Trusting in Family Values

Last week, Governor Fife Symington told the howler monkeys who listen to KFYI talk radio that he was the victim of "a legal ambush" in bankruptcy court.

From the governor's tone of shock, you'd think the bankruptcy lawyers sprang upon him during his morning shower. In any case, the question of surprise misses the point.

"Legal ambush" does not quite capture the carnage, the blood and the soft-tissue damage that Symington suffered during his October 31 hearing. Like a patient sitting up and taking nourishment for the first time after an accident, the governor is still in shock and understandably incoherent. Apparently, no one has told Fife he was in a car wreck, and his political career was totaled.

The lying, the conniving and the sharp real estate practices of Governor Fife Symington were exposed in his $25 million bankruptcy hearing on Halloween.

The preliminary revelations are not a large surprise to those of us who have chronicled his path into Chapter 7, a trail that has also led to a federal grand jury probe.

What is new, and startling, is the role of his spouse, chemical heiress Ann Symington.

Once considered the dutiful, long-suffering mate, Ann didn't even attend the bankruptcy hearing. Nonetheless, her persona was transformed during the Chapter 7 proceeding from a hausfrau into Lady Macbeth with green eye shades and a pocket calculator--a woman who laundered Fife's debts, engaged in sophisticated cash transfers and perpetrated multimillion-dollar flimflams.

Or perhaps she is just a co-dependent enabler.
Ann's precise complicity in her husband's financial misrepresentations is somewhat clouded because a smart lawyer kept her out of bankruptcy court. She has answered no questions.

But this much is crystal clear.
The tale of Ann and Fife Symington is more than a mere reading of ledger entries on loan defaults.

This is a story of family values.
The Symington family valued other people's money with a reckless abandon that has landed it in court. And any suggestion that the Symingtons are the victims of unpleasant attorneys ignores the record.

Consider Governor Fife Symington's remarkable application for a $10 million loan from a pool of union pension funds to constuct the Mercado minimall downtown.

As the largest creditors in the governor's bankruptcy case, the unions were allowed to question the governor.

Their attorney, Michael Manning, presented the governor with a copy of the paperwork Symington personally filled out to obtain the loan.

At the top of the financial statement, in large type, it says that Arizona is a community-property state. Simply put, this means the assets and liabilities of a husband and wife are considered together in the loan application. This is not a small matter to a lender since Symington's wife is a highly publicized heir to the Olin Chemical fortune.

None of the language printed on the statement is in complex lawyer garble (and remember that Symington was a savvy borrower). Nor is the section on community property hidden in a footnote that might be overlooked. It is the very first item on the page. It has a large, all-caps headline--"PLEASE READ CAREFULLY"--over two short paragraphs.

In very clear and concrete language, the financial statement form says that if you and your spouse do not treat your assets as community property, if you treat those assets instead as "sole and separate property," please check this box.

On Symington's financial statement, the box is blank.
Fife Symington represented to the union pension fund that the assets and liabilities of the Symington family were community property.

Which is a lie.
Ann and Fife had a prenuptial agreement. Though it was not disclosed in the bankruptcy hearing, Ann has already testified, very specifically, about that document in a Resolution Trust Corporation (RTC) proceeding. All of Ann Symington's assets were "sole and separate property." That had always been the case.

If Fife Symington defaulted on the loan, which he did, the pension funds had no chance of recovering their money from Ann's fortune. Her money, the governor admits, was tucked away in untouchable trusts.

For that matter, Fife has testified that his inheritance, as a descendant of Henry Clay Frick, is also squirreled away in untouchable trusts. Not that his financial statement revealed this little secret.

On the contrary: The financial statement Manning handed to the governor showed that Symington listed the securities in his trusts, valued at nearly $800,000, as readily marketable.

In other words, Symington told the unions that, if need be, he could sell the stocks in his trust for almost $1 million.

Which is another lie.
Symington, by law, is not allowed to touch his trust. He testified that he receives interest payments from the securities in the trust, but has absolutely no control over those blue-chip stocks, which are held by Mellon Bank.

Symington's response to Manning on these lies was the same: This is only paperwork.

