By Ray Stern
By New Times
By Amy Silverman
By Stephen Lemons
By Stephen Lemons
By Monica Alonzo
By Chris Parker
By New Times
Last Friday's ruling by U.S. Bankruptcy Court Judge George B. Nielsen is a devastating one for former governor J. Fife Symington III.
More than five years after Symington filed bankruptcy seeking dismissal of $25 million in debts, Nielsen ruled that a $10 million loan from a consortium of union pension funds that was used to help finance the Mercado development in downtown Phoenix can't be erased.
Nielsen did not specify how much money Symington owes the pension funds. The amount could be as high as $18 million if interest is included, or far lower depending on how the property is valued.
Nielsen's ruling was celebrated by the pension funds' investment manager, San Francisco-based McMorgan & Company.
"Right does prevail," says McMorgan & Company spokesman Paul Morton.
The pension funds were the only entity to attempt to block Symington from discharging debts that stemmed from his days as a Phoenix real estate developer.
Morton says Nielsen's ruling vindicates the pension funds' dogged pursuit of Symington during the past five years. Morton dismissed claims that the pension funds were engaged in a political attack on Symington, saying the issue was far more clear-cut.
"When someone borrows money and promises to repay the money, they should pay it back," Morton says.
A veteran of many court battles during the last decade, Symington has had his share of victories and defeats. In the early 1990s, he stared down the Resolution Trust Corporation, which filed a civil fraud suit related to his service on the failed Southwest Savings & Loan board of directors. Symington walked away from the suit unscathed.
Symington lived through the public humiliation of resigning as governor in the wake of his September 1997 criminal conviction on seven counts of bank and wire fraud. The federal convictions were later overturned on appeal.
Federal prosecutors were preparing to retry Symington this year and had entered into plea-bargain discussions. Just days before Symington was to enter a guilty plea on one count, he was pardoned by former president Bill Clinton -- a pardon that shocked Justice Department officials who were unaware that a request for the pardon had been submitted to the president.
But these encounters are merely skirmishes compared to the bankruptcy jihad.
Symington is the great-grandson of Henry Clay Frick, one of the richest men in the world at the turn of the 20th century. A vast fortune was and will continue filtering its way to Symington.
Nielsen's ruling hits Symington where it really hurts -- his financial freedom.
"This gives them the ability to harass you for the rest of your life," Symington said during an interview last summer, about the possibility of Nielsen refusing to discharge the debt.
Nielsen ruled in favor of the pension funds' claim that Symington submitted false financial statements and that the funds reasonably relied on those statements when they lent a Symington real estate partnership $10 million in 1989.
Nielsen's ruling marks the second time Symington has been found guilty of defrauding the union pension funds. The criminal jury that convicted Symington included one count related to the pension fund loans.
"It's a very nice win," says Michael Manning, a Phoenix attorney who represented the union pension funds in the bankruptcy case.
But Manning was not always so quick to judge Symington. In the early 1990s, Manning was a Symington supporter and, like voters, the daily press and Republican political leaders, was entranced with Symington's mystique.
"I believed it," Manning says. "I voted for him that first year."
When Symington narrowly defeated Democrat Terry Goddard in a March 1991 runoff election, Manning was intimately aware of the financial shenanigans that characterized the Phoenix real estate market.
"I was seeing financial fraud under every taco stand and every bank. I'm sensitive to this stuff. And I'm looking at this guy [Symington] and saying, 'Son of a bitch, this guy really can, he's developed successfully right into the teeth of a down market,'" Manning says.
That impression soon wore off as Manning began poring over thousands of pages of financial documents and conducting depositions. Manning, who in the 1980s was tapped by federal banking regulators to investigate Charles H Keating's operation of Lincoln Savings & Loan, was well-prepared to review Symington's web of conflicting financial statements and the evasive maneuvers that characterized the former governor's relationship with numerous lenders.
Manning showed during last summer's bankruptcy trial that Symington's financial statement submitted to the pension funds was not a true and accurate reflection of his wealth.
Symington admitted to making "errors and omissions" on the financial statement, but asserts it was as accurate a statement as he could prepare given the uncertainty of valuing real estate assets.
"Even to this day nobody really knows what my net worth was at that point in time because the valuation of real estate assets is an opinion-driven exercise, it is not a factual or scientific exercise," Symington said.
The essential point in the bankruptcy trial was whether the union pension fund manager -- McMorgan & Company -- reasonably relied on Symington's financial statement at the time the loan was issued.
Symington claimed that McMorgan failed to scrutinize his financial statement and did not ask him any questions about his net worth. If fund managers had, they would have soon learned he was facing significant financial troubles.