The Handwriting's on the Wall

Fife Symington's own scrawls reveal a plot to suppress evidence of his plunging net worth

The heart of Governor J. Fife Symington III's criminal defense has been punctured by his own jottings. It would seem that only an emergency transplant by Symington's defense team can save him now.

But if the defense team, led by John Dowd, must continue to rely on compromised witnesses such as Symington's former secretary Joyce Riebel, the governor might as well start packing his bags for a stay in the federal pen.

It went that badly last week for Symington.
For a time, Symington's defense team appeared to be exposing holes in the government's case. Symington co-counsel Terry Lynam walked Riebel through a day and a half of tender testimony in which Riebel simply answered "yes" or "correct" to Lynam's questions.

Lynam's cross-examination was designed to show that Symington's fluctuating financial statements were simply the result of changing real estate markets, unclear directions from bankers on how to prepare the financial statements, typing errors, foul-ups by accountants and simple oversight.

A typical question from Lynam: "When these financial statements were prepared, do you believe they were prepared honestly?

A typical Riebel response: "Yes, I do."
And so it went for more than eight hours.
The fun ended for Riebel at 4 p.m. on Friday, when prosecutor David Schindler began his redirect examination. Twenty minutes later, Riebel's credibility had been sliced to ribbons.

First, Schindler forced Riebel to confirm she had no idea as to the veracity of the values Symington placed on the real estate schedule that is the core of Symington's financial statement.

Then, Schindler noted that Riebel had hired a criminal-defense lawyer after federal investigators began to probe Symington's finances. Riebel confirmed that the governor and his wife, Ann, had paid her legal fees, and that for a time, she and Symington had a "joint defense agreement." Finally, Schindler lowered the boom about Riebel's meeting with Symington's attorneys before she testified before the grand jury that would indict the governor.

Schindler: "Well, do you recall testifying before the grand jury and being asked the question about whether you had met with Mr. Symington's attorneys prior to testifying before the grand jury?"

Riebel: "Are you asking me do I recall?"
Schindler: "Yes, ma'am."
Riebel: "No, I don't recall the testimony. But . . ."

For the seventh time since Riebel took the witness stand, Schindler presented her with a transcript of her grand jury testimony to "refresh" her memory.

After reviewing her testimony, Riebel reluctantly responded, "Yes," she had told the grand jury that she had met with Symington's attorneys.

With that, U.S. District Court Judge Roger Strand adjourned court for the long Memorial Day weekend, leaving jurors to ponder Riebel's humiliation on the stand.

While Riebel's performance clearly hurt Symington's case, it may not be nearly as damaging in the long run as more than 75 pages of Symington's handwritten memos Schindler introduced as evidence last week.

The remarkable series of Symington's "To Do List" and "Symington Issues" memos written from the mid-1980s to 1991 suggests that Symington knew his financial statements were crucial to lending decisions and that the values he placed on them were grossly overstated.

Two memos in particular provide a snapshot of Symington's state of mind during a crucial period in May 1987.

The memos, apparently written for his own files, show that Symington was anxious to avoid an audit by a certified public accountant because it would likely have revealed the inflated values of his real estate assets. Nearly all of Symington's personal net worth was tied to those real estate values.

Instead, Symington wanted accountants to conduct a less rigorous review, known as a "compilation" of his finances, in which he would determine the value of his real estate projects--and thus his personal net worth.

Symington got what he wanted.
In late May 1987, Symington was involved in final negotiations with Dai-Ichi Kangyo Bank over a $77 million loan to build the first office tower and Ritz-Carlton hotel at Symington's Camelback Esplanade development.

According to Symington's handwritten notes dated May 20, 1987, Dai-Ichi appeared to be pressing for an accounting firm to conduct an audit of Symington's finances and issue a letter on its findings.

Symington was against the review.
"The CPA firm, in order to issue the letter, will, in the end, decide on the values of my property--not me!" Symington scrawled.

Symington appeared concerned that the accountants would subtract millions from his purported net worth of about $10 million. In fact, he worried that such an audit would put his net worth at less than $4 million--the limit at which several lenders, including Dai-Ichi, could declare him in default.

