He's Back

A grinning J. Fife Symington III steps into the 10th-floor elevator at the U.S. Bankruptcy Court, joining three reporters who are covering his civil fraud trial. Three union pension funds seek to block the bankruptcy and win an $18 million judgment against him.

"A few years ago, this is the last place I would have gone," Symington says, triggering a round of laughs. "But now, I'm just one of the guys."

All month, Symington has gone to great lengths to shed the elitist image he once projected so determinedly. Instead of evading the press, he now invites reporters to his lawyer's office for private discussions over chocolate chip cookies and soft drinks. Relaxed, jocular and using blunt language to explain his case, Symington appears to be a transformed man.

Gone, apparently, is the vindictive persona he carried as governor, which helped him ram through a conservative political agenda highlighted by a series of tax cuts. He has mellowed into an easygoing yet still immensely self-confident man.

He's free from the fear of being forced out as governor. That's happened. He's survived. And he's happy.

"I have a whole other life now that is beyond all of this," he says, referring to his erstwhile political and development careers.

During the 1980s, Symington built a real estate empire that culminated with the construction of the $200 million Camelback Esplanade and his decision to seek the governor's chair. Glory was short-lived, however, despite being elected governor in 1991. By the early 1990s, Symington was surrounded by an array of high-priced accountants, spin doctors and lawyers who'd been hired to fend off civil and criminal charges that he defrauded lenders as he climbed his way to the top. The shield worked for a while, allowing Symington to win reelection in 1994, even though voters knew he was under criminal investigation.

In mid-1996, federal prosecutors finally indicted Symington, charging him with 23 felonies. The governor accelerated his Nixonian stonewalling tactics as his imperial governorship began to crumble. He gave orders to state agencies not to talk to certain reporters, and blasted his staunchest media ally, the Arizona Republic, for being unfair.

Symington was convicted of seven felony counts on September 3, 1997, and resigned as governor two days later. His conviction was overturned last June by the Ninth U.S. Circuit Court of Appeals on a technicality. His 30-month prison sentence was vacated; he never served a day. (See "Feds Will Retry Symington on Criminal Counts, Sources Say")

The criminal trial was a turning point for Symington. In the ensuing years, Symington says he has reshaped his life. He attended a culinary school and began a new career as an apprentice chef at the upscale Franco's Trattoria in Scottsdale.

"Cooking has been good for me, politics wasn't," Symington says. "That's where I derive a lot of personal satisfaction and fun and it is very rewarding."

Symington vows he's through with politics, although it is apparent he misses the power and the challenge of exercising his considerable political will. Other issues, he says, have taken a higher priority.

"I'm more concerned about my family and just getting this behind me," he says. "This has been a long, a long road. And now with the final Ninth Circuit opinion, I basically, in effect, was removed from office incorrectly. And so it's good to kind of correct the record. As time goes on, more facts come out. I feel good about that."

It's difficult to fathom why Symington feels good about facts coming out during the bankruptcy fraud trial, which stem from his disastrous days as a real estate developer. He seems impervious to the pummeling he takes day after day as his sordid finances get yet another public airing.

He emerges from the courtroom smiling, often expressing satisfaction with his performance on the witness stand, where he spars for five hours a day with Michael Manning, attorney for the pension funds. Observers can't help but wonder whether Symington realizes how desperate his position appears.

But Symington's demeanor is not without foundation. His optimism is based in the belief that after more than two weeks of testimony, the pension funds have yet to prove a crucial point.

So far, the pension funds have made a solid case that Symington's financial statement given to the pension funds was plagued with inaccuracies and misleading. But that's only half the battle. The pension funds also still must prove they reasonably relied on Symington's personal financial statement when they loaned his real estate partnership $10 million.

If Symington wins, he'll be free of an $18 million judgment. If he loses, he knows he won't be paying the debt anytime soon -- at least out of his own pocket.

"The money is not there," Symington claims.

