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Read Case 7.4 – The Fight over the Redwoods on pp. 279-281 and address the questions on p. 281 in a three-to-five-page paper excluding title, abstract, and reference pages, include at least three peer reviewed sources found in the Potomac Library properly cited and referenced.
Please write in narrative writing style (academic writing) with three or more logical headings rather than question-and-answer format.
.
Please use APA style (7th edition) with double line spacing and Times New Roman 12-point font
Please use this strategy when you analyze a case:
Identify and write the main issues found discussed in the case (who, what, how, where and when (the critical facts in a case).
List all indicators (including stated “problems”) that something is not as expected or as desired.
Briefly analyze the issue with theories found in your textbook or other academic materials. Decide which ideas, models, and theories seem useful. Apply these conceptual tools to the situation. As new information is revealed, cycle back to sub steps a and b.
Identify the areas that need improvement (use theories from your textbook)
Specify and prioritize the criteria used to choose action alternatives.
Create a plan for assessing the action to be implemented.
Please use APA style (7th edition) with double line spacing and Times New Roman 12-point font
Case 7.4The Fight Over the
Redwoods
Dense forests of coastal redwood trees once covered 2.2
million acres of southern Oregon and northern California.
Today, only about 86,000 acres of virgin redwood forest
remain. Most of this is in public parks and preserves, but
about 6,000 acres of old-growth forest are privately owned—
nearly all of it by the Pacific Lumber Company,
headquartered in San Francisco.
Founded in 1869, Pacific Lumber owns 220,000 acres of the
world’s most productive timberland, including the oldgrowth redwoods. For years, the family-run company was a
model of social responsibility and environmental awareness.
Pacific Lumber paid its employees well, supported them in
bad times, funded their pensions, and provided college
scholarships for their children. It sold or donated nearly
20,000 acres of forest to the public, and instead of
indiscriminate clear-cutting, the company logged its forests
carefully and selectively. Throughout its history, the
company harvested only about 2 percent of its trees
annually, roughly equivalent to their growth rate. After other
timber firms had logged all their old-growth stands, Pacific
Lumber had a virtual monopoly on the highly durable lumber
that comes from the heart of centuries-old redwood trees.
Because Pacific Lumber was debt-free and resource-rich, its
potential value drew attention on Wall Street, where the firm
of Drexel Burnham Lambert suspected that the company was
undervalued—and thus ripe for raiding. In 1985, Drexel
hired a timber consultant to fly over Pacific Lumber’s
timberland to estimate its worth. With junk-bond financing
arranged by its in-house expert, Michael Milken, Drexel
assisted Charles Hurwitz, a Texas tycoon, and his firm,
Maxxam, Inc., to take over Pacific Lumber for $900 million.
After initially resisting the leveraged buyout, the timber
company’s directors eventually acquiesced, and by the end of
the year Hurwitz and Maxxam had control of Pacific Lumber.
At the time, Hurwitz was primary owner of United Financial
Group, the parent company of United Savings Association of
Texas. In exchange for Milken’s raising the money for the
takeover of Pacific Lumber, Hurwitz had United Savings
purchase huge amounts of risky junk bonds from Drexel.
Three years later, the savings and loan failed, and taxpayers
were stuck with a bill for $1.6 billion.
The takeover of Pacific Lumber left Maxxam with nearly
$900 million in high-interest debt. To meet the interest
payments, Maxxam terminated Pacific Lumber’s pension plan
and replaced it with annuities purchased from an insurance
company owned by Hurwitz. Worse still, Maxxam tripled the
rate of logging on Pacific Lumber’s lands, and it was soon
clear that Hurwitz intended to log the now-famous
Headwaters forest, a 3,000-acre grove of virgin redwoods—
the largest single stand of redwoods still in private hands. “It
was the reason we were interested in Pacific Lumber,”
Hurwitz says. And one can see why. The value of the grove is
astronomical: Milled into lumber, some of the trees are worth
$100,000 each.
