They nailed Al Capone on his taxes, and now the feds are taking a hard look at Governor Fife Symington's tax returns.
It makes sense, doesn't it?
Symington cheated those who banked at Southwest Savings and Loan on the $30 million Esplanade investment; he cheated the taxpayers who had to cover the billion-dollar collapse of the S&L; and he cheated the construction-worker retirees out of $10 million in pension funds.
Would he cheat his uncle?
According to new legal documents in my possession, the FBI and the United States Attorney are examining the preparation of the governor's tax returns step by step. These investigators for the federal grand jury, which has targeted Symington, have interviewed the accountants who worked on the governor's returns.
It is always Tagamet time when the FBI begins nosing around your creative April 15 declarations.
But there is more bad news for Symington in the legal document on my desk--the "Van Voorhees Memorandum."
Whatever else emerges from the grand jury probe regarding Symington's tax situation, the investigation is bringing into sharper focus the dubious relationship between the governor and his high-powered accounting firm, Coopers & Lybrand.
For the first time, there are records from within Coopers & Lybrand that suggest why the governor's man, George Leckie, helped grease the multimillion-dollar bids on Project SLIM, enabling the Symington accountants to get a lock on lucrative state contracts.
The paperwork leads me to believe that the bid-greasing was a payoff.
"And why not? We bought the governor of Arizona fair and square," might well be the reasonable response from any bean-counter at Coopers & Lybrand.
You see, Coopers & Lybrand billed Symington at a phenomenal discount. In preparing one of the governor's complicated tax returns, for example, the accounting firm performed work that should have been worth 500 percent more than what was reflected in the bill to Symington.
Specifically, tax return preparation that should have cost roughly $12,000 was billed at approximately $2,000. This is just one item on Symington's accounting bill. To grasp what this sort of bargain pricing meant to Symington, you need to know that the governor was the largest client for one of Coopers & Lybrand's senior partners.
All of this is astonishing.
It's almost as though Fife Symington was Coopers & Lybrand's very own March of Dimes poster child, a fiscal clubfoot so pitiable that the accountants could not bring themselves to bill him.
But we all know that the bookkeeper's largess was not a simple matter of charity.
Fife and his charming wife, Ann, both possess enormous trusts courtesy of their ancestors, Henry Clay Frick and the founders of Olin Chemical, respectively. While Symington watched his creditors repossess his smarmy real estate developments, the regal couple had no excuse not to pay their full debts to their accountants, since the trusts that underwrite the Symington lifestyle were not subject to the creditors.
Why, then, didn't Coopers & Lybrand bill the unperturbed trust-funders for doing their tax return?
We cannot know with absolute certainty why the government is looking at Coopers & Lybrand billings unless the grand jury indicts. But it clearly appears that Coopers & Lybrand, by discounting Fife's bill, sought to curry favor for anticipated work from the State of Arizona.
Here is what we know.
Two members of Coopers & Lybrand were interrogated by the government in July of this year, according to the internal "Van Voorhees Memorandum," prepared by the accounting firm's attorney, Robert C. Van Voorhees.
Van Voorhees summarized the interviews in a letter prepared for Coopers & Lybrand's corporate counsel in New York, Michael Garrett.
When one of the accountants said he was unfamiliar with the governor's tax returns, the questioning then focused on senior partner Dan Windnagle.
"Significant time was spent," wrote Van Voorhees, "in going over the procedures Coopers & Lybrand used in preparing the tax returns: Who worked on the returns, what responsibilities did each have, who signed the returns, from whom did the information utilized to prepare those returns come, were those returns reviewed with Symington or Symington personnel . . ."
Federal investigators zeroed in on Coopers' recordkeeping regarding Symington's personal and business records.
"Considerable time was spent," continued Van Voorhees, "explaining what documents were received in the course of the preparation of the individual and entity tax returns, in which files they were kept, what those files were called, and where in the office those files were stored. Windnagle was asked to what extent tax preparation materials were on the computer. . . . The materials with respect to the Symington financial disclosure statements were not kept in the file room but were kept in a locked cabinet in the tax-staff room, whose keys were in John Yeoman's office."
Coopers & Lybrand partner John Yeoman served as the finance chair for candidate Symington. He was the campaign's bagman.
The feds seemed to understand that, in a more ethical world, the person in charge of keeping the financial records clean--the accountant--should not also be in charge of raising the money.
The federal prosecutors, understandably, paid particular attention to Yeoman."[David] Schindler [assistant United States attorney] also spent time exploring the relative significance of the Symington engagement for John Yeoman compared to his total mix of clients," noted Van Voorhees. "This was approached in several ways at various points in the interview. Generally, Windnagle said that all Mr. Yeoman's clients were important to him, but that Symington was probably Yeoman's largest client, and Yeoman appeared to have more than general knowledge of his financial affairs."