Yet bankruptcy hasn't diminished his standard of living, thanks to his wealthy wife, Ann, heiress to the Olin chemical fortune. He retains some trappings of power -- an off-duty Department of Public Safety officer accompanies Symington to the trial, carrying his briefcase to and from the courtroom and standing in the hallway during Symington's trips to the rest room.

So with little to lose and much to gain, Symington relishes the combat, at times rising from the witness stand to face Manning as if the men were engaged in an Old West showdown.

"I think it is just about time to stand up to Mr. Manning, and that's exactly what I did and what I'm going to continue to do," Symington says after rising to his feet during his testimony four times in one day. "I'm not going to sit there and have him glower down at me. I'm going to stand up to him and I'm going to look him right in the eye and we're going to go at it."

After seven days of testimony under Manning's grueling -- although sometimes confusing -- questioning, it is clear that Symington submitted a personal financial statement to the pension funds that was riddled with errors and omissions.

"About the only truthful thing on his financial statement was his name and social security number," Manning says.

Symington admits there are mistakes on his December 31, 1989, personal financial statement, but he says the cumulative impact on his then-claimed $12 million net worth was minor. More important, he says, they were unintentional mistakes that were "never intended to hurt or harm anyone."

Manning alleges the financial statement inflicted tremendous harm on the union pension funds. Symington's personal financial statement, Manning says, was given to "induce" the funds to lend a Symington-controlled partnership $10 million in June 1990. In addition, Symington personally guaranteed to repay the loan, which paid off the construction lender for the Mercado retail and office development in downtown Phoenix.

The Mercado project failed from the start, and Symington's partnership defaulted on the pension fund loan in 1991. When the pension funds tried to collect on Symington's personal guarantee, Symington, who was by then governor, refused to pay, saying he was broke. The pension funds sued Symington and won an $11.5 million judgment in 1995 that, with interest, is now worth $18 million.

In September 1995, Symington offered to pay $285,000 to settle the debt and agreed to contribute 25 percent of his governor's salary to the claim. At that rate, it would have taken 600 years to settle the judgment. The pension funds rejected his offer.

Two days later, on September 20, 1995, Symington filed for Chapter 7 bankruptcy, claiming $26 million in debts and $69,000 in assets. Most creditors forgave his debts. The pension funds, however, vowed "to leave no stone unturned" to prove Symington defrauded the unions. The pension funds filed a bankruptcy civil fraud suit in 1996 in an attempt to block dismissal of Symington's debt.

The pension funds hired Manning, who has earned a national reputation for cracking complex financial fraud cases against bank swindlers Mario Renda and Charles H Keating Jr. Manning's expertise doesn't come cheaply, and the union pension funds have spent several million dollars on the case.

Manning's case is straightforward. He says the pension funds had the right to review and approve Symington's personal financial statement in the spring of 1990, and if they hadn't liked what they saw, they could have refused to lend Symington's Mercado partnership the $10 million. Symington, Manning alleges, knowingly gave the pension funds a materially false financial statement to make it appear he was worth millions when in fact he was in desperate financial trouble.

Manning also alleges Symington signed a personal guarantee to repay the loan knowing he neither intended nor had the ability to uphold the guarantee.

"They [pension funds] promised to make the loan on certain conditions being fulfilled, and those conditions were not honestly fulfilled," Manning says.

The 50-year-old Manning, who is rumored to have political ambitions himself, doesn't hide his disdain for Symington, whom he frequently refers to as "this guy." He marvels at Symington's ability to deflect questions with "stump speech" responses but vows to persist in his line of questioning.

"I'm going to get an answer from this guy until the judge tells me I can't ask the question anymore," Manning says.

Manning says many of Symington's explanations are based on "la-la land logic." He lampoons Symington's methodology for valuing real estate assets based on "future hoped-for values" as an approach more suitable to science fiction than high-stakes finance.

"I saw an episode of Star Trek one time where something similar was talked about but I have never seen it in real life," Manning says, taking a dig at one of Symington's favorite shows. "It's absolutely absurd."