Personally, I'm a big fan of unmitigated arrogance, but Symington's position is very bold.

A federal grand jury is looking at indicting the governor for submitting false information in his applications for loans. I don't know that a legal strategy dismissing the paperwork as an irrelevant nuisance is guaranteed to keep him out of prison.

When Manning pressed the issue, the governor maintained that all of his lenders knew the real truth.

How did they know the truth if the paperwork was a lie?
Symington said the pension funds should have inferred that Ann wasn't bound by the legal precept of community property because she had a lawyer of her own.

Symington also said he told the lenders the real story orally.
I'm trying to picture this.
Administrators of the union pension funds are sitting around, and the governor says, "Here's a bunch of misleading and false paperwork for your files, which we all know are subject to federal scrutiny. When you've got a second, I'd like to tell you the real scoop."

By the way, in an interview after the bankruptcy hearing, Manning said none of his clients were told anything by Symington that contradicted the paperwork.

Here is the bottom line.
If Symington lied so easily about such simple and fundamental data, what did he do when it came to the critical, and much more complex, real estate schedule he submitted with his loan application?

Symington gave the unions a list of 17 developments that he had pieces of. He claimed they had a market equity value in excess of $128 million, of which his share was more than $15 million.

How wild and overblown were those numbers?
After deducting his liabilities, Symington wrote on his financial statement that his net worth was $12 million.

What should the unions have inferred from that number?
In the end, the unions asked Ann and Fife Symington to personally guarantee the $10 million loan for the Mercado. The scions did so readily.

And why not?
Ann and Fife's personal guarantees weren't worth the paper they were written on. They pledged their community assets, and, as the governor said during his bankruptcy hearing, he didn't believe he'd ever had any community assets.

Ann has made the same damning admission under oath.
The RTC tried to recover money from the Symingtons over Fife's role in the billion-dollar collapse of Southwest Savings and Loan. On January 2, 1992, Ann gave the RTC a signed, notarized statement that said: "Prior to my marriage to J.Fife Symington III, Fife and I executed an antenuptial agreement. ... On February 7, 1976, Imarried J. Fife Symington III. Since the date of my marriage to Fife Symington, Fife and I have maintained our separate assets in accordance with the terms of our antenuptial agreement and have acquired no community property."

In 1990, believing that she had no community assets--that she had never had any community assets--Ann nonetheless personally co-guaranteed the $10 million pension fund loan with her community assets.

The unions thought two millionaires had signed on the dotted line to back up the loan.

Ann and Fife knew better.
And here's a charming detail buried in the case file.
Ann pulled the same stunt--guaranteeing her husband's loans with her nonexistent community assets--all over town. Ann the heiress stuck Citicorp, First Interstate Bank, Jerome Hirsch and Valley National Bank with more than $10 million of worthless guarantees.

Why wasn't Fife Symington represented bySnell & Wilmer at the bankruptcy hearing? He'd been with that law firm for a quarter of a century. He'd taken work to the Valley's premier Republican powerhouse long before he'd married Ann. As governor, he'dappointed two of the firm's partners torunstate agencies.

And yet, on the worst day of Fife's life, his wife had the Snell & Wilmer lawyer and Fife had two new guys.

I said earlier that this is a tale of the Symingtons' family values, how they view debt and obligations. But there is more to the telling.

This is also the story of big money. The gravity of big money is like a force of nature, creating rules of its own. And when you understand the irresistible pull of the large dollar, there are very few mysteries in the Symington bankruptcy.

For example, bankruptcy attorneys say a law firm cannot represent a debtor (e.g., Fife) if the law firm is also a creditor. Because the governor owes Snell & Wilmer $230,000 in legal fees, the law firm would have had to forgive the debt in order to represent Fife.

We can only speculate that this was not a close call for Snell & Wilmer.
The governor is now ably represented by William Novotny and Robert Schull of Mariscal Weeks McIntyre & Friedlander.

Ann, who can still pay her bills, is having her interests protected by Snell & Wilmer.

That firm's job is to build a moat around Ann Symington.
This has set up a classic confrontation.
Michael Manning, who has been lionized in books and the press for his role in putting Charles Keating behind bars, wants to grill Ann.

