Writing a Sentence

Fife Symington must live with six felony convictions; where he will live with them is still up in the air

Former Arizona governor J. Fife Symington III has just escaped a crush of reporters at the federal courthouse and is moving toward his car when he spies three of the jurors who found him guilty.

It is January 20, and Symington is leaving a daylong presentencing hearing. The jurors happen to be there by coincidence to be photographed by New Times.

Symington turns, retraces his steps and approaches the surprised jurors, who greet him cordially.

Surrounded by a bank of television cameras, Symington, ever the politician, seizes the opportunity to polish his tarnished image.

"I wish you all well," Symington says, shaking the hands of Janice Pettes, Harold Thompson and Bob Bamond as though he were stumping for a third term. "That was a tough job.

"Sorry you had to sit through it for 14 weeks. It will be with us for the rest of our lives. But, anyway, thank you for doing your duty. Okay. Good luck to you."

Symington turns and walks back down First Avenue, away from the courthouse where his political career--and, perhaps, his freedom--crashed on September 3, after he was convicted on seven counts of bank and wire fraud.

He rejoins his chief legal adviser, John Dowd. Feeling at ease with the burly lawyer who has represented him during seven years of legal struggles, Symington comments on the unexpected juror encounter he had initiated.

Apparently, Symington hadn't felt all that gracious.
"That's a hell of a position to be put in, isn't it?" Symington complains to Dowd.

"Yeah," Dowd mumbles.
Symington's insincerity captures the essense of his desperate strategy to avoid prison: Image is everything.

Symington is to be sentenced February 2.
In preparation for that climactic event, Symington's attorneys are going to lengths to divert attention from Symington's felonious aura. They are boldly claiming that despite Symington's conviction for defrauding three lenders, his actions really harmed no one.

"There was no loss caused by Fife," assistant defense attorney Terry Lynam says. "The lenders suffered losses for other reasons."

Under the defense theory, since no one lost any money because of Symington crimes, the 52-year-old former developer should receive probation.

Federal prosecutor David Schindler calls the defense claims "preposterous." He has asked U.S. District Court Judge Roger B. Strand to sentence Symington to 10 years in prison. Schindler points to a U.S. Probation Office presentence report that concludes Symington's fraud cost lenders nearly $23 million.

The Probation Office itself recommends Strand sentence Symington to a stiff, six and a half to eight years in prison.

Strand's discretion is limited under federal sentencing guidelines. He can, however, depart from the Probation Office recommendation and impose a lighter sentence, particularly if he finds that Symington's actions caused little financial harm.

Determining financial loss, in turn, will depend on whether Strand believes Symington's crimes were simply technical mistakes committed by a busy, error-prone man, or were part of a devious, long-term conspiracy to defraud millions of dollars from lenders.

In arguing for leniency during the January 20 hearing, Terry Lynam made the best defense presentation of the trial. He deftly elaborated a score of arguments designed to keep Symington out of prison.

Lynam was encouraged when Strand announced at the beginning of the hearing that he was tossing out one of the jury's guilty verdicts, reducing the number of guilty counts to six.

Lynam recast Symington's image from that of a felon who submitted more than a dozen grossly misleading financial statements to lenders over a six-year period to one of an honest developer whose minor mistakes caused no financial loss.

To accomplish this, Lynam grouped the guilty charges into three distinct groups related to the lenders impacted: one count related to Valley National Bank, four counts tied to Dai-Ichi Kangyo Bank and one count linked to a consortium of union pension funds.

Lynam argued that each set of charges was isolated from each other and therefore not part of a conspiracy. Lynam narrowly focused the impact each set of charges had on any possible loss sustained by lenders while maintaining that the lenders lost no money.

Lynam's tactic was akin to cutting an apple into so many pieces that there is little left to eat.

The first lender Lynam addressed was Valley National Bank (now Bank One), whose chairman, Michael Welborn, provided the defense a powerful weapon.

In a letter to the Probation Office, Welborn states that Bank One is not seeking restitution from Symington for failing to repay a $780,000 loan. The jury found Symington guilty of submitting a false financial statement to Valley National on May 14, 1991, in order to get an extension of the loan.

Lynam told the court that Welborn's letter states "the bank is not satisfied that there was any reliance on this financial statement" when the loan was extended.

The letter opened the door for Lynam to argue that Bank One would have extended the loan to Symington no matter what the financial statement said because the bank knew Symington was in deep financial trouble and that Symington had made earlier payments to reduce the loan.

The jury, Lynam reminded Strand, was deadlocked on whether Symington submitted a false financial statement to the bank when he first obtained the loan. Therefore, Lynam said, there is no proof that Symington's May 14, 1991, financial statement contributed in any way to the $780,000 loss.

