By Ray Stern
By New Times
By Amy Silverman
By Stephen Lemons
By Stephen Lemons
By Monica Alonzo
By Chris Parker
By New Times
Arizona Governor J. Fife Symington III finds himself in U.S. District Court, facing 22 felony counts that could strip him of his job and send him to prison for decades.
How did it come to this?
It's simple. He lied. He lied some more. And then he lied about the lies.
That's what federal prosecutors allege.
Symington doesn't deny the inaccuracy of more than a dozen personal financial statements submitted to lending institutions from which he got hundreds of millions of dollars in loans. He admits they contain "errors and omissions."
The crux of Symington's defense is that the lenders paid no attention to the statements when they decided to issue the loans--and therefore the statements were immaterial.
Symington has been dodging this day of reckoning for more than a decade. While the Arizona Republic last Sunday pronounced Symington a "warrior" for surviving seven years of civil and criminal investigation, the reality is that he has hidden behind the multimillion-dollar skirts of his late mother and his compliant wife.
He's spent their money on expensive attorneys and public relations experts who have attempted to deflect civil and criminal charges and portray Symington as a successful businessman caught in the "great real estate depression."
The facts betray this defense.
Symington wanted to build massive commercial projects in a grossly overbuilt market. By 1987, warning lights were flashing all over Arizona--the real estate economy was overextended. By 1988, Arizona thrifts were collapsing like overdone souffles.
Symington propped up his real estate company and his personal wealth with phony financial statements that exaggerated his assets and understated his liabilities. This was not a difficult thing for Symington to do; he's spent most of his life masquerading as a wealthy man. Until he inherited millions from his late mother last winter, Symington never personally controlled the kind of wealth he grew up with on a Baltimore County estate. His first wife noted in 1970s divorce records that he constantly was in debt and lacked gainful employment.
However, he had the right bloodlines. Fife Symington is the great-grandson of one of America's robber barons, Henry Clay Frick. The patina of Eastern Establishment money opened doors for Symington, who came to Arizona fresh out of the Air Force and landed a seat on the board of directors of Southwest Savings and Loan. He was 27.
Southwest Savings became Symington's piggy bank. During the early 1980s, he used Southwest's money to fuel his tiny development company, which built small office complexes and warehouses in the Valley. He made his living by paying himself development and leasing fees.
But nickel-and-dime developments were not enough for Symington. The Harvard University graduate (major: Dutch art) yearned to make his mark. He wanted something lavish that also would generate millions of dollars in development fees for his firm, The Symington Company.
He wanted the Camelback Esplanade.
In September 1983, Symington convinced his fellow Southwest Savings board members to invest more than $30 million in land at the corner of 24th Street and Camelback Road so his company could develop a huge commercial, retail and hotel complex--the Camelback Esplanade.
Relying on the oldest principle in development--use other people's money--Symington borrowed most of the money he needed to set up the Esplanade partnerships from Southwest Savings. He became the managing partner in the Esplanade project by investing $216 of his own money.
But 20-story office towers didn't go over well with the neighbors; the towers also violated Phoenix zoning ordinances. Symington used Southwest Savings money to launch a massive publicity campaign and convince the Phoenix City Council to revise its zoning and approve a scaled-back, eight-story version of the complex.
Storm clouds continued to gather over the Phoenix real estate market. Years of overbuilding fueled by thrift deregulation and real estate tax breaks ended with congressional approval of the 1986 Tax Reform Act.
Southwest Savings notified Symington that it would not finance construction of the Esplanade. About the same time, Symington and his partner, I. Jerome Hirsch, had a falling out. (Hirsch presciently had urged Symington to more closely manage the Esplanade project lest it become a "white elephant.")
Symington needed millions of dollars to buy out Hirsch's share of the project--and hundreds of millions to build the Esplanade. So he borrowed.
In 1985, he borrowed $2.25 million from construction magnate Robert Hunt so he could buy out a portion of Hirsch's stake in the Esplanade. This loan would be the first of many Symington would fail to list on subsequent personal financial statements, prosecutors allege.
But Symington needed more money to build the Esplanade, and Arizona lenders were wary of such massive projects.
So Symington went to Japan, where he found bankers willing to invest in Arizona's shaky real estate market. Dai-Ichi Kangyo Bank lent Symington's company $77 million in 1987 and another $50 million in 1988 to build the Ritz-Carlton hotel and two office towers at the Esplanade. Symington convinced Shimizu Development Company to be his equity partner and invest more than $30 million in the project.