This was a particularly compelling thing for Windnagle to say about Yeoman.
In fact, it was so interesting that the FBI and the prosecutors returned to this theme.
Later in the "Van Voorhees Memorandum," the accountants' attorney wrote: "Windnagle was asked on several occasions about the extent to which Yeoman reviewed the returns and had knowledge of Symington's financial arrangements. He (Windnagle) said Yeoman did the final review and signed all returns . . . (Yeoman) appeared to have a substantial knowledge of Symington's personal financial situation as well as that of the various financial entities . . ."
Even to me, this is very interesting.
As we all saw in the Charles Keating scandal and numerous other S&L failures, an accountant's relationship with a suspected crook is symbiotic.
It's like this.
Think of the feds as God. A sinning developer comes into the confessional booth to bare his soul. The accountant, or priest, stands between God and the sinner, between the developer and the feds. It is the accountant who shields the guilty from eternal damnation.
It might be too early to divine all the answers about Fife Symington, but it is high time to ask the questions.
Was the governor a supplicant to John Yeoman's benedictions?
How corrupt was the relationship between Coopers & Lybrand and the governor of Arizona?
We know that the feds believe Symington handed out different financial statements to various lending institutions at the same time, telling one bank one thing about his net worth while telling a different bank something else entirely ("She Was Only Following Orders," February 2, l994, and "Cinma Vrit," October 12). If the feds are right, this is felony fraud.
Did the corruption between Coopers & Lybrand and the governor extend to these coded financial statements?
The answer is under Yeoman's lock and key.
Did the corruption extend to fraudulent tax returns?
The answer is under Yeoman's lock and key.
Did the corruption extend to insider dealing worth millions of dollars in state contracts for Coopers & Lybrand?
The answer to that is unequivocal.
The answer is yes.
Here's what we know.
On July 10, the lid on Project SLIM blew off.
The state attorney general announced that Coopers & Lybrand would pay a $725,000 fine, which ended the state's investigation into allegations that the accountants, principally John Yeoman, engaged in outrageous bid-rigging with the governor's henchman, George Leckie, to secure multimillion-dollar contracts on Project SLIM. Everyone concerned promised he would never engage in bid-rigging again.
Which one likes to see in a Big Six accounting firm.
On July 17, the attorney general revealed a similar settlement with Symington handyman George Leckie.
On July 25 and 28, and again on August 1, the FBI and the federal prosecutors grilled the accountants.
When exactly did the cancer of corruption between Coopers & Lybrand and Fife Symington start, and how deep did it run? The answer to that question may well explain why Governor Symington and George Leckie worked so hard to slant the Project SLIM bidding in favor of Coopers & Lybrand.
Here's what we know.
Windnagle told federal investigators that he was aware that Symington was the beneficiary of a stupendous pricing discount on his tax return.
"Under questioning," reads the "Van Voorhees Memorandum," "Windnagle said that the cost to Symington for preparation of his personal return was approximately $2,000 to $2,500, whereas Windnagle's estimate of the time invested by all Coopers & Lybrand persons in preparing that return was approximately 50 to 60 hours."
Does this deal pass the smell test?
You tell me.
A partner like Yeoman bills $200 to $250 an hour. For 60 hours of work, that runs out to somewhere from $12,000 to $15,000.
Symington paid, maybe, $2,500.
But why should the governor pay full freight on his tax bill, or any other accounting bill, when there were millions in state contracts waiting out there for a smart accountant?
Now there may well be a less cynical explanation for all these funny numbers--you know how negative the press is--but none of the players wanted to discuss the "Van Voorhees Memorandum" at length.
I first reached an attorney at the law firm of Bryan, Cave who was sent a copy of the memorandum written by his colleague Van Voorhees.
It would be "inappropriate" to comment, said Stephen Dichter about a memorandum that "was obviously purloined."
I said I understood his feelings and that I would call Van Voorhees directly rather than take up any more of his time.
"Oh, he's not going to talk to you, either," said Dichter, "because I am going down the hall right now and will visit with him before you can call back."
Windnagle is no longer with Coopers & Lybrand, nor is he listed in the Phoenix telephone directory.
John Yeoman's attorney said the accountant would not comment on his billing practices.
Two other accountants from a Big Six firm were prepared to put this all into perspective as long as I hid their identity and the name of their firm.
When I explained the billing numbers--$2,500 for 60 hours of work--to these two, this was their reaction:
"Jesus . . . that's too low. I have clerical people that keypunch for more than that. Jesus, that's low. I should have them do my taxes. They had to make those kind of numbers up somewhere," said accountant number one.
The second accountant had a more dignified response.
"I am surprised," he said, "extremely surprised. That is substantially lower than the firm would like to recover."
Even with junior associates preparing parts of the tax return, both accountants were taken aback by the final bill.
The second accountant had a thought.
"Perhaps their client was an important referral source."