The potential lumber may be worth a fortune to Hurwitz, but
environmentalists consider the Headwaters grove to be
priceless as it is, and they stepped in to do battle with
Hurwitz. They see the Headwaters forest with its 500- to
2,000-year-old trees as an intricate ecosystem that took
millions of years to evolve, a web of animals and plants that
depend not just on living trees but also on dead, fallen
redwoods that provide wildlife habitat and reduce soil
erosion. Some of these activists—including Darryl Cherney, a
member of the environmental group Earth First!—have
devoted their lives to stopping Hurwitz. Earth First! is not a
mainstream conservation organization; it has a reputation
for destroying billboards, sabotaging bulldozers and lumber
trucks, and spiking trees with nails that chew up the blades
of saws. “Hurwitz is a latter-day robber baron,” Cherney
claimed. “The only thing that’s negotiable … is the length of
his jail sentence.”
Other environmental organizations opposed Hurwitz in
court. The Sierra Club Legal Defense Fund and the
Environmental Protection Information Center filed sixteen
lawsuits against Pacific Lumber, giving the company’s legal
experts a run for their money. One of these suits bore fruit
when a judge blocked the company’s plan to harvest timber
in a smaller old-growth forest known as Owl Creek Grove.
The legal reason was protection of the marbled murrelet, a
bird about the size of a thrush, which breeds in the forest and
is close to extinction. The judge also noted that “after the
logging of an old-growth forest, the original cathedral-like
columns of trees do not regenerate for a period of 200 years.”
Pacific Lumber appealed the Owl Creek decision, but the
ruling was upheld a year later. However, at the same time,
the company won the right to appeal to another court to be
allowed to harvest timber in the larger Headwaters forest.
Meanwhile, both conservationists and a number of public
officials were making strenuous efforts to acquire
Headwaters and some surrounding redwood groves from
Hurwitz.
Some environmentalists, however, worried that too much
attention was being directed toward saving the 3,000-acre
Headwaters grove while leaving Pacific Lumber free to log
the rest of its land with abandon. They were less concerned
about the murrelets in particular or even the redwoods
themselves; rather, what disturbed them was the dismantling
of an ancient and intricate ecosystem—an irreplaceable
temperate rain forest, home to some 160 species of plants
and animals. Their aim was to build a new style of forestry
based on values other than board feet of lumber and dollars
of profit. They sought sustainable forest management and a
new resource ethic devoted to rebuilding and maintaining
habitats for coho salmon, the murrelet, the weasel-like fisher,
and the northern spotted owl. As a first step, these
conservationists called for protection not just of the 3,000
Headwaters acres but also for an area nearly twenty times
that amount, called the Headwaters Forest Complex. This
tract included all the ancient redwoods that Hurwitz owned
and large areas of previously logged forest. “We have a vision
that’s bigger than Headwaters,” said Cecelia Lanman of the
Environmental Protection Information Center.
Her vision was definitely more sweeping than that of the
Pacific Lumber workers in Scotia, California, a village
containing 272 company-owned homes. Because Hurwitz
instituted stepped-up logging, which meant more jobs, his
employees tended to side with him, not the
environmentalists. Workers said that Hurwitz had reinvested
more than $100 million in modernizing his mills and had
kept up the tradition of paying college scholarships for their
children. The environmentalists were the real threat, said
one employee. “You’ve got a group of people who hate Mr.
Hurwitz, and they’re using the Endangered Species Act and
anything they can to hurt him. And we’re caught in the
middle.”
The Story Continues …
In 1999, Hurwitz signed a deal negotiated
by Senator Dianne Feinstein and Deputy
Interior Secretary John Garamendi. In
exchange for a 7,500-acre tract that includes
the Headwaters grove and 2,500 additional
acres of old-growth forest, the U.S.
government and the state of California
agreed to pay Pacific Lumber $480 million
(half of what Hurwitz originally spent for
the entire company with its 220,000 acres
of timberland). The agreement banned
logging for fifty years on 8,000 other acres
of company land in order to safeguard the
murrelet, and it set up buffer zones to
protect the river habitats of endangered
coho salmon and steelhead trout. A Habitat
Protection Plan regulated how and where
Pacific Lumber could harvest timber on the
rest of its land. However, because Hurwitz
transferred the $868 million debt that still
remained from his original hostile takeover
of Pacific Lumber from Maxxam to Pacific
Lumber itself, the company still needed to
log as much as it could to make its interest
payments.
