By Ray Stern
By New Times
By Amy Silverman
By Stephen Lemons
By Stephen Lemons
By Monica Alonzo
By Chris Parker
By New Times
A partnership headed by J. Fife Symington III made an apparently illegal payment to a pension fund investment manager who agreed to make a $10 million loan to a troubled Symington development, public records obtained by New Times reveal.
The $10,000 kickback was paid in connection with a loan that several union pension funds made to finance the Mercado, a downtown retail center developed by Symington's partnership. It was the pension funds' attempts to collect on the long-overdue loan that pushed Symington into personal bankruptcy last month.
The pension funds have alleged in civil court that the $10,000 payment--made to an investment manager convicted and imprisoned for taking similar fees--violated federal law.
It is a felony under the federal Employee Retirement Insurance Security Act for a pension fund manager to personally receive payment from anyone conducting a financial transaction with the pension fund. It is also a crime for anyone to make and receive unlawful payments to influence the pension fund manager.
Loan documents and federal court records show that the Mercado Developers Limited Partnership, headed by Symington, paid William Earle Miller $10,000 when Miller agreed to make the $10 million loan in October 1987.
The Mercado loan came at a crucial time for Symington. The details of securing that loan--which figured so prominently in the governor's recent bankruptcy--almost certainly will be crucial to his future.
It was mid-1987, and a highflying Phoenix real estate developer named J. Fife Symington III needed money.
Symington's plan to build the Mercado retail development in downtown Phoenix was stalled by nervous bankers, who didn't want to put up a $10 million long-term loan for the risky project in the midst of a deteriorating real estate market.
If Symington didn't quickly find a permanent lender, his deal with the City of Phoenix--which included such sweetheart inducements as free land, more than $1 million in tax breaks and a $2.7 million low-interest loan--might fall through.
About the same time, a Scottsdale investment manager named William Earle Miller was busy investing more than $200 million of union pension fund assets in about 80 shaky Arizona real estate projects.
By 1987, many of the loans were in default; some borrowers never even paid interest on the loans. But Miller hid the losses from the pension fund trustees.
Actually, Miller did more than hide losses. Miller accepted unlawful payments for loans he arranged. In fact, federal authorities later alleged he had taken more than $600,000 in kickbacks from a Tucson real estate broker for a series of real estate deals between 1981 and 1985.
Symington's and Miller's paths were about to cross. At the Mercado.
Their relationship--which began about 20 months before Miller's illicit activities first were listed in an obscure federal civil suit--was facilitated by the leader of the Phoenix firefighters union, Pat Cantelme.
In 1987, Cantelme was president of the Central Arizona Labor Council. One of his goals was to assist construction projects that used union labor. He frequently helped arrange union pension fund financing for construction projects, if developers promised to use union labor.
"I would be involved as a catalyst to get things together, and that was the case with Symington," Cantelme says.
Cantelme thought Miller might be interested in using union pension funds for the long-term Mercado loan Symington desperately needed.
"I actually introduced Miller and brought them together," Cantelme says.
In October 1987, Miller and Symington hammered out an agreement. The union pension funds would provide up to $11.1 million after the Mercado was built to pay off a $10 million construction loan made by First Interstate Bank.
"The unions stepped up to the plate," Symington declared after the deal was struck.
The agreement cleared the way for Symington and his development partner, a nonprofit community group called Chicanos Por La Causa, to build the Mercado, which was expected to provide subsidized leases to minority owners of small businesses.
But the pension fund loan came at a high price.
Its terms included a $10,000 payment to Miller. It was called a "loan processing fee." But federal prosecutors have called similar fees illegal.
Miller learned this lesson in pension law the hard way and now has plenty of time to reflect.
The former U.S. marine and Stanford University graduate is serving 37 months in a Las Vegas-area federal prison. In 1993, he was convicted of receiving $600,000 in illegal payments from Tucson real estate broker Keith Dolgaard in exchange for funding loans sought by Dolgaard.
Dolgaard also was convicted of violating federal pension fund laws. He is serving 37 months in a west Texas federal prison.
But prison wasn't on the minds of Symington and Miller in October 1987. They had just agreed on a $10 million loan that benefited them both. (Neither man agreed to be interviewed for this article.)
Greed, deception and ambition, however, would soon trigger a brutal, high-stakes struggle among the union pension funds, their money managers and Symington. That struggle would put Miller in prison. Arizona would be left with a bankrupt governor.
Miller committed to lend up to $11.1 million from six pension funds controlled by three unions--the Arizona State Carpenters Union, Arizona Operating Engineers Local No. 428 and the Arizona Laborers, Teamsters and Cement Masons Local No. 395. Even with the new money, delays continued to plague the Mercado development.