An Accounting Nightmare

Coopers & Lybrand leaves governor in "worst of all worlds" legally; but quick removal from office seems unlikely

Last Friday's settlement between the Big 6 accounting firm of Coopers & Lybrand and federal prosecutors delivers a powerful legal blow to Governor J. Fife Symington III.

What Coopers & Lybrand disclosed in a remarkable six-page press release, which was jointly prepared with federal prosecutors, is devastating to Symington's defense in both his criminal and his bankruptcy cases.

Simply put, the government and Symington's creditors now know that when called to the witness stand, the governor's own accountants will testify that he committed bank fraud.

"I thought the Coopers statement on Friday was unbelievable," says Terry A. Dake, the attorney representing the trustee in Symington's Chapter 7 bankruptcy filing. "They basically admitted they were a participant in this fraud."

This admission has many ramifications--all of them bad for Symington.
A 23-count federal indictment leveled last June accuses the governor of knowingly submitting false financial statements to lenders to obtain hundreds of millions of dollars of loans for disastrous forays into real estate construction and management.

Now, Coopers & Lybrand is not only asserting that Symington lied to the firm about the accuracy of his financial statements, which were later submitted to lenders who granted him millions of dollars of loans, the accounting firm is also strongly suggesting it conspired with Symington to deceive at least two institutions that lent money to Symington's firms.

"This is a huge benefit to the feds," says a Phoenix attorney close to the case. "It shows that not only was Fife lying, but that he was conspiring with Coopers & Lybrand."

The federal grand jury is continuing its investigation into Symington's finances and has expanded the probe to include the governor's relationship with his attorneys at the state's largest law firm, Snell & Wilmer.

In Friday's settlement, Coopers & Lybrand also acknowledged that one of its senior partners, the late John Yeoman, had participated in the rigging of bids for Project SLIM, Symington's much-ballyhooed effort to streamline state government. The SLIM contract is still under investigation, and Symington may yet be charged.

And on the heels of the Coopers agreement, the trustee in Symington's personal bankruptcy case has taken formal action to prevent the discharge of all $25 million of the governor's debts, alleging, among other things, that those debts were run up through fraud.

The governor's legal position is as dire as it could be, short of criminal conviction. And increasingly it appears that nothing but convictions will force Symington from office.

If the Legislature had any interest in impeachment whatsoever, the Coopers settlement provides all the ammunition necessary to launch and quickly conclude removal proceedings against the governor.

In the settlement, the accounting firm admits it participated in the illegal rigging of a $1.5 million Project SLIM contract.

This wasn't just any run-of-the-mill state contract. Project SLIM was Symington's prize initiative and one that he personally discussed with Yeoman, months before winning election to a first gubernatorial term in February 1991.

That initial SLIM contract was awarded to Coopers & Lybrand in September 1991--after Yeoman illegally gained information about competitors' bids, and after Coopers lowered its bid at the last moment by $440,000. And in the settlement made public last week, Coopers & Lybrand admits its role in the bid-rigging.

The government alleges Yeoman illegally received bidding information from Symington's closest personal aide and former deputy chief of staff, George Leckie. Leckie, who has been stricken with throat cancer, is charged with seven counts of fraud in connection with the contract and faces an October trial date. Coopers & Lybrand has agreed to testify at Leckie's trial.

Yeoman, who was Symington's longtime personal, business and campaign accountant, also was indicted by a federal grand jury in the bid-rigging scandal. Yeoman, however, was killed in a car crash last April.

Symington has long argued that the Project SLIM contract was awarded to Coopers & Lybrand because it was the most qualified firm. Coopers' admissions in its settlement with federal prosecutors greatly undermine that argument, and other evidence strongly suggests gubernatorial involvement in the corrupt SLIM contracting process.

State records show that soon after Coopers & Lybrand illegally obtained the Project SLIM contract, the firm began slashing the accounting fees Symington owed the company.

Records obtained by New Times reveal that Coopers & Lybrand in 1991 forgave $22,000 of Symington's debt. By 1993, the firm had written off as uncollectible $83,000 of the $88,000 still owed by Symington.

Symington's close ties to Coopers & Lybrand and Project SLIM don't stop with the $1.5 million contract. Internal Coopers & Lybrand documents show Symington and Leckie actively participated in steering a second Project SLIM contract to Coopers & Lybrand in 1993. This second contract was worth some $3.1 million, or twice as much as the first.

Were the two Project SLIM contracts--worth a total of $4.6 million--illegally awarded to Coopers & Lybrand, with the knowledge and/or help of Symington? Did the governor receive a financial benefit--the reduction of accounting fees--as a result of the Project SLIM contracting process?

There is an abundance of evidence suggesting the answer to these questions is yes. There is also an abundance of evidence suggesting the Legislature has no interest in posing those questions.

Its criminal implications aside, the Coopers & Lybrand settlement has triggered a serious round of fireworks in Symington's tumultuous bankruptcy case. Symington filed for personal bankruptcy in September 1995, seeking to erase more than $25 million in debts.

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