History of Milken-Hurwitz relationship

History of Milken-Hurwitz Relationship Part II | History of Milken-Hurwitz Relationship Part III

This section is long and deep. The chronology was written during 1986-1993 for two cases filed against Hurwitz et al for the 1985 fraud in the takeover of Pacific Lumber and a 1993 federal action called a Qui Tam for fraud in the bankruptcy of United Savings Association of Texas. It is over 300 pages long.

Not everyone will find this depth interesting. The nature of the chronology is to record every fact that can be found, looking for patterns and commonalities. There are interesting results insofar as finding the milieu within which Pacific Lumber became a target for resource strippers and how they organized the takeover. The people involved show up later before and after the bombing.

The list below is a table of contents followed by Hurwitz’ business history. Some portions are excerpted in the pages that follow on the Pacific Lumber Maxxam main menu. Use the terms as search terms to reach the pertinent sections.

Hurwitz – The Early Years
The Applied Devices Scandal
The SGI Scandal
The SICONY Scandal
The Early Ties with Milken: REIT’s
The SMR-FDC Scandal
Drexel Utility Shares
The McCulloch Oil Corporation Takeover
Drexel As Hurwitz’ Broker
Drexel And MCOE
Security Capital Corp
Drexel controls the Zero (2007)
Drexel And The Simplicity Takeover
Drexel And The UFG-USAT Takeover
Twin Fair
Drexel, Hurwitz And AMSTAR
Castle & Cook
The PL Takeover Era
Formation Of Maxxam As An Investment Company
Triton Group Inc
Republic Corporation
Maxxam’s Securities Holdings on 12/31/84
Drexel Ownership In UFG-USAT
1985 Transactions
Coastal Corporation-American Natural Resources
Maxxam, ITC, Jefferies, Drexel, Boesky And AMF
American Can-Jefferies
HNG – Internorth
Informatics General
Stanley Cohen
Early History of Maxxam-TSG connection
Maxxam, TSG and Informatics General
TSG and Insider Trades
Pacific Lumber and Andriba
TSG goes from MPI to USAT

Begin Part II

August 5-HSR Act
September 3
September 10
September 11
September 12
September 16
Post-Drexel approval
September 26
Pantry Pride-Revlon
September 30, 1985
Salomon Bros.
Revco–post takeover
Irving Trust Company
October 1
October 2
October 3
Maxxam’s Stock Under Milken Management
October 4
October 7
October 10
October 11
October 22
October 23
October 29
October 30
October 31
The Boesky 13D
November 1
November 8
December 4
December 5
Dec 31, by the end of the year 1985
Subsequent To The PL Takeover
TSG and Boesky
TSG and Palco
During 1986
During 1987
Harvard Business Review
The Milken Debate
Analysis of the takeover
The AMF Example
The Transway Example
Violation of Margin Rules
Second Violation of Hart-Scott-Rodino
Keep Below 5%
Put Stock In “Friendly Hands”
Example: Clabir
Example: Coastal
Example: MGM
Example: SCM
Example: Beatrice/KKR
Keep Out The White Knights
“Best Price” Strategy
Neutralize Salomon Brothers’ Search Strategy
Milken’s Motives behind the Milken-Boesky arrangement
The First Motive: Insider Trading Profits
Milken-Boesky Arrangement
Cases in US v Milken
Apr 84: Vagabond/Northview Financing
Feb 84-May 85: Fischbach-MCA
Apr 84-Jan 85: GN-MCA
Sep 84-Jul 85: Manipulation in 12 Stocks
Jan 85-Jul 85: Occidental Petroleum
Diamond Shamrock
Feb 85-Nov 85: Harris Graphics
Pennsylvania Engineering
May 85: First reconciliation completed
Jun 85-Dec 86: Storer Communications
Aug 85-Apr 86: MGM-UA
Sep 85 – Oct 85: Pacific Lumber
Feb 86: Hudson (Boesky) Funding
Mar 86-May 86: Stone Container
Mar 86-Nov 86: I. F. Boesky Co. Funding
Mar 86: Second Reconciliation
The Second Motive: Increased Fees
Factual Evidence
Testimony Regarding The $38.50 Offer
Testimony Regarding The $40 Offer
Analysis Of The Actual Increase In Fees
The Third Motive: Complete The Transaction
The Warrants Dispute
Documents Regarding The Warrants
A Theory About The Solution To The Warrant Dispute
A Theory About The Intentions Behind Boesky’s Actions
Boesky’s Motives
Example: Boesky-Siegel Arrangement
How Hurwitz Raised Nearly $900 Million
Quid Pro Quo Between Maxxam’s PL Takeover Financing and UFG-USAT’s Drexel Bond Purchases
UFG-USAT History
Details Of The UFG-FAF, Tx Merger
Hurwitz’ Other Banking Experiences
Control Of UFG-USAT
The Tests For Control
FDC-FRC-MCOH’s FHLBB Applications Re: Control
Control From The Merger
Nu-West And Series B Pfd
The Stockholding Test
UFG Series C Pfd
The MCOH-Drexel Option
UFG Stock Ownership In March 1986
The Directors Test: Post-merger UFG-USAT Directors
Group One: Pre-merger UFG-USAT Directors
Group Two: Hurwitz Directors
Group Three: PennCorp Directors
The Presumptive Control Test
Formation Of The Executive Committee
Development Of Strategy: The Transformation of USAT
Parent Only -The Deals That Made The Dividend
Salomon Brothers And Branch Sales
Formation Of Investment Department
Ron Huebsch & UFG-USAT’s Investments
USAT’s Connection to Hurwitz’ Common Arbitrage Operation
Formation of Investment Committee
Junk Issuances
USAT’s Junk Bond Investments
Transcontinental Services Group
PL Takeover
Continuing Relationships After The PL Takeover
Control Of UFG-USAT
USAT’s Investments In The Texas Network
USAT And The Daisy Chains
USAT’s Participation In Milken’s Networks
The Typical Insider who Commits Fraud
Hurwitz’s Texas Network
Cast Of Characters
Rosenberg Chronology
Saks & Spruil
Connie “Chip” Armstrong
Roberts and Hadid
Stories for a jury
The Zero (2007)
Control of UFG, Quid pro quo
The economic integration of Hurwitz’ entities
The creation of MGI
The TSG connection
Hurwitz’ entities under Milken’s influence
The PL takeover
Daisy chains
The Milken and Texas Networks

History of The Hurwitz-Drexel Relationship


Charles Edwin Hurwitz was born March, 1940 in Kilgore, Texas, to Hyman and Eva Hurwitz. His father was in the mercantile business, owned two men’s wear stores, and started the first shopping center in Kilgore. Charles seems to have been relatively prosperous as a child, and owned his own new car in high school.

Charles Hurwitz graduated in 1962, in marketing, from Oklahoma University. He met his wife Barbara, from Tulsa, while attending there.

After a two-year stint in the U.S. Army, from 1962 to 1964, Hurwitz went to work for Bache as a stockbroker in San Antonio.

During 1965, he started his own investment firm called Investamerica, in partnership with his sister’s husband Morris Penner. This was well capitalized both families were affluent. They sold mutual funds in Texas and Oklahoma. In July Hurwitz became Chairman of the Board. (Who’s Who list him as COB, President, Investment Group, Inc. 1965-1967)

Between 1965 and 1967, Hurwitz made his first million in the bull market of this era. He is mentioned in a mid-1960’s popular book about “Whiz-kid” stock traders. Frank Duperier, who was Hurwitz’ personal broker in the mid-1960’s, claims, “Hurwitz was the best salesman I’ve met in 40 years.” He also noted that Hurwitz was “unbelievable at anticipating movements of institutional investors”, during these years, especially Fidelity.”

It is worth noting that fellow Whiz-kid, Gerald Tsai was with Fidelity until December 1965 when he started his own fund: Manhattan Fund. The stock offering was made through Bache. In 1967 Tsai’s Manhattan Fund began to fail and in late 1968 Manhattan Fund was sold to CNA for $30 million.

The New York Times reported on 12/5/69 about an appeals court decision regarding Fidelity Fund, Inc. for placing brokerage business with stockbrokers selling funds from 1966-1968. Tsai later became the CEO of Associated Madison Companies and American Can which purchased PennCorp Financial simultaneously as Hurwitz merged two S&L holding companies, one a subsidiary of PennCorp. Renamed American Can, Tsai’s company had a controlling interest in Jefferies & Co in 1985.

It was probably Hurwitz’ success in mutual funds that attracted the attention of George Kozmetsky and others. Kozmetsky, born in 1918, was a graduate of University of Washington and Harvard University. He was the

co-founder of Teledyne, Inc. (a major arms producer). In September 1965, he arrived at UT as the business school dean; by 1966, was managing investments for the University of Texas Foundation (UT Foundation), a non-profit; was Executive Associate of Economic Affairs of the University of Texas System Board of Regents; and was Dean of the Graduate School of Business of the University of Texas. Buildings at UT are named for him.

In 1967, Hurwitz moved to Houston, and in 1967, Hurwitz, Kozmetsky, and others, started the Hedge Fund of America, with a public offering of 1,700,00 shares worth $54 million. In October, Hurwitz left Investamerica to become COB of Summit Management & Research Corp. (SMR).

The Hedge Fund was controlled by the SMR Holding Company, which included Hurwitz, Kozmetsky, and David Learner on its Board of Directors. Other Hedge Fund backers included owners of several brokerage firms; a former head of the Strategic Air Command, (Thomas Powers); a Nobel Laureate Physicist; Willard Libby; and Dr. Paul McCracken, who had been head of Pres. Eisenhower’s Council on Economic Advisers.

The Hedge Fund was one of the largest funds in the U.S., for a short period of time, but the market collapse and the bear market killed it. In 1969, both Hedge Fund and Investamerica were sold without profit. They had lost money continuously, and were considered financially obscure.

Towards the end of this period, a scandal arose at the University of Texas around conflict of interest at the UT Foundation involving the Hedge Fund, Barnabus, Inc., Loeb Rohdes & Co., Applied Devices, and Walston & Co. The scandal involved conflict of interest and false declarations. In addition to George Kozmetsky, University figures named included Carl Loeb, David Learner, Eugene Konecci, and James Bayless. It is unclear whether any legal action was taken during this scandal.

The Applied Devices Scandal

Soon after his arrival at UT Kozmetsky began managing the new UT Foundation, Inc’s. investments. The first gift to UT Foundation was 100,000 shs of Applied Devices stock & $150,000 of its convertible debentures. The stock was donated by Applied Devices controlling stockholder Carl Loeb of Loeb Rhodes Co.

Applied Devices, a defense contractor had been accused of defrauding both its stockholders and the taxpayers. Loeb hoped Kozmetski, big in the defense industry at Teledyne, could smooth the rough water. In return UT Foundation opened an account with Loeb Rhodes & Co.

Kozmetsky associates Eugene Konecci and David Lerner joined the Applied Devices BOD. In early 1968, Learner was Pres/CEO of Applied Devises.

Barnabus, Inc. (an investment partnership, run by James Bayless, a UT Foundation director) and Walston & Co., an investment firm underwrote $60 million in stock for Hedge Fund.

In October, 1967, Kozmetsky & Walston & Co. wrote letters to UT Foundation approving a trade wherein Bayless would get an option from UTF for the purchase of the Applied Devises debentures and part of the stock in return for UTF receiving a 5% interest in Barnabus, Inc. No mention was made of the conflict of interest from Kozmetski or Walston & Company.


The 20-year relationship between Hurwitz and Kozmetsky was just beginning. After emerging from the University scandal and selling off Hedge and Investamerica in 1969, they together bought Summit Group, Inc., a New York insurance holding company in the business of high risk automobile insurance. Around this time they also began to buy undervalued companies. Summit Group became a subsidiary of the SMR Holding Company, left over from Hedge Fund days.

In 1967, Ron Huebsch had joined SMR. Huebsch, as of 1987 was Executive Vice-President of Investments for USAT. He was mentioned by Hurwitz in 87 as the person running the joint arbitrage account of Hurwitz’ many entities including MCOH, MCOP, Maxxam, UFG & PLC. In 1972 Learner is a consultant to Loeb Rhodes for one year. Sheldon Oster joined SMR as Treasurer.

The SGI Scandal

Trouble was not far behind. In late 1970, Charles Hurwitz, as head of Summit Group, Inc., was charged in an action brought by the SEC for stock manipulation and securities fraud, a case called SEC v. Everest Management Corp., et al., involving 43 defendants. One of them, John Peter Galanis, known for his “high flying issues”, was called a “career white collar criminal” by U.S. Attorney Rudolph Giuliani.

In 1971, in the midst of litigation in S.E.C. v. Everest, Summit Group was taken public. Hurwitz served as its Chairman. By December of 1971, Hurwitz and Summit entered into a consent decree on the Everest case and permanent injunction barring them from violating securities laws. Hurwitz told Dingell in 1987 that the consent decree was entered into to assist the public offering.
The principal business of Summit Group until 1975 was the ownership of Summit Insurance Company of New York (SICONY), a property and casualty insurer. Additional controlling interests in SICONY included Hurwitz and Kozmetsky, Sheldon Oster, and Federated Development Corp. (FDC). In early 1971 Hurwitz was COB of Summit Insurance Company of New York (SICONY) and remained so until May 1975. In July 1971, Oster joined SICONY after leaving the SMR BOD. In 1972 Huebsch left SMR. In December, James H. Paulin, Jr. joined SICONY and remained until August 1975. Paulin had graduated from UT School of Business in 1972 and joined SICONY immediately after. In 1974 Huebsch joined SICONY.

The SICONY Scandal

In May 1975, SICONY was adjudicated by the Supreme Court of New York, New York County, to be insolvent and the Acting Superintendent of Insurance of New York was appointed liquidator of SICONY. SICONY was adjudicated insolvent due to high risk taking and ordered liquidated. By the end of 1975, its parent, Summit Group went bust and was closed down by the State of New York. Seeing the handwriting on the wall, SMR Holdings began a takeover attempt of Federated Development Corporation (FDC).

In May 1975 Hurwitz, Huebsch, Oster left SICONY while on May 28 Lennon v SGI, SMR, FDC, H, Oster alleging, (Superior Court, New York County, Index 42173/77) was brought by the Acting Superintendent of Insurance of New York, charging that:
–Hurwitz defrauded Sicony of at least $834,000; fraudulent use of corporate funds in causing SICONY to pay $2 million to its parent SGI.
–Hurwitz caused damage to SICONY of at least $1,859,000 by breaching fiduciary obligations; and
–Hurwitz and Federated wasted and mismanaged assets of SICONY.

