Not so, testified Cockerham, who was chief financial officer of The Symington Company. In reality, nearly all of Symington's real estate projects were losing money years before the Arizona real estate market plunged off the map in the late 1980s.
Last week was a miserable one for Cockerham. Day after day, the accountant was forced to dredge up more damning evidence supporting the federal government's 22-count indictment against Symington.
Cockerham's testimony provided insight into The Symington Company's internal operations and Symington's strategy to keep the business afloat.
Combined with allegations made in a civil lawsuit filed June 6 in Maricopa County Superior Court by a consortium of union pension funds who lent money to Symington's failed Mercado project, Cockerham's testimony suggests that Symington was the architect of a protracted Ponzi scheme.
As one real estate project after another faltered, Symington made a crucial decision. Rather than pulling back and riding out the vagaries of the marketplace, Symington pushed forward, continuing to build more office buildings in a glutted market.
His company raked in development fees as the buildings were built, and later gleaned management and leasing commissions from them. Symington clearly believed that if he could keep building throughout the real estate downturn, he might weather the storm.
But to do this, Symington had to convince lenders that his personal finances were stable. Cockerham testified that he and Symington were aware that the real estate projects were failing.
Nevertheless, Cockerham testified that he didn't know what values Symington was placing on those buildings when Symington submitted his personal financial statements to lenders.
The reason? The real estate projects were held in Symington's name, not The Symington Company's. Therefore, Cockerham and other Symington Company officials never had reason to review Symington's valuations.
The government was expected to continue questioning Cockerham this week, focusing on the project that has caused Symington the most trouble--the Mercado.
Meanwhile, the union pension funds' civil suit accuses First Interstate Bank (now Wells Fargo) of defrauding the pension funds, which lent $10 million to Symington for his Mercado project.
Wells Fargo failed last month to obtain a court order preventing the pension funds from filing the fraud suit. Wells Fargo spokesman Dan Conway did not respond to New Times' requests for comment on the pension funds' suit.
The suit was filed by Phoenix attorney Michael Manning, who has doggedly pursued Symington since the governor filed for bankruptcy protection in September 1995. Manning has filed a four-count fraud case against the governor in U.S. Bankruptcy Court seeking to prevent Symington from erasing a $12 million debt owed to the pension funds.
Manning's latest suit is well-documented and provides further evidence that Symington intended to mislead lenders to keep his real estate treadmill spinning and his political ambitions alive.
Cockerham considers Symington a friend. And why not? Soon after Symington was elected governor in 1991, he gave Cockerham a plum job in state government. Cockerham was promoted last month to an $87,269-a-year state job as an assistant director at AHCCCS, Arizona's health-care agency for indigents.
Cockerham's lawyer, Phoenix attorney Ivan Mathews, is in Symington's camp as well, also representing Symington's former secretary, Joyce Riebel, who had a joint defense agreement with Symington.
Testifying has become old hat to Cockerham. He appeared eight times before the federal grand jury that indicted Symington, and was subjected to lengthy interviews with government investigators.
Not surprisingly, Cockerham admitted to the jury last week that he would rather not be in U.S. District Judge Roger Strand's courtroom. But there he was, on the witness stand, carefully answering each question posed by assistant U.S. attorney George Cardona.
Cockerham testified that nearly all of Symington's real estate projects were floundering by the time he joined Symington's real estate development company in July 1985. Cockerham's job was to bail water.
To do that, Cockerham generated detailed financial reports on each project and provided regular updates to Symington. The reports included loan balances, appraisals, cash-flow updates, leasing rates, vacancy rates, long-term projections and offers to buy and sell the various projects.
Cardona presented evidence to the jury showing Symington's handwriting on several of Cockerham's detailed reports. Federal prosecutors contend that Cockerham's analyses provided Symington with precise information that Symington could have--and should have--disclosed when he prepared numerous personal financial statements for lenders.
