Two days before Christmas, Tom Martinez sat forlornly in his empty restaurant at the downtown Mercado shopping and office complex. Lights strung above the Cafe La Tasca's bar twinkled for no one but the waiters, who set out silverware and napkins in false hope that someone would come to lunch.

Since it opened three years ago, few customers have bothered to visit the gaudy, Mexican-style plaza at Fifth Street and Van Buren. This holiday season was no exception.

That may be why few people noticed the final retreat of Governor J. Fife Symington III from the multimillion-dollar failure that he developed, with hefty taxpayer subsidies.

With deliberate secrecy, Symington's management company on December 21 turned the Mercado over to three pension funds that had lent the project almost $10 million.

Hopelessly behind on loan payments, the Mercado Developers Limited Partnership--consisting of Symington and Chicanos Por La Causa Inc.--gave up control of the Mercado and walked away.

The pension funds installed a new management company which will try to salvage the struggling shopping center. Attorneys for the pension funds are moving to foreclose on the property, and are suing Symington personally for the almost $10.8 million, including interest, he guaranteed to pay them if the project failed.

Taxpayers, too, are being stiffed by the failure of Symington's project. The Mercado sits on land owned by the city, which in late December began drawing up papers to declare the project in default for failing to pay rent. The city also loaned the project $2.7 million in federal grant money, and it is unclear whether that money will ever be paid back.

The Mercado's collapse was not unexpected. Tenants like Martinez say the plaza has been a nightmare since it opened, a poorly planned, badly managed development that never lived up to the visions Symington spun when he was convincing lenders, including the city, to give him money.

But its failure speaks of more than just another ill-fated development scheme in a city that has seen many. It is also the latest piece of a crumbling faade--that of Symington as a successful businessman and land developer--to collapse.

Until the Mercado cratered, Symington was enjoying the smoothest sailing of his brief political career. The business problems and political foibles that marked his entry into office faded from the front pages, and the first-term governor seemed poised to lay the groundwork for an expected reelection bid.

But once again, it appears that Symington's personal finances are supplying ammunition for opponents who might try to unseat him.

Since he won office in 1991, campaigning on promises to bring his business acumen to state government, Symington has suffered a string of business setbacks as, one after another, the projects he developed went under. He has blamed the failures on a depressed economy.

The Resolution Trust Corporation is suing Symington for his alleged role in the failure of Southwest Savings and Loan, which lent more than $40 million to his Camelback Esplanade project. The governor may still face criminal charges in that matter.

In the past two years, Symington's other business interests, once referred to reverently by the daily press as his "vast real estate holdings," have steadily eroded. He has lost many of his projects through default or foreclosure, and last month transferred the management of those projects he does still control to another company.

The emperor appears to have little empire left.
But court filings and public records show that Symington may remain on the hook for millions of dollars in delinquent loans that he personally guaranteed on his projects, and at least one of his attorneys says he may not be able to make good on the massive debts.

As a result, lenders--including taxpayers--may be eating millions more in losses from Symington's bad deals.

Just how dire Symington's financial situation may be is impossible to determine. His office did not return telephone calls.

But there is little question that there is blood in the water and the sharks are circling.

"It's sort of like a Third World country," says one of Symington's political adversaries. "It's so bad on so many fronts that he could fall into a state of complete receivership."
@body:At the time it opened, Tom Martinez says, the Mercado offered nothing but promise. Martinez, 49, had been a technical artist, designing fast-food restaurants and such, before he decided to take a stab at opening his own eatery in the new Mexican-style plaza Symington was building downtown.

The Mercado was the first major downtown redevelopment project, he says, built before Arizona Center, America West Arena and other downtown attractions came along to compete for business.

It was to be a bold, and presumably profitable, partnership betweeen private and public enterprise. Symington was joined by Chicanos Por La Causa, a nonprofit social service agency, in putting the Mercado deal together. Federal grant money was partially used to pay for the center, and the city made $1 million in improvements on the site. With its pink-and-white stucco and jaunty banners, the Mexican theme development was supposed to promote Hispanic culture, provide jobs and opportunities for minority businesses and draw people back to downtown Phoenix.

Eager to jump in, Martinez conceived and designed the Cafe La Tasca himself, and spent several months in Mexico studying regional cuisines, bringing back the recipes he would use at his restaurant. He invested thousands of dollars of his own money.

When the doors opened, Martinez says, he waited for customers to come eat his specially crafted dishes. He is still waiting.

From the outset, Martinez and others who have watched the project say, the Mercado was a glass half-empty. Promised promotions and advertising never materialized. Not enough tenants could be found, and many of the storefronts sat empty.

There was only one set of bathrooms for the whole shopping center, Martinez says, but that didn't matter too much because few customers came. Parking was inadequate and the stores were not easy to get to.