Symington hired Phoenix attorney Rob Shull to craft his unique defense. (Ann Symington is footing the legal bill.) Symington's defense hinges on the assertion that the pension funds were locked into providing Symington the $10 million loan by a 1987 agreement. Symington claims his December 31, 1989, financial statement was essentially meaningless. Symington and Shull claim the pension funds were obligated to fund the $10 million loan -- as long as Symington was solvent.

"They knew they had to fund the loan, basically no matter what. They were locked in," Symington says.

In any case, Symington says, the pension funds did not rely on his financial statement. Instead, he says, the pension funds made the loan based on the value of the already constructed Mercado -- a project built nearly entirely with union labor.

Whether the pension funds reasonably relied on Symington's financial statement is an important issue. If Symington can prove the pension funds did not reasonably rely on his financial statement before making the loan, his chances for victory increase considerably.

Symington says no one from the pension funds asked him a single question about his financial statement from the time he signed it on May 4, 1990, to the time the pension funds issued the $10 million loan, on June 29, 1990.

"If they would have asked questions, we would have provided answers," Symington says.

Shull says the pension funds will have a difficult time proving reliance.

"If we look at the files of the pension fund at the time leading up to the loan, where are the pieces of paper that indicate they looked at Symington's creditworthiness?" Shull asks. "They are not there."

Manning promises to prove that the pension funds did reasonably rely on Symington's financial statement.

"There was a lot more investigation [by the pension funds] than Symington and his attorney are telling you," Manning says.

Presiding U.S. District Bankruptcy Court Judge George Nielsen will decide the case, which is expected to conclude in late July. Nielsen has shown infinite patience during Symington's frequently heated testimony, which progresses at an excruciating pace.

Symington's frequent memory lapses force Manning to attempt to "refresh" Symington's recollection by introducing into evidence documents and testimony from depositions and Symington's criminal trial. Shull, meanwhile, objects to many of Manning's questions -- which frequently begin with rhetorical statements -- requiring Nielsen to hear legal arguments from both lawyers before making a ruling.

The trial is difficult to follow and significant points can easily get lost in histrionics. Such fodder is unlikely to distract Nielsen, who has taken more than 135 pages of notes. Calmly, yet firmly and usually with a wry sense of humor, Nielsen is providing a fair forum for the barristers to argue their cases.

"Let me assure counsel . . . I've done this before," Nielsen states after yet another nasty exchange between the lawyers. "Let's proceed in a manner that will likely produce useful information."

By early 1990, Symington's real estate company -- The Symington Company -- was in serious financial trouble. Evidence reveals Symington's top aides -- chief financial officer Jim Cockerham and vice president Randy Todd -- were formulating an operating budget that "assumed a wage and hiring freeze for the entire year."

The company was being slammed by Phoenix's real estate market, which was in a free fall that Symington characterized as "cataclysmic" in a 1989 letter to a partner.

Cockerham raised doubt about the company's future in a January 31, 1990, memo to Todd in which Cockerham expressed concern over Symington's desire that his gubernatorial campaign get free office space in the Camelback Esplanade.

At the time, The Symington Company and Symington personally were unable to meet their financial obligations in the Esplanade. The Esplanade was the cornerstone of Symington's development business and accounted for nearly half the $15 million in real estate assets that he claimed on his December 31, 1989, financial statement.

In the memo, Cockerham appeared concerned that Symington's office space grab contradicted Symington's financial commitment to the Esplanade and to his own company. The Symington Company derived much of its income from leasing commissions, and the Esplanade was the company's most important building.

"The company is in the process of downsizing its current space and now Fife is signing a totally separate lease that calls for free rent and no security deposit," Cockerham wrote.

Cockerham fretted that Symington was slashing his employees' compensation to help underwrite his gubernatorial campaign.

"I look at the obligations associated with this lease combined with obligations that TSC [The Symington Company] is currently saddled with and truly wonder if the belt tightening measures we are currently considering, which includes reduction in our benefits, will only prolong the uncertainty of our ultimate survival or worse yet pay for this lease obligation" (emphasis added).

