By Ray Stern
By New Times
By Amy Silverman
By Stephen Lemons
By Stephen Lemons
By Monica Alonzo
By Chris Parker
By New Times
In October 1987, a Symington-led partnership reached a three-way agreement with First Interstate Bank and the union pension funds to build the Mercado. First Interstate agreed to advance a $10 million construction loan while the pension funds, represented by Miller, agreed to provide permanent financing once the project was built.
As part of the agreement, Symington's partnership paid Miller a $10,000 "loan processing fee" in connection with receiving the pension funds' $10 million loan commitment. The pension funds would later allege in their lawsuit against Miller that the $10,000 payment was essentially a kickback that violated federal law. (The Republic has never reported the $10,000 payment or the claim that it was illegal.)
The Mercado project wasn't the only loan Miller made on behalf of the pension funds. He invested nearly $250 million of the pension funds' money in scores of Arizona real estate projects. By 1988--a year after Miller and Symington reached agreement on Mercado funding--the Arizona real estate market was in steep decline.
The real estate collapse exposed Miller's poor investment advice, which resulted in huge losses to the pension funds. It also exposed Miller's illegal tactic of accepting payments from borrowers to facilitate loans.
The union pension funds fired Miller in November 1988 and brought in McMorgan & Co. to manage its accounts. Four months later, the pension funds filed a lawsuit in U.S. District Court in Phoenix against Miller and the companies he worked for.
Meanwhile, McMorgan & Co. reviewed the pension funds' real estate portfolio and realized Miller had committed them to issuing a $10 million loan on the Mercado to Symington's partnership once Mercado construction was completed in the spring of 1990.
McMorgan & Co. officials claim they were reluctant to issue the loan because of the declining real estate market in Arizona. But the firm was also threatened with a lawsuit from First Interstate Bank (now Wells Fargo) if it didn't provide the permanent financing as Miller had promised in 1987.
McMorgan & Co. refused to issue the $10 million loan unless Symington signed a personal guarantee to repay it. "We had one of those eyeball-to-eyeball meetings," says Paul Morton, a McMorgan & Co. vice president. "We needed to collateralize this loan because of the changing market."
Symington signed the personal guarantee on June 29, 1990. At the same time, he submitted a personal financial statement indicating that he and his wife held community assets worth $11.9 million. (The pension funds allege in a civil suit filed in bankruptcy court that Symington lied on this and other personal financial statements.)
After obtaining Symington's personal promise to repay the loan, McMorgan & Co. issued the Symington partnership the $10 million. That was the last the pension funds ever saw of that money.
The pension funds sued Symington in Maricopa County Superior Court in December 1991 after Symington, who had since been elected governor, failed to repay the loan. In July 1995, the pension funds won a judgment against Symington for the debt, which with interest had grown to $12 million. Symington filed for bankruptcy two months later, seeking to erase $25 million in debts, including the $12 million judgment to the pension funds.
Miller, meanwhile, attracted the attention not only of the pension funds, but also federal prosecutors. In June 1991, the pension funds amended their civil suit and accused Miller of accepting an illegal payment from Symington. That payment was later turned over to the pension funds by the owners of MHI.
Federal prosecutors in Tucson indicted Miller in November 1992 for taking under-the-table payments from a Tucson real estate broker in exchange for loans from the pension funds. Miller, and the broker, were convicted and sentenced to three years in federal prison in March 1994.
Symington's $10,000 payment to Miller was not targeted by prosecutors because it was later repaid and it had been documented in the October 1987 Mercado loan-commitment papers.