Metzenbaum had convened a hearing into the failure of Southwest Savings and Loan. The proceedings produced allegations that Symington had improperly profited from the thrift's investment in Symington's Camelback Esplanade project.
Metzenbaum had some questions for Symington. He wanted to know how Symington had earned more than $8 million in development fees from the Esplanade project after investing only $216 of his own cash.
Symington replied that he was responsible for arranging a $135 million loan from Dai Ichi Kangyo Bank and $38 million in equity investment from Shimizu Land Corporation to finance construction of two office buildings and the Ritz-Carlton hotel. This was on top of the $30 million he convinced his fellow board members of Southwest Savings to invest to buy the land where the Esplanade was built.
Once he had other people's money in hand, Symington paid himself millions in fees for overseeing construction (and a predevelopment budget that ballooned from $2.2 million to $13 million under his watch).
But Metzenbaum wanted to know more.
"What was your risk?" the Ohio Democrat asked.
"The risk is called bankruptcy if we fail. We owe $135 million to a bank," Symington, a Republican, said in sworn testimony.
"But when you put this deal together, you invested no money," Metzenbaum said. "Are you on the note for the $135 million?"
"Yes," Symington responded.
"Personally?" the senator queried.
"Yes. Yes, me and my partners are on the guarantee, and if you do not call that risk, I do not know what risk is," Symington said.
Three years later--almost to the day--it's no secret that the Esplanade has been a horrific financial failure. The three buildings will be sold next month to a Boston pension-fund management company for $70 million--that's a cool $103 million loss for the two Japanese companies.
But what about Symington? Didn't he swear under oath that he personally had guaranteed a $135 million loan? He must be filing those bankruptcy papers about now, right?
Symington wriggled off the financial hook.
Although Symington guaranteed Dai Ichi that he would repay the loans, for some reason, Shimizu and Dai Ichi reached a "friendly" settlement that relieved Symington of his liability.
"The bottom line is that Shimizu took over the buildings and took over the problems of having to deal with Dai Ichi," says Shawn Tobin, a Phoenix attorney working with the Resolution Trust Corporation to resolve real estate issues related to the Esplanade.
Shimizu officials declined to return phone calls, and a spokesman for Dai Ichi said he could not comment. Symington's real estate attorney, Jay Wiley, did not return a phone call.
So how did Fife pull it off?
Public records and interviews with three real estate attorneys familiar with the Esplanade provide some insight. The key appears to be that Symington positioned himself on both sides of the table during a series of complicated partnership transactions. He was both buyer and seller.
The governor was the managing partner for the three Symington-Southwest Savings partnerships selling three parcels of land for construction of the two office buildings and hotel. He also was a general partner in three Symington-Shimizu construction partnerships buying the three parcels of land.
When things went sour, Tobin says, Symington had positioned himself so that his agreement was needed before Dai Ichi and Shimizu could sell the three buildings and get out of the horrendous deal.
Thus Symington had leverage with Dai Ichi to release him from the personal guarantees. Of course, by the time that occurred, Dai Ichi was well aware that Symington had no personal wealth, so there was no use trying to squeeze blue blood from a turnip.
The Esplanade project encompassed 19 acres. The three buildings took up seven acres, leaving 12 acres for future office and condominium development. When Southwest Savings failed in 1989, those 12 acres were acquired by the RTC.
Amazingly, Symington also had de facto interest in the undeveloped 12 acres taken over by the RTC. Either by accident or design, before the first office building was constructed, the recorded legal description of land for that building shows the parcel's boundaries extending far into the adjacent 12 acres. This, in effect, placed a lien over a portion of the undeveloped land, making it useless to the new owner--the RTC.
Symington was involved once again on both ends of the deal. He was the managing partner of the entity that was building the office tower and buying the land called Camelback Esplanade Limited Partnership No. 1. He also was the managing partner of the Southwest Savings partnership that sold the land for the building.
Regardless of the cause, the effect of the enlarged legal description gave Symington some leverage against the RTC. So while the RTC was suing Symington, alleging he improperly used Southwest Savings money to buy the Esplanade land, a Symington partnership was blocking the RTC from doing anything with the undeveloped 12 acres.
This dispute was finally resolved last summer after the RTC sued Camelback Esplanade Limited Partnership No. 1 in Maricopa County Superior Court. The case was settled out of court and the disputed property was conveyed to the RTC.
The RTC now hopes to sell the 12 remaining acres of the Esplanade at a public auction this April. But like everything else with the project, there are problems--specifically, with a parking garage. Symington built the underground garage that serves the two office buildings and hotel beneath part of the 12-acre parcel the RTC hopes to sell.
Such an arrangement will make for sticky negotiations if the buyer of the undeveloped land is anyone but Aldrich, Eastman & Waltch, the Boston firm that soon will take title to the three existing buildings. Although there is said to be widespread interest in the 12 acres, real estate attorneys say Aldrich, Eastman & Waltch is the odds-on favorite to get the land.
"Aldrich, Eastman & Waltch would be the logical buyer," says Tobin.
This is a crucial auction for Symington. While he's apparently managed to escape any liability on the $103 million loss suffered by Shimizu and Dai Ichi, he's still on the hook for the undeveloped portion of the land.
The RTC claims in its lawsuit against Symington that Southwest's investment in the Esplanade land--plus additional outlays for predevelopment expenses and foregone interest--resulted in a loss of at least $40 million for the thrift.
Symington says this is balderdash. In December 1991, a few days after the RTC filed its lawsuit against Symington and other Southwest officials, Symington told a news conference that Southwest's shortfall was only $17 million, and that the sale of the 12 acres would recoup some of that loss.
A few months earlier, Symington had estimated the undeveloped 12 acres were worth $13 million. If the land sold for that amount, Southwest would only be out $4 million--at least according to Symington's numbers.
What will the 12 acres sell for?
If the RTC's latest appraisal is any indication, not much. The RTC valued the property last year at $3.5 million. Maricopa County Assessor's Office came in higher at $6.7 million.
Once the land is sold, it will close the book on Symington's involvement in the Esplanade.
More important, it will firm up the figures brought to the negotiating table for a possible out-of-court settlement of the RTC's lawsuit against Symington.
The governor has shaken the Japanese off his back. Now he must go eyeball to eyeball with the RTC.
It's uncanny how well Symington has shifted the financial risk from his shoulders to others. This from a guy who lectured Senator Metzenbaum on the fundamentals of his Esplanade investment.
"I put that together, Senator. It's called private enterprise. I raised that money. I limited their [Japanese and Southwest's] risk. I personally took the risk to develop this project," Symington testified on Capitol Hill three years ago.
At the time of Metzenbaum's hearing, Southwest had long since collapsed. And three weeks after the hearing, Symington--who had run on his business record--was elected governor of Arizona.