Cornered by Fife

Terry Lynam, one of Governor J. Fife Symington III's defense attorneys, sauntered down the federal courthouse steps wearing a big smile.

He was delighted because the defense had scored what he believed were significant points during another round of mind-numbing testimony at Symington's criminal trial. The testimony had centered on the multitude of partnerships involved in the development of Symington's biggest property, the Camelback Esplanade.

"I want you to remember two things," Lynam said last week.
"We had two witnesses--Don Lewis and Robert Hunt--testify today that they didn't rely on Symington's financial statements when they made him loans."

This is significant because the crux of Symington's defense is that none of the lending institutions that advanced hundreds of millions of dollars to Symington's real estate partnerships relied on his financial statements when they extended him loans.

If the defense can convince the jury that Symington's financial statements were immaterial to lenders' decisions to lend his partnerships money, then most of the 22 federal counts Symington faces will vanish.

But celebrations by the defense team are premature.
The loans advanced to Symington by Lewis and Hunt came only because Symington had both men over a barrel. Besides, the government hasn't alleged that the two loans in question were illegal.

Donald Lewis is the former chief executive officer of Southwest Savings & Loan Association. Symington had been a director of the thrift from 1972 until 1984, and had a long personal and business relationship with Lewis. In September 1983, while still a director, Symington convinced Southwest Savings to make a direct investment in Symington's Camelback Esplanade project at 24th Street and Camelback Road.

Federal regulators protested that Symington had a conflict of interest by being both a Southwest Savings board member and the developer of a project in which Southwest Savings had a direct interest. Symington responded by following the money--he resigned from the Southwest board in early 1984 to pursue the Esplanade project.

Symington's original plan called for Southwest Savings to purchase the land for the Esplanade for $26 million and cover $2 million of Symington's predevelopment expenses, which included getting the land rezoned and the buildings designed. Southwest Savings invested the money with the stipulation that it would earn a "preferred rate of return"--in other words, interest--on its investment.

But Symington ran into a buzz saw of resistance from neighbors who strongly objected to his plan to nearly quadruple the amount of office, retail and hotel development space allotted for the 20 acres. Symington's first development plan was rejected by the Phoenix City Council in 1985. He came back with a greatly scaled-back version, which the council approved in 1986.

The zoning battle had been costly. By the time Symington got the building design approved, his predevelopment costs had ballooned from the projected $2 million to more than $12 million--including a boost in development fees for his company from $700,000 to $1.9 million.

Southwest Savings was worried about the escalating costs--by this time, the thrift had dumped about $56 million into the project, including interest. The owner of the thrift, the late Daniel K. Ludwig, who was once considered the richest man on Earth, decided to pull the plug on Symington's Esplanade gambit.

In 1986, the thrift told Symington it wanted "to reduce its exposure" and get out of the project, Lewis testified.

Symington stomped off in a tizzy, claiming Southwest had reneged on its promise to provide another huge construction loan. But documents entered into evidence indicate that Southwest's role was always primarily limited to the purchase of the land and predevelopment expenses. Symington's original proposal for the project stated that another lender would finance construction.

Symington went looking for other partners and eventually rounded up a couple of Japanese firms whose officers apparently were oblivious in 1987 to Phoenix's collapsing commercial real estate market.

The Japanese companies, Shimizu Land Corporation, one of the largest construction companies in the world, and Dai-Ichi Kangyo Bank, agreed to invest and lend money in Symington's Esplanade.

This was great news to Southwest Savings, because Shimizu was set to purchase some of the land that Southwest had already sunk nearly $56 million into.

But there was a catch.
Symington wanted an ownership share in the project during its construction phase. Shimizu was concerned about Symington becoming a partner because he had so little money invested--a whopping $216. Shimizu insisted Symington put up some real cash.

But Symington, who was telling lenders he was worth millions of dollars, had none.

So Symington approached Lewis and asked that Southwest lend $679,964 to four partnerships he controlled; he would invest that money in the Esplanade building partnerships with Shimizu.

What could Lewis say?
If he turned down Symington, Shimizu might take its millions and go home, leaving Southwest on the hook for a project that was sucking more revenue all the time.

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John Dougherty
Contact: John Dougherty