This insurance fraud action was settled in 1979 by Hurwitz paying what the New York Insurance Department called “a considerable of money.” (later learned to be $400,000.)


The Early Ties with Milken: REIT’s

In 1969, Michael Milken entered Wharton in Class of 1970. Milken held a summer job at Drexel, Harriman, Ripley which becomes Drexel-Firestone and in early 1970. Milken goes full time with Drexel-Firestone, He writes no paper updating low-rate bond study (Forbes 8/25/86) and gets degree only in 1978. MM working to move large blocks of low rate bonds. He dominated market in early 1970’s. He specialized in failing corporations and by mid-1970’s in REITS and other “junk” bonds.

In the 1970’s, according to In Re Boesky Hurwitz begins his relationship with Drexel Burnham Lambert (Drexel) and Michael Milken. A close study of Hurwitz entities finds Hurwitz, Drexel, and Milken involved in many ways with Hurwitz playing roles as arbitrager, as junk bond issuer and as junk bond buyer.

With the REIT stock market collapse in 1973, more attention was focused upon securities issued by these failing companies. In 1970 Hurwitz and Kozmetsky began searching for undervalued companies. It is probably here around 1972 that Hurwitz and Milken began to do business, since both were into junk companies and the junk securities they had issued. Within a few years Milken controlled these securities and the market in them.

REIT’s become junk stock the equivalent of junk bonds (JB’s). REIT’s total assets in 1968 ($1B), 1969 ($2B), 1974 ($20.5B) Michael Milken dominated the REIT market. Anyone interested in taking over REIT properties or entire trusts had a deal with Milken because he and his clients controlled the paper. Many of these real estate men are still working with Michael Milken in 1986. (Forbes 8/25/86)

In early 1973 Drexel-Firestone merges with Burnham and Company to form Drexel Burnham. In mid-1974 the Market crashes. In September Fred Joseph joined Drexel Burnham Lambert. He comes from E.F. Hutton (1968-1972) and Shearson (1972-1974)

In 1973, SMR has $184,000 invested in SGI and $37,000 in three other investments. SMR owns 47% of SGI. SGI’s principal asset is SICONY which on December 31, 1972 had no networth. SMR had a working capital deficit.

The SMR-FDC Scandal

In 1973, the Hurwitz-controlled Summit Marketing and Research Inc. (SMR) bought 78% of Federated Development Company (FDC), which at that time was a Real Estate Investment Trust (REIT).

SMR acquired control of FDC in September 1973, buying 800,000 shares representing 50.0089% of the outstanding shares issuing $12.5 million debt to finance, secured by banks. SMR borrowed $10 million from Continental Illinois, Ltd. for this purpose. Federated Development Company (FDC) created from Kirkeby Realty, Kirkeby Natus, Federated Mortgage Investors & United Ventures, Inc. Paul Tichenor affiliated with Kirkeby since 1963, remained on when Hurwitz took over FDC to become manager of real estate and the insurance holding company.

In December 1973, Hurwitz left Pres. of SGI and in Jan 1974, Hurwitz was elected COB/CEO of FDC, replacing W.T. Golden. In April Huebsch joined FDC as a consultant. The SEC was conducting, at this date, a private investigation of the last SMR tender offer for FDC shares.

In June 1975, Oster joined FDC just in time for SMR to be in trouble again. In 1973, they had issued a $12.5 million bank debt to finance the FDC takeover. SMR Holdings refinanced in May 1975, and Hurwitz became personally liable for $5 million. By June, he had brought in World Service Life Insurance to help. (Continental Illinois, Corp. subsidiary) Security for loan was the 800,000 FDC shares. FDC repurchased these shares in late 1976. In August 1975, Paulin left SICONY to join FDC.

Still in trouble by late 1975, with SMR owning 82% of FDC, Hurwitz engineered an innovative “parent flip”, a restructuring in which the subsidiaries FDC and FRC took over the parent company SMR(Hurwitz and Kozmetski on both boards) because of its financial troubles, and assumed its debt. Interestingly, the $10.8 million in SMR liabilities assumed by FDC included the personal liability of Hurwitz for $5 million. Directly after the flip, SMR defaulted on its 1973 loans, paying 53 cents on the dollar to the lending banks. The Texas State Securities Board concluded the deal “raises serious questions about the fairness to Federated (FDC) public shareholders…and fiduciary duty…but that FDC could not be prosecuted under existing Texas laws protecting targets, since FDC was acquiror and SMR shareholders were not injured. A subsidiary of Federated owned a majority of Summit’s outstanding common stock until sometime in 1976.


Hurwitz used or attempted to use corporations under his control for his personal advantage to the detriment of the minority public shareholders. These corporations have issued convertible preferred stock and purchased their own shares with the effect of substantially diluting the holdings of minority shareholders. For example, in 1979, Hurwitz succeeded in squeezing out over 200 shareholders of Federated (as well as avoiding S.E.C. reporting requirements) by engaging in a 1-for-40 reverse stock split that was followed the next day by a 39-for-1 stock split that re-stored the number of shares to their prior level. Finally, left with less than 300 shareholders, FDC no longer had to file the public disclosures (10-K’s, etc.) required by the Securities and Exchange Commission.

Shortly after the parent flip, the SMR/Summit/SICONY enterprises fell away and disappeared. Hurwitz and Kozmetsky then turned the attention of the new parent, Federated Development Company (FDC) (a new name, a clean slate?) towards greenmail; takeover attempts; and real estate management (land taken by FDC foreclosures).

By December 1975 FDC bought 20% of Federated Reinsurance Corp (FRC). In 1976, Huebsch became a director of FRC.

In 1976 Drexel Burnham merges with William Witter, controlled by Belciar Compagnie Bruxelles Lambert came to become Drexel Burnham Lambert

By 1977 the market crash of ‘74 created bargains, inflation raised the value of assets but not stock prices. It became cheaper to buy a company than to build one.

In April 1977, Drexel underwrote its first junk bond (JB) issuance: Texas International (oil & gas exploration and equipment manufacturing.)

Tom Spiegel had inherited Columbia S&L (COL S&L).

Fred Carr in ’69 left as head of Enterprise Fund just months before its collapse; In 1974 he was hired to head First Executive.

By the end of 1977, Drexel has 6 more JB deals than Lehman Bros. for the year for a total of $124.5 million. Lehman Bros. were the originators of junk bonds.


FDC, often using its insurance sub Federated Reinsurance Company (FRC), began to invest in other REIT’s for the purpose of “greenmailing.”

Greenmail seems to have been one of Hurwitz’ favorite techniques.

Greenmail is threatening to take control unless the target corporation purchases back the stock at prices substantially above prevailing market. These investments included Property Trust of America (1977) and United Realty Trust (1977). FRC would later be used to acquire control of MCO Holdings, United Financial Group with its sub the United Savings Association of Texas (UFG-USAT) and Simplicity Pattern Co the predecessor of Maxxam.

In mid-1977 Hurwitz approached James Polk,III, pres. of Property Trust of America (PTA) an REIT. Hurwitz offered to buy control of PTA & through PTA to buyout 2 or 3 other REITS to be combined under one management. Hurwitz proposed to infuse capital into PTA by Hurwitz buying PTA issued convertible subordinated debentures (junk bonds), the money to be used by PTA to purchase shares of United Realty Trust (URT) based in Beverly Hills, CA. In November, 1977 FRC held 113,697 shs of PTA valued at cost: $667,371.90 or $5.87 per share.

In 1978, after the attack on Property Trust of America (PTA), PTA sued Hurwitz and others, PTA v FDC, FRC, H, Oster, Paulin, for filing a false 13D and falsely stating in it that he and his associates had acquired shares of PTA for “investment purposes,” and a restraining order was granted. The tender offer for PTA was thereafter dropped, and Hurwitz sold back to PTA FRC’s PTA stock. On March 13, 1978, PTA paid FRC $6 p/sh for FRC’s 167,666,404 shs of PTA. The total value of the PTA shares was now $1,005,998.

On March 31, 1978, FRC acquired 278,000 shs United Realty Trust (URT) at cost of $2,436,730.04. On July 3rd, URT v FDC, FRC, Hurwitz was filed.

On February 1, 1979, URT bought FDC’s 285,700 shs at $12.55 p/sh for $3,585,551 plus $320,000 for covenants keeping Hurwitz from purchasing URT stock or entering a proxy battle until 2/1/84.

Hurwitz’ modus operandi has included the purchase of a stake in a “target” company in open market transactions without disclosing his and his associates’ true intentions, including the intention to seek control or to extract “greenmail.” By withholding his true purpose, and typically concealing such purpose under the guise of false representations as to his alleged passive “investment” intent, Hurwitz has been able to induce public shareholders to sell their shares to him, or entities under his control, at prices far below the prices he would have had to pay if he had disclosed publicly his true intentions. Hurwitz’ attempts at greenmail have, in large part, been successful because the possibility of him becoming personally involved in a company’s business and operations is a powerful inducement to pay a premium to ensure that such involvement never takes place.


In 1978, FDC-FRC began investing in the Maryland Realty Trust, a REIT, which, once it came into FDC-FRC’s control, was renamed Maxxus and in 1984 merged into Maxxam Properties Inc, a sub of Maxxam Group Inc (Maxxam).

In April, 1980 Maryland Realty Trust (MRT) sought recapitalization following Ch. 11 reorganization. FRC, Kozmetsky, & “the group” already major shareholders committed to purchase a pro rata portion of new shares.

In February, 1981 with Oster & Kozmetsky Jr on MRT BOD, FRC owned 44%, Kozmetsky (13.4%), Kozmetsky, Jr (6.4%).

At the end of November 1983, Maryland Realty Trust changed its name to Maxxus.

Drexel Utility Shares

Also by 1978, FDC-FRC held an investment in Drexel Utility Shares, which it maintained until at least 1982. Drexel Utility Shares was renamed Energy & Utility Shares Corp. Energy & Utility Shares is believed to be a Milken created and advised junk bond mutual fund. In 1977, Milken had begun a series of high-yield mutual funds so that small investors could invest in a diversified portfolio of junk bonds.

In 1980, FRC held $1,711,200 in EUS shares. In November 1981, FRC sold 108,900 shares of Energy & Utility Shares, Inc. for $2,070,189. Ezra Levin, an FDC director, was on the Board of Directors of Energy & Utility Shares Corp. during the pertinent period. Levin first appears in Hurwitz entities when he joined the FDC board in 1975. He was elected to the MCO Holdings board in 1978.

The McCulloch Oil Corporation Takeover
In 1978 Hurwitz began his foray into the world of hostile takeovers, by attacking McCulloch Oil Corporation. (We have not found any evidence that the takeover of FDC had been hostile, although certainly its fairness to FDC shareholders was questioned).

McCulloch Oil Corporation may have been ripe for takeover. Incorporated in 1955 as the Cuban-American Oil Company, it changed its name in 1960, during a merger, to McCulloch Oil Corporation of California. Further mergers in the 1960’s led to further acquisition of oil and gas properties, and the name was simplified in 1969 to the McCulloch Oil Corporation. The early 1970’s led to the acquisition of at least ten new subsidiaries – mostly in gas, oil, airways, and coal, but with some resorts and land development properties as well. Yet something was wrong, because by 1975 and 1976, some subsidiaries were sold off, and McCulloch posted a $60 million loss in 1976. In 1977, Robert P. McCulloch MCO’s founder died, due to a combination of drugs and alcohol. Also in that year, an oil field subsidiary pled guilty to fraud. The combined years of 1977 and 1978 showed a loss of $63 million.

In 1977, MCO bought 51% of Pratt Properties, Inc. from Loren Pratt and all of the land development assets of McCulloch were combined into a subsidiary called Pratt Properties. The real estate developments of McCulloch acquired in the 1960’s (Fountain Hills, Lake Havasu City, Holiday Island and Pueblo West) probably went into this subsidiary.

It is unclear why Hurwitz and Federated wanted to acquire McCulloch Oil Corporation. More than likely they saw it as a cash-rich company that had been recently poorly managed and therefore undervalued. This was the pattern of takeovers of the late 1970’s merger wave.

In 1978, Hurwitz, as Chairman and CEO of Federated, and using FDC’s subsidiary Federated Reinsurance Corporation (FRC), bought an option on 1 million shares of McCulloch stock at $3.50 per share, from Black & Decker. and for $10 another option, `the second option,’for 1,216,931 shs of MCO.

In May 1978, FRC filed a Schedule 13D disclosing the purchase of over 5% of MCO’s common stock. McCulloch Oil sued Hurwitz “to tie him up.” And in June 1978, George Kozmetsky and Ezra Levin were elected to the Board of McCulloch Oil. By August 1978, Charles Hurwitz had also been elected to the Board. The 13D claimed “investment” was the sole purpose of purchases by FRC and, while it reserved the right to take alternative courses of action, it did not disclose any plan or intention by FRC to seek control of McCulloch, or representation on its Board. Nevertheless, within months of the filing of the 13D, Hurwitz and an associate became directors of McCulloch, and, by March 1980, Hurwitz was appointed Chairman and CEO of McCulloch Oil Corporation.

In 1979, C.V. Wood, the Chairman of McCulloch’s Board of Directors, retired. In February MCO BOD appointed a Special Committee – Land to evaluate 51% sub PPI and during 1979, McCulloch Oil acquired the remaining portion of Pratt Properties, by purchasing the 49% owned by Loren Pratt. Pratt remained as a consultant to MCO until July 1984 to make it a wholly-owned subsidiary, and then changed Pratt’s name to MCO Properties.

In late 1979 MCO offerred $60 million in 12-1/2% Subordinated debentures. Carr’s FEC held $6.63 million. On Dec. 10, 1979 MCO self-tenders a redemption: stock for subordinated debentures.

On May 17, 1979 MCOH board member William Leone is listed as a director of Franklin Financial Corp. (May be a Kansas City based holding company, parent of Franklin SA, Ottawa, Kansas.)

By 1980, the McCulloch takeover was completed. It appears that a weak Board of Directors was unable to successfully defend itself against the machinations of a corporate raider. Joseph Hegener, on the McCulloch board since 1960, remained. Charles Hurwitz was elected Chairman of the Board in 1980, and the name of McCulloch Oil Corporation was changed to MCO Holdings (MCOH). MCO Holdings then consolidated its oil and gas properties into a new subsidiary called MCO Resources, and made George Kozmetsky its head. The formerly unwieldy company then had two major divisions, real estate (MCO Properties) and oil and gas (MCO Resources).