Lynam next moved to the four Dai-Ichi Kangyo Bank guilty verdicts.
The jury found Symington guilty of submitting three false statements to DKB in 1991 and 1992 to obtain money--in the form of "draws"--to pay for construction of the second office tower at the Camelback Esplanade. The jury also said Symington was guilty of sending DKB a letter in which he falsely represented that his net worth as of December 31, 1990, had been $5.4 million.

In his presentence report, the probation officer says that DKB claims to have lost $38 million as a result of its Esplanade loans to Symington. The probation officer concluded Symington is responsible for $9 million of the loss, which is the amount Symington guaranteed to repay.

Lynam, however, told the court the $38 million loss was related to DKB's overall investment in the Esplanade, which included two office towers and a hotel. Symington, Lynam said, was found guilty only for his role in obtaining routine construction disbursements for the second office tower as it was nearing completion. Most of the money from the cash disbursements was returned to DKB in the form of interest payments and paid to contractors.

Furthermore, Lynam said the original loan for that office tower was executed in 1988, three years before Symington's false statements were made.

"And," Lynam said, "I think it's significant to point out that . . . there is no charge of fraud in DKB's decision to make" the Esplanade loans.

As he did with Valley National Bank, Lynam turned to a letter from DKB to support his case. The letter, Lynam said, states that "DKB takes no position on whether Mr. Symington's conduct caused the loss to DKB." While not as strong as Welborn's letter, DKB's letter was nonetheless helpful.

The actual cause of DKB's loss in the Esplanade, Lynam told the court, had nothing to do with Symington submitting false statements in 1991 and 1992. Instead, the loss occurred when DKB's partner, Shimizu Construction Co., decided to sell the Esplanade for a huge loss in 1993.

"Mr. Symington shouldn't be sentenced because of Shimizu's decision to sell," Lynam said.

The remaining guilty charge stems from a $10 million loan a Symington partnership received for the Mercado retail center in downtown Phoenix. The jury found Symington guilty of wire fraud when he induced the pension funds to lend the money on June 29, 1990.

The probation officer concluded the pension funds lost $6.85 million because of Symington's fraud. The loss was determined by taking the difference between the $10 million loan and the value of the Mercado when the pension funds acquired it at a 1993 foreclosure sale conducted after Symington defaulted.

Symington had personally guaranteed repayment of the entire $10 million loan, but the probation officer capped the loss at $6.85 million.

Lynam, however, said the loan has not resulted in any loss to the pension funds because they still own the Mercado and the property has regained much of its value.

He presented the court an appraisal showing the Mercado and the land beneath it, which is owned by the City of Phoenix, to be currently worth $10 million.

"The loss can be reduced by the amount the lending institution has recovered or can expect to recover from the collateral," Lynam said.

Since the pension funds can expect to recover all of the money they loaned to Symington's partnership for the Mercado, Lynan said Symington's wire-fraud conviction has not resulted in any loss.

Convincing Strand that Symington's guilty verdicts caused no losses was just the beginning.

The prosecution and the probation officer claimed that Symington's guilty conduct carried over to his dealings with two other lenders, causing $6.1 million in losses, even though the jury was deadlocked or returned not guilty verdicts on the charges related to these lenders.

The not guilty and deadlocked charges were related to loans Symington's partnerships obtained from First Interstate Bank and Citicorp Real Estate Inc. and failed to repay.

Lynam argued that the government has not provided sufficient proof to show that Symington defrauded the lenders and is therefore responsible for their losses.

"He wasn't convicted of the other stuff," Lynam says in an interview. "Let's sentence him on what he was convicted of."

Midway through Lynam's deconstructionist maneuvers, prosecutor David Schindler threw up his hands in disgust.

After pursuing the case during more than two years of grand jury proceedings and securing a conviction in a historic, three-month criminal trial where the prosecution presented 35 witnesses and introduced more than 1,300 exhibits, Schindler clearly was agitated over Lynam's effort to trivialize the impact of Symington's actions.

"His argument, Your Honor, really amounts to Mr. Symington did nothing wrong at all in this case," Schindler told Strand.

"[Lynam] ignores all of the evidence of the multiple financial statements. . . . He ignores Mr. Symington's own handwritten notes erasing things, changing numbers, increasing numbers. And he suggests that there wasn't a scheme to defraud more than one financial institution. That just ignores the evidence in this case."

Schindler said Symington misled lenders who believed they were dealing with a multimillionaire capable of meeting his guarantees to repay loans. When the real estate market declined in the late 1980s, Symington defaulted on his real estate loans.

