SEVEN DAYS INTO 1987, James Simmons needed to look a few people in the eye. The 62-year-old president and board chairman had spent a quarter-century building United Bank of Arizona into the state's fourth largest bank. Now, the payoff was at hand.

A new law had made it possible for out-of-state companies to buy Arizona banks, and the desert was ablaze with pecuniary romance. Banks like United were being courted by huge financial institutions offering princely sums to string another pearl on their corporate chains.

Every year for a decade, United had made more money than the year before. It had about $2.5 billion in assets and branches all over Phoenix and other Arizona cities. Like all other banks, it appeared to be getting rich from a real estate boom that had made Arizona one of the country's fastest-growing states.

The United Bank pearl was shimmering brightly in the eyes of an English multinational corporation called Standard Chartered PLC. More than a year earlier, the company and the bank had gotten engaged, and now Standard Chartered was ready to cut a check for $335 million to buy United and place it under the control of its California subsidiary.

That January day, Simmons had before him a two-page document that would make or break the sale. It was a wordy certificate--crafted by lawyers paid well to mind every subparagraph and semicolon--essentially assuring the buyers that United Bank was not lying about its fiscal soundness.

Simmons and another bank officer had to sign the certificate for the deal to go through.

Around a conference table, Simmons gathered the ten top managers of the bank, men and women who knew the institution intimately and in some cases had spent the bulk of their careers helping it grow from an upstart to a large, respectable institution.

Simmons laid the document before him on the table and read it aloud. Then, with hundreds of millions of dollars on the line, he started asking questions.

"I questioned each of the people in that room, and asked them if they had any knowledge or any reservations about signing that document," Simmons recalls. "There was not any indication from any of them. . .that there were any problems."
Simmons signed, and the next day a happy union was consummated. London-based Standard Chartered got its desert gem, and $335 million coursed its way into the bank accounts of United stockholders around the world, including Simmons and other United officers.

The bank kept its name, and Simmons and most of the other bank officials kept their jobs. Standard Chartered didn't plan to meddle much. It expected United to be a profitable Arizona franchise, reporting to the company's Union Bank subsidiary in California.

In only a matter of weeks, however, Standard Chartered began to suspect that somebody in Simmons' conference room had looked back at him and lied.

One after another, several of the bank's largest loans "blew up," as lawyers are prone to say. United found itself writing off tens of millions of dollars in losses and trying to explain to its new owners what was going wrong.

The marriage plunged quickly toward divorce and by summer, with Standard Chartered scraping for cash because of unrelated problems it faced back in England, the bank was on the block. In January 1988, United Bank was sold to Citicorp for $207 million, although Standard Chartered had to buy back $140 million in bad loans as part of the deal. All told, Standard Chartered would later argue, the star-crossed romance had caused it $338 million in losses.

Determined to recover some of the money, the English banking giant began looking for somebody to sue.

Its sights eventually focused on a group of people who had not even been in the conference room that day, but whose company had deep enough pockets to justify massive, expensive litigation--Price Waterhouse, the internationally known Big Six accounting firm, which for years had audited United Bank.

During what became the state's longest civil trial, lasting 11 months, Standard Chartered officials argued that Price Waterhouse should have discerned the bank's shaky financial underpinnings and alerted them before they bought it. In May, in a verdict that stunned the accounting profession, a jury agreed and awarded Standard Chartered the $338 million it asked in compensation, the largest civil verdict in state history.

An old joke holds that auditors enter a battlefield after the fight and bayonet the wounded. But, as the Price Waterhouse verdict underscored, accountants have found themselves facing bayonets after the financial carnage of the late 1980s.

The end of the decade was not kind to banks in Arizona, or across the country. First, oil cratered. Then real estate. The stock market crashed. Savings and loans dropped almost daily. Banks, big and little, sought buyers with deep pockets to save them from collapse.

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David Pasztor