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 #300  

 July 2000




Clinton Administration Places Special Interests Over Civil Rights

by Amy Ridenour

 

Americans recently have been shocked to learn of lax standards surrounding the protection of key nuclear secrets.

Because of the potential for loss of life, this scandal may trump all others in significance. But another, less known scandal may have even more serious implications for the rule of law.

In this scandal, high government officials of the Clinton Administration, working with federal agencies like the Federal Deposit Insurance Corporation (FDIC), Department of the Interior and others, sought to prosecute a man because they wanted his property.

While doing so, at least one government agency, the FDIC, lied, defrauded taxpayers of at least $100 million, attempted to seize authority belonging to Congress, followed the dictates of special interests rather than official procedures and generally behaved as though it was above the law.

The FDIC's misbehavior was so great a federal judge, noting that the FDIC was engaging in "active misrepresentations" and "hammering citizens," compared it to the Mafia.

The case goes back to the 1980s, when a Texas savings and loan failed because of the Texas real estate and oil recession and interest rate volatility of the time. A company called Maxxam, chaired by Charles Hurwitz, was a 28% minority investor in the company that owned the S&L.

Fast-forward to the mid-1990s. Several environmental activist groups want the government to protect a plot of California redwoods on land zoned for logging that is owned by a Maxxam subsidiary. The environmentalists have a brainstorm: convince the government to blame Maxxam and Hurwitz for the S&L failure and use the government to force Maxxam to surrender the land.

The environmentalists apparently forgot that government should prosecute citizens only in the pursuit of justice, not in the pursuit of free land.

To their shame, when this scheme was suggested, government officials did not reject it. Instead, then-White House Chief of Staff Leon Panetta endorsed it, saying "Budgetary constraints have made it impractical to acquire such an expensive tract of land through outright federal purchase." Numerous high-ranking members of Congress similarly pressured the FDIC. Meanwhile, environmentalists pressured the government to act against Maxxam and Hurwitz, going so far as to offer $50,000 to anyone who could help send Hurwitz to jail.

Using a brief suspiciously similar to a memo by one of the activist groups, the FDIC sued Maxxam and Hurwitz. Because the FDIC did not expect to win, it also paid a sister agency, the Office of Thrift Supervision (OTS), to do so as well. OTS suits are easier for the government to win because they are decided by the OTS itself rather than the courts.

In the meantime, Maxxam and Hurwitz sold the government the land, by several accounts for less than it is worth. Meanwhile, the suits continue, reportedly because the government wants still more land.

This scandal cries out for a congressional investigation, because:

* Agencies must place the interests of the taxpayer over special interests. During the Maxxam case, the government sold the failed S&L. Maxxam offered $100 million more for it than the other bidder but the government selected the other buyer, apparently because of its antipathy for Maxxam. Loss to taxpayers: $100 million.

* Agencies must be accountable to Congress. When this story came to light, House Majority Whip Tom DeLay (R-TX), arguably the most influential member of Congress and a member of the House appropriations subcommittee overseeing the FDIC budget, asked the FDIC specific questions. The FDIC's response contained outright falsehoods.

* The government should file suits only on their merits, not under political pressure.

* If the FDIC wins a lawsuit over an S&L failure, it should recover cash. That is, after all, what the taxpayers spent bailing out S&Ls.

* If the federal government decides to acquire land, it should be with an appropriation voted on by Congress, not on the authority of an agency that is not authorized to purchase land.

Some believe the protection of redwood trees is so important that it justifies taking shortcuts with civil rights. But half a century ago, a similar situation took place. Then, the cause was winning World War II, and the issue was the involuntary incarceration of Americans of Japanese descent. The federal government decided then that violating the civil rights of these Americans was justified because the cause was important.

Americans today are appalled by that reasoning. As we should be. No cause, however popular, justifies the elimination of civil rights.

# # #

Amy Ridenour is president of The National Center for Public Policy Research. Comments may be sent to [email protected]




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