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.