Lenders then counted on Symington's guarantees to help repay the loans but discovered that Symington's financial statement was grossly overstated and Symington, in fact, was insolvent.

Symington's lenders, Schindler said, "viewed Mr. Symington's financial statement and his personal guarantee as something that was valuable."

Instead, it was worthless.
Schindler said the evidence presented proved that Symington's deceit misled lenders for many years and extended beyond submitting false financial statements. Symington, Schindler said, hid damaging financial information from lenders and attempted to confuse bankers on his financial condition.

Schindler suggests in court filings that Symington conspired with his late accountant, John Yeoman, to conceal Symington's true financial condition from DKB at the same time Yeoman's firm, Coopers & Lybrand, was engaging in illegal activity to win a state contract.

Yeoman admitted in a sworn deposition before his death that he obtained confidential bid information from Symington's deputy chief of staff, George Leckie, in September 1991. That intelligence allowed Coopers & Lybrand to win the Project SLIM contract. About the same time, Yeoman lied to Coopers & Lybrand associates when he told them he had forwarded a Symington financial statement to DKB showing the governor's net worth had plummeted to negative $23 million.

Yeoman never sent Symington's financial statement, preventing DKB from learning that Symington had defaulted on his Esplanade loan covenants, which required that he maintain a net worth of at least $4 million. DKB didn't learn Symington was in default until the following year.

"It was entirely permissible to infer that Symington knew full well that his buddy Yeoman was not going to give it to DKB, so DKB wouldn't find out about it," Schindler tells New Times.

Such sleights-of-hand were typical of Symington's dealings with lenders, Schindler said. Evidence showed Symington understated the value of loans owed to banks while overstating the value of assets. He claimed ownership of $800,000 worth of stocks that were, in fact, held in a spendthrift trust to which he had no direct access. He failed to disclose millions of dollars' worth of loans from friends and family members.

After hammering home the extent of Symington's wrongdoing, Schindler told Strand that Lynam's methodology for determining loss is irrelevant under sentencing guidelines.

"What the defense is asking this court to do is to say that because the property declined in value . . . that that should somehow be removed from the determination of the losses suffered by the institutions," Schindler said.

Schindler said sentencing guidelines state that a defendant is liable for any loss suffered by a lending institution resulting from a decline in value of the collateral.

Using this standard, Schindler said the probation officer correctly determined the losses suffered by DKB and the pension funds totaled nearly $16 million. The jury found Symington guilty of submitting false statements to these lenders.

In addition, Schindler argued that Symington's persistent misconduct caused Citicorp and First Interstate Bank to issue loans that resulted in another $6.1 million in losses.

Whether the losses computed by the probation officer overstate or understate the seriousness of Symington's offenses must be dealt with separately, Schindler said, in the form of a request by the defense for the judge to deviate from sentencing guidelines and impose a lighter sentence.

So far, Symington's lawyers have not formally asked Strand to depart from the sentencing guidelines, although Lynam suggested Strand pursue that course of action at the close of his presentencing-hearing comments.

Schindler concluded his arguments in the same way he wrapped up his closing statements to the jury last August 8.

"It cannot be that Mr. Symington submitted all of these false financial statements to all of these lenders and nothing happened," the prosecutor said. "Common sense suggests that's just not right."

Judge Strand has provided few clues about the sentence Symington will receive, but if his rulings so far in the trial hold true, he will likely split the difference between the probation officer's recommendation of six years in prison and the defense request for probation.

Throughout the trial, Strand has proved to be evenhanded in his decisions while at the same time going out of his way to give the defense every opportunity to present its case.

Strand appeared to be wrestling with the two scenarios presented by Lynam and Schindler during last week's presentence hearing.

Schindler's argument, in a nutshell, is that Symington is guilty of widespread misconduct.

Lynam's position is that Symington's illegal behavior was not the primary reason lenders lost millions of dollars on real estate loans to Symington's partnerships.

One of the few questions Strand asked during the hearing cut to the heart of the matter.

"What do you do when there is culpable conduct on the one hand, but perhaps not causation in the full sense on the other? How do you--how do you make a reasoned judgment in that regard?" Strand asked.

Symington will learn Strand's answer at 1:30 p.m. February 2.

Regardless of any prison time, fines and restitution Strand orders, Symington will likely never admit to his crimes.

Moments after he breaks up his chat with the jurors on the courthouse steps, New Times lobs Symington a question.

"Governor, you thanked them for doing their duty. Do you think they did their duty correctly?"

"I think they did the best they could. Sure. Sure. They did the best they could. Absolutely."

"Do you support their decision, then?"
"No. Of course not. I've always felt I'm innocent. Okay?"

Contact John Dougherty at his online address: jdougherty@newtimes.com

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