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Any snag in financing the Mercado would not only have destroyed his political ambitions, it could have left him personally on the hook for $8.4 million.

In the mid-1980s, Symington asked First Interstate Bank for loans to two real estate development partnerships. The first project was a small East Valley strip mall called Alta Mesa.

First Interstate lent a Symington partnership $2.34 million in March 1987 to build Alta Mesa. A few months later, Symington and First Interstate negotiated another deal for a far larger project called the Mercado.

The Mercado transaction was more complicated. First Interstate agreed to provide Symington an $8.4 million construction loan--but only after Symington found a lender to provide permanent financing once the project was built.

Symington reached an agreement with a consortium of union pension funds, which pledged to provide a long-term, $10 million loan to Symington's Mercado Developers Limited Partnership. The $10 million would go to repay First Interstate its construction loan and provide Symington with initial capital to operate the Mercado.

The pension funds signed a letter in October 1987, promising to provide permanent financing as long as Symington met certain conditions by June 30, 1990. Those conditions included Symington's submission of financial statements demonstrating his "financial stability and creditworthiness."

The pension funds' commitment letter also allowed them to back out of the deal if Symington or his partnerships were to default on any loans, make late payments or become insolvent.

Symington, First Interstate Bank and the pension funds signed an agreement in May 1988 that reaffirmed the right of the pension funds to back out if Symington's financial position waned, the pension funds' lawsuit charges.

A few months later, First Interstate Bank got its first inkling that Symington was in financial trouble. The Alta Mesa project was having problems finding tenants.

By the fall of 1988, Symington was forced to ask two limited partners to contribute an additional $92,500 each to the partnership. At the same time, Symington was also seeking a permanent lender to pay off First Interstate's construction loan on Alta Mesa.

Cockerham testified last week that Pima Savings & Loan was ready to provide permanent financing, but backed out after Symington was unable to attract additional tenants.

The $2.3 million construction loan came due on March 1, 1989, and Symington was unable to pay. First Interstate agreed to extend the loan to September 1, 1989, after Symington paid a $12,500 extension fee. First Interstate placed the loan on its watch list of troubled accounts.

In mid-April 1989, Symington announced his candidacy for governor. On April 26, 1989, Cockerham suggested in an internal memo that Symington initiate confidential discussions with a First Interstate executive about the Alta Mesa loan to "see if he can assist behind the scenes."

The pension funds allege this was the beginning of an effort to deviate from the banks' normal procedures, which could have resulted in a public notice of foreclosure on Alta Mesa--an action that would have tipped off the pension funds to Symington's financial woes.

Cockerham and Symington met with First Interstate executives. Symington followed up one key meeting with a May 18, 1989, letter that stated the Alta Mesa project was "suffering through what best can be described as a market cataclysm."

Symington told the bank that Alta Mesa's problems "have created severe pressure on the budget, and, therefore, on me."

Symington suggested that with his dedication and the bank's "continued patience and assistance," the project could have a "positive outcome."

The "continued patience" Symington sought included another extension on the Alta Mesa loan from September 1989 to March 1991--well after the November 1990 gubernatorial election.

First Interstate was not as patient as Symington hoped, agreeing to extend the due date on the loan until December 1, 1989. Symington paid a $6,250 fee for the extension.

In the weeks preceding the December 1, 1989, deadline, First Interstate Bank conducted an appraisal of Alta Mesa that showed the property's value had dropped far below the outstanding $2.3 million loan. On December 1, Symington defaulted.

Later that month, First Interstate wrote off $963,297 of the loan as a loss and reduced the outstanding amount owed by Symington's partnership to $1.36 million. The bank apparently did nothing to try to collect the loan from Symington even though Symington had personally guaranteed repayment.

The union pension funds allege that the Alta Mesa writedown heightened First Interstate's concerns about the Mercado construction loan and whether Symington would be able to meet the pension funds' financial conditions.

If Symington couldn't convince the pension funds of his financial viability, First Interstate would not only have the nonperforming Alta Mesa loan on its books, it also could be stuck with the $8.4 million Mercado construction loan.

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John Dougherty
Contact: John Dougherty