Subsequent to Hurwitz’ obtaining control, MCOH offered an exchange of its common shares for unregistered convertible preferred stock with voting privileges far in excess of those of the common shares. The effect of the exchange was to dilute substantially the holdings of MCOH’s minority shareholders, because only Hurwitz and his associates (who already had control) were willing to trade their common shares for unregistered–and thus illiquid–securities, thereby dramatically increasing Hurwitz’ actual voting control.

MCO Holdings was ready, under the helm of Hurwitz and Federated Development Company, for a new decade of takeovers.

Drexel As Hurwitz’ Broker

Types of connections between Milken/Hurwitz and Drexel/Maxxam list other types of connections.
Risk Arbitrage in Takeover stocks – buy/sell;
Drexel as Hurwitz adviser and investment banker;
Greenmail – example – AMSTAR;
Mergers and acquisitions Putting into play – the role of rumors in money making and in takeovers.
Actual takeover offense and defense
Junk Bond Network includes institutional investors; savings & Loans;
companies “in play” Issuers (corporate raiders)
Buyers (S&L’s, institutional investors)

In mid-1978, Milken visited Houston where James Caywood of Caywood Christian had a small fund. By ’86 Caywood had $l.5 Billion mostly from S&L’s to invest. Caywood also ran American General Capital Corp.

Milken raised $50 million in JB’s for Sun Chemical. Norman Alexander of Sun Chemical (related to WRI family?) paid high fees for deals because of needing Milken to trade bonds for him.

In August, Drexel/High Yeild Department, Milken moved to L.A. Milken formed Lorsand Partnership, GLJ, Otter Creek, L.P., Cambrent Financial Group.

Milken sets people into the management of sources of capital on an ongoing basis.

At the end of 1978 Drexel has had 14 issues of junk bonds for $439.45 million and First Executive bought 66.7% of the Drexel junk bond issues.

In the beginning of 1979, Milken had it all in place; `a springboard movement’. Stephen Wynn, who wanted to move up from Golden Nugget, had Stan Zax (Milken’s cousin) of Zenith LIC introduce him to Milken. Drexel accepted Wynn where Harrads, Bally & Caesars have been denied Drexel’s aid. Drexel raised $125 million for Wynn. At the end of 1981 Drexel raises $160 million for Wynn but it took 2 yrs; thru 1987 Drexel raised $1 billion for Wynn. John Kissick nominally Milken’s boss, sat on Golden Nugget BOD.

By the end of 1979 First Exec. brought 73.3% of Drexel junk bond issues.
In 1980 the Recession began. Milken gave a deposition to the SEC.

By the end of 1980 Drexel issues $415 million in junk bonds of $1.4 billion issued industry wide. First Exec. bought 86.7% of Drexel junk bond issues.

In 1981, Milken formed Belvedere Securities. Managing partners are James Regan & Edward Thorp controllers of Princeton-Newport Partners & Oakley-Sutton managment. Belvedere General Partners included Milow Corp. (Milken & Lowell Milken) and Richard Sandler. Milken also formed Dorchester Government Securities. Regan-Thorp had given Milken the treasury stripping idea. Each Limited Partners (LP) had 4 individuals and one corporation as general partners. In each case the corporation was Milow which had 2 stockholders, Lowell Milken and Richard Sandler, per Milken in LB1514819.

When First Exec. needed $10 million to go into reinsurance, MM sold $5 million Pf to Posner, Lindner, Steinberg, then Milken/Drexel put in $5 million (50% interest; in 1986, diluted to 46%) in the reinsurer, subsequently renamed First Stratford. First Stratford formed a group of reinsurers including Clarendon Insurance Co, based in Bermuda and may explain the control Milken and Hurwitz later had over the course of events related to MCOH’s Zero(2007).

In December 1981, Boesky filed form BD regarding Seemala wherein a Milken partnership Camro Associates owned 100% of Class B stock or 1% of Seemala’s equity and had since 1/1/81. This showed Boesky-Milken relationship in its early stages.

The number of firms selling junk bonds (including Drexel) in ’79(17), ’80(13), ’81(6); junk bonds issued to date $1.47 billion of which Drexel sold $1.08 billion in 20 deals. First Executive bought 100% of Drexel junk bond issues in 1981.

The earliest known Hurwitz-Milken “broker” relationship was in 1981, when Drexel brokered MCO Holdings’ floating rate bonds.


The first two years of the new decade – 1980 and 1981 – were relatively quiet ones on the corporate transaction front for Hurwitz and MCO Holdings. 1980 marked the completion of the takeover of McCulloch Oil Corporation, the election of Hurwitz as Chairman of the Board, and the important name change from McCulloch Oil to MCO Holdings. Even though Federated Development Company owned only 47% of the voting power of MCO Holdings, control and management were unquestioned under the new leadership.

In February 1981, MCOH began buying Integrated Energy, Inc. John P Holmes Jr was a director of IEI. Holmes is a longtime friend and business associate of John H Roberts Jr., mutual business associates of Connie “Chip” Armstrong and MCOH director Stanley Rosenberg. In March 1984, acquisition of Integrated Energy, Inc. was completed by MCOH. IEI merged with MCOR to become MCRIC. Since early 1980 MCO Resources (MCOR) was 50% owned, 75% controlled by MCO, with Kozmetsky as CEO.

In November 1981, MCOH or MCOR? sold its California oil fields for $155 million in notes to Manley-McGinn.

In December 1981, Hurwitz announced a 1-for-600 reverse split for Federated Development Company (FDC). Hurwitz attempted unsuccessfully to squeeze out most of the remaining public share-shareholders of Federated by proposing a 1-for-600 reverse stock split which would have forced investors to sell their interests at 20% of book value. The FDC stock split caused suits to be filed in early 1982 by Howard Wolf, of Fulbright and Jaworski, in federal court; and by New York-based Galdi Securities in State court. Hurwitz abandoned his effort after these lawsuits, backing down on the stock split, it is believed, because the suit sought removal of some FDC directors.

Drexel And MCOE

In March 1980, FDC controlled MCOH with 47% voting control but only 20% of common stock: Hurwitz was elected chairman and CEO of MCO. In May FDC exercised the 2nd MCO option and MCO changed its name to MCOH.

Beginning in the Spring of 1982 Drexel and Shearson served as a dealmakers for MCO Equities selling shares of MCOE for a fee. Hurwitz was bundling distressed properties from FDC and other REIT’s and offering shares to the public. MCOE was reputed to be Hurwitz’ “Billion Dollar Brainstorm” until its failure in October after less than a year.


Security Capital Corp

The Reagan ’81 Economic Recovery Act changed the tax structure.

FRC’s 1979 investments included Chase Manhattan Corp, Citicorp, Manufacturers Hanover, Melon National, Tennaco Offshore, Barclay’s, First City NB of Houston, Royal Bank of Canada all were sold before the end of 1980. Holdovers included Drexel Utility Shares (renamed Energy and Utility Shares), Texas International, Zapata Corp (Bush’s corp), and MCOH. New issues included Coastal Corp, Ensearch, Maryland Realty Trust (Maxxus). This may demonstrate a change in strategy from connections to New York based corps to Texas based corps as the Texas financial community began to exert its independence.

May 15, 1981, FRC filed a 13D on Security Capital Corp. (SCC). SCC had a subsidiary Benjamin Franklin Savings Association in which J Livingston Kosberg was reportedly a principal. This was Hurwitz’ second known attempt to acquire control of a savings and loan. On October 30 FRC owned 529,000 shares of SCC valued at $1,934,513.40. In April, 1982 FRC sold its SCC shares to a subsidiary of SCC for $2,380,000, or $4.50 per share for the 529,000 shares. Immediately afterward FDC and MCOH began to acquire United Financial Group shares.


Drexel And The MCOH Zero(2007)

In 1982, Corporate profits plummetted. Corporate raiders began to emerge.

On May 31, 1982 Milken formed his inner circle of favored clients who bought hard to place issues and enjoyed a place in the partnerships Milken was forming. During the period (1/1/80-5/31/82) Milken’s closest contacts are Richard DeBurke (CNA Financial Corp.), Fred Carr, Carl Lindner, Saul Steinberg, Stephen Wynn, Victor Posner, Mishlis Riklis. No one but Milken knew the partnerships trading activity according to Stewart.

Boesky doing business with Jefferies in this period.

During the Spring 1982 Shearson’s Peer Wedvick joined Clarendon IC.

In May 1982, Guy Dove, soon to head Clarendon’s Atlantic Capital was charged with trading Advent Corp. on inside information.

At this year’s Gobhai session the concept of airfund or blind pool was born leading to the `highly confident’ letter, thus making credible takeover artists of Icahn, Pickens and others.

SEC investigated Milken’s influence in trading in Riklis’ Rapid American, Lindner’s AFC & Steinbergs Reliance from Jan. ’80 – May ’82 (trading period). The investigation also included CNA and First Exec. Milken gave a deposition. This involved going public with LBO’s after going private through a merger and the manipulation of stock in the process.

To save JB holders Drexel used Sec. 3(a)9 of Securities Act of 1933. New paper issued to replace earlier unregistered JB’s. Over next 5 yrs. Drexel does 175 of these exchange offers for $7 billion in JB’s

In 1982, There were 2,297 takeovers. Junk bonds were 11% of the total corporate debt issued. Drexel offered only 8 issues of JB’s over $100 million. Drexel started raising `mezzanine’ financing define with 2 deals in 1982 and 2 more in 1983. First Executive bought 92% of Drexel’s junk bond issues.


Zero (2007)

In July 1982, Drexel underwrote MCO Holding’s Zero(2007). It is now the subject of the litigation United Progressive v Hurwitz. Simultaneously, MCOH suspended its quarterly dividend.

The Zero (2007) was a very strange instrument created for the purpose of increasing Hurwitz’ control of MCO Holdings. Considering that it is possible that, at this early date, Hurwitz conceived of the 1984 creation of a takeover vehicle, a major takeover, and the eventual merger of MCOH and Maxxam; the Zero (2007) was an instrument to increase Hurwitz’ control of the final survivor corporation: Maxxam Inc.

The history of the Zero(2007) involves Drexel (the underwriterand first purchaser), ELIC (the second purchaser), Drexel again (the third purchaser who appears to have owned the bond from March to August 1986), Clarendon Insurance Company of Bermuda (the fourth purchaser who owned the bond from the beginning of August 1986 until its sale to Maxxam sub Maxxam Properties Inc in November 1987. Clarendon did however, sell an option for the Zero to Hurwitz, personally, while it owned the bond), MPI(the fifth purchaser), which converted the bond into 990,000 shares of Maxxam Inc and then sold these to Hurwitz at a price that was about one-third market value for the shares.

Clarendon’s sub Atlantic Capital was a purchaser of the PL takeover bonds. Atlantic Capital was run by Guy Dove III, an ex-Drexel employee. There were rumors that Milken had an equity stake, perhaps through First Executive affilliate First Stratford, in Clarendon, which became a subject for an SEC investigation relating to inside trading in Drexel’s 1985 junk bond issuers. Clarendon was used by Milken to take a 20% stake in Centrust in 1986.


In 1981,Rodrigo Rocha, `a Mexican’ with his `cohort’ Eerki Pesonen, Chairman of Kansa General Insurance Co. in Helsinki, Finland, took over Clarendon Insurance Company, a Bermuda based reinsurance company. Kansa owned 35% of Clarendon.

In 1982, First Stratford, a reinsurance company, was formed and owned, primarily, by Milken and First Executive. Kansa was a member of First

Stratford’s pool of reinsurers. Atlantic Capital was formed as a subsidiary of Clarendon. Kansa had a AA rating which passed through to Clarendon then to Atlantic; Atlantic began selling investment contracts losing money. Atlantic also lost money on computer-driven hedging attempts using Treasuries.

In April 1982, MCOH and FRC filed their first joint 13D with respect to UFG. On May 4, Drexel agreed to sell $260,000,000 face amount 12-1/2% ZCSSN’s (2007), convertible debentures [Zero (2007)] for MCOH. The net proceeds were $3,497,000. By July 26, Drexel had sold the Zero (2007) to ELIC. In August MCOH loaned funds to FDC to buy additional UFG stock.

On August 18,1982 Simplicity Pattern Co. (SPC) announced it was buying ELIC’s SPC stock at 35% over the market price by issuing a note to ELIC with face value of $14.4 million at 8% due in 7 years.

In May, 1983 ELIC owned 10% of AMSTAR. By June, Drexel was advising SPC in its attack on AMSTAR.

On Mar. 22, 1984 an MCOH interoffice memo discussed a put-call agreement regarding the Zero(2007). An MCOH “Schedule” was drawn up showing “MCOH, Zero Coupon Bonds, Executive Life”, with the key figures 7/26/87, $8,277,771, 752,525 shares.

By mid-1984, Atlantic had moved to Milken’s junk bonds and preferred stock. Guy Dove, a former Milken employee, became its trader. Rumors were circulating concerning Milken having an equity stake in Clarendon.

By the Fall, Atlantic Capital had changed strategies, because the AA rating important to its insurance business was lowered. Within the year Personen left Kansa to join Clarendon, in its London office.

On December 31, Maxxam owned $.930 million or 20,000 shares of CenTrust preferred stock. Clarendon was used by Milken to take a 20% stake in Centrust in 1986 prior to the emrgence of BCCI’s ownership position in Centrust. Drexel acquired 733,00 shares of CenTrust Common initial stock offering underwritten by Drexel in 1985. Steinberg’s Reliance FSC held 7.7%.

Early in 1985, Guy Dove III, the former Drexel employee, was running Atlantic Capital’s $3 – $4 billion portfolio from an office located across the street from Milken’s Drexel headquarters in Beverly Hills. Atlantic, et al. are “heavy hitters” in takeovers in 1985, including National Can early in 1985 and Revlon and Pacific Lumber later in the fall.

By early 1985 ELIC had acquired 9.9% of Imperial Capital

(ICA). Columbia S&L held 8.08% of ICA. Drexel held 7.2% of UFG.

Planning by Maxxam, Drexel and others for takeover of Pacific Lumber Company had begun by mid-year.

