He's Back

Ex-governor Symington seems blissful despite the damning evidence that mounts at his bankruptcy trial. What's up his sleeve?

Several times during his seven days of testimony, Symington asked Judge Nielsen for rest-room breaks -- most of the time during a series of difficult questions from Manning. Nielsen always granted his request. Once again, Symington turned to the judge and asked for a break.

This time, Nielsen said no.

"Answer the question first," he said.

Timothy Archibald
Symington lawyer Robert Shull says mistakes were made, but it doesn't matter.
Leah Fasten
Symington lawyer Robert Shull says mistakes were made, but it doesn't matter.

"I wasn't sure when it would be realizable," Symington testified. "That was my current view of what I thought my values would be in a good market."

At the time Symington gave his financial statement to the pension funds, everyone, including Symington, knew that the Arizona real estate market was in a shambles.

Manning continued to tick off misinformation on Symington's financial statement:

• A half-dozen personal loans totaling more than $1 million had been left off.

• $70,000 in cash Symington said was available was actually controlled by the trusts.

• Symington's interest in his most valuable real estate asset, the Esplanade, had been pledged to a bank as collateral and not disclosed.

• The amounts of most loans owed by the real estate partnership were reported low.

Symington said most of the loans were from friends and family -- his wife and mother advanced more than $1.2 million -- and didn't have to be repaid. He admitted that the $70,000 cash in the trusts wasn't under his control. He testified that he forgot to report that he used the Esplanade as collateral, but he insisted it didn't affect his net worth. The errors on the real estate partnership loans, Symington testified, amounted to only $7 million, a fraction of the $200 million in real estate loans he reported.

"Obviously, you're striving for accuracy in the financial statement," Symington testified. "It was hard to keep track of it all. I put the statement together from memory and I made mistakes."

By the spring of 1991, however, Symington was no longer putting his financial statements together from memory. Symington's real estate investments were crumbling, and creditors -- with the pension funds leading the way -- were pressing him on loans he had personally guaranteed. At least one creditor demanded a formal audit of his personal financial statement.

But Symington was no longer simply a private developer. He had been elected governor a few months earlier. He turned to his longtime business, personal and campaign accounting firm, Coopers & Lybrand, to prepare a detailed personal financial statement. Coopers & Lybrand obliged and on May 31, 1991, presented Symington with a compilation of his personal finances showing he had a negative net worth of $23 million.

In the 11 months since he obtained the union pension fund loan for the Mercado, Symington's net worth had plummeted by $35 million.

"I didn't dispute it," Symington testified. "I thought it was a pretty good assessment of where I was at the time."

The governor sent the dismal financial statement to most of his creditors, letting them know he could not meet his obligations.

Unlike the financial statement Symington gave the pension funds to obtain the Mercado loan, the May 31, 1991, compilation included his personal debts to family and friends.

"At this point in time, they [Coopers & Lybrand] wanted to draw a circle around anything that could be construed as a debt of mine," Symington testified.

The compilation also noted that the supposedly readily marketable securities were in a spendthrift trust. It reported that the Esplanade had been offered up for collateral. Finally, all the real estate loans on his developments were accurately reported and his real estate assets were given fair market values.

Manning asked Symington to repeat the instructions he gave to Coopers & Lybrand in the spring of 1991. Throughout the bankruptcy trial, Symington had frequently stated that Coopers & Lybrand had reviewed his December 31, 1989, financial statement sent to the pension funds and never mentioned any errors or omissions.

"Coopers had all my records, everything," Symington repeated several times.

Then why, Manning asked, did Coopers & Lybrand suddenly prepare a financial statement that included information that had been left off earlier financial statements?

"What did you want Coopers to do?" Manning asked.

"I don't remember. I don't have an exact recollection," Symington replied.

"What generally did you want Coopers to do?"

"To get to the bottom of my financial situation," Symington replied. "Find out how big the hole was."

Manning had scored another direct hit.

When Symington wanted money from a lender, he prepared his financial statement from memory, used future hoped-for values for his real estate assets. He left off personal debts and obligations and included assets locked up as trust funds as marketable securities. The result was his December 31, 1989, financial statement showing a net worth of $12 million.

When creditors were pressing for repayment, Symington had Coopers & Lybrand prepare a detailed financial statement that included all his debts, provided current market values for his real estate and revealed details of the spendthrift trusts. The bottom line: Symington's net worth was a negative $23 million.

Judge Nielsen appeared to pay keen attention to this testimony, asking counsel to give him a moment to finish writing his notes before making a procedural ruling.

The courtroom was silent for what seemed like an eternity as Judge Nielsen wrote down his impressions.

Fife Symington emerged from the courtroom last Friday seemingly oblivious to the festering wounds ripped open during his last afternoon of testimony before the trial recessed for three weeks.

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