Symington was home free, almost.
Dai-Ichi did require a few safeguards. It demanded that Symington personally guarantee to repay up to $9 million of the loans. It also won a provision that would put the loan into default if Symington's net worth dipped below $4 million.
Default would have cost Symington his prized project and more than half of his reported net worth. A dip in his net worth would have scared off other lenders he needed for smaller development projects, plunging Symington into a tailspin.
But by the late 1980s, such a scenario loomed. Symington was in a bind.
So he decided to run for governor.
The only way Symington, a Republican, could finance his gubernatorial campaign was to hit up his wife and his mother.
It was illegal to accept more than $550 in contributions from a single contributor. And since Symington and his wife, Ann, kept their personal finances separate, her donor power was limited.
So the Symingtons huddled with lawyers and hatched a plan under which his mother and his wife said they lent money to the candidate and that he in turn lent it to his campaign. They drew up promissory notes requiring repayment in three years, with interest.
As many people suspected at the time, it was all a sham. Ann Symington now admits in sworn testimony that she never intended to collect on the loans.
Symington received more than $1.2 million from his wife and his mother in apparent violation of campaign-finance laws. The cash infusion bought a last-minute advertising campaign that accused his opponent, Terry Goddard, of violating campaign-finance laws.
But during his campaign, Symington did much more than deceive voters and flout campaign-finance laws. Federal prosecutors allege that Symington repeatedly committed fraud by lying to lenders to prop up his real estate company.
In the years following the 1986 Tax Reform Act, Symington always kept more than one version of his personal financial statement. They were secreted in a fireproof cabinet accessible only to him and his secretary.
Symington had two different versions of his April 1, 1986, statement; three different versions of his October 1986 statement; two different statements for December 31, 1987; and two more for December 31, 1988.
The year 1990 was critical for Symington. By then, he was issuing four different financial statements dated December 31, 1989.
Prosecutors say Symington used the various statements to deceive federally insured lenders; these documents compose the heart of the criminal case, accounting for 14 of 22 criminal counts.
"During the campaign, Symington began to present different pictures of his financial condition to different lenders, depending upon whether he was seeking additional financing, in which case he continued to show a large net worth, or whether he was seeking debt relief, in which case he presented himself as a victim of the Arizona real estate depression," prosecutors say in pleadings.
While stumping for office, Symington also was attempting to extricate himself from yet another errant development, the Mercado in downtown Phoenix.
Symington had personally guaranteed to repay a $10 million Mercado construction loan from First Interstate Bank (now Wells Fargo). He also personally guaranteed a $10 million long-term loan from a consortium of union pension funds that would replace the construction loan once the project was built.
In May 1990, the pension-funds managers indicated they would withhold $2.8 million of the loan intended to finance Mercado tenant improvements. This meant Symington lacked enough money to repay all of the First Interstate loan.
Symington pleaded poverty to First Interstate--despite the fact that he had just given it a financial statement, dated December 31, 1989, saying he was worth $11.9 million.
First Interstate demanded that Symington hand over a new financial statement and told him to disclose the market values and costs of his projects. Symington resubmitted the statement on June 26, 1990, again showing a net worth of $11.9 million but adding a disclaimer: "The current depression in the real estate market makes it difficult to determine real estate value, thus any evaluation is highly subjective . . ."
Three days later, Symington claimed he was flush, telling the pension funds that his December 31, 1989, statement was "true and correct" and that there had been "no material adverse changes."
The pension funds issued the long-term Mercado loan; Symington appeared to be off the hook.
I. Jerome Hirsch put him back on.
In August 1990, Hirsch tried to pledge as collateral a $4.2 million promissory note he had received from Symington for a portion of Hirsch's share in the Esplanade. Hirsch wanted to use the note as security for a loan from Security Pacific Bank.
Security Pacific wanted to see Symington's personal financial statement.
Symington took off the wealthy mask he'd worn for the pension funds a few months earlier and donned his pauper's mask again. On August 23, 1990, Symington submitted yet another version of his December 31, 1989, statement to Security Pacific, but with a new disclaimer: "Because of the current situation of the Arizona real estate economy . . . the value of the assets and net worth shown on the financial statement are now materially and dramatically overstated."
Security Pacific wouldn't accept Symington's promissory note as collateral; Hirsch demanded a meeting with Symington to determine the status of the $4.2 million note.
