During the final days of a heated 1990 Republican primary campaign for Arizona attorney general, candidate David Eisenstein accused Grant Woods and his family of doing business with a known mobster. Eisenstein claimed the Woods family's failed project, the former Radisson hotel in downtown Mesa, would cost taxpayers millions of dollars.
Woods, who won the primary and was subsequently elected attorney general, angrily denied Eisenstein's accusations and--citing a rule that prevents lawyers from making reckless statements about candidates for attorney general--threatened to seek his foe's disbarment.
"Taxpayers won't have to pay anything in this thing, ever," Woods vowed to the Arizona Daily Star a week before the three-way primary was settled in his favor.
Woods also said during the campaign that he and his father, Mesa contractor Joe E. Woods, were unaware that Mario Renda, a hotel partner of theirs for six months in 1986, was a notorious bank con artist. As federal regulators sorted out the savings-and-loan mess, Renda would later emerge as one of the most sophisticated and ingenious swindlers of the era. Both Joe Woods and Grant Woods said they knew nothing of Renda's escapades until they were disclosed by local newspapers in October 1988. Two months later, Joe Woods flew to Washington, D.C., and told FBI officials that he believed he had unwittingly become involved with "the mob."
And three years after Eisenstein sounded the alarm while standing on the steps of the 12-story hotel, which is now called the Sheraton Mesa hotel, federal records show that taxpayers will indeed suffer significant losses from the failed project--approximately $10 million.
In addition, a November 24, 1992, deposition given by Joe Woods indicates that before Renda became a partner, the Woods partnership--Centennial Enterprises--was given a financial-disclosure statement showing that Renda had been the target of extensive litigation alleging bank fraud and racketeering in another state. But according to the deposition, that information was either overlooked or ignored by Centennial, which was managed by Joe Woods.
Renda's financial-disclosure statement did not become a factor even though Joe Woods' deposition reveals that he had serious concerns about doing business with Renda and his partner, Carroll Davis, before the men joined Centennial in April 1986. Furthermore, Woods said he always tried to keep a distance from unsavory characters.
"I've always had questions in my mind as long as I've been in business about being affiliated with the mob. Always," Woods said in the deposition. "That's my pattern and my style, and I try with all diligence to be involved." Despite Joe Woods' claims of vigilance, he said in his deposition he doesn't remember reviewing the Renda/Davis financial statement. He said the statement was given to the partnership's attorney, Barbara Ross, who forwarded it to Western Savings, which financed the hotel. At the time, Ross was married to Grant Woods.
"My pattern in those days was to be nonfinancial," Joe Woods said in his deposition. "I would pass them [financial documents] on to people that I thought had the ability to read them and understand them."
But Ross tells New Times she never saw the financial statement until the final meeting of the partners and Western Savings that ushered Renda and Davis in.
"The only time I think I saw it was at the closing," Ross said.
Moreover, Joe Woods said in his deposition that even if Ross had seen the disclosure statement, it wasn't her job to blow the whistle on Renda.
"I relied on the financial institution [Western Savings] to do that," he said in the deposition.
The $10 million that taxpayers must pick up stems from a $19.5 million Western Savings loan to Centennial. The partnership defaulted on the loan--which grew to more than $20 million, including unpaid interest and late fees--in 1988. After Western Savings failed in 1989, the federal Resolution Trust Corporation sold the hotel in May 1990 for $7 million.
Joe Woods and his major partner in Centennial, David Schuff, had agreed to pay Western Savings $3 million each when the partnership defaulted on the hotel loan in October 1988. Schuff paid his share, but Joe Woods filed suit in Maricopa County Superior Court, challenging his payment. That suit was voluntarily dismissed last January when the RTC agreed to reduce Woods' payment to $1.35 million.
Grant Woods declined to be interviewed for this story. When asked about the Davis/Renda financial statement, Joe Woods said he couldn't remember details and referred New Times to his deposition. Efforts to reach Renda and Davis were unsuccessful.
The hotel project was a Woods family affair from the beginning.
In 1983, Joe Woods convinced the Mesa City Council that the hotel project would benefit downtown redevelopment plans. The city agreed and sold the five acres where the hotel would be built to Joe Woods and his wife, Nina, for $1. Joe Woods hoped the land would provide a nice income for his family. In the early years, Joe Woods said the hotel would lease the land for free, but once the hotel became profitable, he and his wife would collect lease payments.
The Woods family also expected to make money building the hotel. Joe Woods' contracting company built the hotel while Schuff supplied the steel. Barbara Ross, whose marriage to Grant Woods ended in divorce in August 1988, handled the legal work. Ross and Grant Woods were minor partners in Centennial until June 1988, when they bailed out.
In his deposition, Joe Woods said he never intended to operate the hotel, which was completed in 1984. He planned to sell it for a profit. But buyers proved scarce.
