Feds Target Fife's Lawyers

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

The Mercado negotiations are another chapter that might have led federal prosecutors to investigate Snell & Wilmer. The tense negotiations showed Symington's willingness to use his position as governor to attempt to influence Phoenix and the state Legislature to invest in the Mercado.

The Mercado was different from most of Symington's other failed developments. In most instances, a lender's only recourse when a Symington project failed was to take back the property. But Symington could obtain construction and permanent financing for the Mercado only by personally guaranteeing to repay the loans.

In July 1991--only five months after ascending to the Governor's Office by touting his business acumen, being elected governor on a platform of being a successful businessman--Symington was in dire straits with the Mercado, as well as numerous other real estate projects. Symington called Mallery to a meeting with pension fund officials to discuss repayment options for the Mercado.

According to documents filed in the bankruptcy case, Mallery asked the pension funds to release Symington from his $10 million personal guarantee; in exchange, Mallery offered to "use all influence he could muster" with the City of Phoenix and another private developer to take over the Mercado.

Symington told the pension fund representatives that the City of Phoenix "could step in and agree to lease the majority of the vacant area in the Mercado," according to a memo prepared by Mark Taylor of McMorgan & Co., a San Francisco pension fund management firm.

The City of Phoenix had lent Symington $2.7 million from a federal grant for the Mercado. Symington defaulted on that loan as well.

The pension funds were unimpressed with Symington's and Mallery's proposal and told them that unless some formal repayment plan was worked out, the pension funds would be forced to file a default notice.

According to Taylor's memo, Symington became angry, and a "general discussion ensued regarding the credit worthiness of Fife's personal guarantee."

Mallery then delivered jarring news. Symington's finances were a disaster, even though a year earlier, as Symington sought a loan from the pension funds, he had submitted documents showing him to be worth $12 million.

Mallery told the pension funds that "Fife had $20 million in negative net worth" and only $1.4 million in assets, with $1.2 million of that in notes due from his election campaign.

Taylor's associate, Don Eaton, then asked Mallery whether the pension funds could be repaid by Symington's wife, or from proceeds from the governor's trust funds. Mallery said neither source could be tapped to repay Symington's personal debt to the pension funds.

The pension funds then pressed the governor further on his ability to repay the loan. The governor reportedly told the pension funds that forcing him to default would diminish his political influence over the Legislature.

Symington's relations with the Legislature were vital to the Mercado's viability, because Arizona State University was one of the few tenants in the development.

"[Symington] stated that he had to go to extreme lengths to lobby the Legislature to continue to have ASU in occupancy on their year-to-year lease," Taylor's memo states.

Symington vigorously opposed funding increases for ASU in 1991, with one notable exception: a $400,000-a-year boost to cover ASU's lease payment for the Mercado.

Symington reportedly told the pension funds that a default and potential bankruptcy would make him "not as influential in the future."

Negotiations broke down with the pension funds by December 1991. The dispute ended up in court, and in May 1993, Symington tried one last-ditch effort to stave off foreclosure by asking the City of Phoenix to buy the development for $5.2 million. The city rejected the proposal, clearing the way for foreclosure.

The pension funds purchased the Mercado for $3 million at an auction. The funds then sued Symington in Maricopa County Superior Court for the $7 million difference between their purchase price and the $10 million loan.

Snell & Wilmer attorney Lonnie Williamson represented Symington in the case. The suit was concluded in July 1995, with the pension funds winning an $11 million judgment against Symington.

The judgment triggered Symington's bankruptcy filing in September 1995.

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