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By Michael Lacey
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The Halloween Day creditors' examination signals just the beginning of what is expected to be a detailed review of the governor's finances by lawyers representing Symington's single largest creditor--six union pension funds owed $11.5 million.
The pension funds won an $11.5 million judgment against Symington last summer stemming from the governor's failure to fulfill his personal guarantee to repay a $10 million loan to Symington's Mercado Developers Limited Partnership.
The pension funds' legal team has hired Phoenix attorney Michael Manning, one of the nation's top financial fraud attorneys. Manning specializes in investigating potentially fraudulent transactions conducted by debtors seeking protection from creditors in bankruptcy court.
Manning's sharp eye for financial chicanery attracted national attention when he authored the federal government's $2 billion fraud and racketeering civil lawsuit against Keating.
In the governor's case, Manning says Symington's financial statements, the governor's trust funds, his wife's finances and the location of assets such as jewelry and art will come under scrutiny.
The pension funds pressed Symington for much of the same information last summer when they obtained the $11.5 million judgment in Maricopa County Superior Court.
"After our client acquired its judgment, we intended to inquire through a judgment debtor's exam into the precise terms of his trusts, his wife's trusts, the prenuptial agreement and the various transfers of property that have occurred over the past few years," Manning says.
"The filing of the bankruptcy prevented that from going forward," he says.So far, the union pension funds seem to be the only creditor aggressively seeking repayment from the governor in bankruptcy court.
Symington's other major creditors include: CitiCorp Real Estate Inc., owed $4 million; First Interstate Bank, owed $3.2 million; the City of Phoenix, owed $2.7 million; Hirsch Capital Corporation, owed $1.8 million; Bank One, owed $1 million; and various law firms and accounting firms, owed an unspecified amount that is increasing at $19,000 per month.
While most creditors appear to be hesitant to collect on the governor's debts, officials with McMorgan & Company, the pension funds' investment manager, say the funds are aggressively pursuing Symington's debt because they are legally required to take all reasonable actions to protect the funds' assets.
The pension funds are under federal scrutiny because of the settlement of a massive federal civil suit the funds filed against their former investment manager.
The November 1994 settlement required the trustees for the pension funds to contribute $9 million of a $93.5 million settlement paid to the pension funds by various defendants in the five-year-long civil racketeering suit.
The Department of Labor intervened in the civil suit in the fall of 1994, alleging that the pension funds' trustees had failed to closely monitor the activities of the former investment manager--convicted felon William Earle Miller--who invested more than $250 million of the funds' assets in poorly performing Arizona real estate projects, including Symington's Mercado.The Labor Department reached a settlement with the pension funds that requires the funds' trustees to follow strict guidelines on reviewing investments and the activities of the new investment manager--the San Francisco-based McMorgan & Company. Among other things, the trustees must closely monitor all efforts to collect on bad debts.
Symington offered the pension funds $285,000 last month to settle his $11.5 million debt. The pension funds rejected Symington's offer. Symington filed for bankruptcy days later.
McMorgan & Company officials say they would pursue Symington's $11.5 million debt whether he was governor or a private businessman.
"We would do this no matter who the guy was," says McMorgan & Company vice president Paul Morton.