Donald Gaffney, unknown to the public, is in Manning's way.
Does Snell & Wilmer's anonymous bankruptcy lawyer have the grit to frustrate the bulldog Manning?

Let me tell you a little something about Mr. Gaffney and grit.
Though he is a distinguished member of the bar today, in 1978 he was just another law-school graduate employed at Streich Lang in Phoenix.

As he waited to take the bar exam, it was apparent to the young attorney that he was not ready.

The day before he was scheduled to sit for the bar, Gaffney was assaulted by two mysterious strangers in a parking lot. They tried to rob the young attorney and shot himin the hand--the very hand he would use to complete the bar exam. Fortunately, it was just a flesh wound; though he was unable to take the bar, the injury was not permanent.

Tragically, no one saw the shooting, and the mysterious suspects disappeared.

Shortly thereafter, the partners of Streich Lang learned that Mr. Gaffney was not qualified to take the bar exam because he did not have a law-school diploma, a revelation that shocked the partners. Some even felt the young man had misrepresented himself.

Cynical lawyers contend that Gaffney shot himself to avoid taking the bar illegally.

I find that hard to believe.
I prefer to think that God sent armed robbers to shoot the young lawyer in the hand and spare him the embarrassment of taking the bar under false colors.

But even if Mr. Gaffney did shoot himself in the hand, is that necessarily a bad thing?

It shows a certain tenacity and ruthlessness that will serve Ann Symington as she tries to deflect the relentless Manning.

When you understand that Gaffney is trying to shelter Ann--and that there is good reason to do so--things make more sense.

For instance, Governor Symington has said he went Chapter 7 because he was unable to pay back the $10 million Mercado loan to the pension funds.

But Ann has something to do with the timing of the bankruptcy.
The unions had won a court judgment for $11.5 million. In an attempt to collect the award, Manning was about to question Ann Symington about her finances.

Before that happened, the governor sought protection in bankruptcy court and changed the ground rules.

By any law that you or I would recognize, Ann Symington ought to have declared bankruptcy, like her husband. She did, after all, personally guarantee the loan her husband defaulted on. You would think that both of them would have been subject to cross-examination by Manning.

But, as I said, the well-to-do benefit from the law as if their wealth were a force of nature. Ann was able to avoid public interrogation, legally, while Fife twisted in the wind created by Manning's questions.

If the bankruptcy ends with a settlement, Ann Symington might avoid Manning's questions altogether.

And if there is no settlement, when her time to face the music occurs, it will be in the relative privacy of a deposition, which will be conducted away from the prying eyes of the press and the public. At least for a time.

For now, her attorney is playing a sort of chess game with the rules of Chapter 7, protecting Ann from attack in every way possible.

Even with Ann sequestered, though, details of her big-dollar plays leaked out at the bankruptcy hearing during her husband's testimony.

Ann Symington will have plenty of money-moving to talk about if she ever does face Manning.

First, during the 1990 gubernatorial campaign, Ann and Martha Frick Symington, Fife's mother, lent $1.3 million to Fife. He then turned the funds over to the campaign. The loan was widely viewed as a heavy-handed attempt to circumvent campaign finance limits.

The governor told Manning that Ann subsequently bought Martha's share of the note, so that Fife owed all of the $1.3 million to his wife.

And, bless her heart, she forgave the entire debt. Now you owe me $1.3 million, now you don't.

So, instead of giving the ordinary legal limit of $500, Ann Symington got away with pumping more than $1 million into the campaign.

Then, in 1993, Ann intervened again. She paid Fife's Washington, D.C., lawyers more than $200,000.

A grateful Fife said he, in turn, passed to Ann $100,000 worth of antiques, jewelry and assorted robber-baron loot.

"I thought the least I could do," Fife told Manning, "was turn over some things I thought were of value and transfer them to her."

Now, if you or I did this, it would be looked upon as "fraudulent conveyance," an attempt to circumvent bankruptcy debt by hiding your ill-gotten gains.

People like Ann and Fife, however, believe that prenuptial agreements and "sole and separate property" loopholes shelter valuables from pensioners looking to be paid back.

