By Monica Alonzo
By Stephen Lemons
By Jason P. Woodbury
By Dulce Paloma Baltazar Pedraza
By Ray Stern
By Pete Kotz
By Monica Alonzo
By New Times
First Interstate Bank cut Governor J.Fife Symington III two generous deals on more than $3 million in overdue loans, despite having evidence that Symington had submitted false financial statements to the bank, court documents reveal.
First Interstate officials slashed the amount of interest and principal owed by the governor when they signed two loan "workout" agreements with Symington on December 4, 1991.
The workout terms included a provision that gave the governor a chance to greatly cut his indebtedness to the bank. Under the workout, for every $1 the governor contributed toward his loans, the bank would credit him as having paid an additional $2, according to First Interstate Bank loan documents filed in U.S. Bankruptcy Court.
The loan documents, filed in connection with Symington's September 20 Chapter 7 bankruptcy case, indicate the bank was aware that previous financial statements submitted by the governor might not have been accurate.
It is a felony to provide false financial information in connection with receiving a loan from a federally regulated institution.
Apparent inaccuracies in the governor's financial statements were addressed when Symington signed (and First Interstate accepted) a December 2, 1991, document titled "Clarification of Certificate Regarding Financial Statements."
While the language in the clarification certificate is not included in Bankruptcy Court records, the certificate is cited in the two loan-workout agreements. Those agreements suggest that the certificate modifies previous Symington financial statements to eliminate any "untrue statement" or omission of "material fact."
First Interstate Bank spokesman Tom Ellis said the bank would not comment on financial matters concerning its customers. Symington spokesman Douglas Cole declined to return a New Times call seeking comment. Bill Novotny, Symington's bankruptcy lawyer, also declined comment.
A Phoenix banking attorney says the clarification certificate indicates that First Interstate Bank "undercut" its ability to sue Symington for presenting false or misleading financial statements.
"This is kind of a cute way of abrogating any chance they have to sue on a false financial statement they may have received earlier," the attorney says.
The clarification agreement adds to the weight of evidence suggesting that Symington submitted false or misleading financial statements to lenders that provided his partnerships with hundreds of millions of dollars in loans in the 1980s and early 1990s. All of Symington's dozen or so development projects have failed, costing lenders more than $200 million in losses.
A federal grand jury has been investigating Symington's finances since at least July 1993, focusing on whether the governor submitted false or misleading financial statements to lenders. The grand jury--which is meeting in Phoenix, but led by the U.S. Attorney's Office in Los Angeles--is continuing its probe.
The clarification agreement appears to modify financial statements submitted by the governor in the fall of 1991. Those statements have not yet been submitted to the Bankruptcy Court. Whether these--and scores of other Symington financial records--become public depends on a crucial bankruptcy hearing set for December 21.
Symington's attorneys are attempting to place "protective orders" on the governor's financial records submitted during the bankruptcy case, amove designed to prevent the public and the press from reviewing depositions and documents.
Attorneys representing Phoenix television station KTVK (Channel 3) and Phoenix Newspapers Inc. have filed motions challenging Symington's request for the protective order. The motions will be argued before U.S. Bankruptcy Court Judge George B. Nielson.
Symington filed for personal bankruptcy protection on September 20 claiming $25million in debts and $62,000 in assets.
Among the first of Symington's financial records being sought are records of Symington's trust funds held by Mellon National Bank and the Union Trust Company, both of Pittsburgh. The request for trust records was made by attorneys representing a consortium of union pension funds, which have an $11.5 million judgment against the governor.
Symington has carefully guarded against disclosure of the conditions of at least four trust funds established by his late grandfather, Childs Frick. The funds consist of blue-chip stocks worth about $830,000.
The union pension funds, which lent a Symington partnership $10 million for the failed Mercado project, want to determine whether the trust funds could be used to repay a portion of Symington's debts.
While the union pension funds are pressing Symington to repay his loans, First Interstate Bank--like other major creditors, including Bank One and Citicorp--has remained largely silent during the bankruptcy proceedings.
All three do extensive business with the state.
Bank One, which is owed about $1.2 million by the governor, handled more than $168 million worth of state business in fiscal 1995, which ended June 30, according to Department of Administration records.
First Interstate Bank--owed $4.3 million for two Symington loans, when interest is included--is used far less by the state, but still had $16 million of state funds flow through its doors last fiscal year. The amount is increasing. The state did $20 million worth of business at First Interstate Bank in July and August of this year, state records show.
Citicorp, whose real estate funding subsidiary is owed $4 million by Symington, provides the credit card used by state workers. State employees rang up $1.7 million on the Citicorp Diners Club credit card in fiscal 1995 and nearly $585,000 for the first five months this fiscal year.
Symington borrowed money from First Interstate in connection with two developments. The bank lent $2.5 million for the Alta Mesa strip mall in Mesa and $10 million for the Mercado minimall in downtown Phoenix.