While Symington's campaign never signed the Esplanade lease, the memo underscores the internal dissent gripping the company in early 1990. The company's cost-reduction plan included removing Symington, the company owner, from the payroll by the second half of 1990.

The memo also reveals that Symington was unable to pay his share of "operating deficit loans" for the Esplanade. By failing to pay the loans, Symington was opting instead to reduce his equity share in the project -- which he was valuing on his financial statements at $7 million. Manning alleges Symington never disclosed his diminished investment in the Esplanade in his December 31, 1989, financial statement -- Symington has acknowledged this is true.

The Esplanade was not the only project that was hemorrhaging in early 1990. Nearly all of The Symington Company's 16 real estate projects were in tatters. Symington had hired attorneys to discuss throwing six of the projects into bankruptcy. A lender was threatening to foreclose on another project, the Scottsdale Center.

Symington's efforts to sell half of his share in the Scottsdale Seville project for $600,000 were rebuffed at the same time he continued to claim the project was worth $2.3 million on his financial statement. He eventually sold the share for $700,000 -- to his elderly mother.

While his company reeled, Symington was campaigning for the Republican nomination for governor. The centerpiece of his campaign was that he was a successful businessman who could bring his financial skills to government. But before Symington could get elected, he had to figure a way through a financial minefield. News that his real estate empire was crumbling could devastate his election effort.

Two major problems were emerging. First, a strip shopping center called Alta Mesa was having serious problems, and the construction lender, First Interstate Bank, was demanding that Symington make payments on a delinquent construction loan.

Second, the Mercado project was completed and it was time for Symington to close a loan with the union pension funds to repay the construction lender, which again was First Interstate Bank (now Wells Fargo Bank).

The union pension fund manager -- San Francisco-based McMorgan & Company -- was not enthusiastic about making the Mercado loan. It was agreed to three years earlier by a previous investment manager who ended up in federal prison for taking illegal loan kickbacks. The former manager saddled the pension funds with more than $250 million in Arizona real estate, most of which was losing money.

The loan called for the pension funds to provide permanent financing on the Mercado once construction was complete. The pension funds were committed to make the loan as long as Symington met certain requirements, including submission of an updated personal financial statement prior to loan closing.

Symington testified he knew McMorgan & Company was not excited about funding the Mercado loan in the spring of 1990 because of the ailing real estate market.

"I had heard discussions they would probably not like to fund the loan," Symington testified.

And he also testified -- and evidence shows -- Symington knew First Interstate Bank wanted him to close the pension-fund loan and use the proceeds to repay the bank's construction loan.

Finally, Symington testified that he knew he had to submit an updated personal financial statement to the pension funds for review and approval to obtain the loan.

"It was a requirement of the permanent [pension funds] loan commitment," Symington testified.

Evidence indicates that as spring 1990 turned to summer, First Interstate Bank was well aware of Symington's financial straits. Yet evidence shows First Interstate never informed the pension fund manager, McMorgan & Company, about Symington's mounting problems.

It is during this crucial period that Manning alleges Symington secured the $10 million pension-fund loan by submitting a fraudulent financial statement.

In May 1990, McMorgan & Company officials told Symington they would not provide the full $10 million loan. McMorgan cited provisions in the 1987 loan agreement that allowed the pension funds to withhold money for tenant improvements and future loan repayments.

The holdback created a $1.2 million gap -- the difference between what Symington's Mercado partnership owed First Interstate Bank on the construction loan and what he would receive from the pension funds.

Symington had also personally guaranteed repayment of the $10 million construction loan to First Interstate Bank. In early June 1990, Symington met with First Interstate Bank officials to discuss the situation.

First Interstate Bank already knew Symington's partnerships were faltering; Symington had missed loan payments on the Alta Mesa project. First Interstate Bank agreed to extend the Alta Mesa loan to July 1, 1990, two days after the pension funds were scheduled to fund the Mercado loan. Manning alleges First Interstate Bank conspired with Symington to extend the Alta Mesa loan past the Mercado funding date to keep the pension funds from learning that Symington's partnerships could not pay their debts.