In September Atlantic Capital was a heavy hitter in the Revlon takeover using names Atlantic Capital Corp., Worldwide Trading, SSC II Corporation, Garrison Capital, First Oak Financial.

In November, Atlantic Capital bought $68.5 million in PL takeover bonds second only to First Executive. Note that on Feb. 9, 1987, SEC launched an investigation of Clarendon Group, Ltd. regarding insider trades during 1985 related to Drexel junk bond sales.

In 1986, Dove moved to Clarendon’s London office.

On March 31, MCOH and Drexel amend the Zero (2007) regarding the loss of MCOR to Maxxam. Thus Drexel was then the owner of the Zero.

On August 18, Hurwitz entered into an agreement with Clarendon Insurance Company so Hurwitz would purchase the Zero on November 18, 1987 at a price of $8,144,721.

Question: Did Clarendon IC, London buy Maxxam’s TSG stock and then sell it to USAT six months later?
On October 31, MCOH and Clarendon amended the Zero (2007) to reflect the merger of Maxxam and MCOH which was announced seven days earlier on September 24, 1986, but was not completed until November 24, 1987.

In December U.S. District Court Judge Owen Panner granted a preliminary injunction against Dove, Garrison Capital Corp., Charles Knapp and Traflagar Holdings to block a hostile takeover.

In December Clarendon America IC and Clarendon National IC both indirect US units of Clarendon Group, Ltd. took a 20% stake in CenTrust S.B.

On April 7, 1987 Clarendon Group, Ltd. began a takeover of a former Teledyne unit, Argonaut. Kozmetsky was a co-founder and still a large shareholder of Teledyne.

On July 26, the Zero would have converted to $8,277,771.34 or 752,525 shares at $11 per share if one had converted it on that date.

On November 16, Hurwitz terminated his agreement with Clarendon.

MPI purchased the note from Clarendon for $8,139,712. Simultaneously, MPI entered into an agreement with Hurwitz, a put-call, regarding the Zero (2007). MPI could “put” to Hurwitz for $8,704,598 between 7/3/88 and 7/17/88 and Hurwitz could “call” from MPI for $8,996,297 in the same period.

On May 18, 1988 the Put-call was amended with the put exercisable between 5/20/89 and 6/3/89 at the price of $9,9000,000 and the call exercisable between 7/3/89 and 7/17/89 at the price of $10,300,000.

On Feb. 17, 1989, MPI, MCOH and Hurwitz agreed that Hurwitz would exercise his call and MPI would convert the note to shares prior to the exercising of the put-call to Hurwitz. Hurwitz would pay $10,304,068 for 990,000 shares. The conversion probably brought tax advantages to MPI.

On April 9, 1989, Progressive v. Hurwitz was filed.

By July 6, Hurwitz acquired 990,000 shares for $10,304,068 of which $8,500,000 was obtained from the proceeds of a loan from FDC. The windfall to Hurwitz was $19,907,040. He received stock at $11 per share when the market was at $30.50. Is it possible Hurwitz traded these shares for Drexel’s Maxxam warrants?

Drexel And The Simplicity Takeover

In 1982, Drexel had been trying to find a suitor for Simplicity Pattern Corp (SPC). ELIC owned stock in SPC. FDC-FRC and MCO Holdings (FDC-FRC-MCOH) took over SPC. SPC purchased ELIC’s SPC stock for 35% over its market value.

The same months in 1982 that the Zero (2007) was issued and the smooth acquisition of UFG was going forward, Hurwitz and MCO Holdings began and completed the takeover of Simplicity Pattern Company, Inc. After two years of defending themselves against takeover attempts, Simplicity fell rather quickly (although probably not willingly) into Hurwitz’ arms. For two years it had been a battle between SPC and various “corporate raiders” of the “Drexel network”, ending with Hurwitz emerging victorious.

Simplicity was incorporated in 1927 in New York as Simplicity Pattern Company, Inc. Other than a couple of acquisitions and sales of subsidiaries between 1969 and 1971 (the purchase and sale of both Visual Statistics, Inc. and Education Consultant Service, Inc.) their corporate activities were centered almost entirely in the pattern-making business, with subsidiaries called either “Simplicity Patterns” or “Style Patterns” throughout the world from South Africa to Canada.

By 1980, SPC was a takeover “target” – perceived as undervalued, with good cash flow, money in the bank and low debt – because that is when several takeover attempts began.

The first takeover attempt was from within Simplicity’s Board of Directors. The Board included Marne Obernauer of Devon Group and John McMillan of Northwest Energy. Drexel’s Corp. Michael Gallert had been on Devon’s Board of Directors since 1969.

Devon Group began buying blocks of stock in 1980. Mysteriously, three reporting hoaxes – rumors about Simplicity – appeared during that year. In January, 1980, there was a false report of a 100% tender offer, followed by an equally false rumor of an acquisition announcement. Then on August 12, 1980, a third reporting hoax rumored an extraordinary dividend. Someone was putting Simplicity “in play”.

The Devon management-buyout group turned down offers from F.S.C. (Stanley Sheinman) and Pier One Imports (J. B. Fuqua) in early 1981, but on March 3, Devon Group sold its block of Simplicity stock to NCC Energy, Ltd., a British corporation. Obernauer and McMillan then resigned from the Simplicity Board, probably after making a good profit on their stock sales.

Drexel had brought Simplicity to the attention of NCC Energy, and by May 1981 was their investment advisor.

But a parallel development was occurring with another member of the Drexel Network, Victor Posner, Chairman of Southeastern Public Service Corp. of Miami. On April 3, Posner announced the purchase of 1.6 million shares, or 11.4%, of Simplicity stock, and his willingness to buy up to 25.1% of Simplicity, maybe from NCC. On April 7, Posner sold his stake in Simplicity – 1.36 million shares – to NCC, and the remainder of 250,000 shares in the open market. NCC’s stake rose to 15.4%.

By May 28, Simplicity Pattern and NCC Energy were said to be working toward a merger. NCC was attempting to become a U.S. Corporation, instead of British, through the purchase of a producing American company. Drexel, as NCC’s advisor, was recommending the exchange of Simplicity shares for subordinated debentures (junk bonds) and warrants.

In June 1981, Peter Ackerman, of Drexel, recommended Simplicity stock to Diversified Industries as a “risk-free” investment to produce a capital gain for Diversified (who had sought Drexel’s aid in gaining such to preserve a tax loss carry-forward). Ackerman had “a special, deep non-public knowledge that the sale would go through…”.

This was insider trading. Ackerman did not reveal, it was alleged in a lawsuit, that Drexel held an undisclosed position of more than 5% of Simplicity, or that Drexel would make $500,000 in fees if the NCC-Simplicity merger was completed. Peter Ackerman worked in Michael Milken’s office at Drexel, as part of his “core group”. When no merger occurred the lawsuit was filed. No criminal charges were brought against Ackerman for this. The suit was settled out of court.

In August 1981, another corporate raider in the Drexel network, Carl Icahn, had his investment group, Bayswater Realty & Capital, buy 11.2% of Simplicity. Icahn then objected to the NCC-Simplicity merger. Simplicity by this time had hired Dillon-Reed as their investment banker and advisor. On September 12, Bayswater and Icahn announced a takeover try of Simplicity. Icahn then owned 13% of Simplicity, NCC owned about 20% (2.1 million shares). On October 30, 1981, came the announcement of a merger of NCC Energy, Ltd. (UK), with Simplicity. Simplicity indicated they did not want Icahn, and on November 18 rejected his bid of $11.50 per share. Icahn then withdrew. NCC’s offer of $13-$14 per share was judged inadequate. NCC and Simplicity went back to the drawing board. (At this point, Diversified, who bought on Ackerman’s advice, lost their hoped-for gain).

Icahn sold his Simplicity stake to Walton Bond, Ltd., who was willing to support the new NCC bid. Together, Walton and NCC now held 29% of Simplicity.

On December 16, Executive Life Insurance Company, another member of the Drexel network, bought 5.86% of Simplicity (805,200 shares) at $10.15 per share, “because the stock was undervalued”

Why NCC, with 20%, plus backing from Walton (13%) and Drexel (5%-10%), was unable to takeover Simplicity, is unclear.

On May 7, 1982 MCOH bought 33% of SPC, 20% from NCC, 13% from Walton. The 13(D) said “for investment purposes only”. Hurwitz soon became chair of BOD, MCOH used bank credit of $100mm from 1st Interstate Bank of California. Forbes Feb. 13, 1984 says Hurwitz snatched Simplicity away from Victor Posner & Carl Icahn.

On August 18,1982 SPC bought ELIC 1.4 million shares of SPC by issuing a $14.5mm note to ELIC (does the interest paid explain the allegation that SPC bought at 35% above the market?). SPC was otherwise debt free.

By the end of 1982, MCOH had acquired 4,576,000 shares or 37.7% Simplicity Com/stk. In November, 1983 SPC bought 309,400 of its own shares.

In February 1983 Robert L. Rosen left Shearson/American Express and Shearson Realty, to join Simplicity.


Drexel and The UFG-USAT Takeover

In December 1982, FDC-MCOH gained presumptive control of UFG-USAT. A few months later UFG-USAT merged with First American Financial with its S&L sub Houston First American, controlled by Carl Lindner’s American Financial Corp. FDC-MCOH held 23.3% of the survivor corporation, UFG-USAT.

In June 1983, FDC-MCO Holdings filed an application with the Federal Home Loan Bank Board to increase its holdings of UFG-USAT to more than 25% common and to establish clear control.

In June 1984, UFG-USAT issued Series C Convertible Pf Stock. FDC-FRC-MCOH bought 97.5% of this issue. Under the terms of the Pfd stock, upon the June 15, 1987 conversion date, Hurwitz’s stake in UFG-USAT would increase by 15% to a total of 38.5%.

In September, 1984, UFG-USAT sold 20 branches to Independent American S&L. This sale built USAT’s networth to allow the issuance of a dividend to UFG and the purchase of junk bonds.

With deregulation of savings and loans on the horizon for 1982, and a Reagan – “get government off businesses’ backs” mood sweeping the country, it is no surprise that Hurwitz chose this moment to acquire a string of savings and loans which at its height in 1985 became the largest savings and loan association in Texas as measured by assets.

Kosberg and Struass’ Gibraltar S&L was first measured by other measurements.

Incorporated in 1970 as Southwestern Group Financial, Inc. (SGF) with five savings and loans, SGF merged its savings subsidiaries into United Savings Association of Texas (USAT) in 1978, acquiring new branches in the process. Kaneb Services acquired SGF and USAT in 1979, added World Savings, Parker Square Savings & Loan, and Wharton County Savings & Loan in 1981, and changed the name of SGF to United Financial Group (UFG) in 1981. USAT, the savings and loan subsidiary of UFG, kept the same name. It now had approximately 58 branches.

UFG carried with it a special covenant from a 1977 loan note issued, forbidding dividends except in special circumstances. Yet in 1981, when Kaneb Services spun off UFG, a “special dividend” of UFG stock was distributed to Kaneb stockholders. Also in 1981, UFG attempted to sell USAT to Daniel Ludwig.

On February 12, 1982, FDC and Federated Reinsurance filed a Schedule 13D reporting that Federated Reinsurance had purchased 7.86% of the outstanding shares of common stock of United Financial Group, Inc. (UFG). The 13D–in accordance with Hurwitz’ now familiar technique–stated that the acquisition was for “investment purposes”. In the first amendment to the Schedule 13D, filed March 3, 1982, Federated Reinsurance declared that it had “no present intention to seek to acquire power to direct [UFG’s] management or policies or to exercise control over [UFG] or any of its subsidiaries or affiliates”. That amendment also stated that Federated Reinsurance did not intend to purchase more than 10% of UFG’s common stock.

Yet, contrary to the statements in Federated’s 13D’s, the entire takeover of UFG/USAT covered only a seven-month period. By August 1982, FRC and MCOH had 23% of UFG stock, and Barry Munitz had been elected to the UFG Board. By December, Hurwitz and MCO Holdings were described in 13D’s as “control persons” of UFG. So, by the time Ronald Reagan signed the Garn-St. Germain Act (October 15, 1982), Hurwitz had controlling interest (24%) in a large deregulated savings and loan. As Reagan stated on the day he signed the Act into law, “all in all, I think we’ve hit the jackpot.”

During the UFG takeover period (February-August 1982), Drexel Burnham Lambert (Drexel) entered the picture. Drexel sold $260 million, face value, in “junk bonds” or “zeros” (zero coupon convertible senior subordinated notes) for MCO Holdings, the Zero(2007), which netted about $3.4 million for MCOH. Within this same period, MCO Holdings lent Federated Reinsurance Corp. (FRC), a subsidiary of their mutual parent corporation FDC, the money to purchase UFG stock and Simplicity stock. The junk bond sale thus formed a small “blind pool” of MCOH money for Hurwitz to use in acquisitions, with UFG and Simplicity the targets. MCO Holdings became a large stockholder in UFG, as did Drexel Burnham Lambert.

It was FRC who initially took over UFG, but when FRC was sold in late 1982, FDC took its place in the ownership of UFG and USAT. In October FDC sold all the outstanding & issued shares in FRC to `an unaffiliated 3rd party’. FRC is sold to Holt Corp. for a cash price of $1,573,021, agreed not to compete in certain reinsurance business through October 27, 1984 for $100,000 per year for 10 years. All shares of MCOH, Maryland Realty Trust, UFG were transferred to FDC and two notes receivable with balances of $1,595,081 also were transferred to FDC.

In December 1982, UFG and USAT engaged in a land sale transaction with Nu-West Florida. A Board member of Nu-West was Loren Pratt who had been, until late in this period, Vice-President of McCulloch Properties and the director of Pratt Holding Company in Fountain Hills. (Pratt Properties had become MCO Properties in 1980, and was a wholly-owned subsidiary of MCO Holdings.) It is not clear whether Pratt was an officer of any part of the MCO/Hurwitz empire at the time of the land deal. Because so much of the empire was real estate-oriented, and so many opportunities for cross-over existed between the twin worlds of real estate and securities (i.e., deeds, mortgages, etc.), the opportunity for self-dealing was great.

At the end of 1982, USAT regulatory net worth is $58,388,000 more than amount set by FSLIC. USAT reports net worth to be $89,789,000 “actual” = $76,311,000 (closing audit) In either case USAT exceeds regulatory net worth on this date.

