Feds Target Fife's Lawyers

Prosecutors wonder how Symington's debt to a powerhouse law firm was paid

The state's largest law firm has been dragged into the federal criminal investigation of Governor J. Fife Symington III's finances.

Phoenix-based Snell & Wilmer represented the governor on business matters for more than a decade before Symington sought bankruptcy protection from creditors last September. The firm--considered to be the state's most influential--no longer represents the governor, although Symington has said he owes the firm at least $230,000.

"We are aware that prosecutors from the U.S. Attorney's Office in Los Angeles, California, are investigating Governor Symington's business dealings," the firm said in a statement released to New Times on May 16.

"As an extension of that investigation, many organizations will be subject to inquiry, including Snell & Wilmer. We are cooperating fully with the authorities in their investigation."

Sources familiar with the investigation say a grand jury is focusing its attention on Richard Mallery and Jay Wiley, two Snell & Wilmer attorneys who had close ties to Symington. Both assisted Symington in real estate and partnership transactions.

Neither Mallery nor Wiley returned phone calls seeking comment.
The criminal investigation into Symington already has ensnared the governor's former top aide, George Leckie, and his former personal, campaign and business accountant, the late John Yeoman. Leckie and Yeoman were indicted March 14 on federal fraud charges related to a state contract.

Yeoman was a tax partner in the Phoenix office of the national accounting firm of Coopers & Lybrand. He was killed in an automobile crash April 5, two days after his arraignment on federal charges. Leckie's trial is scheduled to begin in July.

Coopers & Lybrand, meanwhile, has confirmed it also is "cooperating" with the federal prosecutors who have been conducting a grand jury probe into Symington's business affairs since at least July 1993.

Snell & Wilmer played a prominent role in Symington's bankruptcy case, representing the governor's wife, Ann Symington. The Symingtons claim their assets are separate, and only the governor has filed for bankruptcy. Ann Symington replaced Snell & Wilmer earlier this month with the New York firm of Weil, Gotshal & Manges, which is considered the premier bankruptcy firm in the nation.

While Snell & Wilmer says it is cooperating with federal authorities, the firm has repeatedly objected to requests for documents in Symington's bankruptcy proceeding. Symington is seeking relief from $25 million in debts through Chapter 7 bankruptcy.

Lawyers representing a consortium of union pension funds are investigating the governor's finances in bankruptcy court before deciding whether to sue the governor in an effort to collect more than $11.5 million from Symington. One issue the pension funds want resolved is who has paid Symington's Snell & Wilmer legal fees.

The governor said last October during his sworn debtor's examination in bankruptcy court that he could not remember how much he had paid the firm and whether anyone assisted him in those payments. Symington also was vague when asked whether Snell & Wilmer agreed to write down any debts.

"From time to time, there have been negotiations . . . where we grapple over invoices where we feel lawyers have overcharged us," Symington said.

State records, however, show Symington reported receiving "compensation" worth more than $1,000 in 1994 for a reduction in Snell & Wilmer legal fees.

Questions have been raised about whether Snell & Wilmer agreed to reduce Symington's legal bills in return for favorable appointments and state business. Federal investigators are believed to be examining this relationship.

Several top posts in the Symington administration were filled by Snell & Wilmer attorneys, including Ed Fox, former Department of Environmental Quality director; Rita Pearson, director of the Department of Water Resources; and executive assistant Mary Leader. The firm has received more than $369,000 in state business during Symington's tenure.

It is not unusual, however, for a firm as large as Snell & Wilmer--it has more than 130 attorneys in Phoenix--to have lawyers appointed to powerful state positions or to obtain large state contracts for legal services.

During his debtor's examination, the governor promised to provide pension fund attorney Michael Manning with detailed answers on his payment history with Snell & Wilmer. Those records have not yet been produced and Snell & Wilmer is objecting to pension fund subpoenas seeking documents, saying the requests are too broad.

Snell & Wilmer's Jay Wiley specialized in creating myriad partnerships for Symington's numerous real estate projects; those partnerships typically were structured to give Symington control of the investments with very little of his own money invested. The governor, for example, personally invested about $216 to obtain control of the $200 million Esplanade development.

The Esplanade project later became the focus of a federal Resolution Trust Corporation lawsuit against Symington and other former officials of the defunct Southwest Savings & Loan Association. The government claimed Southwest's investment in Symington's Esplanade resulted in more than $30 million in losses for the savings and loan. RTC settled with Symington in 1994, with the governor admitting no wrongdoing and paying no settlement fee. The government says it settled the case because Symington was broke.

Richard Mallery has been a friend and business partner of Symington's since the early 1970s. He is well-known for his skills in smoothing over complicated real estate transactions and conducting negotiations. Mallery played a crucial role in Symington's futile efforts to prevent the pension funds from foreclosing on the governor's Mercado project in downtown Phoenix.

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