Instead, prosecutors allege Symington defrauded lenders when he disregarded or suppressed detailed financial information that showed his share in the various projects was worthless. Instead, prosecutors allege Symington inflated the market values of his buildings and understated the loan balances on them to manufacture an illusory net worth exceeding $10 million.
Cockerham told the jury that he never saw Symington's personal financial statements, although he frequently forwarded the statements to lenders. Symington's financial statements, Cockerham testified, were always given to him in a "sealed envelope."
Cockerham also revealed how unlikely it was that Symington would ever profit from his real estate projects. Symington, Cockerham explained, was at the end of a long line of people who would get any profits. Symington did not receive any income from any of the nine real estate projects Cockerham has testified about.
Symington managed the real estate developments through limited partnerships. He typically put no more than a few thousand dollars into these partnerships, which he controlled as the general partner. Instead, other investors, either individuals or institutional investors, put up substantial funds as limited partners.
The partnership would then borrow additional funds from banks, insurance companies or pension funds to finance the construction of office buildings.
The terms of the partnerships required the lender to be paid first if a building was sold. If there were any profit remaining, the limited partners would be repaid their investment plus interest.
Only then would Symington get a return of any significance. Unfortunately for Symington and his limited partners, the real estate projects rarely sold for enough money to cover the outstanding loans, Cockerham testified.
Symington also had a habit of diluting his ownership stake in the partnerships. For example, the Symington Partners Limited Partnership had a 0.5 percent ownership share in the Scottsdale Centre office development. But Symington only had a 50 percent share in Symington Partners Limited Partnership, reducing his personal stake in the Scottsdale Centre project to a minuscule 0.25 percent.
Despite his scant interest in the project, Symington claimed on his financial statements in the late 1980s that his equity in it was worth $1 million--meaning the project would have to have been worth more than $400 million. But at its peak, the project was worth only $35 million, and by 1991 it was returned to lenders when the Symington partnership defaulted on its $24 million debt.
Scottsdale Centre was no aberration.
On many of his financial statements, Symington claimed a 36 percent share in the Van Buren Industrial Park. But Cockerham testified that partnership records showed Symington only had a 1 percent stake in the property. And Symington was far down the list of those who would get any potential profits.
On his December 31, 1989, financial statement, Symington claimed the building was worth $1.85 million, and his 36 percent equity share was worth $400,000.
In reality, the industrial property located at 39th Avenue and Van Buren had few tenants and was burdened by nearly $2 million in loans and limited-partnership obligations. When Symington compiled his 1989 year-end financial statement, Symington had no equity in the property, and Symington knew it, Cockerham testified.
Cardona asked Cockerham if financial statements prepared for the Van Buren property and given to Symington ever showed a profit between 1985 and 1990.
"They all showed losses," Cockerham replied.
Although Symington would earn nothing from the operations and sale of the properties until after the limited partners and lenders were paid, his company did get a cut of the action up-front.
The Symington Company would get income from development fees, typically about 5 percent of the construction cost. The firm also got management fees and leasing commissions once office space was built.
Symington drew a $100,000-a-year salary from his company, and occasionally made additional withdrawals from the company of which he was the sole shareholder, Cockerham testified.
The only significant income generated by The Symington Company came from the construction of new office buildings and subsequent leasing and management fees. The dilemma Symington faced in the mid- to late 1980s was that his office buildings didn't generate enough money to pay back the loans.
Symington attempted to cover operating losses on projects, at least for a while, Cockerham testified. But since his only source of income was to build new projects, prosecutors allege he elected to inflate the values on his financial statements to impress lenders.
By the winter of 1989 and spring of 1990, all of Symington's real estate projects were in serious trouble, Cockerham testified. He said Symington sought legal advice about placing several partnerships into bankruptcy. Symington wanted to keep his financial troubles out of the public eye so as not to detract from his gubernatorial campaign, which was in full swing by December 31, 1989.
Perhaps more important, Symington was also facing crucial negotiations with two lenders involved with his high-profile downtown redevelopment project, the Mercado.
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.
