Republic Scoops Self

The expose told of a newly discovered "confidential settlement" that has an impact on Symington's bankruptcy case. But the Republic itself had reported the settlement--in 1994.

With jury selection for Governor J. Fife Symington III's criminal trial only weeks away, Symington's bankruptcy attorney last week manufactured a bombshell that the Arizona Republic obligingly splashed on its front page.

The story contained numerous inaccuracies. After New Times brought the errors to the Republic's attention on Monday, the newspaper on Tuesday printed a second story that corrected some of the errors. Conspicuously missing from the second story, however, was any mention that if the Republic had checked its own files, it would have known the first story was erroneous.

The first story appeared on April 4, after Symington's bankruptcy attorney, Robert Shull, told the Republic that a group of union pension funds that seeks to prevent Symington from erasing a $12 million debt already has been repaid by other parties. The debt stems from a loan the pension funds made to finance Symington's failed Mercado development in downtown Phoenix.

Shull told the Republic that a "confidential settlement" of a lawsuit resulted in a $93 million award to the pension funds. Shull said a portion of the governor's Mercado debt may have been paid in that settlement.

Shull's statements were apparently intended to buttress the governor's contention that the pension funds are challenging his bankruptcy for political reasons. Shull and the governor's criminal attorney have claimed that the pension funds experienced no significant loss from a $10 million Mercado loan that Symington personally guaranteed but did not repay. The loan was made in 1990.

The Republic's April 4 story was titled "Pensions' double-dip suspected." The salient information, the story said, had been "disclosed" by Shull last week.

Symington's attorneys had never broached the November 1994 "confidential settlement," the Republic reported, because "it was discovered only this week by Symington's attorneys."

It's true that the pension funds sued their former investment manager--William E. Miller of Mitchell Hutchins Investments (MHI)--for making poor investments. It's also true that the pension funds settled that lawsuit for $93 million.

But Shull's contention that the settlement was confidential and secret--and suddenly newsworthy--is false.

The Republic should have known this--the paper reported on the settlement.
The U.S. Department of Labor, which joined the pension funds in suing MHI, issued a press release about the settlement, and the Republic reported on it on November 3, 1994. The piece, by Guy Webster, appeared on the front of the Republic Business section, and was headlined: "$93 million settles pension-funds suit."

New Times reported on the settlement in an October 1995 story that focused on an apparently illegal kickback Symington had paid to MHI.

Contrary to the Republic's April 4 report, the settlement was not confidential; copies of the agreement have been available at the U.S. District Court in Phoenix for more than two years.

Furthermore, even if Shull had failed to read the 1994 Republic story or the 1995 New Times article, his contention that he was unaware of the settlement rings hollow. All Shull needed to do was walk down the hall of his Phoenix law firm--Mariscal Weeks McIntyre & Friedlander--and knock on the door of partner Gary Birnbaum. Birnbaum represented at least three lawyers who were sued during the pension funds' civil suit and was privy to the settlement, says Michael Manning, an attorney representing the union pension funds in bankruptcy court.

Shull declined to comment on the record in an interview with New Times--other than to say he continues to seek additional documents to determine whether the pension funds attributed any of the $93 million settlement to Mercado-loan losses.

Reached at the Republic Monday afternoon, political editor Dave Wagner said he would return New Times' call "in five minutes." He didn't. Reached at his home on Tuesday morning, Wagner said he had been "forbidden" to return the call. The reporter who wrote both stories, veteran Pat Flannery, did not return phone calls seeking comment.

Flannery's second story, published April 8, was headlined "Union-funds settlement was public." The story paraphrases Manning as saying that, contrary to Shull's claims, the pension-funds settlement was not confidential and had in fact been mentioned in depositions in the bankruptcy case. The second story also paraphrases Manning as saying that "local newspapers" had reported on the settlement in 1994. It doesn't mention that the Republic itself reported the story.

Aside from the errors regarding the settlement's confidentiality, the pretext for the story--Shull's contention that the $93 million payment to the pension funds includes the Mercado--also appears dubious. The settlement was based on loans made by the pension funds--at Miller's direction--between 1980 and 1988. The pension funds didn't make the Mercado loan until June 1990.

And the $93 million settlement was not paid by borrowers, such as Symington, who defaulted on pension fund loans. The bulk of the settlement was paid by the corporations that owned Miller's company, MHI.

"What was lost on the Mercado had nothing to do with the damage calculations," says Manning.

Shull is also claiming that Symington is not responsible for a loan that came as a result of shoddy underwriting practices by Miller.

"If the loans shouldn't have been made, what was the basis for the loss?" Shull asked in last week's Republic piece.

The pension funds' loan to Symington is far more complicated than Shull suggests. While the commitment to make the loan was made by Miller, the actual funding of the loan came nearly three years later--under far different conditions. And Symington's and Miller's role in obtaining the pension funds' initial loan commitment was questionable, to say the least.

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