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Fife's Cross to Bear

Inexorably, federal prosecutor David Schindler is dragging Governor J. Fife Symington III through a time Symington would rather forget.

Schindler is taking Symington back 12 years, to the fall of 1985, when the first major cracks in Symington's development company began to appear.

Back to the days when Symington was forced to repeatedly borrow millions of dollars from friends and financial institutions to keep his struggling company afloat and sustain his dream of building the Camelback Esplanade.

Back to April 1986, when the government alleges he first began lying on his personal financial statements and other documents submitted to lenders to obtain loans--a pattern prosecutors allege continued for the next six years.

Symington is a reluctant passenger on Schindler's cross-examination time machine. But it's a ride he must take. On July 24, he became Arizona's first sitting governor to take the witness stand as a criminal defendant.

During cross-examination that began late Friday, July 25, and resumed Tuesday, Schindler treated Symington like a first-class passenger, frequently allowing the governor to digress into lengthy explanations that bordered on lectures.

Symington appeared to be enjoying much of the ride, smiling when his response was particularly pithy. And so, too, did Schindler, who could barely hide his smirk as Symington reeled off yet another pat but elliptical response to a pointed question.

Courtroom observers generally agreed that Symington held up well in the early going. He was argumentative in his responses to Schindler's questions, yet controlled his fierce temper. His voice was steady and strong. He countered several of Schindler's attacks with style and humor.

But Schindler is steadily forcing Symington to admit that his financial statements were fraught with mistakes that had the overall effect of increasing his net worth, increasing the likelihood that lenders would look kindly on Symington's requests for money.

The ride will become increasingly choppy as Schindler's time machine moves into the late 1980s and early 1990s. Symington will be forced to confront reams of documents that appear to support the government's contention he knowingly prepared multiple financial statements with widely varying values during the same time period.

Not only did he prepare the statements, the government alleges he knowingly submitted the false financial statements to lenders to obtain loans--loans that Symington personally guaranteed to repay but never did.

By late Tuesday, Schindler was turning up the heat on Symington, asking more accusatory questions and cutting off Symington's speechmaking. Symington's face flushed red under the barrage.

So far, Symington's only explanation for repeated mistakes he admits appear on his financial statements was that he simply didn't pay much attention when he filled out the forms and he was relying on his faulty memory.

"The financial statement was not the focus of my life. I didn't spend a lot of time on it," Symington testified Tuesday.

Symington's blithe mea culpas already were wearing thin.
And Schindler was only two years into his six-year journey through the Symington Years.

Symington is well-prepared for battle.
He knows his lines, which for the most part have worked in his favor.
Symington has been under fire for his business practices since before he was elected governor in February 1991. So far, he's deflected charges of unethical and illegal actions in a manner that would make Ronald Reagan envious.

Symington's defense was expected to call about 12 witnesses during 12 days. Instead, his attorney, John Dowd, called just four witnesses prior to calling the governor.

Symington's brief defense caught many by surprise.
"We don't waste time," Dowd explained in response to reporters' questions about his strategy.

Symington's defense is to downplay 22 criminal counts alleging bank fraud, extortion and perjury by simply shrugging them off as nothing more than nit-picking. Dowd has portrayed the feds as being obsessed with meaningless fine print buried in risky and complicated business transactions that damaged no one.

"This is supposed to be a criminal case," Dowd says. "Where's the body?"
Rather than attempting to defuse land mines planted by the prosecution, Dowd used Symington's testimony to propel the case in a different direction.

Instead of the blame-shrugging developer described by prosecutors, Symington admitted responsibility for numerous errors on his financial statements. All the mistakes, Symington testified, were unintentional.

"He's very candid in how he fouled up and messed up," Dowd says.
Symington portrayed himself as the heroic developer who ignored his financial collapse to obtain funds from Dai-Ichi Kangyo Bank so he could pay laborers working on the Camelback Esplanade project.