While providing some leeway on Alta Mesa, First Interstate still wanted Symington to make good on the personal guarantee he'd given on the Mercado construction loan, and cover the projected $1.2 million gap.

According to notes from a June 7, 1990, meeting prepared by First Interstate Bank lending officer Jeff White, Symington told the bank that his $12 million net worth was "almost entirely vested in commercial real estate." Symington also stated that the market values he was carrying on his real estate projects "do not accurately reflect the current market," Whites notes state.

During the meeting, First Interstate also learned that Symington's financial statement did not fully account for contingent debt, which further raised questions about his net worth.

Finally, Symington had reported on his financial statement that he had $800,000 in readily marketable securities. While the real estate assets were of questionable value, Symington's financial statement at least indicated he could get his hands on some cash if necessary. However, during the meeting, Symington told White that the stocks were held in a trust and that the assets could not be cashed or pledged.

Symington wasn't worth the $12 million he claimed on his financial statement, and he told White he could not make good on his personal guarantee to repay the shortfall on the Mercado construction loan.

White recommended the bank be prepared to "charge off" the $1.2 million shortfall as a loss.

The next day, Symington, First Interstate Bank and the pension funds met to discuss the $1.2 million gap. What happened at that meeting cuts to the heart of Symington's defense.

Symington claims in an interview that during the meeting he alerted the pension funds that neither he nor the Mercado partnership had the cash to cover the $1.2 million shortfall.

Symington says if the pension funds had really relied on his personal financial statement, they would have begun to ask serious questions when they learned he could not cover a $1.2 million debt.

A key point in the trial is the pension funds' claim that they would have canceled the Mercado loan to Symington if they had known he couldn't pay his debts. Symington claims the pension funds were given clear indication he was facing cash-flow problems on June 8 -- three weeks before they funded the loan -- and did nothing.

"No lender that was serious about reunderwriting the credit would sit through a meeting like that and march forward without asking its borrower or guarantor detailed financial information," Symington says in a taped interview.

"The fact of the matter is there were no questions. And I put everything on the table. When I say everything, I mean we discussed the very simple fact, it was a very simple statement, that I did not have the liquidity," he adds.

Others familiar with the June 8, 1990, meeting have a different interpretation. Manning says Symington did not indicate that he personally was unable to pay the $1.2 million shortfall.

Instead, Manning says Symington indicated that the real estate partnership that controlled the Mercado was incapable of covering the gap. That made sense, Manning says, because the Mercado was just beginning to lease space and was not generating income for the partnership.

Manning claims that Symington never told the pension funds that he personally could not cover the $1.2 million gap. If he had, Manning says, the pension funds would have canceled their loan.

"He told White that [on June 7], but he never told the pension funds," Manning says.

Former federal prosecutor David Schindler, the lead attorney in Symington's criminal trial, also says the critical meeting between Symington, the pension funds and First Interstate focused on the Mercado partnership's attempts -- not Symington personally -- to avoid covering the shortfall.

"His real estate development partnership was looking not to take money out of its pocket," Schindler says.

The conflicting views of the meeting may be resolved with the testimony of Sam Coppersmith, an attorney who represented the pension funds at the June 8, 1990, meeting. Coppersmith is a former congressman.

Both Manning and Symington's attorney, Rob Shull, believe Coppersmith's testimony will strengthen their cases. Manning says in 1990 Coppersmith was a key adviser to Democratic gubernatorial candidate Terry Goddard, making it unlikely that Symington, a Republican, would tell Coppersmith that he was having severe personal financial problems.

"The truth is, no one told Coppersmith or anyone else in the pension fund that Fife was unable to pay on that gap in June of 1990," Manning says.

Shull says he expects Coppersmith's testimony to support Symington's version of the events.

"I find some potential sweet irony in Mr. Coppersmith testifying for us," Shull says.

While there remains some question over how much the pension funds knew about Symington's financial condition in early June 1990, there is no doubt First Interstate Bank understood he was in trouble.