On August 31, 1990, Symington's attorney told Hirsch's attorney that Symington's stake in the Esplanade was worthless, even though Symington's personal financial statement said his share in the project was worth $7 million.
"Symington's attorney also said that Symington was aware of the federal statute regarding influencing financial institutions, and was avoiding overstating his assets in order not to mislead the bank," prosecutors state in pleadings.
The next month, Symington was negotiating with First Interstate over a $2.5 million construction loan he had guaranteed for a Mesa strip mall. Symington rejected First Interstate's request that he sign a statement saying he was aware of the penalties for issuing false financial statements to lenders. He then came up with a new financial statement.
On September 19, 1990, he submitted a statement saying his net worth had plummeted from $11.9 million on December 31, 1989, to $4.4 million. Before he signed the statement, Symington also scribbled out language saying that he was aware of the penalties for submitting false statements.
He allegedly submitted just such a statement the very next month. Once again, problems arose with Hirsch and the Esplanade.
Symington had borrowed more than $1.2 million from Valley National Bank (now Bank One) in the late 1980s. About $600,000 of that sum were dedicated to paying the interest on the $4.2 million promissory note to Hirsch.
In October 1990, Valley National was pressing Symington to pay down his debt and obtain collateral for the unsecured loans. To accomplish this in the weeks leading up to the gubernatorial election, Symington once again turned to his mother, Martha.
Symington convinced Martha Symington to pay him $700,000 for a 50 percent interest in the Scottsdale Seville real estate partnership he controlled. (Weeks earlier, another investor had rejected the deal, at $500,000.)
The day after Martha Symington's investment, Symington received a $574,000 distribution from the partnership. He used some of the money to reduce his Valley National debt by $301,000 and about $83,000 to fund his election campaign. (The money funneled to the campaign appears to have violated election laws. However, Symington last week swore in a deposition that many of the 1990 campaign financial records have been lost.)
Symington next convinced his mother to pledge stock held in her account at the Mercantile Safe Deposit and Trust in Baltimore, Maryland, as collateral against another $300,000 he owed to Valley National Bank. Mercantile, however, demanded that Symington submit a personal financial statement before it would issue a letter of credit as collateral for his loans to Valley National.
Symington took off the poor man's disguise he'd used a month earlier in negotiations with First Interstate and Security Pacific; he put on the wealthy face he had shown for the pension funds.
In October 1990, Symington submitted a December 31, 1989, personal financial statement to Mercantile showing his net worth to be $11.9 million. He also signed a statement saying the financial statement was "true and complete" and that Mercantile "may consider this statement as continuing to be true and correct until a written notice of a change."
The government alleges that by the time Symington issued these statements to Mercantile, "he had already told other institutions that it was no longer accurate."
Mercantile issued the letter of credit allowing Symington to avoid a possible default at Valley National Bank weeks before the November 1990 election.
In February 1991, Symington defeated Goddard in a special run-off election.
As governor, Symington attempted to keep his financial charade afloat. But as his first year in office unfolded, it became increasingly difficult to keep up appearances.
In May 1991, Symington submitted a financial statement to Valley National showing a net worth as of December 31, 1990, of $5.4 million, up from $4.4 million in September 1990. This claimed gain in value was remarkable, given the eroding market and his admission to Hirsch's attorney in August 1990 that his stake in the Esplanade, by far his biggest project, was worthless.
It is even more remarkable because Symington knew his net worth was far in the red, prosecutors allege.
In April 1991, a little more than a month before he told Valley National he was worth $5.4 million, a Symington Company employee prepared a list of his liabilities that exceeded $39 million, leaving Symington "with a substantial negative net worth," pleadings state.
A month after Symington told Valley National he was worth $5.4 million, negotiations with First Interstate about the Mesa strip mall resumed, with Symington pleading poverty. On June 26, 1991, he submitted a financial statement to First Interstate stating his net worth was a negative $4.1 million. Remarkably, the statement submitted to First Interstate has the same "as of" day as the $5.4 million statement he'd given to Valley National a month earlier.
The only difference was, he was suddenly worth $9.5 million less.
At the same time Symington was negotiating with Valley National and First Interstate, he was also talking with union pension funds. The Mercado was performing poorly and Symington wanted to renegotiate the terms of his loan.
The pension funds told him if his partnership didn't make payments, they would foreclose on the Mercado. On July 17, 1991, Symington and his attorney, Richard Mallery, met with two pension-fund money managers. During the meeting, Mallery told the pension-fund representatives that Symington's net worth was a negative $20 million.