Another major player in the Drexel network entered the Hurwitz scene in 1982, and lined up a deal which was to nearly double the size of USAT by early 1983. This was Carl Lindner of American Financial Corporation, now most known for his ties to the infamous Charles Keating. (Keating was an Executive Vice-President and director of American Financial Corp. (“AFC”) prior to 1979, and also a founding partner of the law firm Keating, Muething & Klekamp, which represented AFC. In July 1979, an SEC judgment entitled SEC v. Keating, Muething & Klekamp against Lindner, et al., enjoining them from self-dealing in an Ohio bank subsidiary.) The same year, Keating bought Continental Homes of Phoenix from Lindner and renamed it American Continental Corporation, which then bought Lincoln Savings & Loan in 1983 with Drexel-issued junk bonds.

Lindner’s AFC had a subsidiary called PennCorp Financial which, in turn, had a subsidiary called First American Financial of Texas (FAF). FAF had a subsidiary called Houston First American Savings Association (Houston First), which had 36 branches.

In February 1982, just as the UFG takeover was occurring, UFG signed a loan agreement with FAF and PennCorp. PennCorp at this time distributed 2.9 million shares of FAF as a dividend to PennCorp’s shareholders, and retained 600,000 shares in connection with the sale of PennCorp to Tsai’s American Can. In August 1982, when Hurwitz was already in control of UFG, an agreement was signed between UFG and FAF to merge; a deal was made between MCO Holdings and AFC to accomplish this in August, and signed in December 1982.

Thus, United Financial Group (UFG), newly acquired by FDC and MCOH, merged with First American Financial (FAF), and the respective subsidiaries, USAT and Houston First, also merged. An additional 36 branches were added to USAT’s 58 branches, making a total of 94 branches when the merger was completed in April 1983. However, 4 branches of USAT were sold in November 1982 to Olney Savings Association for a $6.6 million gain for UFG, so the total branches in April 1983 may have been 90. Houston First’s assets were $1.5 billion according to a 6/30/82 financial filing.

Early in January 1983, Hurwitz, personally, bought 44,000 shares of “FAF of California”, a separate corporation. This may have been a mistake or a mistaken entry by the SEC’s publication, because in March 1983, FDC bought 663,648 shares of “FAF of Texas” to increase their holdings. FAF, Ca had John H Sculley and John H Roberts Jr (see Rosenberg) as directors. Hurwitz and Kozmetsky were elected to the FAF, Tx Board in January 1983, before the completion of the merger in April.

The April 1983 merger of UFG and FAF provided $1.1 billion in a loan portfolio to UFG and the addition of $550 million in Goodwill to the assets of UFG. During that month, FDC traded 7.4 million shares of FAF for 523,000 shares of UFG, and 2 million shares of UFG were issued to FAF stockholders.

UFG, now doubled in size and firmly under Hurwitz’ control, used a subsidiary called United Financial Corporation (UFC), to attack, in March 1983, Castle and Cooke Corporation. MCO Holdings also participated in the attack.

In 1983 the Recession ended. Milken was ready to move to new plateau.

Drexel and Michael Milken began the “Enterprise” and began raising funds for the Boesky organization.

In April, Drexel financed MGM-UA for $400 million, its largest offering to date.

Forbes quotes a Hurwitz’ detractor, speaking of this era, that “He has cut a few too many corners to get what he wants”

In April MCOH began acquiring Ensource stock. In May, 1983 Hurwitz took Home Centers of America public. This offering involved many members of the Texas Network including Rosenberg and John Connally.

Twin Fair

In April 1983 SPC and MCOH acquired control of the REIT Twin Fair, which became a sub of SPC’s successor corporation Maxxam and was later renamed Maxxam Properties Inc. Twin Fair held real estate in NY & Fla. and a $21 million tax carry forward. On April 27, 1983 SPC bought 125,000 shares of Twin Fair from MCOH and agreed to buy another 125,000 shares of Twin Fair from MCOH for $12.5 million. In September SPC bought more of Twin Fair for a total of $25 million and a 68.8% interest.

SPC’s 10K states: Between May 31, 1983 and June 7, 1983, Simplicity (or MCOH?) purchased on the open market 435,000 shares of common stock of a New York Stock Exchange Company for an aggregate purchase price of $13,708,062. On June 7, 1983, the Company purchased on the open market 475,000 shares of such issuer for an aggregate purchase price of $14,986,250. The funds used by the Company to purchase the common stock of such issuer were borrowed from Simplicity pursuant to a non-interest bearing note. On that same date, the Company agreed to sell, and Simplicity agreed to purchase, the 475,000 shares purchased by the Company for $31.55 per share, less any dividends received by the Company in respect of such shares, subject to the expiration of the application waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. On July 8, 1983, Simplicity purchased the 475,000 shares owned by the Company for $31.55 per share, or $14,9986,250 in the aggregate. Simplicity paid such purchase price by cancellation of the promissory note referred to above. On August 16, 1983, Simplicity purchased in the open market an additional 223,400 shares for $7,048,270. In December 1983, an agreement was reached under which substantially all of such shares of such New York Stock Exchange company were exchanged for an equal number of shares of new issue of preferred stock as well as the provision that such preferred shares may be purchased from Simplicity in August 1984 for $53,000,000 plus accrued dividends. (PL000960)

A December 1983 Twin Fair self-tender boosts SPC & MCOH to 96% ownership. By early 1984 MCOH & SPC have 100% of Twin Fair.

Apr. 24, 1984 a Note was issued to Twin Fair Holdings by Carteret S&L, F.A. sub Carteret Commercial Mortgage.

In Sep.84, Hurwitz through Twin Fair, a Simplicity subsidiary, attacks Holly Sugar; leads to “Greenmail”

Drexel, Hurwitz and AMSTAR
In May 1983, Simplicity put AMSTAR in play. ELIC owned 10% of AMSTAR common stock. Drexel advised SPC in this acquisition. By August SPC held 12.4%. In September 1983 SPC made a $35 million, long term investment in AMSTAR valued at $53 million during Mar.-Sept. 1983. Under pressure from SPC talks began regarding an Leverage Buy Out. By October a group led by KKR received AMSTAR’s board’s approval for a tender offer. SPC sold its shares to AMSTAR in a greenmail prior to the approval of the offer. Jefferies was also involved in AMSTAR. Maxxam’s 10Q ending September 30 reports a net gain of $12 million in sale of a Pf stk investment thought to have been AMSTAR.

In July, 1983 Drexel financed MCI communications for $1 billion and the WSJ reported the successful Jefferies stock trading -in the third market – through telephone deals.

By August the market had risen 50%, over the prior 12 months. In September HITS, a junk bond mutual fund, was formed by Milken.

Milken engineered securities swaps so First Executive, COL S&L, Drexel unload Pf in Integrated Resources, Inc. at $37 when market at $32. Integrated, a client of Drexel, does private real estate deals with Milken.

This was also the time of the worst economic decline since Great Depression. Interest rates were in double figures, Mexico was ready to default on its loans, and stocks were cheap.


Castle & Cook

On October 14, 1983, Hurwitz attacked Castle & Cooke (C&C) through United Financial Corp & MCO Holdings. UFC was a subsidiary of USAT. Hurwitz is chairman of UFC Board. C&C owned 150,000 acres in Hawaii; the entire island of Lanai and the 5,700-acre Sea Ranch in California.

In December 1983, MCO Holdings, which had begun buying Castle & Cook stock in October, halted its purchases short of HSR limit. MCOH-UFG file 13D claiming C&C stock for investment purposes only.

On March 9, 1984, Hurwitz threatened a takeover if not “greenmailed” by C&C. This attempt at a takeover using insured deposits was halted by a Federal court when on March 12, Hurwitz was restrained by the court, C&C sued H for false 13D filing, using USAT deposits for takeover bid & failing to disclose “excessive unsecured loans”.

On March 15 Hurwitz filed a 13D on C&C at 11.8%. In April, Hurwitz “greenmailed” C&C. USAT’s share of the $13 million total is said to be $7 million.


On October 15, 1982, Reagan signed the Garn-St. Germain Act, “I think we’ve hit the jack pot,” he said. On October 25, Boesky filed a 13(D) on Financial Corp. of Santa Barbara. On November 9, Boesky made a tender offer for Financial Corp. of Santa Barbara with Drexel as banker. FHLBB sandbagged the offer. Deal withdrawn.

In late 1982, the NYT quoted Jill Delaney, saleswoman with Jefferies & Co., when she described a deal with Caesar Cone II, where he agreed to sell his shares in Cone Mills (takeover target of Western Pacific Ind.)

NYT also reported Gulf & Western’s sale of its 25% stake in Amfac to Jefferies & Co.

ELIC acquired a 13% position in Fischbach, a Posner target. Milken orders Boesky to take a large stake. Carr depended upon Milken and generally did as Milken asked. This because Milken made a market for ELIC’s junk bond purchases. Boesky was becoming dependent upon Milken as most of Boesky’s financing was through Drexel.

Milken also ordered Boesky to take a large position in Columbia Savings creating a Drexel secret interest in a Drexel client.

Drexel created a $1 billion airfund for Charles Knapp, of FCA, selling Preferred & SSN’s; major buyers incl Atlanta/Sosnoff Capital Corp.,

AFC (Lindner); Sallis Securities Co. (Fred Carr’s street name); 338 Rodeo (COLS&L); Worldwide Trading Service (Atlantic Capital and Clarendon IC)

Steinberg set up a partnership Reliance Capital Group, Ltd. Partnership (RCG). Investors incl: Boesky, Perelman, Posner, Belzberg, Spiegel, & the largest is Mantar Associates, Milken and other Drexel clients.

Reliance LP investors:

$ 1 million Wm. McGowan, MCI Communications (Drexel raises $2 billion in JB’s for MCI)
$ 3.5 million Wynn and others
$ .75 million Spiegel family
$ 1 million Mr. & Mrs. Boesky
$ 2 million Gene Phillips & Wm. Friedman (Southmark and San Jacinto S&L)
$ 1.5 million Perelman
$ 1.5 million Posner
$ 1.5 million Belzberg family
$ 1 million Sinatra
$ 2 million Diana Ross
$ 6 million Mantar Association
$ 1.6 million Michael Milken

From 1977, 225 companies issue $19.5 billion in JB’s but in 1983 $40 billion in junk bonds are issued v $375 billion issued in straight bonds

Drexel has 23 offerings over $100 million and a total of $4.69 billion for all JB offerings.

First Executive bought 100% of Drexel junk bond issues. Fred Carr (First Executive) and Thomas Spiegel (COLS&L) were said to be thriving on junk bonds.

During 1983 MCOH opened a trading account with Jefferies & Co.

In January, 1983 Tom Gaubert took over a small thrift in Grand Prairie, TX; moved it to Dallas, and changed its name to Independent American S Association (IASA). Assets double by (1/84). Examiners catch wind of odd deals & weird clients.

In early 1984, UFG hired Salomon Bros. & Goldman, Sachs to sell up to half of USAT’s 90 branches.

By March 1984, USAT has 95 real estate projects. of these, one residential and 6 commercial are in Florida & New Mexico; USAT’s real estate investments are in 6 projects, 2 of which are in Florida.

In March, Icahn testifies against Greenmail before Congress.

In the same month, Drexel arrangement with Boesky, Jefferies begins. In return for agreement to raise $800 million for Boesky, Boesky agreed to buy and to sell securities at the direction of and for the benefit of Drexel without revealing true ownership. Drexel used Boesky “to manipulate securities prices and to facilitate merger & acquisition activities”

PL Takeover Era

Sometime in the Spring of 1984, Drexel brought takeover candidate Pacific Lumber to Maxxam’s attention. That July, Drexel began raising blind pools for its customers for the purpose of “creating equity” for potential acquisitions.

Drexel and Maxxam discussed Pacific. Maxxam/Drexel opened talks on Pacific Lumber (PL) as one of more than two dozen Forest Products Industry target companies. Quirk says he introduced Maxxam to the forest product industry about this time period by meeting with Reid. Quirk discussed Champion International with Maxxam. But C.I. announced plan to acquire St. Regis so Maxxam lost interest. Quirk discussed three Forest Products corporations with Maxxam in September. Decision was made to invest in PLC apart from potential acquisition no later than 12/84.

In June the stock market a sharp rise lasting until April 1986. Stanley Rosenberg, MCOH director is also a Director of Groos Bank NA (San Antonio), COB. Ezra Levin is a director of UMB Bank & Trust. SEC v Data Point filed, settled, enjoined its directors although “Kozmetsky and Leone were not named”.

In July, Michael Milken raised $100 million `blind pool’ for Triangle. One of the early ones Milken issued for his players. That Summer at the Gobhai seminar: Drexel identified the need to find those players who no one else could or would finance, who therefore would be desperate enough to pay the price (interest, rates, fees, equity stakes) Ex: Ichan, Wm. Farley.

That Summer, Drexel began its mortgage backed securities dept. USAT buys increase from $250 million (’84) to $6.5 billion (’86).

In July MCOH acquired 1 million shares (15.6%) of Horizon Corp., which lead to a merger.

Jefferies & Co. acquired 1.2 million shares (3.5%) of Walt Disney Prod.; 690,000 of these are held for unidentified customers of First N.B. of Minneapolis. NYT had an interview with Ronald A. Alghini, president of Jefferies Group, described as active in third market; he discusses outlook for 24-hour trading.

From mid-August through December, Maxxam held a board meetings regarding its investment company status and its need to acquire new producing company. Rosen attended.

On August 30, Rosen’s calendar shows a meeting with Quirk, “here.”

On August 31, Maxxam Group, Inc. opened an account with Jefferies & Co.

In September, PLC hired Dillon Read to commence a stock buy back program.

Rosen calendar on September 11 shows a meeting with Reid and Quirk at “60 Broad St.”

In October, Maxxam began buying United Nuclear Corp. Was this from Jefferies? Rosen, was a director of FAB Industries, Inc., Kozmetsky, a director of Republic Bank (Austin).

It was October 1984, that Robert Quirk remembered as the time Drexel initiated discussions of PL with Maxxam.