First Interstate Bank required Symington to submit an amended personal financial statement to the bank on June 26, 1990, three days before the pension fund loan was scheduled to close. While the new statement still reflected a net worth of $12 million, Symington attached two important disclaimers.

First, Symington amended the standard certification language attesting that the information on the statement is truthful. Instead, Symington told First Interstate Bank that his financial statement was a "best efforts" evaluation of his financial condition. Symington alerted the bank that the "current depression in the real estate market makes it difficult to determine real estate values, thus any evaluation is highly subjective."

Second, Symington attached a letter from a family attorney who told the bank that Symington's purported readily marketable securities were indeed locked up in four trusts and could not be used to repay Symington's debts.

Symington, however, did not pass along the same disclaimers about "highly subjective" real estate values to the pension funds, nor did he tell the pension funds that the $800,000 in securities were untouchable to creditors.

Manning asked Symington why he didn't provide the pension funds the same information about his financial statement as he gave First Interstate Bank three days before the pension funds issued the $10 million loan.

"The pension funds never asked me for it, so I never provided it," Symington testified.

Instead, Symington signed a personal guarantee on June 29, 1990, promising to repay the $10 million loan. In the guarantee, Symington states that he was not aware of any "material adverse changes" to his financial condition and that his "financial condition was sound."

Symington also signed a borrower's certificate stating that "no material adverse change" has occurred in his financial condition from the time the original loan commitment was signed in 1987 and the funding date of June 29, 1990.

The pension funds issued the loan to Symington believing they were ethically and legally required to "fund so long as the Borrower complied with all the terms of the loan commitment," according to a July 9, 1990, letter from McMorgan & Company to trustees for the union pension funds.

Manning claims Symington lied to the pension funds about this financial condition on June 29, 1990, which constituted a clear violation of the loan commitment provisions.

Symington's actions the ensuing months support Manning's contention.

Less than two months after the pension-fund loan was issued, Symington submitted another December 31, 1989, financial statement, this time to Security Pacific Bank. The statement was identical to the financial statement submitted to the pension funds showing a $12 million net worth, except for a one-page disclaimer Symington attached.

Blaming a real estate depression, Symington warned the bank that his net worth was "not an accurate statement of my financial condition as of August 23, 1990." Symington told the bank that the "value of the assets and net worth shown on the financial statement are now materially and dramatically overstated."

Symington gave the statement to Security Pacific Bank to discourage the bank from using as collateral a $4.2 million promissory note Symington had given a former business partner.

A month later, Symington issued yet another financial statement -- again dated December 31, 1989 -- to First Interstate Bank, which had grown anxious about Symington's inability to repay the Alta Mesa loan or cover the $1.2 million Mercado shortfall.

Just weeks after Symington had won the Republican nomination for governor, touting himself as a successful businessman, Symington slashed his net worth on a September 19, 1990, financial statement to $4.5 million -- a 60 percent reduction in value from the statement he gave the pension funds fewer than three months earlier.

Manning repeatedly asked Symington if he could point to an event that caused his net worth to deteriorate so rapidly in the summer of 1990. Symington could not identify any events. Instead, Symington pointed to the different ways he determined the values of his real estate.

Symington testified that his September 19, 1990, financial statement was based on taking a "liquidation value" of his properties in a bearish real estate market. Symington defined liquidation value as the price he would receive for property if he sold it in a bad market. Using this methodology, Symington slashed his real estate assets to $7.8 million.

Three months earlier, he had told the pension funds his real estate was worth $15 million. Symington testified that those values were based on what he expected to get from the properties sometime in the future, in a good market.

Manning asked Symington what the fair market value of his real estate was when he prepared the September 19, 1990, financial statement. Symington, who was a licensed real estate broker and developer, issued a stunning response to a fundamental real estate concept.

"I had no understanding of that term," Symington testified.

Manning had Symington cornered.

"The financial statement you gave First Interstate Bank in September 1990 stated that you listed all assets at fair market value," Manning said.

