Symington found the system to be an easy touch when it came to borrowing money for his real estate gambits. Like many of his real estate projects that a few short years ago supposedly had created $12 million in equity but are now worthless, his $975,000 loan from the retirement system ended poorly--at least for the retirement fund's 196,000 beneficiaries.
Symington defaulted on the loan in 1991, a year after his personal guarantee to repay the note expired and after a series of unusual actions cut him a break on fulfilling that guarantee. The governor walked away from the note, leaving the state with a half-empty office building and a $350,000 shortfall.
The governor's handling of the Ten Mo real estate project at 1002 East Missouri also displayed Symington's penchant for shortchanging Maricopa County on real estate property taxes. The same month Symington received the $975,000 loan from the retirement system based on a $1.25 million appraisal, he was telling Maricopa County the office building was only worth $432,357.
The governor's past dealings with the retirement fund provide insight as to why Symington is linked to a recent effort within the retirement system to increase investments in Arizona economic development projects, such as real estate investments. The system is limited by law to investing no more than 1 percent of its total assets of $10.5 billion in state economic development projects. Historically, the system has invested far less in such projects because of their perceived risk.
Last year, Symington appointed real estate developer and prominent Republican party fund raiser John Stiteler to the state retirement system board of directors. Stiteler has been pressuring other board members to increase investments in state economic development efforts, including venture capital funds. He also wants Arizona stock brokers to handle some of the nearly $5 billion in stocks the fund has invested. The system now uses out-of-state brokers to reduce the chances of kickbacks and other corrupt activities.
Current and past board members have criticized Stiteler's efforts, saying such investments are too risky. Ron Pelton, the former chairman of the retirement system board, resigned in June after Stiteler announced his desire to increase speculative investments of retirement funds. Pelton says Stiteler does not have the ability or understanding to act as a trustee for the retirement fund.
"Stiteler lacks fiduciary temperament," Pelton says.
Last week Stiteler came under fire for failing to disclose his lengthy history of business failures. His checkered business career includes six bankruptcies of commercial ventures, state and federal tax liens, a $263,000 judgment against him stemming from a failed New Mexico thrift and a $15 million federal lawsuit filed against him and six other former officers and directors of the failed Century Bank.
The Century Bank lawsuit, filed by the Federal Deposit Insurance Corporation, charges that the bank made large loans to Stiteler and Stiteler's business that resulted in major losses for the bank. The suit alleges the bank failed to properly review the loans because Stiteler was on the board of directors.
The charges are very similar to the ones faced by Symington in a federal lawsuit. The Resolution Trust Corporation alleges Southwest Savings and Loan made improper loans to Symington while the governor was a member of the thrift's board of directors. The thrift failed in 1989 at an estimated loss to taxpayers of $941 million.
The governor used the Southwest Savings loans to finance the land purchase for his Camelback Esplanade project. The government claims the deal resulted in Southwest Savings' single largest loss at more than $30 million. Symington denies any wrongdoing and claims no money has been lost. Symington's role in the Esplanade transaction has been the target of a federal criminal investigation since late 1991.
A knowledgeable source close to the retirement system fears Symington, who is still burdened by a $1.2 million debt from the 1990 election and has raised little money to date for the 1994 race, is hoping investments by the state retirement fund in Arizona economic development projects and the inclusion of state brokerage firms will generate contributions to his near-empty campaign coffers.
While Symington repeatedly claims in statements issued by his press secretary that he has no role in Stiteler's crusade to increase speculative investments, the governor's longtime friend and former chief of staff George Leckie is deeply involved. Leckie, who was Symington's campaign finance chairman in 1990, has said he helped get Stiteler appointed to the retirement board, in part, because Stiteler raised funds for Symington.
Leckie, who resigned from the governor's staff last year after bungling the governor's office budget and in the wake of disclosures about his own business failures, has shown up at retirement board meetings. Now a private citizen but still closely tied to Symington, Leckie sat in on a recent board meeting where a potential candidate for executive director of the agency was interviewed.