In January 1990, First Interstate lending officer Jeffrey White instructed Symington to make sure he met all of the pension funds' requirements so that the $10 million loan would be funded.
"The Bank expects you to meet these deadlines, and its position is that the permanent funding should occur as soon as it is possible," White wrote Symington on January 19, 1990.
About the same time, First Interstate agreed to extend the unpaid Alta Mesa loan for a third time--until March 15, 1990--but this time there was no extension fee. Once again, the Symington partnership failed to meet the deadline.
The next day, March 16, 1990, the pension funds allege, Cockerham and Symington induced First Interstate to join in a conspiracy to hide Symington's financial problems from the pension funds.
The pension funds had already expressed reluctance about funding the loan because of the deteriorating Phoenix real estate market. Symington and First Interstate faced the June 30, 1990, deadline to meet the pension funds' requirements or the loan could be canceled.
On March 16, 1990, the pension funds allege Cockerham sent a letter to First Interstate suggesting that Symington and the bank would both benefit from informal handling of the Alta Mesa loan default rather than a public foreclosure.
"It is in the best interest of both parties to work together to stabilize the property and, ultimately, to sell it," Cockerham wrote.
The pension funds allege that First Interstate accepted Cockerham's offer and subsequently took actions that violated the bank's internal lending practices.
On May 25, 1990, First Interstate agreed to delay any efforts to collect on the delinquent Alta Mesa loan until July 1, 1990--one day after the pension funds were scheduled to fund the permanent Mercado loan, which would repay First Interstate.
First Interstate executive Douglas Hawes requested authorization to strike a forbearance agreement to "allow time for finalization of the Mercado loan pay-off." Symington and his wife, Ann, signed the forbearance agreement on May 29, 1990.
Delaying action on the Alta Mesa loan removed one obstacle that could have triggered the pension funds to refuse funding the permanent loan.
But First Interstate Bank soon faced the bitter prospect of providing additional loans to Symington.
About the same the Alta Mesa forbearance agreement was being finalized, the union pension funds--which knew nothing about the forbearance--informed Symington and First Interstate that they would not fund the entire amount of the construction loan Symington owed to First Interstate.
Instead, the pension funds planned to "hold back" $2.8 million of the $10 million loan to cover future tenant improvements and projected operating deficits.
The pension funds' plan meant that First Interstate would only receive $7.2 million of the $8.4 million owed by Symington. First Interstate would have to rely on Symington, who already had defaulted on the Alta Mesa loan, to cover the $1.2 million Mercado shortfall.
To make matters worse for First Interstate, the $1.2 million would be unsecured debt because First Interstate would have to give up its deed of trust to the Mercado in exchange for the pension funds' loan proceeds.
First Interstate was in a bind.
The bank didn't want to be forced to rely on Symington for repayment, because Symington had admitted to the bank that he couldn't pay it. But First Interstate didn't want to press the pension funds too hard about funding the full $10 million in fear the pension funds would walk away from the table.
First Interstate lending officer Jeffrey White notified the bank's senior loan committee of the problems in a detailed June 7, 1990, memorandum. He suggested that the bank be prepared to write off the $1.2 million Mercado shortfall as uncollectable from Symington.
White also informed the committee that Symington had overstated his $11.9 million net worth when he submitted a personal financial statement to First Interstate in May 1990.
"Symington's stated net worth is almost entirely vested in commercial real estate, indicated market values of which he has stated do not accurately reflect the current market," White wrote.
In addition, White disclosed that $791,000 in "marketable securities" listed on Symington's financial statement "are held in an irrevocable family trust of which Symington is the beneficiary" and that the assets cannot be "liquidated or pledged."
The pension funds allege that First Interstate ignored its obligation to tell federal banking regulators that "Symington had engaged in acts that constituted known or suspected criminal violations" by submitting a false financial statement.
Despite White's disclosure of Symington's dismal financial condition, First Interstate continued to press the union pension funds to make the permanent Mercado loan without informing them of Symington's financial problems.