The pension-fund managers refused to modify the loan terms.
"Symington then stated that if the pension funds went forward with their plans to foreclose on the Mercado and did not release him from his guarantee, he . . . might be forced to declare bankruptcy," federal prosecutors state in pleadings.
If that happened, Symington said, he would not be as influential with the Legislature in securing funding for Mercado's only major tenant, Arizona State University. But if the pension funds agreed to release him from his personal guarantee, Symington allegedly promised to pressure the City of Phoenix and Maricopa County to lease space at the Mercado.
The pension-fund representatives viewed Symington's statements as "serious threats to use his position as governor to cause the pension funds financial harm and embarrassment if they did not bend to his demands," court records state.
Symington's financial costume changes continued. On July 18, the day after meeting with the pension-funds managers, Mallery had a letter hand-delivered to First Interstate. It claimed that Symington had "had a constructive negotiating session" with the pension funds and that there was a "preliminary understanding" that Symington would be released from his personal guarantee.
The letter, prosecutors allege, was a fraudulent attempt to convince First Interstate that Symington's financial condition was improving.
Symington's Mercado partnership failed to make payments the next three months, and on October 11, 1991, Symington had another conversation with pension-funds manager Donald Eaton.
According to Eaton's notes of the conversation, Symington "threatened that if the pension funds filed a notice of default," Symington would not deliver the ASU lease, would "call off" the county from leasing space and "steer away" a congressman who might lease space.
The government has charged Symington with attempted extortion for his dealings with the pension funds over the Mercado loan.
The pension funds ignored the threats and proceeded toward foreclosure on the Mercado.
During the Mercado negotiations, the pension funds insisted that Symington's accountants prepare a certified financial statement for the governor. The pension funds weren't alone. First Interstate also wanted a report.
In July 1991, the governor's personal, business and campaign accounting firm, Coopers & Lybrand, received several versions of Symington's 1990 and 1991 financial statements. C&L had been reviewing Symington's statements for a number of years. But when it received the 1990 and 1991 statements, C&L accountants realized that Symington had failed to provide accurate information for the firm's 1987, 1988 and 1989 reviews.
Despite the discrepancies, the firm agreed to prepare a certified confidential statement for Symington at the urging of C&L partner John Yeoman.
At the time, Symington was Yeoman's largest client; Yeoman had served as Symington's campaign treasurer. Symington owed C&L tens of thousands of dollars. In July 1991, C&L was also bidding to run Symington's government-reform proposal, Project SLIM. (C&L won the $1.5 million contract, and Yeoman and former gubernatorial aide George Leckie were indicted for rigging it. Yeoman subsequently was killed in a traffic accident; Leckie is currently on trial in U.S. District Court.)
C&L finished its report on Symington in August 1991; it showed his net worth to be negative $22.6 million as of May 31, 1991.
The confidential report revealed that there had been "many material errors and omissions" in Symington's December 31, 1989, statement, which he had used repeatedly during the 1990 campaign.
The C&L report was carefully controlled and only released to certain lenders. Copies were sent to the pension funds, Citicorp Real Estate, Inc., Valley National and First Interstate.
The report was instrumental in allowing Symington to renegotiate favorable settlements with Valley National, First Interstate and Citicorp, all of which required small payments for several years and then a balloon payment in late 1995. Symington borrowed money from his mother to make periodic payments. Not long before the balloon payment came due, he filed for bankruptcy.
The workout negotiations with Citicorp on a $10 million loan were more difficult than with other lenders. In November 1991, Citicorp asked Symington for a copy of his December 31, 1990, financial statement.
C&L prepared a letter for Symington to send to Citicorp that simply stated: "A December 31, 1990, financial statement was not prepared." Symington signed the letter on November 22, 1991, and submitted it to Citicorp.
The government alleges that Symington committed wire fraud when he sent the letter to Citicorp because he had prepared two December 31, 1990, financial statements: one showing a net worth of $5.4 million and the other showing a negative net worth of $4.1 million.
While the C&L report was submitted to several lenders, it was never sent to Symington's most important creditor, Dai-Ichi Kangyo Bank. It was imperative that Symington maintain a net worth of $4 million or he could lose his share in the Esplanade, which he believed would one day recover its value.
During construction and initial startup operations of the Esplanade, Symington was required to submit monthly statements so he could get operating funds from Dai-Ichi. In these statements, the governor had to reaffirm he had a net worth of at least $4 million.