Pacific Lumber, for its part, contended that
state and federal agencies were so rigidly
enforcing the habitat conservation plan that
it couldn’t cut enough lumber to keeps its
mills running, and it decided to close down
Scotia’s 104-year-old mill. “We are being
strangled by the operating restraints,” said
Robert Manne, president of Pacific Lumber,
which are “not working to meet the
company and its employees’ economic
needs.” To this complaint, conservationists
and governmental officials responded that
Pacific Lumber, which continued to operate
two smaller and much newer mills in
neighboring towns, was scapegoating them
for problems stemming from falling timber
prices and the company’s depletion of its
old-growth redwood groves by clearcutting. According to Paul Mason, president
of a local environmental organization, “The
lumber market is right in the tank, and that
takes a bite out of your profit margin. The
company has been operating at an
unsustainable level for a number of years.”
Whatever the exact cause, Pacific Lumber
eventually declared bankruptcy, and in
2008, as part of a court-supervised
reorganization plan, it was taken over by
the Mendocino Redwood Company, a nineyear-old logging venture owned by Don and
Doris Fisher, the founders of Gap.
Environmentalists, state officials, and local
residents were thrilled at the prospect of
Pacific Lumber Company emerging from
bankruptcy free of Hurwitz and Maxxam
and able to reestablish itself as an
environmentally responsible company
practicing sustainable forestry. That’s
because, as U.S. bankruptcy judge Richard
Schmidt explained, “MRC [is] an
experienced, environmentally responsible
operator with a proven track record, and
whose experience in operating timberlands
and working cooperatively with
government regulators was
uncontroverted.”
As for the town of Scotia, the bankruptcy
court awarded its 272 homes, two churches,
hotel, and handful of commercial buildings
to a hedge-fund group, Marathon Asset
Management, which had been a big creditor
of Pacific Lumber. Marathon executives say
they are trying to do right by the residents,
maintaining the homes and keeping rents
reasonable. “We didn’t want to fire
everyone in the town and close it down,
chop down the trees and call it a day,” says
Marathon’s chief operating officer, Andrew
Rabinowitz. As of 2015, the hedge fund had
sold or put on the market the town hall and
a few other buildings. Eventually, though, it
wants to get out of the landlord business,
sell the homes, and recover at least part of
the $160 million it had been owed by Pacific
Lumber.
Discussion Questions
1. Does an ancient redwood forest have value other than its
economic one as potential lumber? If so, what is this value,
and how is it to be weighed against the interests of a
company like Maxxam? Are redwoods more important than
jobs?
2. Is it morally permissible for private owners to do as they
wish with the timberland they own? Explain why or why
not. What’s your assessment of Hurwitz? Is he a robber
baron, a socially responsible businessperson, or something
in between?
3. Were mainstream environmentalists right to try to thwart
Hurwitz, or were they simply trying to impose their values
on others? Does a radical group like Earth First! that
engages in sabotage go too far, or do its ends justify its
means?
4. Do we have a moral obligation to save old redwood forests?
Can a forest have either moral or legal rights? Does an oldgrowth forest have value in and of itself, or is its value only a
function of human interests? How valuable is a small but
endangered species such as the murrelet?
5. Before its takeover by Hurwitz, did Pacific Lumber neglect
its obligations to its stockholders by not logging at a faster
rate? What would be a morally responsible policy for a
timber company to follow? Do we need a new
environmental resource ethic?
6. How would you respond to the argument that there is no
need to try to save the Headwaters (or any other private)
forest because there are already tens of thousands of acres
of old-growth redwood forest in parks and preserves?
7. Was the deal that the U.S. government and the state of
California struck with Pacific Lumber a fair and reasonable
one? Did the taxpayers end up paying too much, as
environmentalists think? Was Pacific Lumber squeezed too
hard? What about Scotia and its laid-off workers?
