By New Times
By Connor Radnovich
By Robrt L. Pela and Amy Silverman
By Ray Stern
By Keegan Hamilton
By Matthew Hendley
By Monica Alonzo
By Monica Alonzo
But Symington had a key ally: First Interstate Bank, which still held a $10 million note for the Mercado construction loan.
First Interstate knew Symington's real estate business was a shambles. By March 1990, Symington was so pressed for cash that one of his partnerships couldn't make payments on a relatively small, $2.5 million note First Interstate held on an East Valley shopping center called Alta Mesa. The Alta Mesa project was so decimated that one of Symington's lieutenants wrote First Interstate Bank in February 1990, saying the partnership's investment had been "wiped out."
The First Interstate loan on Alta Mesa had been extended three times because the Symington partnership was unable to make payments. Property taxes were unpaid and a tenant was owed $13,000.
Rather than foreclosing on the property, First Interstate Bank extended the loan again. The bank agreed not to take further action against Symington if he came up with $20,000 by July 1, 1990.
July 1 was a crucial date for both Symington and First Interstate. The only hope First Interstate had of recouping its $10 million construction loan was for the pension funds to issue the permanent loan before June 30.
By extending the Alta Mesa loan to July 1, First Interstate helped Symington avoid a foreclosure, which would undoubtedly have scared off the pension funds.
In his deposition, Symington told Manning that the July 1 extension on the Alta Mesa loan was a coincidence.
Coincidence or not, on May 4, 1990, Symington submitted a grossly misleading financial statement to the pension funds, making it appear that he and his partnerships were healthy and solvent. The financial statement--dated December 31, 1989, but presented as accurate as of May 4, 1990--claimed the governor had $12 million in net worth.
The misrepresentations in the statement are reflected in Symington's valuation of the Alta Mesa property--the investment that First Interstate had been told was "wiped out." Symington told the pension funds that his share of the Alta Mesa property was still worth $250,000.
Symington's financial condition continued to erode as the deadline to obtain the pension fund loan approached.
On June 26, 1990--just seven weeks after he had given a financial statement to the pension funds--Symington made a crucial amendment to that same statement. He told First Interstate that his claim of $15 million in real estate equity was "highly subjective" because of the "current depression in the real estate market." Symington never gave that crucial information to the pension funds. Neither did First Interstate Bank.
Symington says in his deposition that he didn't tell the pension funds that the value of his real estate was "highly subjective" because he didn't think the loan hinged on his financial statement.
"The union pension funds made a loan against the real estate," Symington says. "They weren't lending against my financial statement. It was an asset-based loan."
Based, at least in part, on Symington's fabricated financial statement, the pension funds issued a $10 million loan on June 29, 1990, to the Mercado partnership.
The Mercado partnership immediately paid off the bulk of the construction loan, letting First Interstate largely off the hook.
First Interstate Bank officials declined to comment on their dealings with Symington.
With the Mercado financing crisis quelled, Symington focused on his campaign. He coasted to victory in the Republican primary and narrowly defeated Democrat Terry Goddard in a February 1991 run-off.
Among Symington's first gubernatorial appointments was a First Interstate Bank executive to head up the state Department of Administration, an agency that oversees millions of dollars in state contracts.
By July 1991, the pension funds' fears about the Mercado loan came to pass. Symington's Mercado partnership couldn't make payments.
After a lengthy legal battle with Symington, the pension funds purchased the Mercado at a trustee's sale in 1993. The pension funds won an $11 million judgment against the governor last July.
The judgment prompted Symington to file for bankruptcy in September, seeking to erase $24 million in debts. The pension funds are expected to contest Symington's attempt to have his $12 million debt to the funds discharged.
Confronted by Manning with overwhelming documentation of errors and omissions in his financial statement, the governor at first admitted that mistakes were made.
But as the mistakes piled up and Manning was able to establish a pattern--Symington consistently overstated the value of assets and understated liabilities--Symington began to invoke his creative accounting methods.
Documents show, however, that Symington hasn't always relied on imagined valuations.
In 1982, for example, a Symington financial statement specifically stated the percentage he owned in each of his partnerships. That statement specified that he had a 15 percent share of the 1515 East Missouri investment. Based on the 15 percent ownership share, Symington correctly claimed $187,500 equity in the project, which had a total equity of $1.25 million.
But by 1989, Symington had made a small but crucial adjustment in the way he reported the value of his investments. His statements no longer specified his percentage of ownership. Instead, Symington simply stated the dollar value of his share.
In the financial statement submitted to the union pension funds, Symington said his share of the 1515 East Missouri partnership was worth $255,750--a figure apparently based on the 15 percent ownership share he had claimed seven years earlier.
But Symington's true ownership percentage in the partnership was far less. In fact, 1989 tax returns disclosed in the deposition indicate that Symington had sold the bulk of his stake and owned a minuscule 0.5 percent in the 1515 East Missouri project.