Occasionally, Martinez says, tour buses would pull up at the Mercado. Camera-toting visitors would snap pictures, reboard the buses and drive away.

"The Mercado was supposed to cultivate the Hispanic culture," Martinez says. "The Symington Company doesn't know peanuts about the Hispanic culture."
In applying for federal grant money, Symington and his partners estimated that the project would create 235 new full-time jobs, many of them for minorities. At best, only about 100 permanent jobs were ever created, says Margaret McKeough, the city's business programs administrator who oversees the grant program.

The Mercado never has turned a profit, court records show, and has steadily sunk deeper and deeper into financial ruin. Martinez can point across the street to the thriving Arizona Center to see how a successful downtown project is run.

"People park here and go over to the Arizona Center," he says.
Over time, virtually all of the tenants fell behind on their rent, and then stopped paying it altogether, Martinez says. The Mercado Developers Limited Partnership, in turn, fell behind in its loan payments to the pension funds that invested almost $10 million in the project.

Lonnie Williams, Symington's attorney on the Mercado, says the pension funds share the blame for the project's failure. Time and again, he says, the pension-funds manager vetoed leases that would have filled the complex, holding out for higher rents that were unreasonable in the depressed Phoenix market.

McMorgan & Company, the San Francisco-based manager of the pension funds, blocked efforts by the Mercado management to sign a lease with at least one restaurant owner who wanted to locate there, according to a lawsuit the Mercado partnership has filed against McMorgan.

The suit, which charges McMorgan with trying to sabotage the project, also claims that the pension-fund managers squelched a deal that would have brought the Phoenix Museum of History to the Mercado, and refused to allow an existing jewelry store to expand.

Firefighters' union chief Pat Cantelme, who originally helped Symington obtain pension-fund backing for the Mercado, says McMorgan was unwilling to approve leases for several tenants that he tried to recruit for the floundering project.

"When they ran into problems, I was asked by Symington and the unions involved in it to help out," Cantelme says. "We brought them three leases that I thought were very good, and they were all turned down."
One of the proposed leases, Cantelme says, was with newly elected Congressman Ed Pastor, who was looking for a district office. McMorgan rejected the lease because the space Pastor wanted to lease was designated as retail, not office space, Cantelme says.

"It just seemed like everything we tried wasn't working," Cantelme says. "I think the pension funds thought the governor wasn't putting enough into the project. There was a lot of finger-pointing, and it turned into a disaster."
Last July, Symington and his partners stopped making any payments on their loan, says John McVay, one of the attorneys representing the pension funds. In December, the pension funds sued to force the project into foreclosure, and the Symington Company turned over the keys.

The Mercado is now scheduled to be sold at auction March 10. But that will almost certainly not be the end of Symington's troubles with the project.

In enticing the pension funds to invest with him, Symington signed personal guarantees on the loans, effectively pledging that, if the deal went sour, he would pay the money back out of his own pocket.

McVay says the pension funds plan to hold Symington to the guarantees and expect him to cough up the difference between whatever the Mercado sells for at auction and the $10.8 million they are owed.

When the deal closed, McVay says, Symington's personal finances appeared solid enough to back up such a pledge. Now, even one of Symington's attorneys implies that he probably isn't good for the money.

"I think any type of liability like that would be difficult for someone like him to handle, given the real estate market," says Williams, who declined to elaborate on the specifics of Symington's financial position.

The pension funds may not be alone in going after Symington for money. The governor also personally guaranteed the $2.7 million loan of federal grant money from the city. No payments are due on that loan until this summer, McKeough says, so technically it is not in default.

But if the center is sold at auction before loan payments come due, McKeough says, the city will have to decide whether to attempt to pry the money from Symington's own bank accounts.

@body:The Mercado is merely the latest of Symington's dominoes to fall. In the past several years, he has lost, through foreclosure or default, two shopping centers, various office buildings and an industrial park.

Missouri Court, an office complex, was foreclosed even before Symington was elected, and a Scottsdale shopping center was foreclosed shortly thereafter.

Another shopping center, the Alta Mesa, was sold at a $1.5 million loss in late 1990. Four office buildings that Symington built on North 40th Street, financed by different banks and insurance companies, were defaulted back to the lenders, and an industrial center on Van Buren Street was sold off by the RTC.

Of the dozen or so major projects Symington touted as his business empire when he ran for office, in fact, little is left except for the Mercado, the Camelback Esplanade, the Scottsdale Seville shopping center and other office buildings.

Now that the Mercado has fallen from the list, only one crown jewel is left in Symington's portfolio, the Camelback Esplanade, the glitzy development composed of two office towers and the Ritz-Carlton hotel on Camelback Road. It is by far Symington's largest project, and his biggest headache.

