The Earthmover and Fife

Bill Dereschuk is one pensioner who wants Symington to prevail in his bankruptcy case

Dereschuk doesn't think the funds will recover a penny from the ex-governor. He believes the legal fees are a waste of money.

McMorgan and Local 428 proponents dismiss him as a misinformed malcontent.

Some even accuse Dereschuk of wanting to wrest management from McMorgan so Dereschuk's nephew, a former McMorgan employee, can run the pension funds.

Fife Symington maintains he's innocent.
Doug Hoeschler
Fife Symington maintains he's innocent.
Bill Dereschuk
Paolo Vescia
Bill Dereschuk

Dereschuk laughs at the accusation.

"I don't ever see the kid, except once for a reunion," he says.

He wants no manager, not even a nephew. He wants to break up the fund once and for all.

Dereschuk has reason to be distrustful. The year he retired, 1994, his pension fund was steeped in scandal. That was the year William Miller, a Phoenix money manager of several pension funds, including Local 428's, was sentenced to 37 months in federal prison for racketeering and taking kickbacks "to influence the operation of a pension plan."

The feds said Miller illegally took "finding fees" from developers, then arranged to get them pension fund loans for lousy real estate projects.

That same year, 1994, the Department of Labor helped the pension funds recoup more than $93 million from Miller, affiliated companies, and, curiously, the trustees of the pension funds (who paid $9 million but admitted no wrongdoing) and their law firm Ward, Keenan and Barrett (the lawyers paid $300,000 but admitted no wrongdoing) for allegedly turning a blind eye to Miller's machinations. It irks Dereschuk to no end that the Ward law firm in Phoenix continues to do legal work for the Operating Engineers.

Miller actually got a $10,000 "loan processing fee" from a Symington partnership to arrange the Mercado loan.

When it became apparent Miller was headed for the slammer, the trustees hired a new money manager, McMorgan.

McMorgan agreed to approve the prearranged $10 million loan (unpaid interest has upped the debt to $18 million, unions say) only if Symington and his wife, Ann, the heiress to a chemical fortune, "personally guaranteed" the loan with their community property.

In 1990, Symington submitted to McMorgan a financial statement that said he and his wife, Ann, had community property worth $12 million. Ann Symington signed a document promising to pay the pension funds from their community property should the Mercado go belly up.

Dereschuk believes McMorgan did little to research the wildly inflated financial statement. Even though the real estate market was tanking in Phoenix, McMorgan did not order a new appraisal of the properties Symington listed on his financial statement. In most cases, Donald Eaton, the McMorgan representative who okayed the loan, didn't even inspect some of the buildings Symington held up as collateral.

Eaton later testified that Symington was an "exception to the rule" and he "checked out with people."

The pension funds loaned $10 million to fund the Mercado, which was a flop from the start.

When the pension funds tried to recover their money, Symington filed for Chapter 7 bankruptcy. His wife, Ann, claimed she and Fife had no substantial community property. Her wealth was sole and separate.

Were the pension funds conned, largely because McMorgan hadn't checked out the Symingtons' financial statement?

"That personal guarantee couldn't have been much of a personal guarantee," snorts Bill Dereschuk.

"Our trustees never should have made that loan, and now they are spending millions in legal fees to cover their improper conduct."

Manning, the pension fund attorney, contends McMorgan wasn't the only one duped into thinking Symington was the "Donald Trump of the Valley." Major banks, the press and the voting public all believed Symington was a successful developer, Manning says.

"Fife Symington was adept at anesthetizing lenders, the press and the public and now he's trying to anesthetize the press and this judge," says Manning,

But that doesn't excuse McMorgan's apparent laxity.

As for the Symingtons, they took a European vacation shortly after Fife Symington claimed he was destitute in bankruptcy court.

The pension funds have been trying to recover their money from Symington for nearly a decade. Throughout this period, Symington has had unusually good luck, while the funds have suffered legal setback after legal setback.

In September 1997, a federal jury in Phoenix found Symington guilty of multiple criminal counts in connection with his failed real estate empire. Everyone thought the fraud convictions would make it easy for Manning to prevent Symington from discharging the $10 million debt to the pension funds in bankruptcy court. (A bankruptcy debt isn't dischargeable if fraud is involved.)

Then Symington got lucky. In 1999, an appellate court threw out the ex-governor's felony convictions, saying Judge Roger Strand had improperly removed an elderly juror from the jury. The appellate court essentially reaffirmed its decision a couple of weeks ago.

So Symington didn't serve the 30-month prison sentence imposed by Judge Roger B. Strand.

Instead, he went to cooking school. Now he flips ravioli at Franco's Trattoria, an upscale north Scottsdale Italian eatery, and has become something of a radio personality, maintaining, as always, that he committed no crime.

The feds have yet to decide whether to retry Symington, arm-wrestle him into a plea bargain or drop charges.

The pension funds recently got another legal setback when a Maricopa County Superior Court judge ordered them to pay more than $300,000 in legal fees for a Mercado-loan-related case against a bank. The funds are appealing the ruling to the Arizona Supreme Court.

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