Symington tried to move away from the subject, forcing Judge Nielsen to ask Symington whether he provided First Interstate Bank liquidation values or fair market values.

"I'm really not familiar with the term 'fair market value,'" Symington told the judge.

Manning seized on Symington's evasive response and circled back to Symington's financial statement to the pension funds in which he reported he had $800,000 in readily marketable securities when, in fact, they were in spendthrift trusts and could not be pledged.

Manning again asked Symington why he never gave the pension funds a copy of the letter to First Interstate Bank alerting the bank the securities were held in trusts.

"The pension funds never asked for the letter," Symington testified. "First Interstate Bank asked for the letter."

Once again, Judge Nielsen was not satisfied with the response and asked Symington directly about the trusts and whether Symington knew the stocks were not available to creditors when he submitted the financial statement to the pension funds.

"Did you know that?" Nielsen asked.

"Yes," Symington replied.

Symington had confirmed to the judge he knowingly placed materially false information affecting nearly $800,000 of his net worth on the financial statement he used in connection with obtaining the pension fund loan.

It was the beginning of a series of dreadful admissions for the former governor.

Manning placed several large posters on easels a few feet from the witness stand. The posters depicted different pages of the December 31, 1989, financial statement Symington gave to the pension funds.

Each time Symington admitted that information he provided on the statement was incorrect or missing, Manning drew a large X over the entry. As Symington's testimony wore on, the half-dozen posters that composed Symington's financial statement slowly transformed into a splatter of Xs.

Several times Manning forced Symington to rattle off a half-dozen inaccuracies at a time -- emphasizing each admission with another X. The tactic wore on Symington's nerves. Manning stood just feet away from the witness, prompting Shull to ask that the former college linebacker move back.

"This witness is a little uncomfortable with Mr. Manning three or four feet away," Shull told the court.

Manning obliged, and stepped back. But he continued to bore in with his questioning -- focusing on Symington's real estate valuation techniques.

"Even if lender wanted current asset values, you would give them future values?" Manning asked.

"If a lender asked what I was worth, I would give them the December 31, 1989, statement," Symington replied.

"Even if the lender wanted current asset values?" Manning asked.

Symington indicated yes. Only if a lender insisted on obtaining current asset values -- or, in Symington's parlance, liquidation values, as First Interstate Bank did in September 1990 -- would Symington provide real estate values based on the current market rather than hoped-for future values.

Steadily, Manning established that Symington knew his financial statement given to the pension funds was detached from market forces and simply a figment of Symington's optimistic imagination.

Symington grew restless and frequently looked at Shull.

Manning asked about the $15 million in real estate assets he claimed to control on the December 31, 1989, financial statement given to the pension funds.

"You knew, Mr. Symington, didn't you, that was not currently owned or realizable as of December 31, 1989?" Manning asked.

Several times during his seven days of testimony, Symington asked Judge Nielsen for rest-room breaks -- most of the time during a series of difficult questions from Manning. Nielsen always granted his request. Once again, Symington turned to the judge and asked for a break.

This time, Nielsen said no.

"Answer the question first," he said.

"I wasn't sure when it would be realizable," Symington testified. "That was my current view of what I thought my values would be in a good market."

At the time Symington gave his financial statement to the pension funds, everyone, including Symington, knew that the Arizona real estate market was in a shambles.

Manning continued to tick off misinformation on Symington's financial statement:

• A half-dozen personal loans totaling more than $1 million had been left off.

• $70,000 in cash Symington said was available was actually controlled by the trusts.

• Symington's interest in his most valuable real estate asset, the Esplanade, had been pledged to a bank as collateral and not disclosed.

• The amounts of most loans owed by the real estate partnership were reported low.

Symington said most of the loans were from friends and family -- his wife and mother advanced more than $1.2 million -- and didn't have to be repaid. He admitted that the $70,000 cash in the trusts wasn't under his control. He testified that he forgot to report that he used the Esplanade as collateral, but he insisted it didn't affect his net worth. The errors on the real estate partnership loans, Symington testified, amounted to only $7 million, a fraction of the $200 million in real estate loans he reported.

