An Indictment Primer
At 11:45 a.m. on Thursday, June 13, the sound from four knocks on the inside of a wooden door bounced down a long hallway on the seventh floor of the U.S. District Courthouse in downtown Phoenix.
They were the sounds of destiny.
Outside the door, three assistant U.S. attorneys had been anxiously awaiting this moment. Each had spent four years working on an investigation that delved deeply into the personal finances of Arizona Governor J. Fife Symington III.
Together, they had reviewed more than one million documents and 300 witnesses. Many of those documents and witnesses had been presented to 18 grand jurors empaneled since October 19, 1994. Today it was time for the grand jury to make its decision in secret.
At the sound of the knocks, assistant U.S. attorney David Schindler briskly entered the grand jury room. After a few moments, the other attorneys joined him.
A decision had been reached.
Thirty minutes later, the three U.S. attorneys, the grand jurors and four FBI agents marched down the hallway, entered a stairwell, descended two flights and entered the chambers of U.S. Magistrate Morton Sitver.
The grand jury foreman presented documents to Sitver.
"The indictment is filed," Sitver replied. "The issuance of a summons is granted."
It was 12:25 p.m.
With that, the United States of America had formally filed 23 felony charges against John Fife Symington III, the governor of Arizona.
While the charges against Symington took years to investigate, the bulk of the case is relatively simple. The government believes Symington lied to a dozen financial institutions about his financial condition while he and his partnerships were obtaining hundreds of millions of dollars' worth of loans.
Nora Manella, the U.S. Attorney for the Central District of California, says the evidence will show that Symington knowingly engaged in a complex scheme to defraud lending institutions from the mid-1980s until the early 1990s, resulting in losses of tens of millions of dollars.
Essentially, the government charged, Symington made himself look rich when he wanted to get a loan, and poor when he wanted to avoid paying back a loan.
"When he sought to secure loans for real estate projects that would generate millions of dollars of development fees for his company and himself, or when he sought to secure or extend personal lines of credit to himself, he represented his financial condition as healthy," Manella says.
"When he sought to renegotiate the terms of loans or to be released from personal guarantees or to stave off default, he represented that he was financially ruined."
Manella told a throng of reporters gathered at a press conference in the Phoenix FBI offices that Symington frequently "made contradictory representations to different lenders at virtually the same time."
Ninety minutes after Manella's statement, Symington declared in a second-floor conference room at the state Capitol that he had done nothing wrong.
"I am innocent of these accusations," the governor said, with his wife, who appeared stunned, at his side.
Symington refused to take questions from the press concerning the indictment, leaving that chore to his defense attorney, John Dowd. But Symington's defense appears to be as simple as the government's charges: Honest mistakes were made.
"The federal government seeks to punish, with the force of a criminal prosecution, what are no more than unintended errors and omissions in personal financial statements," Dowd told a press conference moments after Symington left the room saying he was "going back to work."
Dowd says no money was lost as a result of Symington's error-filled financial statements. Instead, all losses should be attributed to the collapse of the real estate market.
In fact, Dowd says, financial institutions were not seriously concerned about Symington's personal financial condition when they made the loans. Instead, Dowd claims, the banks were looking strictly at the real estate asset as collateral for their loans, not Symington's personal wealth, despite the numerous personal guarantees he signed to back the debts.
"In many cases, the financial statements were submitted after the loans were made," Dowd says. "They were papering their files."
Dowd's claim that lending institutions were "papering their files" appears to be an attempt to shift blame away from Symington and onto his lenders.
Federal banking regulations forbid banks from simply stuffing their files to make it appear that they properly analyzed the creditworthiness of a borrower.
"Regardless of the underlying value of the asset securing a loan, it is extremely important that all pertinent financial data be in the file and analyzed prior to approval," says Mary Short, a former Arizona superintendent of banking.
The question of whether Symington simply committed mistakes or engaged in criminal fraud will likely focus on an 18-month period between December 31, 1990, and May 14, 1992.
During this period, the government alleges that Symington submitted two different December 31, 1990, personal financial statements to three lenders and then lied to a fourth lender by saying neither financial statement existed.
The indictment alleges the governor filed a false December 31, 1990, financial statement on May 14, 1991, with Valley National Bank. The statement, submitted when Symington was seeking a loan extension, claimed the governor had a net worth of almost $5.4 million.
Five weeks later, Symington gave a different financial statement, also dated December 31, 1990, to First Interstate Bank. This statement, which claimed his net worth was a negative $4.1 million, was submitted when Symington was trying to persuade the bank to modify repayment terms.
Despite preparing two different December 31, 1990, financial statements, in November 1991 Symington told a third lender, Citicorp Real Estate Inc., that he didn't have a December 31, 1990, financial statement.
The government alleges that Symington committed wire fraud when he transmitted a letter to Citicorp saying he had no December 31, 1990, financial statement.
Five months later, Symington apparently rediscovered at least one of his December 31, 1990, financial statements. This one showed a positive net worth. On May 14, 1992, the governor sent Dai-Ichi Kangyo Bank a letter stating his net worth on December 31, 1990, was $5.4 million.
The government alleges that Symington submitted the letter to Dai-Ichi to avoid being declared in default on tens of millions of dollars of loans related to his Esplanade development.
U.S. Attorney Manella says Symington prepared his own statements and "kept careful track of exactly which statement he gave to which lender.
"What he told them, the grand jurors concluded, depended on the lender to whom he was telling it and what he wanted that lender to believe.
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