"All those people had to get paid," Dowd says in explaining why Symington falsely certified that he still had a net worth of $4 million when it was actually negative $22 million at the time he signed three draw requests in 1991 and 1992 to obtain funds from the bank.

 

Instead of hiding information from lenders, Symington testified that he and his company gave as much financial information as any lender requested. Furthermore, Symington asked his accountants at Coopers & Lybrand to look over financial statements in 1987, 1988 and 1989 to make sure they were accurate.

"They had everything that I could give them and I just assumed they checked my financial condition," Symington testified.

When Symington learned the statements were in error soon after the 1991 election, he asked Coopers & Lybrand to root out all the problems and he forwarded updated statements "to all the lenders I was dealing with," Symington testified.

Faced with extortion and perjury charges, Symington simply denied any effort or intention to commit such crimes. His answers to the accusations were a curt "I did not."

On their face, many of Symington's denials appear to be plausible.
But deep fault lines exist below the surface.

Schindler's list of questions for the governor is long, detailed and potentially lethal.

With his mother and his bride of three months in the courtroom, the 36-year-old Schindler began his cross-examination of Symington on July 25, with a 45-minute interrogation that was as polite as it was effective.

Within minutes, Symington appeared befuddled about the direction of the questioning; Schindler scored some quick points.

First, Schindler established that Symington knew the rules of the lending game because of his previous duties as a director at two thrifts. Symington admitted that banks relied on financial statements to determine the financial strength of a developer.

Next, Schindler tried to show that personal enrichment drove Symington to submit false financial statements to lenders. Symington admitted withdrawing $2.039 million in Symington Company shareholder distributions between 1987 and 1989. Symington was the company's sole shareholder.

The governor testified that the shareholder distributions, plus another $300,000 in salary, came primarily from developer fees taken from construction loans Symington's partnerships obtained from lenders. The loans would not have been made without his personal guarantees, which were supported by his financial statements.

Finally, Schindler gave the jury reason to wonder why Symington kept his personal financial statements hidden from all his employees except his secretary, Joyce Reibel.

More than 90 percent of Symington's reported net worth was tied to his real estate projects. Symington agreed with Schindler that all of the financial information concerning those projects was readily accessible to several people in his company, including his chief financial officer, Jim Cockerham.

If Symington wanted to give lenders an accurate picture of his real estate investments--and his net worth--all he had to do was ask Cockerham, who was a certified public accountant, to run the numbers.

Symington eventually did ask Cockerham to look over his real estate schedule--but only when Symington wanted to convince lenders he was too broke to repay loans he guaranteed.

"In fact, the first time that you went to him . . . was after you became governor when you were doing workout negotiations, right?" Schindler asked.

"That's basically correct," Symington replied.
Cockerham obliged and soon determined Symington's real estate holdings were worthless and that the governor's net worth had plummeted to negative $4.1 million. The negative financial statement was a handy prop in Symington's pitch to convince lenders to back off--all did except for a consortium of union pension funds that instead went to court and won a $10 million judgment.

After a weekend recess, Schindler continued his low-key questioning through most of Tuesday. Symington frequently asked Schindler to "refresh my memory."

Time after time, Schindler presented documents to refresh Symington's memory. The governor would use the opportunity to review records, most of which had been introduced earlier in the trial, and launch into long digressions that avoided answering Schindler's question.

The prosecutor stood his ground, however, frequently asking the same question several times. But even then, the governor often avoided answering a question with a direct response.

For most of the day, Schindler allowed Symington plenty of time to wander, as if Schindler wanted Symington to display his agile mind to the jury.

When Schindler wanted to make a point, however, he generally was successful. He opened the second day of his cross-examination by attempting to show the jury that Symington put his personal interest ahead of his partners'.

Schindler landed a major blow when he produced a document showing Symington was pressuring a tenant in one of his small office projects to move into the Camelback Esplanade as early as 1986. Cornoyer-Hedrick Architects was the anchor tenant in Symington's Missouri Court project.