"Obviously, you're striving for accuracy in the financial statement," Symington testified. "It was hard to keep track of it all. I put the statement together from memory and I made mistakes."

By the spring of 1991, however, Symington was no longer putting his financial statements together from memory. Symington's real estate investments were crumbling, and creditors -- with the pension funds leading the way -- were pressing him on loans he had personally guaranteed. At least one creditor demanded a formal audit of his personal financial statement.

But Symington was no longer simply a private developer. He had been elected governor a few months earlier. He turned to his longtime business, personal and campaign accounting firm, Coopers & Lybrand, to prepare a detailed personal financial statement. Coopers & Lybrand obliged and on May 31, 1991, presented Symington with a compilation of his personal finances showing he had a negative net worth of $23 million.

In the 11 months since he obtained the union pension fund loan for the Mercado, Symington's net worth had plummeted by $35 million.

"I didn't dispute it," Symington testified. "I thought it was a pretty good assessment of where I was at the time."

The governor sent the dismal financial statement to most of his creditors, letting them know he could not meet his obligations.

Unlike the financial statement Symington gave the pension funds to obtain the Mercado loan, the May 31, 1991, compilation included his personal debts to family and friends.

"At this point in time, they [Coopers & Lybrand] wanted to draw a circle around anything that could be construed as a debt of mine," Symington testified.

The compilation also noted that the supposedly readily marketable securities were in a spendthrift trust. It reported that the Esplanade had been offered up for collateral. Finally, all the real estate loans on his developments were accurately reported and his real estate assets were given fair market values.

Manning asked Symington to repeat the instructions he gave to Coopers & Lybrand in the spring of 1991. Throughout the bankruptcy trial, Symington had frequently stated that Coopers & Lybrand had reviewed his December 31, 1989, financial statement sent to the pension funds and never mentioned any errors or omissions.

"Coopers had all my records, everything," Symington repeated several times.

Then why, Manning asked, did Coopers & Lybrand suddenly prepare a financial statement that included information that had been left off earlier financial statements?

"What did you want Coopers to do?" Manning asked.

"I don't remember. I don't have an exact recollection," Symington replied.

"What generally did you want Coopers to do?"

"To get to the bottom of my financial situation," Symington replied. "Find out how big the hole was."

Manning had scored another direct hit.

When Symington wanted money from a lender, he prepared his financial statement from memory, used future hoped-for values for his real estate assets. He left off personal debts and obligations and included assets locked up as trust funds as marketable securities. The result was his December 31, 1989, financial statement showing a net worth of $12 million.

When creditors were pressing for repayment, Symington had Coopers & Lybrand prepare a detailed financial statement that included all his debts, provided current market values for his real estate and revealed details of the spendthrift trusts. The bottom line: Symington's net worth was a negative $23 million.

Judge Nielsen appeared to pay keen attention to this testimony, asking counsel to give him a moment to finish writing his notes before making a procedural ruling.

The courtroom was silent for what seemed like an eternity as Judge Nielsen wrote down his impressions.

Fife Symington emerged from the courtroom last Friday seemingly oblivious to the festering wounds ripped open during his last afternoon of testimony before the trial recessed for three weeks.

Painful as the whipping was, Symington knew it meant nothing unless the pension funds can prove they reasonably relied on his financial statement -- a hurdle Symington says Manning won't overcome.

Symington bantered with reporters and said he was pleased with his testimony. Asked how he graded his preparation of the December 31, 1989, financial statement given to the union pension funds, Symington gave himself a B or a B plus.

"It's impossible to prepare a 100 percent accurate personal financial statement," he said. "You will always, unless you're a professional, make errors and omissions."

Symington thanked the press for attending and bade farewell, saying he was flying to California to join his wife for the weekend.

Asked to make a prediction on the case, Symington demurred.

"I just hope it works out. If it doesn't, life will go on."

Contact John Dougherty at 602-229-8445 or at his online address: [email protected]

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John Dougherty
Contact: John Dougherty