By Amy Silverman
By Olivia LaVecchia
By Monica Alonzo and Stephen Lemons
By Chris Parker
By Michael Lacey
By Weston Phippen
Cowed by Dowd's campaign of intimidation and put off by the complexities of financial reporting--the longest article in the Arizona Republic on the Southwest collapse has been Symington's self-defense--journalists Mary Jo Pitzl and Kim Sue Lia Perkes were able to say, quite accurately, at a recent media round table that the story of the RTC and Symington had largely disappeared from the press.
Even the MacNeil/Lehrer show that got me my threatening letter from Dowd was far from being a penetrating look at Symington's role in the collapse of Southwest Savings. The comments on PBS were a mere sound bite in a telecast focused upon Arizona's larger-than-average share of misfortunes.
On June 9, on the MacNeil/Lehrer NewsHour, I said of Symington: "Here was a guy who, while he sat on the board of an S&L arranged for that S&L to give him the largest single loan in its history, okay. And with a total investment of $400 on his part, he then cut himself checks for approximately $4 to $5 million; erected a white elephant that sits primarily vacant, okay; has gone into default, dragged the S&L down with it . . ."
In his letter of demand for retraction, Dowd pounced on my characterization of the deal as a loan in default.
And he is correct.
In his Congressional appearance last winter, Symington informed the committee: "The RTC alleged that the Camelback project was Southwest's largest 'borrower.' It was this allegation that I stated was blatantly false. The Camelback project is not a 'borrower' transaction. It is a joint venture that was set up to acquire and develop the Camelback Esplanade. Southwest is an equity partner. As such, the Camelback project represented Southwest's largest 'investment' up to that time."
But Symington and Dowd are trying to take our eyes off the ball when they ask us to focus upon this distinction. The collapse of Southwest Savings and the $197 million lawsuit by the RTC that targets Symington are not matters that hinge upon the characterization of the financial instrument--loan or investment--though it is an investment.
The lawsuit points out Southwest sank $31.25 million into land acquisition for the Esplanade and another $23 million for zoning, planning and architectural costs. Millions more went into capitalized interest. When Southwest collapsed, the Esplanade and Symington deal represented the S&L's largest single loss, $40 million according to the RTC.
Not only did Symington and Southwest flout industry regulations, the lawsuit charges that Symington screwed Southwest and its depositors on the terms of the deal.
"The joint venture was inherently unsafe and unfair to Southwest [which] assumed virtually all of the risk of project failure but stood to receive only half the profits from the sale of the land. "At the same time Symington and his partner [Jerome] Hirsch put up a total of $432 yet stood to make 38 percent of the profits."
In other words, the S&L advanced $54 million plus millions more in interest, but got only 50 percent of the deal, while Symington and his partner put up $432 and took 38 percent. (The remaining 12 percent went to the original owner of the land.)
The lawsuit also notes that Symington operated on the Esplanade with an agreement for development fees that put $8 million in Fife's pockets with the approval of Southwest's board.
Dowd argues that Symington did not cut himself these development checks, that the project is not a white elephant (the term first used by Symington's partner, Hirsch, to describe the evolving events at the Esplanade), that Symington did not "arrange" for Southwest to do the deal.
Dowd argues long and he argues loud. He even argues points best left unmolested.
Dowd claims that Symington did not put up the $400 dollars I mentioned, the same $400 cited in court documents. Because that total was actually split with his partner Hirsch, Dowd argues that Symington really only wrote a check that "totaled $215.90."
Furthermore, says Dowd, ". . . Southwest has lost nothing."
"Southwest's participation in the Camelback Esplanade venture is an investment, not a loan, and there is no obligation on any party to repay Southwest's investment . . ."
Isn't that a charming sentiment?
Symington's position is that once the real estate market rebounds, however many years from now that turns out to be, everyone will get his money back. Symington's rationalization, according to an RTC attorney, ignores Lord Keynes' caution that in the long run we're all dead. Today, Southwest has collapsed, taxpayers are liable for the bill and the Esplanade deal is upside down.
While Congress is dithering through the S&L debacle and the press is being taught to heel by Dowd, the taxpayers' last hope for restitution resides with the RTC, where a small unit of attorneys has sued the former directors of the failed S&Ls to recover the squandered wealth.
The news on that front is unsettling.
Amid calls for increased staff, the RTC actually decimated its own ranks.
In a June 2 report to the U.S. Senate, the General Accounting Office supported doubling the number of attorneys pursuing restitution from former directors of failed savings and loan institutions.
The assistant director of the GAO, Ed Stephenson, praised the aggressive fieldwork of the understaffed RTC attorneys at the same time that he criticized the go-slow attitude of that agency's administrators.