Symington told the company in a March 1986 letter, "I need you to go in the Esplanade."

 

During the next few years, Symington sold nearly all of his interest in the Missouri Court project, never telling the buyers, including former Symington Company executive vice president Jean Wong, that he planned to get Cornoyer-Hedrick into the Esplanade.

After Symington reduced his share in the project to 0.5 percent, The Symington Company told other Missouri Court investors in July 1989 that Cornoyer-Hedrick was moving out of Missouri Court and into the Esplanade the next spring.

The firm's departure left Missouri Court vacant and wiped out the limited partners' investments. The only person to make money on the Missouri Court partnership was Symington.

Schindler accused Symington of hiding his plan to move Cornoyer-Hedrick from his partners.

"That may well be the case," Symington replied.
Schindler said that Symington's failure to inform his partners was a breach of his fiduciary duty.

"I would disagree with that," Symington replied.
Schindler then moved through a series of questions that showed Symington was in financial trouble as early as 1985, primarily because of problems stemming from the Camelback Esplanade.

Symington's growing financial desperation, however, did not show up on his April 1, 1986, personal financial statement. Symington, for example, failed to list a $2.25 million loan he needed to buy out his former Camelback Esplanade partner, Jerome Hirsch.

The governor said he didn't include the loan because it was from a friend. He did admit, however, that he included more than $100,000 in interest payments as a deduction on his 1986 income tax return, a year in which he paid no taxes.

(Dowd asked the court to declare a mistrial after the government introduced the tax information, saying Schindler had deliberately "poisoned" the jury. Judge Roger B. Strand rejected Dowd's request, but instructed the jury to ignore testimony related to the amount of Symington's taxes.)

Symington's failure to accurately reflect his business dealings on his financial statements carried over to his personal finances. Symington reported on the April 1986 financial statement that his home was worth $800,000, even though he had signed a contract to sell the home in February for $500,000.

Schindler pressed deeper into Symington's real estate schedule, showing Symington was duplicitous when he filled out his real estate values.

Symington testified that he used appraisals to determine the $35 million market value of the Scottsdale Center he listed on his April 1986 financial statement. But Symington departed from using market values when he determined his personal share of the project.

Instead, Symington testified that he used a "hoped for" value of what he thought he would earn at some unspecified time "down the road." Using this methodology, Symington claimed his share in the project was $1 million.

"I viewed my share to be worth $1 million down the road because it was a great project," Symington explained.

Schindler, however, showed the jury that the partnership records for the project indicated that Symington would only net $26,000 if the project was sold for $35 million.

After attacking Symington's nebulous basis for determining his ownership share in the real estate projects, Schindler moved to show Symington would selectively use professionally prepared appraisals.

The governor routinely rejected the values obtained from the Phoenix appraisal firm of Burke, Hansen and Homan, even though he continued to use the firm and pay fees for the reports.

Instead, Symington used his own, higher values for several of his real estate projects when filling out his financial statements. Schindler asked Symington why he rejected an appraisal firm that Symington said was one of the best in the Southwest.

"I feel my opinion should be of equal if not more weight when it comes to valuing a real estate project," Symington testified.

Schindler then guided Symington into 1987, when Symington submitted to lenders two different financial statements dated as of October 30, 1986.

Symington testified that the "as of" date was incorrect on the financial statements and that one statement was simply an updated version of the other. He told the jury he would give the updated version of the statement to the latest lender requesting information.

Schindler, however, showed that Symington provided an October 30, 1986, statement with a net worth of $9.1 million to lenders on February 5, 1987, and May 19, 1987. Symington gave a different October 30, 1986, statement with a lower net worth of $8 million to other lenders before and after May 19, 1987.

Symington had no explanation.
Which is exactly what Schindler hopes to prove during the next few days of cross-examination.


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