By Ray Stern
By Ray Stern
By New Times
By Amy Silverman
By Stephen Lemons
By Stephen Lemons
By Monica Alonzo
By Chris Parker
Governor J. Fife Symington III's Chapter 7 bankruptcy case is moving further from the public eye with each passing week.
Agreements to seal documents from public review are increasing as Symington prepares for an expected hostile deposition later this month by his largest creditor, a consortium of union pension funds he owes more than $11 million.
In an unusual tentative agreement reached April 19, the pension funds and another Symington creditor--Citicorp Real Estate, Inc.--have agreed to keep confidential Citicorp internal documents related to a $4 million real estate loan that Symington has never repaid.
The proposed agreement, which must be approved by Bankruptcy Court Judge George B. Nielsen, is surprising, because the pension funds have been aggressive in researching the governor's finances and have objected to past efforts to seal records.
The pension funds--which lent $10 million to Symington's development company for construction of the Mercado mall in downtown Phoenix--are investigating Symington's finances to determine whether they should fight his effort to have the court erase the debt.
Mike Manning, attorney for the pension funds, believes the confidentiality agreement is necessary because the pension funds want to review Citicorp's internal documents before deciding if they should challenge Symington's bankruptcy. The pension funds must decide whether to do so by June 14.
"Citicorp has held hostage these documents, and they are important documents to us," Manning says.
The proposed agreement allows the pension funds to ask the court to unseal any documents that the funds believe are not truly confidential.
"This allows us to have a look at the documents and then approach the court if we find, as we know we will, they have far overstated the need for confidentiality," Manning says.
While the proposed agreement may give the pension funds access to internal Citicorp documents, Manning says he is concerned the agreement may encourage other parties in the case to attempt to seal records.
"I don't want any precedent set for others, but it's going to be hard to avoid some of that," he says.
Attorneys representing Phoenix Newspapers, Inc. and KTVK-TV Channel 3 are seeking to intervene in the bankruptcy case to prevent the Citicorp records from being sealed--an action thepension funds welcome. Media attorney Frank Long says in court pleadings the proposed confidentiality agreement would "make secret critical aspects of Citicorp's business relationship with the governor."
A hearing on the media motion to intervene is scheduled for May 9.
Symington's bankruptcy case has been mired in discovery disputes since it was filed September 20, with the governor claiming $25 million in debts and $62,000 in assets.
The most significant dispute to date stems from Symington's refusal to produce documents related to his family trust funds. A Pennsylvania bankruptcy court ruled last month that Symington must allow the pension funds to inspect family trust documents controlled by Mellon Bank in Pittsburgh.
Symington receives about $30,000 a year from earnings on about $800,000 worth of stocks held in four family trusts. The pension funds are investigating whether Symington is also a contingent beneficiary for additional trust funds.
Discovery disputes are expected to become even more contentious as the bankruptcy case proceeds.
The governor's personal and business accounting firm, Coopers & Lybrand, already has filed court pleadings objecting to the pension funds' subpoena seeking an array of records. Coopers & Lybrand says it will respond to the subpoena only if most of the accounting firm's documents are sealed from public review.
"Coopers will--once an acceptable protective order is entered--make available for inspection and copying nonprivileged documents contained in its working papers for the tax- and audit-related work performed for Governor Symington," the accounting firm's attorneys told the court.
The proposed confidentiality agreement between the pension funds and Citicorp would seal Citicorp internal documents dealing with a $4 million loan made to Symington in August 1989 for a real estate project at 5050 North 40th Street in Phoenix.
The pension funds subpoenaed Citicorp documents related to the loan last November. Citicorp disclosed 4,000 pages of materials, but refused to turn over other documents that it claims contain proprietary information.
"The only documents for which Citicorp is seeking confidentiality are documents to which the debtor is not even privy," Citicorp's attorneys say in court pleadings.
Documentation of external communications between Citicorp and third parties was turned over to the pension funds, Citicorp's lawyers say.
Citicorp's court pleadings say the internal documents it wants to seal include: initial credit-approval memos; monthly account-management summaries; credit memorandums and analysis of outside information; action plans; information on Citicorp's reserves for nonperforming loans; and recommendations concerning write-downs of the Symington loan.
Terry Dake, an attorney representing the trustee of Symington's bankruptcy estate, says he has agreed to the terms of the proposed confidentiality agreement.
"I don't see this as a big deal at all," Dake says.
Citicorp's internal documents outlining discussions of the Symington loan would likely not be admissible in court, Dake says.
The internal documents need to be reviewed, however, because they may lead to other records that are relevant to Symington's bankruptcy and could be used in legal proceedings, Dake says.
Dake also says he doesn't believe the confidentiality agreement with Citicorp would set a precedent, even though Coopers & Lybrand is seeking a protective order.