Bankers Dozin'

Testimony at the governor's criminal trial and a new civil complaint suggest that First Interstate helped Symington dupe other lenders

The pension funds' commitment letter also allowed them to back out of the deal if Symington or his partnerships were to default on any loans, make late payments or become insolvent.

Symington, First Interstate Bank and the pension funds signed an agreement in May 1988 that reaffirmed the right of the pension funds to back out if Symington's financial position waned, the pension funds' lawsuit charges.

A few months later, First Interstate Bank got its first inkling that Symington was in financial trouble. The Alta Mesa project was having problems finding tenants.

By the fall of 1988, Symington was forced to ask two limited partners to contribute an additional $92,500 each to the partnership. At the same time, Symington was also seeking a permanent lender to pay off First Interstate's construction loan on Alta Mesa.

Cockerham testified last week that Pima Savings & Loan was ready to provide permanent financing, but backed out after Symington was unable to attract additional tenants.

The $2.3 million construction loan came due on March 1, 1989, and Symington was unable to pay. First Interstate agreed to extend the loan to September 1, 1989, after Symington paid a $12,500 extension fee. First Interstate placed the loan on its watch list of troubled accounts.

In mid-April 1989, Symington announced his candidacy for governor. On April 26, 1989, Cockerham suggested in an internal memo that Symington initiate confidential discussions with a First Interstate executive about the Alta Mesa loan to "see if he can assist behind the scenes."

The pension funds allege this was the beginning of an effort to deviate from the banks' normal procedures, which could have resulted in a public notice of foreclosure on Alta Mesa--an action that would have tipped off the pension funds to Symington's financial woes.

Cockerham and Symington met with First Interstate executives. Symington followed up one key meeting with a May 18, 1989, letter that stated the Alta Mesa project was "suffering through what best can be described as a market cataclysm."

Symington told the bank that Alta Mesa's problems "have created severe pressure on the budget, and, therefore, on me."

Symington suggested that with his dedication and the bank's "continued patience and assistance," the project could have a "positive outcome."

The "continued patience" Symington sought included another extension on the Alta Mesa loan from September 1989 to March 1991--well after the November 1990 gubernatorial election.

First Interstate was not as patient as Symington hoped, agreeing to extend the due date on the loan until December 1, 1989. Symington paid a $6,250 fee for the extension.

In the weeks preceding the December 1, 1989, deadline, First Interstate Bank conducted an appraisal of Alta Mesa that showed the property's value had dropped far below the outstanding $2.3 million loan. On December 1, Symington defaulted.

Later that month, First Interstate wrote off $963,297 of the loan as a loss and reduced the outstanding amount owed by Symington's partnership to $1.36 million. The bank apparently did nothing to try to collect the loan from Symington even though Symington had personally guaranteed repayment.

The union pension funds allege that the Alta Mesa writedown heightened First Interstate's concerns about the Mercado construction loan and whether Symington would be able to meet the pension funds' financial conditions.

If Symington couldn't convince the pension funds of his financial viability, First Interstate would not only have the nonperforming Alta Mesa loan on its books, it also could be stuck with the $8.4 million Mercado construction loan.

In January 1990, First Interstate lending officer Jeffrey White instructed Symington to make sure he met all of the pension funds' requirements so that the $10 million loan would be funded.

"The Bank expects you to meet these deadlines, and its position is that the permanent funding should occur as soon as it is possible," White wrote Symington on January 19, 1990.

About the same time, First Interstate agreed to extend the unpaid Alta Mesa loan for a third time--until March 15, 1990--but this time there was no extension fee. Once again, the Symington partnership failed to meet the deadline.

The next day, March 16, 1990, the pension funds allege, Cockerham and Symington induced First Interstate to join in a conspiracy to hide Symington's financial problems from the pension funds.

The pension funds had already expressed reluctance about funding the loan because of the deteriorating Phoenix real estate market. Symington and First Interstate faced the June 30, 1990, deadline to meet the pension funds' requirements or the loan could be canceled.

On March 16, 1990, the pension funds allege Cockerham sent a letter to First Interstate suggesting that Symington and the bank would both benefit from informal handling of the Alta Mesa loan default rather than a public foreclosure.

"It is in the best interest of both parties to work together to stabilize the property and, ultimately, to sell it," Cockerham wrote.

The pension funds allege that First Interstate accepted Cockerham's offer and subsequently took actions that violated the bank's internal lending practices.

On May 25, 1990, First Interstate agreed to delay any efforts to collect on the delinquent Alta Mesa loan until July 1, 1990--one day after the pension funds were scheduled to fund the permanent Mercado loan, which would repay First Interstate.

First Interstate executive Douglas Hawes requested authorization to strike a forbearance agreement to "allow time for finalization of the Mercado loan pay-off." Symington and his wife, Ann, signed the forbearance agreement on May 29, 1990.

« Previous Page
Next Page »
My Voice Nation Help
Phoenix Concert Tickets