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By Ray Stern
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By Stephen Lemons
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Symington says no one from the pension funds asked him a single question about his financial statement from the time he signed it on May 4, 1990, to the time the pension funds issued the $10 million loan, on June 29, 1990.
"If they would have asked questions, we would have provided answers," Symington says.
Shull says the pension funds will have a difficult time proving reliance.
"If we look at the files of the pension fund at the time leading up to the loan, where are the pieces of paper that indicate they looked at Symington's creditworthiness?" Shull asks. "They are not there."
Manning promises to prove that the pension funds did reasonably rely on Symington's financial statement.
"There was a lot more investigation [by the pension funds] than Symington and his attorney are telling you," Manning says.
Presiding U.S. District Bankruptcy Court Judge George Nielsen will decide the case, which is expected to conclude in late July. Nielsen has shown infinite patience during Symington's frequently heated testimony, which progresses at an excruciating pace.
Symington's frequent memory lapses force Manning to attempt to "refresh" Symington's recollection by introducing into evidence documents and testimony from depositions and Symington's criminal trial. Shull, meanwhile, objects to many of Manning's questions -- which frequently begin with rhetorical statements -- requiring Nielsen to hear legal arguments from both lawyers before making a ruling.
The trial is difficult to follow and significant points can easily get lost in histrionics. Such fodder is unlikely to distract Nielsen, who has taken more than 135 pages of notes. Calmly, yet firmly and usually with a wry sense of humor, Nielsen is providing a fair forum for the barristers to argue their cases.
"Let me assure counsel . . . I've done this before," Nielsen states after yet another nasty exchange between the lawyers. "Let's proceed in a manner that will likely produce useful information."
By early 1990, Symington's real estate company -- The Symington Company -- was in serious financial trouble. Evidence reveals Symington's top aides -- chief financial officer Jim Cockerham and vice president Randy Todd -- were formulating an operating budget that "assumed a wage and hiring freeze for the entire year."
The company was being slammed by Phoenix's real estate market, which was in a free fall that Symington characterized as "cataclysmic" in a 1989 letter to a partner.
Cockerham raised doubt about the company's future in a January 31, 1990, memo to Todd in which Cockerham expressed concern over Symington's desire that his gubernatorial campaign get free office space in the Camelback Esplanade.
At the time, The Symington Company and Symington personally were unable to meet their financial obligations in the Esplanade. The Esplanade was the cornerstone of Symington's development business and accounted for nearly half the $15 million in real estate assets that he claimed on his December 31, 1989, financial statement.
In the memo, Cockerham appeared concerned that Symington's office space grab contradicted Symington's financial commitment to the Esplanade and to his own company. The Symington Company derived much of its income from leasing commissions, and the Esplanade was the company's most important building.
"The company is in the process of downsizing its current space and now Fife is signing a totally separate lease that calls for free rent and no security deposit," Cockerham wrote.
Cockerham fretted that Symington was slashing his employees' compensation to help underwrite his gubernatorial campaign.
"I look at the obligations associated with this lease combined with obligations that TSC [The Symington Company] is currently saddled with and truly wonder if the belt tightening measures we are currently considering, which includes reduction in our benefits, will only prolong the uncertainty of our ultimate survival or worse yet pay for this lease obligation" (emphasis added).
While Symington's campaign never signed the Esplanade lease, the memo underscores the internal dissent gripping the company in early 1990. The company's cost-reduction plan included removing Symington, the company owner, from the payroll by the second half of 1990.
The memo also reveals that Symington was unable to pay his share of "operating deficit loans" for the Esplanade. By failing to pay the loans, Symington was opting instead to reduce his equity share in the project -- which he was valuing on his financial statements at $7 million. Manning alleges Symington never disclosed his diminished investment in the Esplanade in his December 31, 1989, financial statement -- Symington has acknowledged this is true.
The Esplanade was not the only project that was hemorrhaging in early 1990. Nearly all of The Symington Company's 16 real estate projects were in tatters. Symington had hired attorneys to discuss throwing six of the projects into bankruptcy. A lender was threatening to foreclose on another project, the Scottsdale Center.
Symington's efforts to sell half of his share in the Scottsdale Seville project for $600,000 were rebuffed at the same time he continued to claim the project was worth $2.3 million on his financial statement. He eventually sold the share for $700,000 -- to his elderly mother.
While his company reeled, Symington was campaigning for the Republican nomination for governor. The centerpiece of his campaign was that he was a successful businessman who could bring his financial skills to government. But before Symington could get elected, he had to figure a way through a financial minefield. News that his real estate empire was crumbling could devastate his election effort.