"I might disagree, for good reason, but, taken to the extreme, they could put me in default re 4.0 . . . ," Symington's notes state.

Instead, Symington's notes indicate he was prepared to insist that Dai-Ichi accept an accountant's compilation letter tied to his personal financial statement prepared on a Valley National Bank form.

"CPA will issue a typical compilation letter," his notes state. "Will do this for 2 yrs., then a review."

Symington also appeared ready to tell Dai-Ichi that other lenders had been content to accept his financial statement prepared on the Valley National form.

"VNB has always accepted a compilation in the form I have given--never required more," Symington's notes state.

So had other lenders, including Citicorp and MeraBank, his notes state.
"MeraBank--recent loan/past--has never required a review--have accepted the VNB form, a compilation," Symington's notes state.

Besides insisting on using a compilation based on his financial statement prepared on the Valley National form, Symington also was prepared to argue that he knew far more about the value of his real estate assets than professional appraisers or accountants.

"I have sold properties over the years for values higher than appraised value," his notes state. "I am the best judge of these values and will be happy to explain them to DKB [Dai-Ichi]."

Symington's notes also sketch out his fallback position in case Dai-Ichi insisted on a full-blown audit. The notes show that Symington would accept a review and determination of "net worth x," but in that case, he would insist on a release from the $4 million net-worth requirement.

"As long as I'm solvent, not . . . default," his notes state.
Dai-Ichi agreed to Symington's demands to accept a compilation letter prepared by his accounting firm, Coopers & Lybrand. The letter was attached to Symington's personal financial statement prepared on the Valley National Bank form.

On May 29, 1987, nine days after he had jotted his strategy, Dai-Ichi lent Symington's Esplanade partnerships $77 million.

Coopers & Lybrand prepared its first compilation letter for Symington when he submitted a year-end financial statement for December 31, 1987, to Dai-Ichi to show he was maintaining a $4 million net worth as required by terms of the loan.

The compilation letter made it clear that Coopers & Lybrand had not conducted an audit of Symington's finances but merely had reviewed his methodology in preparing his December 31, 1987, financial statement to see if it was consistent with previous statements.

Symington submitted year-end personal financial statements and compilation letters from Coopers & Lybrand to Dai-Ichi for 1988 and 1989 showing net worth of $10.8 million and $11.9 million, respectively.

But Symington did not provide Dai-Ichi with his December 31, 1990, or 1991 financial statements until the bank requested the information in May 1992; Coopers & Lybrand did not prepare compilation letters for those year-end statements.

Symington did, however, prepare 1990 and '91 year-end financial statements for other lenders. One of Symington's December 31, 1990, statements reported a net worth of negative $4.1 million--another reported a positive net worth of $5.4 million. By December 31, 1991, Symington reported a net worth of negative $22.6 million.

Prosecutor Schindler introduced Symington's handwritten notes during his redirect examination of Riebel. Schindler had Riebel read from about a dozen other memos in which Symington expressed a desire to sell numerous real estate projects that were losing money.

Symington's notes belie his claims that his real estate investment strategy was to hold properties for long periods. Instead, his notes indicate that Symington was attempting to shed losing real estate projects while maintaining their inflated values on his financial statement so he could get loans to develop ever larger and more expensive projects.

Symington's purported strategy of holding properties for the long haul is central to his claimed values of his holdings, which propped up his claimed net worth. In depositions, Symington said he determined the value of his real estate projects by the prices he hoped to get when he eventually sold them.

Yet his own notes now suggest he had no intention of holding properties for the long run and instead was desperate to sell ailing properties.

Symington's notes also provide a glimpse into Symington's evolving political interests. Scattered through the memos are several references to John McCain, who was member of the U.S. House of Representatives for four years before winning election to the U.S. Senate in 1986.

McCain has long been one of Symington's staunchest supporters. The two men share many of the same legal and campaign advisers, including Dowd, who represented McCain during the Senate Ethics Committee hearings on McCain's relationship with Charles H Keating Jr.

In one of Symington's undated "To Do List" memos that appears to have been prepared in 1986, McCain's name appears under the second listing where Symington simply writes:

"Checks to John McCain.

Show Pages
 
My Voice Nation Help
 
Phoenix Concert Tickets
Loading...