Formation Of Maxxam As An Investment Company

In 1984, after taking control of Maxxam (formerly Simplicity Pattern), Hurwitz sold the major operating businesses of Maxxam and terminated the employee pension plans, in effect liquidating the company for cash. He is now seeking to reinvest that cash by acquiring Pacific Lumber. (PL0003451)

Maxxam Group Inc (Maxxam), the eventual purchaser of Pacific Lumber, was created from Simplicity Pattern Corp (SPC) in June, 1984. Maxxam was formed as an acquisition vehicle through the sale of Simplicity Pattern, Inc (SPI), a newly formed production subsidiary of SPC, to Triton Group Inc (TGI). TGI simultaneously merged with Republic Corp. SPI’s parent corporation Simplicity Pattern Corp (SPC) changed its name to Maxxam Group Inc (Maxxam) and renamed its real estate subsidiary, Twin Fair, to Maxxam Properties Inc (MPI) which simultaneously merged with Maxxus, a subsidiary of FDC and MCO Holdings. The cost of the mergers was born by TGI, which transferred $34 million to Maxxam. Maxxam took over 10% of TGI in the merger. The merger costs and the funds for the repurchase of Maxxam’s TGI stock was funded later by the issuance of Drexel underwritten junk bonds. Maxxam became an Investment Company, a shell corporation, under the meaning of the Investment Company Act.

Triton Group Inc

In 1970’s, Chase Manhattan Mortgage and Realty Trust was the largest real estate investment trust. It entered bankruptcy in February 1979 and emerged from bankruptcy in the May 1980 as Triton Group, Ltd. Triton was four real estate properties & tax carry forward. By mid-1984 Triton was a resort, Palmas Del Mar, and the indebtedness. On June 2, 1982, American Financial Corp. reported owning 36% of Triton Group, Ltd. common. Ten banks held warrants for Triton stock. Reliance Financial Services, Inc. also held common.

Mar.1983, Fuqua bought a large block of Triton and took over its management. Fuqua Industries reported holding 24.7%, J. B. Fuqua held 5.2% and Chase Manhattan Bank held 11% from the conversion of warrants. May 31 Triton published, as exhibit 13 to its 10-K, a sales presentation seeking a buyer for Triton Group.

At the time of the merger of Simplicity into Triton, Triton was controlled by J.B. Fuqua (7.5%) and Fuqua Industries (20.4%). In the merger Triton will also merge with Republic Corporation controlled by New America Fund, Inc. Triton will also trade Palmas & Triton stock to Maxxam for Simplicity Pattern.

Republic Corporation

In 1978 Republic Corp. emerged from bankruptcy with no owners holding over 5% of common stock. A group of banks controls Republic through ownership of its Pfd. stock. By 1979, New America Fund (NAM) held 11%. In 1981, it held 15.6 % and in 1982, NAM held 20.097%. In 1983, NAF held 20.792%, and J. P. Morgan & Co. converted its Pfd. to common and held 8.723%. In 1983, Felt of Trafalgar Industries joined the Board of Directors of Republic and by March 1984, Felt was its Chairman. By August 13, 1984, Glen Kassan was President of Triton. Republic Corp. directors incl chair John P. Guerin, a managing partner of Pacific Partners & Richard Seaver, Pres. of Hydril. (Kozmetsky is listed as a director of Hydril in Oct. 1984). Guerin is also COB, Pres. of New America Fund which owns 40% of Republic Corp.

Dec.1984 Triton was 40% controlled by Fuqua. Triton merged with Republic Corp. then traded money, Triton stock, warrants and Palmas Del Mar for Simplicity Pattern and a warehouse. SPC has changed its name to Maxxam Group, Inc. (Maxxam) and merged with Maxxus as part of Simplicity sale.

Republic Corp. was controlled by New America Fund. Republic had been brought out of bankruptcy in the 1970’s by Sanford Sigoloff now chair of Wickes. MM owned or controlled vast portions of Sigoloff’s debt. New America Fund now has 40% of Republic. Republic’s directors include chair John P. Guerin, a managing partner of Pacific Partners and COB, Pres. of New America; and Richard Seaver of Hydril. Kozmetsky was also a director at Hydril. Felt of Triangle Ind.????? was Chairman of the Board.


Maxxus was brought out of the bankruptcy of Maryland Realty Trust. FDC owned 45.7% of Maxxus, Kozmetsky owned 20% of Maxxus. Hurwitz, Kozmetsky and Munitz were directors with Munitz chair and CEO.

On October 10, Maxxam and Maxxus agreed to merge. The Maxxus – Maxxam merger caused Maxxam to buy $3,100,000 in Maxxus shares and to distribute 567,600 shares of Maxxam to Maxxus stock holders.


Maxxam received from Triton $64,700,000 as $35mm in cash, $10mm in Triton common stock, $8mm in Simplicity Pf series A&B and warrants to buy 3.5mm shares of Triton. Maxxam also received Palmas Del Mar which it booked at a $2mm loss. Maxxam declared a $24.4mm gain on the sale.

Triton paid $130.7mm for Republic at $33 and a $10 stated value Triton Conv.Pf share for each Republic share.

Triton raised funds for Simplicity and Republic purchases with bank loans. Triton formed a partnership with Maxxam called SPI Acquisition Corp., a subsidiary of both Maxxam and Triton. After the SPI sale Maxxam had control of 13-20% of Triton (20% with the conversion of the warrants.

By May 7,1985 Robert Rosen was made the Vice-Chairman of Triton Board of Directors.

In December 1985, Triton issued $125mm in JB’s to retire the bank debt from the SPC and Republic acquisitions. These were underwritten by Drexel.

In April 1986, Fuqua sold its holdings in Triton to Charles “Red” Scott of Intermark, Inc. (40%). Fuqua sold its shares in Triton for $34 million and an after tax gain of $11.5 million.

In January 1987, Maxxam held 7.1% of Triton common, a reduction in control, from 19.2% as additional Triton shares had been issued to “3rd parties”, possibly connected to the junk bond issuance.
In May 1987, with Robert L. Rosen, general partner in Ballantrae Partners still on Triton BOD, Triton redeemed Maxxam’s SPC series A&B Pf for $8mm and Triton warrants for $2 million following a Drexel bond offering?

According to Triton’s Annual Report, dated May 1987:
“The excess of the Simplicity acquisition cost over the fair value of the net assets acquired was approximately $42 million.”

“The excess of the Republic acquisition cost over the value of the net assets acquired was approximately $15 million.”

Acquisition Excess Fair
Cost Value
Simplicity $ 64,700,000 $ 42,000,000 $ 22,700,000

Republic $130,679,000 $ 15,000,000 $115,000,000

In February 1988, Simplicity Holding Co. was acquired by WesRay from Triton in a $117mm LBO with $52mm in senior debt and $61 million in subordinated debt both underwritten by Drexel.

In 1989 Paul Schwartz Director of Maxxam & UFG BOD is a Director of Triton.

In 1990, Triton becomes a sub. of Intermark in a stock trade. By then Intermark now owned 23.7% of Fuqua Ind. and Scott had become a Director of Fuqua.


On October 11, Rosen’s calendar shows a meeting with Quirk. Quirk initiated the discussion of PLC. Prior discussions centered upon the timber industry in general and a set of possible candidates for aquisition only in this era did the discussion focus upon PLC with the motive being Hurwitz’ interest being sparked by the buy back.

In November, Maxxam bought into Transcontinental Services Group with Maxxam holding 3,469,500 Common shares & 100 thousand warrants of TSG.

Sometime in November or December, Hurwitz meet with W.P. Fitzgerald (hired him 1/85) for 3 hrs. The topic was USAT. On page 12 and 13 of the 10/16/85 deposition of Maxxam’s Walter Fitzgerald, he speaks of a meeting with Hurwitz for the purpose of Maxxam’s hiring him as Senior VP and Director of Investments. WF reports `we spent a lot of time’ talking about UFG.

In December, Jefferies & Co. acting for Irwin Jacobs, says an NYSE specialist sold Jefferies broker 2 million shares of ITT instead of 500,000 specialist maintains; dispute arose after 2 million ITT trade crossed ticker only to be corrected by Big Board to 500,000; Big Board upholds specialist’s contention.

Jacobs says his broker Jefferies & Co. has been able to fill his order for 3.8 million shares of ITT despite initial mixup on NYSE in handling. That is about 3% of ITT common.

From October through November Quirk prepared a 5 volume report on PLC for Maxxam. On December 13 and 14, Lynch meet with Maxxam to review timber industry and PLC. Quirk and Reid were involved, Rosen attended for Maxxam. Quirk presented Drexel’s PL analysis to Hurwitz and Rosen. Maxxam develops major interest in PLC. From December through February 1985, Drexel analyzed PLC. Lynch tried to find out who owned PLC stock.

Dec. L. Reid mentions Levine as having direct contact with Hurwitz during 1984-1985 Hurwitz claims to have met Levine once.

Drexel’s John Sort: `We used the high yield weapon twice, Steinberg took Greenmail. We decided not to do this for Greenmail. Too much criticism.’

In Mesa’s run at Gulf, MM had $2.2 billion in commitments from Network before public announcement. Word leaked. Pickens was fading. Drexel raises $300 million from Lindner but Pickens bid was too small pushing Gulf to Standard Oil of Calif., a White Knight. In December, Pickens is Greenmailed in `Phillips’

There were 3,157 takeovers in 1984.

Alliance for Capital Access PAC, lobby formed of Drexel clients at Drexel’s prompting to oppose federal limits on JB’s; Larry Mizel of MDC Holdings was leader.

In 1984 Maxxam booked a $42.3 million gain with a $24.4 million on the sale of SPC & $12.2 million on sale of Pf Stock (unnamed but probably AMSTAR). Maxxam held 19.2% of Triton following the merger.


AS OF 12/31/84 (Source – 1984 10-K)

Name of Issuer of Market Value Notes Preferred Shares (mm=millions)
American General If this is Amer. Gen. Capital Corp., then it is Caywood, a Drexel client $ 1.063 mm
Burlington Northern 1.459 mm
Centrust (Drexel Client) .930 mm
First Arkansas Capital .945 mm
First City Bankcorp (Drexel Client) .632 mm
James River Corp. .432 mm
Kaneb Services .450 mm
Landmark Funding (Drexel Client) .709 mm
Occidental Petroleum (Drexel client) Boesky involved per US v. Drexel .524 mm
Occidental Petroleum 2.160 mm
PSFS Finance .950 mm
Reading & Bates .420 mm
Tidewater Inc. .497 mm
Torchmark Corp. .513 mm
US Steel 1.530 mm

In 1984, Federal court blocks merger with National Intergroup. Inc.

Common Shares

Name of Issuer of Market Value Notes  Preferred Shares (mm=millions)
UNC Resources 13.191 mm

Longterm Investments

Leveraged Pf Trusts 6.621 mm
TSG NV 9.395 mm
SPC Series A Pf 5.000 mm
SPC Series B Pf 3.000 mm
Triton Common 8.000 mm
Triton Warrants .370 mm
Other notes receivable 8.000 mm

Drexel Ownership In UFG-USAT

Also, at the end of 1984 the FHLBB approved the June 1983 application by FDC-MCOH but among “several conditions” was one requiring a pro rata guarantee of capital to maintain networth or if FDC-MCOH exceeded 50% of common stock then 100% of networth was to be maintained. Other conditions were not revealed in SEC disclosures by MCOH. FDC-MCOH opened discussions with the FHLBB regarding a modification of the networth conditions. These discussions were never concluded. At the end of 1984, Drexel reported having bought 7.1% of UFG-USAT common. However, Drexel did not disclose when the purchase was made. Given Milken’s habit of holding stock for others, without disclosing that fact, it is possible that Drexel was holding this stock for Hurwitz. Or was it similar to Columbia, Centrust and Imperial?

During 1984

BancUnited `discontinued’

USAT entered into many joint ventures with Barry Lotz;

USAT real estate investments included $34 million in Cinco Ranch with Gibraltar Savings

USAT purchased a real estate investment in Houstonian,Inc. (were Hurwitz, GHW Bush and John Connally live)

USAT was a limited partner with a Houston developer Treplow Co. building a large office building in L.A.

USAT became associated with a newly formed insurance company United Texas Insurance Agency

USAT started a new sub called United Capital Venture, Inc.

USAT buys $251,299,000 in mortgage backed securities, earned $12,393,000 from sales what from Drexel?

USAT buys $361,850,000 in investment securities, earned $33,323,000 from dividends & sales. USAT bought $5 million in Drexel bonds.

The sale of USAT branches to IASA yielded UFG’s best year and consequently the only dividend paid to UFG in its history.

Beverly Hills S&L bought $300 million in junk bonds mostly from Drexel.

On July 30, 1985 the Feds close Beverly Hills S&L, call it dumping ground

Milken using `Richard Sandler’ owns 9.9% of COLS&L; Drexel groups control 10.3%; MM controls Drexel Grps.; Milken, therefore controls 20% COLS&L.

Jefferies Group reports 4th quarter earnings $3.5 million compared with $1.7 million a year earlier for same period.

1985 Transactions

Note that these are all the known deals from 10K’s and public sources.

In 1985, Milken gives deposition. In SEC deposition of Milken says, “I don’t have investment authority!”

Milken moves his players like a chess game. Highly confident letter first used.

Jan. 07 Hurwitz, Rosen meet at Drexel

On Jan. 16 . Maxxam & Maxxus merge, Maxxus is controlled by FDC and the Kozmetsky group. Maxxam controlled by Hurwitz, Kozmetsky, Munitz and MCOH. MCOH controls Maxxam, FDC controls MCOH (64.4%).

Hurwitz sued by Shamrock & Associates over Horizon proxy fight alleging issuing notes to go private without stockholder approval.

Coastal Corporation-ANR

On January 14, Coastal Corp. began to acquire American Natural Resources Corp. (ANR) stock. Coastal Corporation (CC) owned 1.66 million shs of American Natural Resources (ANR) common. CC hired Drexel (1/14). CC/ANR talked began.

In February Levine arrived at Drexel. Kay assigned him to CC/ANR. He assured Coastal executives that ANR was increasingly vulnerable because more and more of the stock was falling into the hands of arbitrageurs eager to sell into a tender offer.

In March, according to LA Times (12/6/86) Drexel in attempting to line up buyers of JB’s to finance ANR-CC sent sealed envelopes to Drexel clients on (3/1) identifying the target. Those who later financed the takeover (and therefore presumably received the information) include Steinberg, Belzberg, Perelman, Wynn, Peltz, Riklis, and Hurwitz’ Maxxam. According to New York Times (12/9/86) Drexel began seeking financing on (2/23). On (2/27) ANR stock had climbed from $46.50 (2/22) to $49.75 a share. Maxxam held ANR stock prior to March 25, indicating a possible inside trade.