By August 1985, the hotel was in deep financial trouble. Joe Woods met with Western Savings' chief, Gary Driggs, that month to discuss what to do. In his deposition, Joe Woods said he concluded from the meeting that "the only thing that could be done is to find somebody that wanted the hotel for reasons other than investment." Such a person typically would be looking for a tax write-off.
Renda and Davis came into the picture in early 1986, when Western Savings was leaning on Joe Woods to come up with a buyer. Schuff contacted Davis in San Diego to see if he might be interested in the Mesa hotel. Schuff knew Davis because he had erected the steel for a Radisson hotel Davis had built in San Diego.
Although eager to sell, Joe Woods indicated in the deposition he was worried about doing business with Davis. The partnership had received information that Davis faced financial problems related to the San Diego hotel, Ross told New Times.
Joe Woods said in his deposition that he told Jim Daggett, a Western Savings lending officer, "that you better check him [Davis] out and make sure he is clean." But Woods said he never made the request in writing. Daggett could not be reached for comment.
The deposition also indicates that Joe Woods was concerned about Davis' financial partner, Renda, who had reported a staggering net worth.
"I had a severe question about a man with $168 million," he said in the deposition. "Where did he get it and what was he going to do with the hotel?" But Joe Woods also said he knew that Renda was looking for tax write-offs.
Before Renda and Davis were brought into the partnership, the men submitted a consolidated financial statement for their businesses. The statement disclosed that Renda had been accused in a lawsuit of attempting to defraud a financial institution, according to Joe Woods' deposition.
Until New Times told him last month, Schuff said he had no knowledge that Renda's disclosure statement revealed the alleged bank fraud. If he had seen Renda's financial statement, Schuff said, he wouldn't have done business with him. "We never would have touched him with a ten-foot pole," Schuff said.
Joe Woods insists that Western Savings had assumed responsibility for checking out Renda and Davis. Joe Woods says his responsibility was only to bring potential buyers to Western's attention.
"I assumed the due diligence [financial review] was done by Western and accepted by them," Woods told New Times. "One of two things happened. Either the due diligence was not done, or the due diligence was done and the facts were overlooked."
Joe Woods said in retrospect that his failure to more closely scrutinize Renda and Davis and ask Western Savings why it wanted the men in the partnership was foolhardy. It was "stupid on my part. It cost me a lot of money to make that decision," he told New Times.
Western Savings increased its loan to Centennial by $1.5 million, to $19.5 million, when Renda and Davis joined Centennial. The loan was increased to cover "back and future interest payments" on Western's original loan, Joe Woods said.
Renda and Davis were given a six-month option to buy out the remaining partners and also were exempted from any personal liability for the debt. The plan was for Davis to manage the hotel and Renda to provide capital.
But by late summer 1986, this new arrangement was doomed. Additional cash was needed to pay the Western loan, but Renda and Davis failed to produce any. They were forced out of Centennial in the fall of 1986 and Joe Woods once again assumed control.
Centennial did a review of the hotel's finances immediately after Renda and Davis left and found that some money couldn't be accounted for. But Joe Woods says the amount was small. "We could not find where they used some of the money, but there was nothing in there that said they had looted the hotel per se," Woods said in his deposition.
Joe Woods kept the hotel afloat another year by rounding up a group of local investors. But by early 1988, it was clear the hotel could not survive. Woods and Schuff agreed to give the hotel to Western Savings and each pay the thrift $3 million.
Joe Woods filed a lawsuit in Maricopa County Superior Court in 1990 after he said he learned of Renda's crimes. Woods alleged that Western Savings knew or should have known of Renda's background. Because of Western's alleged negligence and the thrift's insistence that Renda and Davis become partners, Joe Woods claimed he lost money. In the deposition, he also said "my family was exposed to the mob" because of Western's negligence.
Joe Woods' attorney, Phoenix lawyer William French, discovered that Renda had steered $27 million in deposits into Western Savings during a nine-month period in 1984. Placing large deposits into thrifts was part of Renda's criminal pattern.
By 1987, Renda had pleaded guilty to fraud and embezzlement charges in New York and Kansas in addition to a bank fraud conviction in Florida. While they unraveled his complex scheme, investigators developed a grudging awe for Renda's methods: He placed huge deposits into financial institutions in exchange for loans to third parties. The third parties would turn loan proceeds over to Renda, then default on repayment. The government never accused Renda of doing this to Western Savings.
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Besides filing the lawsuit, Joe Woods said in his deposition that he contacted the FBI and flew to Washington, D.C., in December 1988 to meet with RTC and FBI officials to discuss his role in the project and express concerns about having done business with Renda.
He said he told the FBI he was "scared to death that we're involved with the mob. . . . And I was advised how to open my door. I was advised how to start my car, and don't be surprised what might happen."
Joe Woods said Tim Taylor, a high-ranking RTC official, told him he was wise to come to Washington.
He said Taylor told him, "It's a good thing you came to us . . . because if you didn't, in a few years, somebody would come to your front door and put handcuffs on you and take you away.