The governor is expected to come to trial sometime this year in a civil lawsuit that charges him with misusing his position as a director of Southwest Savings and Loan to obtain financing for the Esplanade. When the S&L failed, the Resolution Trust Corporation claims, taxpayers were stuck with more than $40 million in bad loans from the Esplanade project.

Symington has also been interviewed by the Federal Bureau of Investigation as part of a criminal investigation of the S&L's failure.

Symington has fought back defiantly, blasting the RTC for targeting him and pursuing legal maneuvers to have the civil case against him dismissed.

Regardless of the outcome of the RTC lawsuit, however, plenty of money is still owed on the Esplanade project.

Through various interlocking partnerships, Symington and his companies borrowed more than $100 million from two Japanese companies to build the Esplanade, according to public deed records.

The money was lent by the Shimizu Land Corporation and the Dai-Ichi Kangyo Bank. Deed records indicate that Symington may have signed some form of personal guarantees for the loans. In several places, the deed records refer to a "Payment Guaranty" that was "given by J. Fife Symington III and Ann Pritzlaff Symington, husband and wife, to the lender." Details of the guarantee are not included.

In addition, in one of the original deeds, Symington pledges to maintain an individual net worth of at least $4 million. Failure to do so, the deed says, can be considered a default on the loan.

The Esplanade loans, taken together with the $10.8 million owed on the Mercado, paint a potentially grim scenario for the governor, say several businessmen and other observers who have tracked Symington's finances either for business or political reasons.

The Mercado loans, they say, could push Symington into default on the Esplanade if his net worth drops below the $4 million he pledged.

In fact, there is no way of knowing if Symington's net worth may already have fallen below that level. Officials of both Shimizu and Dai-Ichi Kangyo--which have an interest in monitoring Symington's financial status to see if he is complying with the guarantee--did not respond to requests for interviews.

Information gleaned from the financial-disclosure forms Symington is required to file as an elected official indicates that the worth of his various business partnerships has dropped dramatically since he ran for office.

Symington's equity in each of the three partnerships that make up the Camelback Esplanade, for instance, was reported to be more than $100,000 in his 1990 financial disclosure. Earlier this year, however, Symington reported his equity in each partnership as less than $25,000. (Financial-disclosure forms show only ranges of value. The three categories are less than $25,000, $25,000 to $100,000 and more than $100,000.)

Similarly, The Symington Company--the firm Symington used to manage his properties--dropped from a reported equity value of more than $100,000 to between $25,000 and $100,000, the documents show.

In late December, Symington announced that the company would become a "passive investment vehicle," and turn over its management functions to CORE Properties Inc., a company headed by former Symington Company officer Randy Todd.

Symington and his wife both receive income from family trusts, and there is no expectation that the governor and his family will ever lack for food.

But observers say Symington's financial problems continue to mount, and that the RTC lawsuit may be the least of his problems.

"He's like a fish flopping on the dock," says one observer.
@body:Ironically, Symington's continuing business woes may drag him down financially at a time when he is enjoying his best political position since being elected.

With Republicans controlling both the House and Senate for the first time in his tenure, lawmakers say Symington should be able to shepherd through whatever legislative program he wants. The legislature convenes January 11.

"I have no doubts he'll get most of what he wants this legislature," says Democratic State Senator Chuck Blanchard.

Symington's early-term political embarrassments--which led to the resignations of top aides George Leckie and Annette Alvarez--have faded somewhat, friends and opponents say, and have left Symington with some room to maneuver.

Among other things, the governor is promising to push for criminal-code reforms (although he vetoed a reform package last year), beef up collection of child-support payments and scrub the state budget in search of possible tax cuts.

Symington has already said he will run for a second term, and the political gossip mills are busily prognosticating on his most likely opponents.

Most mentioned on the Democratic side are Secretary of State Dick Mahoney, Phoenix Mayor Paul Johnson and former mayor Terry Goddard, who lost to Symington last time around. Attorney General Grant Woods is believed to be the most likely to challenge Symington in the Republican primary. None of the men will publicly say if he plans to run.

Privately, leading Democrats say that Symington's continuing business and legal problems should make him an easy target in the next election. Polls done by the Clinton campaign before the November election, they say, showed Symington was vulnerable.

"If he faces a decent candidate, he's dead," says one Democrat. "If he wants to win, he needs to start a war with Sonora. He needs to do a minor Desert Storm."
Sitting alone in his restaurant waiting to see how much longer he can keep the doors open, Tom Martinez says that, if Symington does run again, he had best not try to run on the basis of his business record.

"I have absolutely no respect left for the man," Martinez says. "He has financially ruined me.


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