As talks between ANR & CC commence, ANR threatens a “poison pill”. CC authorizes a tender offer at $60 on (3/4) but no public announcement is made. A press release on (3/12) states “meetings held”. ANR-CC agree to $65 and announce on (3/13). During the period (2/14-3/1) Levine (now at Drexel)bought 145,000 shares ANR. Levine tell Wilkes and Boesky. Boesky bought 3,735,00 shs of ANR.

In Maxxam’s 10-K for 1984 dated March 25, 1985, reference is made in the notes on Exhibits no 10(s) of a securities purchase agreement dated 3/13/85 among CC, Maxxam, “and other purchasers named therein” (incorporated by reference to Exhibit (b)(6) of Amendment No. 9 dated March 18, 1985, to the schedule 14D-1 of Colorado Interstate Corporation with respect to common stock of American Natural Resources Company). Also, according to an Exhibit to Kassan’s 10/3/85 deposition, Maxxam held on 10/3/85 $16,025,000 of C.C. Pf.

CC/ANR was the first junk bond financed hostile (turned friendly) takeover by Drexel. The plan was for a lightning fast strike with an all cash tender offer.


Maxxam, ITC, Jefferies, Drexel, Boesky And AMF

Early in 1985, Morgan Stanley, AMF’s investment banker, brought AMF to Hurwitz’ attention. AMF sought out Maxxam and Minstar to finance an LBO. Maxxam put AMF into play, engaging Shearson Lehman to raise funds for a proposed AMF acquisition. Irving Trust Co, which would later join with Drexel to finance the PL takeover, agreed to help finance Maxxam’s part of an offer for AMF through formation of a bank syndicate. Ezra Levin is said by ITC to have introduced ITC to Maxxam. Jefferies, under a contract with Minstar, had been buying AMF stock and filed a 13D on April 15, 1985. Hurwitz and Jefferies worked together on option agreement for the AMF takeover bid. Minstar filed a 13D on April 26th. Jefferies eventually sold his AMF holdings to Minstar on July 8th. Minstar filed a 14D-1 on July 18th. Drexel was deal manager for Minstar. (Boesky was also involved in the AMF takeover.) The AMF contract with Jefferies was an example of the contract Hurwitz requested of Jefferies on August 5, 1985 for the PL purchases.

Feb. 06 Rosen calendar shows meeting “here” with Dan Lynch, Bob Quirk, Doug McClure. Drexel calendar shows meeting with Rob and Charles

Feb/Mar. Moradian learns about the Boesky-Milken arrangement re: certain stocks

By Mar. Hurwitz is president and CEO of UFG MCOH’s “after tax equity” in UFG’s 1984 net earnings of $50.3 million was $4.9 million. MCOH holds 100% MCOP, 37.3% Maxxam, 17.8% Horizon and majority of MCOR. Maxxam has subs: MPI, Maxxus Properties, Inc., Palmas. Maxxam holds 12% TSG valued at $9,600,000

In March, the Columbia S&L stockholders include Drexel (10.2%), Sandler(Milken) (9.9%), Integrated Resources, Inc. (Harvey Eisen) (9.8%), Boesky (9.8%), Sosnoff (9.7%)

On Mar. 18 & 19 Daniel Lynch discussed with John Hancock Mutual “timber put” and the financial transactions being contemplated by Maxxam. Letter dated this era does not reveal names but does demonstrate real property as target

On March 19, 1985, Drexel’s Daniel Lynch sent a letter to John Hancock Insurance re: A Drexel “Client’s” acquisition intentions.

Spring Maxxam & Drexel worked on tender offer. First mention from Hurwitz of PLC as interesting to look into per Affinito.

Alliance for Capital Access PAC gives big bucks to Rep. Tim Worth of Colorado. Other contributors and targets see (259-260 in Predators Ball)

Mar. 27 Predators Ball date

In February, Icahn’s bid for Phillips was 1st takeover launched without finance in place. The list of buyers in Icahn’s Phillips deal include no S&L’s `even though we had a lot of them’; growing concern about JB’s and S&L’s; so no S&L’s in hostile takeovers to avoid drawing suspicion. Buyers include Triangle, Wynn, Belzbergs, Knapp, Atlantic (biggest). Belzbergs are First City Properties, First City Financial, Far West Financial.

Maxxam holds $10 million in Phillips notes in Oct 85

The first and only media mention of Drexel junk bonds purchased by a subsidiary of USAT was the April purchase of $50 million in Picken’s Unocal bonds by United Houston Financial.

In April 1985, USAT Finance, a sub of UFG-USAT issued DARTS (Dutch Auction Rate Transferrable Securities). A Drexel underwriting for the purpose of supply funds for junk bond purchases.

In April, the National Can takeover by Peltz and Mays Triangle Industries begins.

May Triangle makes all cash offer for National Can (NC)

NC wants more. Peltz says `I had to get MM’s OK’

By March 1985, Maxxam began buying United Nuclear Corp and Amsted stock through Jefferies. The Amsted purchases were by Maxxam Associates, a partnership of MPI and MCOH.


Apr. 01 Maxxam holds 6.9% UNC Com. at $14,350,000

Apr. 10 Maxxam holds 8.7% UNC files 13(D)

May 14 Maxxam current holdings 5% or more: AMSTED, UNC, TSG, Informatics, Triton.

Aug. Jefferies acquiring AMSTED and UNC stock for Hurwitz.

Aug. 09 MCOP & Maxxam associates hold 8.6% Amsted, Maxxam holds 12.4% UNC

Oct. 02 Jefferies & Co. deliver 1,216,500 shares of UNC to MPI

Oct. 02 Jefferies & Co. delivers 1,216,500 shares of UNC (United Nuclear) to Maxxam Properties, Inc.



Apr. 10 Maxxam Associates formed, as a partnership between Maxxam Group and MCO Properties

Apr. 16 Maxxam Associates, Maxxam hold 8.7% AMSTED file 13(D). Hurwitz sued by Amsted for false 13(D), leads to “greenmail” in Feb. 1986 show maxxam amsted buy from jefferies

Apr. 01 Rosen calendar shows meeting “Bilger-Drexel-L.A.”

Apr. 04 Drexel calendar shows meeting with Gallagher.

Apr. 09 Rosen calendar shows meeting, “Drexel here.”

Apr. 09 First meeting of Drexel and Maxxam personnel (Fitzgerald, Quirk, Reid, Rosen and Lynch) re: PLC.
On Apr 10, 1985, Lynch sent a letter re: timber put to John Hancock revealing that Maxxam was the “Client”.
Apr. 11 Rosen calendar shows meeting, “Drexel at Kramer Levin.”

American Can-Jefferies
In mid-April Gerald Tsai’s American Can Co. bought 9.8% of Jefferies Group shares for $20 million “for investment purposes only”. By August 7, American Can Co. agreed to increase its stake to 20%. In October, due to poor quarterly reports on earnings, stock in Jefferies Group dropped from 22 in July to 13 in October. Ron Alghini and Boyd Jefferies sold their Jefferies stock at 19 to American Can Co, which largely was responsible for bringing its stake to 20%.

HNG – Internorth

On (4/20/85) Houston Natural Gas (HNG) and Internorth start talks. HNG hires Lazard (4/22/81). Internorth hires Goldman (4/25). Public announcement (5/2).
May 3 Internorth files a 13D re HNG 0 to 18.5%

Before the announcement, Goldman’s Brown tells Sokolow who tells Levine. Levin had joined Drexel’s M&A Dept. in February 1985. Lazard’s Wilkis also tells Levine who never the less tells Boesky. From 4/30 to 5/1, Wilkis buys 35,000 shares shares of HNG. Levine (74,000), Boesky (301,000 in Seemala and 285,00 thru other entities). Goldman’s Freeman tells Siegal (Kidder M&A then to Drexel in Feb. 1986), Siegal, et al. buy 60,000 shares of HNG.

According to Oct. 5, 1987 Dingell Memorandum, Pg.7, TSG surfaced in four NYSE investigations in the years around the takeover of PL. In each case TSG bought stock before the announcement of tender offers. In HNG, TSG bought stock in the acquiring company Internorth.

According to Dingell’s Committee Report and Maxxam’s filing within it, Maxxam purchased 3,469,540 shs of TSG on Nov. 9, 1984. On Mar. 22, 1985, Maxxam holds 12% of TSG. In April 1985, Maxxam holds 12% of TSG, FDC & H hold 41.8% of Maxxam, H owns 52.5% FDC.

In the Spring, Maxxam first became a client of Drexel according to Art Bilger. Drexel retained by Maxxam. Maxxam and Drexel worked on tender offer. Art Bilger meets with Hurwitz regarding $150 million bond issue. Rosen and Hurwitz tell Bilger Maxxam had no specific acquisition target at this time.

In the Spring of 1985, according to his later testimony, Hurwitz became interested in PL as an acquisition target.

Apr. 18 Rosen meeting with (Drexel/Lynch)? calendar.

Apr. 19 Drexel calendar shows meeting with John Hancock.

Apr. 28 Drexel calendar shows meeting with Chas. Hurwitz.

May 09 Maxxam Group, Inc. applies for new account with Jefferies & Co.

May 13 Drexel calendar shows “Maxxus filed”

May 13 Irving Memo from D.E. Lee to William Klausing, Sr VP re Lilyan Affinito. This is a superficial research profile on Maxxam and its directors. May be related to AMF deal.

May 14 ITIB letter to PALCO Int’l. controller Roccaforte (see Irving/PL file).

May 14 Drexel calendar shows “Pacific Lumber luncheon”. Is this the dog and pony show?

On May 14, Drexel’s committment committee approved a $75mm senior subordinated 13-5/8 notes due 1992 (SSN) offering for Maxxam. Maxxam filed for registration of $75 million in SSN’s due in 95. Bond offer for $75mm came back $300mm. Maxxam took $150mm. $150mm blind pool financing through Drexel originally for AMF per Hurwitz. No limit of using excess proceeds for Drexel investments. Maxxam realized $143mm in proceeds, buyers include:

AFC 10,000 split into 6 accts.



First Columbia


Mani Hani

Mountain West

Ohio Cas. & Pacholder(?)



Atlantic Corp.(Clarnedon IC)


Keystone (Hong Kong)

FEC bought $51 million.

Out standing: $150mm on 12/31/89, debt held as Maxxam.

Hurwitz and Munitz focussed on deals and organizational strength building showing a growing-into-reltionaships with Milken, Jefferies and ITC.

Milken began to finance Boesky’s firms in 1982 and Boesky was immediately impressed with Milken’s huge cash infusions so much so Boesky did not pay much attention to the fees Milken extracted. These fees and warrants demanded by Drexel put enormous pressure on the operation to earn huge arbitrage returns to make the interest payments. And the equity stake gave Drexel enormous influence over fundamental decisions affecting the business.

In 1982 Boesky began doing business with Jefferies and Co.

MCO Holdings opened an account with Jefferies & Company sometime in 1983.

In March 1984, Milken’s arrangement with Boesky and Jefferies began.

By February 1985, Boesky and Milken had a special arrangement regarding “certain stocks.”

After more than a year of Boesky buying stocks at Milken’s request and with Milken guaranteeing Boesky against all losses both Milken and Boesky realized that they could use each other, not only to generate insider trading profits for Boesky, but to achieve far greater dreams of corporate conquest and control.

Informatics General

On April 16, 1985 Transcontinental Services Group and Maxxam Properties Inc filed a joint 13D as a registered group declaring that each owned 331,500 shares of Informatics for a value just short of $15 million each. The 13D was signed by both Robert Rosen for Maxxam and Stanley Cohen for TSG.

TSG said to be an offshore Investment Co. with principles S. Cohen, R.P. Burrows & a Carribean Mgmt. Co. named Carabsche Beheers Maatschappij NV of Curacao, Netherland Antilles. TSG’s Chair & CEO is Nathaniel de Rothschild. Directors incl. NC de Rothschild, Chrm J. Rothschild Holdings, plc & FJP Mayer, senior managing director of LF Rothschild, Unterberg, Towbin on Dec. 22, 1986, NYT reports Thomas Unterberg Chrm. & A. Robert Towbin, V-Chair. resign form LF Rothschild Unterberg, Towbin Holdings, Inc., FJP Mayer, 45, named co-CEO. LF Rothschild, et al. is an investment banking firm.

Stanley Cohen

According to the 1987 testimony before Dingell, in 1983 Stanley Cohen left his association with Kramer-Levin and joined the Transcontinental Services Group’s Board of Directors.

Cohen’s 1986 biography provided in a Freedom of Information Act request of the NYSE shows him residing in NY and Paris during the PL takeover era. He

-graduated from Cornell in 1955

-took his law degree from Harvard in 1959

-served in the US Army 1959-60

-was an associate in the firm Gotshal & Manges in NY in 1960-61 and in its Paris office 1961-68

-was a partner in Cohen and Meyohas, Klien and Associates, NYC and Paris, 1961-68

-was not listed as to his associations from 1969-81 except that he was decorated chevalier de l’Ordre National du Merite(France) in 1979 and served on the Conseil Juridique International (France) in 1979

-was a partner in Kramer,Levin,Cohen & Klien NYC and Paris from 1981. This partnership was set up by Cohen to provide legal counsel in Europe for some unnamed clients of Cohen according to his testimony to congress in 1987.

His 1986 associations are listed as

-CEO J. Rothschild International NV

-Director in TSG, NV which engaged in arbitrage

-Director in RIT & No plc

-Director in Holmes Protection Inc which provided security services in Europe and the US

-Director in Matra Datavision Inc

-Director in Hottinger Bros

-Alt. Director in L F Rothschild, Unterberg, Towbin a brokerage

Material produced by the NYSE regarding its investigation of inside trading in PL stock in the takeover era shows Cohen as

-Treasurer and General Counsel of International Protective Systems Inc, NYC

-Vice President of Security Corp of America, NYC

Holmes Protection is a sub of SCA which in turn is a sub of IPS.

Persons of interest associated with the above firms are

-Olivier Grinda, VP and Secretary of IPS, President of Holmes Investments. He also served as a Director of Ketchum Communications Inc. Ketchum is of interest for two reasons.

1) Robert Rosen of Maxxam was a neighbor of and a commuter with suspected inside trader in PL stock Herbert Gordon known to be an owner of a NYC sound studio.

Ketchum lists its President of the Specialized Services Group through 1990 as Herbert David Gordon also a director of WNEU-TV.

