Governor J. Fife Symington III apparently prepared conflicting financial statements in 1990--one showing that he personally controlled blue-chip stocks worth nearly $800,000; the other indicating that the stocks were controlled by a family trust.
At least one of the sworn statements appears to be inaccurate. It is a crime to knowingly file false statements such as these.
The statement in which Symington claims control of "readily marketable" stocks was submitted to union pension funds as Symington was seeking a $10 million loan to build the Mercado in downtown Phoenix.
The other statement, which lists the stocks as part of a family trust, was submitted to the Arizona secretary of state when Symington was a candidate for governor.
The conflicting statements may play a key role in Symington's pending Chapter 7 bankruptcy case and in the outcome of a federal grand jury investigation into his finances.
The distinction between whether Symington owned the stocks or was simply the beneficiary of a trust fund that owns the securities is crucial.
If the securities were under Symington's direct control, as he claims in a financial statement submitted to the union pension funds, they could be considered liquid collateral on the $10 million loan. Symington has refused to fulfill a personal guarantee to repay the loan.
However, if the securities were under the control of Symington's four family trust funds, then Symington's access to the stocks and the income generated by the stocks is far less direct.How much control Symington had over the trusts' stocks depends on how the trusts were structured. Since filing for bankruptcy on September 20, Symington has claimed his Frick Trusts have "spendthrift" provisions that restrict "the beneficiary's ability to transfer his interest in the fund"--an assertion that appears to contradict the financial statement he submitted to the pension funds in 1990.It is unknown whether the structure of the Frick Trusts has changed since 1990 to include the spendthrift provisions or if the trusts at one time gave Symington direct access to their assets.
However, trust-fund experts say it is highly unlikely that Symington's Frick Trusts have been changed since the most recent fund was created in 1960. Trusts created by wealthy families during that period usually were for estate and tax-planning purposes and were "irrevocable trusts" that cannot be modified.
Typically, only the trustee of a spendthrift trust--in the governor's case, Mellon Bank--can make investment and income disbursement decisions.
Trust-fund experts say spendthrift trust beneficiaries must be very careful when listing assets of the trust fund as personal property on loan applications.
"As far as saying that these stocks and bonds that are in the trust are the same as though they are in your personal portfolio is, I think, wrong. That's not correct," says a Phoenix trust lawyer who asked not to be identified.
The two financial statements in question are:
A personal financial statement dated December 31, 1989; it was submitted to the pension funds on May 4, 1990, as Symington sought the Mercado loan. New Times has obtained portions of Symington's May 4, 1990, financial statement.
A financial disclosure statement that gubernatorial candidate Symington submitted to the Arizona secretary of state on October 15, 1990. The statement covered the 12month period ending May 31, 1990.Symington claims on the statement given to the pension funds that his personal assets include $791,002 worth of "readily marketable securities." The governor also claims under the "annual income" portion of the statement that he received $52,000 during 1989 from his securities.New Times has learned that the securities Symington told the pension funds he owned include blue-chip stocks in the Mellon Bank Corporation, Merck & Company Inc., IBM, E.I. Du Pont de Nemours &Company, General Electric Corporation, Exxon, General Motors Corporation, Imperial Chemical and Abbot Laboratories.The only reference to a trust on the May 4, 1990, financial statement obtained by NewTimes comes under a section called "Securities Owned," where Symington describes the stocks as: "Marketable Securities/Mellon Bank Trust" and lists a value of $791,002.
It is unknown whether Symington makes a reference to the Frick Trusts elsewhere on the portions of the financial statement not obtained by New Times. However, a pension fund source indicates the lenders believed the securities to be Symington's personal assets--in other words, liquid collateral.
But while he was telling the pension funds he owned the stocks, the governor's financial disclosure statement submitted to the secretary of state claimed the same securities were controlled by his family trust funds.
Symington identified 15 stocks in the 1990 state disclosure in which he listed himself as a "trust beneficiary." These stocks mirror those listed on the statement he gave to the pension fund: Mellon Bank Corporation, Merck & Company Inc., IBM, E.I. Du Pont de Nemours & Company, General Electric Corporation, Exxon, General Motors Corporation, Imperial Chemical and Abbot Laboratories.
The listing of individual stocks disappeared from disclosure statements Symington subsequently filed with the state, but, according to those reports, the stocks were never sold.
Instead of the stock listing of 1990, Symington indicated on subsequent disclosure forms that he was the beneficiary of four family trust funds--the Frick Trusts.
A source for the union pension funds says pension fund officials want to determine whether Symington actually controlled the stocks when he submitted his financial statement in May 1990, or whether they were part of his trust funds.
If Symington's "readily marketable securities" are actually part of the trust, the pension funds may be able to stake a direct claim to the governor's trust funds.
"I'd love to see if this [securities listed on the pension fund statement] is the Frick Trust. Because if it is, and he listed it as an asset, then it should be something we can go after [in bankruptcy court]," a pension fund source says.
If the pension funds convince the bankruptcy court that Symington obtained the pension fund loan by submitting a fraudulent or misleading financial statement, the court could exclude Symington's $11.5 million debt to the pension funds from the bankruptcy case. The pension funds could then try to collect the debt from Symington indefinitely.
Such a scenario would make it difficult forSymington to keep the pension funds from laying claim to the roughly $38,000 a year recent disclosure forms say he now receives from his Frick Trusts.
The federal grand jury probing Symington's personal finances might also take interest in Symington's claim to the pension fund of "readily marketable securities."
Symington did not return New Times' calls seeking comment.
Symington filed Chapter 7 bankruptcy September 20 to discharge all of his $24.8million in debts. His largest single debt is the $11.5 million owed to union pension funds. Symington defaulted on the $10million pension fund loan for the Mercado project in 1992; the pension funds won their $11.5 million judgment against the governor in August.
Since the bankruptcy filing, the governor has claimed the spendthrift provisions render the Frick Trusts exempt from creditors.
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"The trust income and principal do not become part of the bankruptcy estate," the governor stated in a press release issued on the day he filed bankruptcy.
The trusts were created by the governor's late grandfather, Childs Frick, son of wealthy industrialist and art collector Henry Clay Frick. Childs Frick had four children, one of whom is Symington's mother.
Other details released by Symington about the family trust may now come back to haunt the governor. His September 20 press release, for example, states: "A spendthrift trust contains language that prevents the beneficiary from transferring or assigning, voluntarily or involuntarily, his right to future income from, or the principal of, the trust."