To induce the pension funds to make the permanent loan, Symington offered to extend his personal guarantee to repay the $10 million loan to five years after the date the project was fully leased. The pension funds allege that Symington and First Interstate knew Symington's personal guarantee was worthless, but failed to inform the pension funds.
At the same time, First Interstate demanded that Symington submit a new personal financial statement that showed "both cost and current market value of listed assets." First Interstate also wanted details of Symington's trusts.
Symington did not immediately respond to First Interstate's June 8, 1990, request, forcing the bank to ask again on June 19, 1990. Symington finally responded on June 26, 1990, by submitting a statement containing identical values indicating a net worth of $11.9 million as the ones he sent to the bank and the pension funds in May.
However, Symington added a disclaimer stating that he was providing "a 'best efforts' evaluation of my financial condition. The current depression in the real estate market makes it difficult to determine asset value, thus any evaluation is highly subjective."
The pension funds allege that First Interstate now had ample proof of Symington's poor financial condition and that the pension funds were entitled to that data.
And more bad news was flowing in every day. First Interstate confirmed that Symington's "readily marketable securities" were in fact held by a "spendthrift trust" and were off-limits to creditors.
First Interstate also learned that Symington's Mercado limited partners were upset because the return-on-investment projections that had lured them to invest had contained mathematical errors. The limited partners wanted out of the partnership and were demanding their money back from Symington, White stated in his June 7, 1990, memo to the loan committee.
"This threat currently prevents Mercado's counsel from issuing the Permanent Lender a 'clean' opinion letter, a condition precedent to closing [the pension funds' loan]," White stated.
Symington wanted First Interstate to pay off the limited partners' $500,000 investment, an option the bank refused because White noted it would change the partnership structure and give the pension funds "a clear out."
First Interstate also learned that Symington was having difficulty funding tenant improvements at the Mercado for space to be leased by Arizona State University. Symington sought a loan from First Interstate to continue tenant improvements "and to avoid having to disclose the situation" to the pension funds.
First Interstate and Symington managed to mollify the limited partners and provide the tenant improvements in the days leading up to the June 29, 1990, closing date to obtain long-term financing from the union pension funds.
The pension funds allege that while Symington, Cockerham and First Interstate Bank were hiding negative financial information, Symington was projecting an upbeat image.
Symington's gubernatorial campaign trumpeted his purportedly successful career as a developer.
He crafted a similar image for the pension funds.
On May 4, 1990, Symington gave the pension funds a personal financial statement that said he was worth $11.9 million.
On June 29, 1990, Symington, First Interstate and the pension funds met to sign the papers that would transfer $7.2 million from the pension funds to Symington's Mercado partnership, which in turn would pay off most of First Interstate's $8.4 million construction loan.
Prior to signing the papers, Symington recertified that his May 4, 1990, statement showing a net worth of $11.9 million was accurate.
The pension funds allege a conspiracy of silence kept them from learning:
* Symington had defaulted on the Alta Mesa loan three times and was unable to pay his debts.
* First Interstate had written down the Alta Mesa loan by $963,297 just six months earlier, an indication that Symington wasn't paying his bills on time.
* Symington's $791,000 in "readily marketable securities" reported on his financial statement were in fact untouchable.
* Symington had admitted to First Interstate just three days earlier that the real estate values that made up nearly all of the reported wealth on his financial statement were "highly subjective."
Instead, Symington lied about his real estate assets on his financial statement given to the pension funds. For example, Symington claimed he still had $250,000 in equity in the Alta Mesa project even though he had defaulted three times on the loan.
The pension funds would not begin to learn the truth until after Symington declared bankruptcy in September 1995. Since that time, pension funds attorney Michael Manning has left no stone unturned in his examination of Symington's finances.
So last week was miserable for Cockerham, and the future doesn't look much brighter. He's certain to spend many more hours being grilled by the prosecutors in Symington's criminal trial.
After that, Mike Manning will be waiting for him.