2) Ketchum’s clients include Clorox which hired Ketchum to defame Greenpeace because of its campaign to halt the use of chlorine in industrial processes that produce Dioxin as a bi-product. In Humboldt County major Dioxin producers in 1990 include Louisiana Pacific and Simpson both of which operated pulp or paper mills polluting Eureka and environs with Dioxin. Because PR firms such as Ketchum hired ex- intelligence community officers to run campaigns in psy-ops and CIA- style disinformation and because listings of CIA agents include one named Herbert Gordon there is a concern that either Ketchum or Gordon may have been involved in the bombing of California Earth First! activists in 1990.

Gordon’s relationship to the CIA is also of interest because during the PL takeover era the CIA through its ex-SEC director William Casey is suspected of using various illegal techniques to raise funds for its covert actions. These techniques included S&L fraud and perhaps inside trading as well as diversion of funds from domestic charitable fund raising.

The three references to Herbert Gordon as Rosen-neighbor, as Ketchum employee and as CIA employee are not necessarily the same person but may be the same.

-Joseph Riggio, Sr VP of Holmes Protection who pled guilty to inside trading in the 1980 acquisition of Santa Fe International Corporation by Kuwait Petroleum. Riggio was related to and received information from Robert (or Ronald) A Feole, General Counsel to S F Minerals Inc a sub of SFIC.

Other inside traders include employees of Charter Oil, controlled by the DuPont’s and later Carl Lindner, and a Qatari named Ahmed Mannai who later became a major stockholder in Houstonian/Livingwell. H/L investors and financiers included UFG/USAT, Drexel and Drexel-controlled Pacific Asset Holdings, also suspected of CIA related dealings with Centrust and BCCI.

-Other parties in TSG include IFI International SA affiliated with Instituto Bancario San Paolo di Torino, a buyer of the Maxxam/PL Bridge Notes.


Early History of Maxxam-TSG connection

From June 1984 to at least March, 1986 Maxxam held a significant investment in TSG and then from December 1986 until some unknown date UFG-USAT held a significant investment in TSG.

In November, 1984 TSG NV formed. This was a type of corporate reorganization.

On November 9, 1984, Maxxam, through its sub Maxxam Properties Inc, purchased in a private placement, 3,469,540 common shares and warrants to purchase 100,000 additional shares for a total of 12% of TSG NV. The holding was valued at $9,600,000. This made TSG an affiliate of Maxxam.

On November 14, 1984, a WSJ news article claimed TSG, an arm of Charterhouse J Rothschild PLC has $80 mm available for investments.


Informatics General

From 1982, ELIC held 1% of Informatics stock and Fred Carr and fellow FEC and ELIC board member Albert Handschumacher served on Informatics Board of Directors.

On January 1, 1985, Andriba, controlled by Cohen, began buying Informatics General.

On March 7, 1985, TSG began buying Informatics stock.

Cohen before the Dingell committee in October 1987 said that Informatics was suggested by Maxxam. “We did a great deal of research on it. I did not participate in the discussions. Maxxam became disinterested. Very heavy buying drove the stock up. We spoke to the Maxxam people. We decided to purchase on our own. A 13D was filed by Sterling at that time. We continued to buy shares.” Cohen went on to tell Dingle that MPI paid TSG $99,000 to investigate whether “Informatics had any merit or not.”

On April 8, 1985 TSG halted purchasing of Informatics. Market ranged from $17-19 over the prior 30 days.

Drexel was Sterling Software’s dealer manager. Mar. 22 Jeffery Neuman of Drexel bought Informatics General Corp. Neuman is in RocamII, Moredon, PL&D, Kidpix, Dunmore, Chanticleer, Carlyle II, Camro, Conterburg Group in 1983 or longer. Apr. 01 Neuman sold his Informatics (Maxxam/TSG is still buying stock)*

On April 8, 1985, TSG halted purchasing of Informatics. Market ranged from $17-19 over the prior 30 days.

On April 15, 1985, Informatics rejected Sterling Software’s first bid.

On April 16, 1985 TSG bought Informatics at 23 1/4-24 1/8. TSG, MPI filed a joint 13D as a registered group declaring that each owned 331,500 shares of Informatics for a value just short of $15 mm each. The 13D was signed by both Rosen and Cohen.

On April 22, 1985, TSG bought Informatics at 23 1/2-24 5/8.

MPI bought 200,000 shares of Informatics from TSG at 21.60.

On April 25, 1985, TSG and MPI each purchased 88,000 shares of Informatics at 24.25 per share. MPI agreed, on this date, to purchase 42,600 shares of Informatics on April 26 from TSG for 23.85 per share.

On April 26, 1985 Informatics rejects Sterling’s second bid. Sterling filed a 13D at 8.6%. On April 29, 1985 TSG and MPI made a bid for Informatics. On May 2, 1985 Informatics reportedly was “Exploring a sale”. On May 4, 1985 Sterling reports “talking to large shareholders” of Informatics. On May 10, 1985 Informatics reported “talking” to unnamed parties.

Jun 5 Kramer Levin memo “Summary Termsheet” refers to tender offer of Maxxam to AMF at $24.

On June 22, 1985 Informatics agreed to Sterling buyout. On June 24, 1985 Sterling commenced purchasing Informatics shares under its tender offer. On August 8, 1985 MPI tendered its 331,500 shares of Informatics to Sterling with a value of about $7.5 mm for $9 mm. TSG reported a gain of $2 mm on its tendering of Informatics stock. Andriba sold its 5,500 shares of Informatics into the tender offer. On August 9, 1985 Sterling halted its tender offer for Informatics having succeeded in gaining control.

Aug. 06 Maxxam sells Informatics for a net pre-tax gain of $1.5mm

On August 8, 1985, MPI tendered its 331,500 shares of Informatics to Sterling with a value of about $7.5 mm for $9 mm. TSG reported a gain of $2 mm on its tendering of Informatics stock.

On August 9, 1985, Sterling halted its tender offer for Informatics succeeding in gaining control. Andriba sold its 5,500 shares of Informatics into the tender offer.


TSG and Insider Trades

On February 28, 1985 TSG, Glen Kassan, Robert Rosen and Herbert Gordon all bought Hoover Universal Inc on the same day prior to the announcement of a takeover of Hoover by Johnson Controls.

On April 20, 1985, HNG-Internorth talks began in secret but TSG bought Internorth stock before the announcement.

From June through November 1985 TSG and Maxxam both engaged in an arbitrage of Baxter Travenal Lab’s takeover of American Hospital Supply.

In September and October TSG and Maxxam were both involved in the arbitrage of the Pantry Pride takeover of Revlon and the Phillip Morris takeover of General Foods. The trading in General Foods shares by unidentified parties was said to be under investigation by the SEC for inside trading.

On September 20, TSG director Harold Geneen was said to have contacted Revlon Chair Bergerac to offer him a golden parachute if he would agree to complete the merger with Pantry Pride which was waging a bitter battle to acquire Revlon.

Pacific Lumber and Andriba

On September 3, 1985, Rothschild Bank’s agent in Switzerland bought 5,000 shares of PL.

On September 4, 1985, Andriba bought 3,000 shares of PL.

On September 23, 1985, Andriba bought 3,000 shares of PL and TSG bought 15,000 shares of PL.

It is interesting to note that according to the NYSE investigation of possible inside trading in PL stock numerous entities involved were Swiss or oddly related. For instance Salomon Bros was the broker for Rothschild Bank AG (9/23 and 9/26) and for Winterthur I C (8/1). Rothschild Bank AG also bought through Wm Blair & Co. TSG bought through Rothschild Inc which cleared through Bear Stearns (9/24 and 9/25). On these same days Windsor Associates bought through Bear Stearns. Andriba bought through Wertheim & Co.

In following the NYSE investigation into possible inside trading in the takeover of Pacific Lumber by Hurwitz controlled entities, a study of the investments of Transcontinental Services Group NV (TSG) and Andriba Enterprises, Ltd. (Andriba) was made.

The public record; established by SEC filings, the report of the hearings before the Subcommittee on Oversight and Investigations of the Committee on Energy and Commerce, dated October 5, 1987 (Dingell Report) and our FOIA request from the NYSE; shows a strong co-relation between the investment activities of Hurwitz and Stanley Cohen of TSG and Andriba. See attached table.

The record shows two investment involving Hurwitz, Drexel Burnham Lambert, Executive Life I.C., TSG and Andriba; namely Pacific Lumber and Informatics.

On August 14, 1985, Andriba’s stock holding records for the period 8/14 through 9/30 show that it held the Drexel related
Informatics General also held by Maxxam,TSG and ELIC
United Financial Group also held by MCOH and FDC
Bally Mfg Corp
Loews Corp
Pacific Lumber also held by Maxxam,TSG and ELIC
Andriba also held
Dayco also held by TSG
Amsted also held by Maxxam

On August, 30, the Andriba holdings (Amsted,Maxxam,UFG) related to Maxxam were 34.8% of Andriba’s total holdings. On 9/30 these holdings (Maxxam,PL,UFG) represented 56.4% of Andriba’s total.

ANDRIBA HOLDINGS 8/14/85 & 9/30/85

Hurwitz TSG Drexel ELIC X X X
Informatics General Corp. X X
Revlon X
Dayco Corp.
Kansas City Southern Ind., Inc. X X
United Financial Group
Spanish-American Med. Systems,Inc.
InterCo, Inc. X
Bally Mfg. Corp. X
Maxxam Group, Inc.
OMI, Corp. X
Loews, Corp. X X X
Pacific Lumber Company

TSG goes from MPI to USAT

As for Maxxam’s holdings in TSG, Maxxam, divested itself of its 12% ownership of TSG stock in the Spring of 1986 only to have Maxxam’s subsidiary, UFG, holding TSG shares by the end of 1986 when the REVCO deal closed.

Dec. 31, 1985 MPI holds 10.3% of TSG

Apr.1986 MPI completes sale of 3,700,000 shs of TSG

Dec. 1986 – May 1987 – A sub of UFG acquires 6.24-7.24% TSG

On March 31, 1986, Maxxam held 1,081,570 shares of TSG plus the 100,000 warrants valued at $3.14 million and $1.66 million respectively.

In April 1986, MPI completed the sale of 3,700,000 shares of TSG for a pre-tax gain of $1.8 million.

In December 1986, UFC, a sub of UFG/USAT acquired 6.24-7.24% of TSG increasing through May 1987.


May 28 MXM Board dinner at Box Tree (Rosen). Rosen calendar shows meeting “Lynch/ Quirk here”.

May 29 Drexel calendar shows meeting with “Charles and Rob.”

May 30 Rosen calendar shows meeting “Brenner at Drexel.”

Latest Wave of anti-takeover sentiment cresting in Congress in May 85.

In the Spring, 1985, (PAH formed?). Gary Winnick who had worked with Milken from ’78, became the Mgr. of Pacific Assets Holdings [Winnick ($30mm), a Drexel Grp. ($40mm), Bass, etal. ($45mm)] other gen’l partner is Sandler (appears in many Milken partnerships). Sandler said to be Milken’s personal attorney. PAH would later become an investment partner of USAT’s in the Houstonian/Livingwell

In June Drexel begins selling junk bonds and Pfd stk for USAT Finance, USAT Finance II and USAT Finance III. USAT Finance issues $75 million in DARTS

Jun. 01 PLC stock: no one owns more than 5%. Corporate insiders (BOD, etc) owned less than 5% together. 40% is held by large institutions (non-voting).

On June 7, 1985, Drexel’s Daniel Lynch mailed materials for meeting to explore conceptual financing to Hurwitz. Art Bilger from Drexel Corporate

Finance Department gets involved.

Lynch sends Hurwitz and Rosen a draft engagement letter re: acquisition of PLC by Maxxam.

Jun. 10 Rosen calendar shows meeting “Lynch/Quirk”.

Jun 10 Irving letter from Roger Jones to Robert Rosen, Maxxam re revisions in draft commitment letter (AMF) and making well on costs if deal doesn’t go forward.

On June 12, 1985, Drexel’s Lynch sent Robert Rosen of Maxxam, Hurwitz’ immediate subordinate, information on financials based on $40 per share and a draft engagement letter for the PL takeover.

Jun. 17 Drexel calendar “Rob to respond”.

In late June or early July the second meeting of Drexel and Maxxam personnel occurred (Rosen, Affinito, Kassan, Hurwitz, Hurwitz’ son, and Fitzgerald from Maxxam. Lynch, Reid, Quirk and one other from Drexel). Results of Drexel’s timber cruise discussed.

On June 21, 1985, Maxxam using “Glen Cassin” began buying PL stock through Drexel’s Beverly Hills office. Purchases were made during June and July under “Cassin”, Kassan”, and “Ocean Company” mostly through Drexel’s Beverly Hills.

Meetings between Drexel and Maxxam (Milken/Hurwitz). David Kay’s partner Leon Black, head of M&A department says Hurwitz and Milken met to discuss the warrants (deposition)other mtgs?

Jul. MCOP buys $100 million in Mortgages (Ginnie Maes)

Jul 1Maxxam notice card, moving office seffective 7/1/85 to 350 Park, 12th Floor, New York with executives’ names and numbers.

Jul. 01UFG, Maxxam, Horizon all have losses for 1st half of 1985

Jul. 02Drexel calendar “meet with Rob-350 Park Ave.”

Jul. 09Maxxam Properties, Inc. opens new account with Jefferies & Co. Signed by Kassan on 8/19/85. Was incorporated 2/10/84 in New York as

Twin Fair Holdings, and the name was changed on 6/27/84 to Maxxam Properties.

Jul. 10 Drexel presents unsigned engagement letter, Reid to Rosen. This letter led to negotiations about terms. Rosen calendar shows meeting “Dan Lynch/Lang Reid”. Bilger became aware of Maxxam/PLC discussions. Not yet a deal. Early stages only. Bilger now prime Drexel contact for Maxxam. Milken negotiates terms of engagement. Drexel and maxxam meet to talk financing and timber puts. Milken, Levine and Akerman with Hurwitz. Milken thought transaction was feasible.

Jul. 15MCO Resources sells 4,000,000 shares Ensource at $10,150,00, lost $2,801,00. MCOR retained 813,311 shares.

Jul. 19Drexel calendar shows meeting with Rosen.

History of Milken-Hurwitz Relationship Part II >>

History of Milken-Hurwitz Relationship Part III >>