Finally, in 1994, long after Fife had defaulted on the union loan, Ann lent Fife $50,000 for his reelection bid. At first, he paid her back with campaign funds. Fife testified that, after giving her the money, he changed his mind and took the cash back from Ann to send his kid to Phillip Exeter Academy, a school for little pootbutts who grow up to be trust-funders like Ann and Fife.

If you or I declare bankruptcy, one of the first things that happens, I guarantee, is that our kids end up in free public schools. We don't get to use campaign funds to send our children to Hotchkiss.

Despite their cavalier manipulation of wealth, Ann and Fife insist there is hardly a cent to repay the nail pounders, ditch diggers, truckdrivers and crane operators who lent them money.

Keep in mind that the creditors' hearing was only round one--a feeling-out round in what could be a long and revealing ordeal.

Even so, the number of red sirloin scraps with Ann's fingerprints all over them is enough to rouse the hounds.

Take the vanishing $1.3 million; throw in the $100,000 in valuables laundered out of Fife's swag and grabbed by his wife; and add Ann's revolving $50,000 fund in 1994 and the $50,000 she dumped to take the entire family on a tour of Europe days before the governor officially declared bankruptcy; frost all of that with some $20 million in worthless loan guarantees from the heiress; take all that together, and you can understand why Ann has hired a rat terrier like Gaffney to keep the big dogs from turning over her garbage cans.

Outside, goblins and ghouls paraded about the plaza on Halloween. Ten stories above the street, in bankruptcy court, Governor Fife Symington tried on a new identity of his own.

Like Old Scratch himself, the governor put up a hell of a show, obfuscating, blowing smoke, even feigning indignation about his $25million bankruptcy.

At 10:08 a.m., Fife Symington raised his right hand and swore before God that he would tell the truth.

Within moments, Governor Symington exhibited short-term memory loss and long-term memory loss.

Fife Symington could not remember who signed on his checking account. He could not remember whether his wife signed on his checking account.

He could not remember whether his inherited trust had ever issued him a check for six figures.

He could not remember whether he had once sold his interest in one of his multimillion-dollar developments for $10.

Wouldn't that kind of loss stick in your mind?
He could not remember for certain whether one of his investors had offered to give up his interest in Symington's Scottsdale Center, for free.

Who can forget such facts?
Ronald Reagan on his worst day, in an oxygen tent, with plastic tubes up his nostrils, was more lucid than the governor of the State of Arizona.

Fife could not recall who wrote out the checks to his own lawyers.
"I'm not sure how they got paid, what they got paid ..." said the governor.
Well, then, did anyone else pay his bills for him?
"I'm not sure," said Symington.

"I have no idea. ... I don't know. ... I just don't remember. ... I don't know how to answer that question."

There have been those in the press who have questioned what the governor's aides do to earn salaries that are among the highest in the nation.

Now we know.
They tell Governor Symington where he left his drool cup.
The bankruptcy hearing was legal pageantry at its most compelling.

The courtroom was packed. More than 100 people jammed the pews while the overflow stood in the rear, leaning against the walls.

The governor's beefy bodyguards surveyed the crowd, looking for the next Lee Harvey Oswald, while Symington himself scanned the courtroom looking for a friendly face.

At last, the governor spied a supporter and bestowed a wink upon the lucky citizen.

If Symington felt isolated, he did not show it. In fact, he appeared bored, having to fight off yawns and stretching his eyes to stay focused.

Citizens who made it into the courtroom will have something to talk about at their holiday parties; they can tell their friends about the tittering Symington's testimony provoked.

The governor wanted it both ways: He hid behind a memory as blank as wiped slate, and yet managed to act insulted at the very idea of questions.

"Perhaps you are trying to embarrass me publicly," Symington told Manning, and people snorted in amusement.

You see, none of us actually believed the governor was a victim of dementia. It was all a charade.

Important people often develop amnesia when they have to put their hand on a Bible.

The truth is, Fife's absent-minded pose was as transparent as Ann's absence.
Eventually, Manning will get his answers.
Nor will Ann remain mute forever.
She is too critical.

After all, no one knows better than Ann Symington what she and Old Scratch have been up to.--Lacey

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