategy. They recounted the number of companies which have been purchased by Maxxam, only to be looted into bankruptcy, their pension plans emptied, their assets mortgaged, and finally their employees terminated. They warned the Board that Hurwitz, master of junk bond piracy, had already enriched himself by borrowing on PL's timber assets and then moving the money to Maxxam, anticipating PL's bankruptcy.

It is heartening to see this maturing political awareness of Humboldt citizens just as so many saw through Maxxam's failed attempt to buy the recall of District Attorney Paul Gallegos in 2004. Charles Hurwitz believes that he will be able to obfuscate, frighten, misdirect and divide our community and keep his stolen profits, leaving Pacific Lumber in financial shambles. He believes that Pacific Lumber's past reputation, loyal workers and former positive influence in Humboldt County will cover the stink of his strategy, coupled with his assumption that no one will be able to understand and uncover his financial manipulation and the money trail leading directly to his pockets.

I believe we need to join together to defeat Maxxam's strategy and to make Humboldt County's forests and timber industry permanently sustainable.          Â

To do this, we may need to accept the difficult decision to slow PL’s rate of cutting and decrease its workforce to sustainable levels, despite bondholder's demands. Humboldt County must look clearly at the long-term future of Pacific Lumber and take direct control of our collective destinies. One promising option would be to allocate Headwaters Fund money to determine if and how we and PL's own employees could purchase PL through an Employee Stock Ownership Plan (ESOP). Another potential worker retraining solution under consideration is nurturing forest and watershed restoration industries in the County.          Â

Our community is coming to better understand what Maxxam has planned for Pacific Lumber and its workers. We are coming to see that we are all in this together against Maxxam, and that, if we are to survive Hurwitz’ PL bankruptcy strategy, we must take control of Pacific Lumber’s future today, because it is tied to our future.

If and when Hurwitz declares PL’s bankruptcy, this community must protect its workers by “piercing the corporate veilâ€? of Pacific Lumber - by going directly after Maxxam and personally after CEO Charles Hurwitz. The District Attorney’s lawsuit is one avenue which, if successful, could result in Maxxam being legally forced to assume the liability for the harms it has caused the County, the land, the water and PL workers. Other legal actions may have to be taken against Maxxam and Hurwitz if and when bondholders line up to clear-cut Humboldt County forests in payment for Hurwitz’ billion-dollar borrowing.
One thing is for sure, as evidenced by testimony before the Board of Supervisors: the people of Humboldt County are asleep no longer. Are we too late to save PL and our timber industry from Hurwitz? Will we be able come together to defend PL and Humboldt County from Maxxam's “final solution?� Our future as a community and as an economy depends on us finding an alternative (and local) solution.

Michael Twombly is a founder of Local Solutions PAC (Political Action Committee) (http://www.localsolutions.or).
He lives and works in the redwood forests of Bayside.