Symington continued to tell Dai-Ichi he was worth $4 million even after C&L had prepared its certified financial report showing he had a net worth of negative $22.6 million. Three of the criminal counts against Symington are related to the submission of the monthly statements.
On May 4, 1992, Dai-Ichi wrote Symington and asked him to send copies of his 1990 and 1991 financial statements as required under the loan agreements. Symington sent a copy of a 1991 financial statement showing a negative net worth of $22.6 million.
Dai-Ichi responded by saying it wouldn't take immediate action against Symington, but it reserved the right to declare him in default in the future. The bank also asked Symington for a copy of his 1990 financial statement.
Instead of sending a copy of the statement, Symington wrote Dai-Ichi a letter saying his net worth on December 31, 1990, was $5.4 million even though he had submitted another December 31, 1990, statement to First Interstate showing a negative $4.1 million net worth. That letter inspired another criminal count.
With the exception of the union pension funds, no lender pressed Symington for full repayment of his loans. In July 1995, the pension funds obtained a judgment against Symington for defaulting on the Mercado loan. Symington filed for bankruptcy protection in September 1995, declaring $25 million in debts and $69,000 in assets.
During his sworn bankruptcy examination on October 31, 1995, Symington allegedly lied when asked about the accuracy of his December 31, 1989, financial statement. That testimony led to a charge of perjury.
The pension funds have sued Symington in bankruptcy court claiming he fraudulently obtained the pension-fund loan for the Mercado by submitting a false financial statement. The case is expected to go to trial this fall.
Symington's house of cards might have stood if it hadn't been for the Resolution Trust Corporation, created in 1989 to liquidate the assets of the nation's failed thrifts. In December 1991, RTC sued Symington and other members of the Southwest Savings and Loan board of directors in connection with the failure of the thrift, which cost taxpayers nearly $1 billion.
RTC settled with the defendants in July 1994 after the estate of the thrift's late owner, billionaire Daniel Ludwig, agreed to pay a $12.1 million settlement. Symington was dropped as a defendant in the civil suit after RTC reviewed his financial statements and determined that he had no assets that could be recovered.
But the RTC investigation turned up enough information about Symington's finances that it led to a criminal referral to the Department of Justice in September 1991.
Symington and his advisers attempted to focus attention on the RTC civil suit while the governor's Washington, D.C., attorney, John Dowd, quietly tried to derail the criminal probe.
In October 1992, Dowd offered to make Symington available to the U.S. attorney for the "stated purpose of bringing the investigation to quick close," court records show. In January 1993, Symington was informed he was a target of a criminal investigation.
At Dowd's request, Symington was interviewed on February 4 and 5, 1993, under oath by federal attorneys in Phoenix. Dowd agreed at the conclusion of the interview to provide further written comments to the U.S. attorney.
Over the next 15 months, Dowd submitted four lengthy statements to prosecutors, attempting to convince them not to indict the governor.
Nevertheless, the grand jury investigation continued and gathered more evidence from hundreds of witnesses.
By 1995, prosecutors were convinced that Symington had lied to them during the initial 1993 interviews and that Dowd's four written statements were misleading.
"After conducting a thorough investigation of those statements and assertions, this Office determined that many of them were inaccurate, without evidentiary support, misleading, or just plain false," federal prosecutor Jeffery Issacs states in court filings.
In November 1995, prosecutors wrote Dowd informing him that the U.S. attorney was considering filing charges "relating to false statements made by Mr. Symington to the Department of Justice . . . and false statements on behalf of Mr. Symington in subsequent written submissions to the Department of Justice."
In repeated conferences and letters in early 1996, Dowd vigorously contested the government's position that Symington lied and should be indicted. Dowd was successful, at least in part.
On May 30, 1996, prosecutors told Dowd that Symington would not be indicted on charges of making false statements during his February 1993 interview. A week later, Dowd was informed that the grand jury would be asked to indict Symington on more than 20 felony counts.
On June 13, 1996, Arizona Governor J. Fife Symington III was indicted on 23 felony counts. (Judge Strand dismissed one count last week.)
Eleven months later, Symington's opportunity to tell his side of the story is finally at hand.
As for the Esplanade, Symington lost his stake in the property when RTC took it over and sold it to a Boston investment company in 1994 for $69 million.
The sales price was about one third of the amount of money Southwest Savings, Dai-Ichi and Shimizu poured into Symington's ill-fated project.