Symington is being sued by a group of local labor unions who say Symington defrauded their pension funds of more than $18 million in connection with a 1990 loan for a Symington partnership that built the disastrous downtown Mercado shopping center.
This is a topsy-turvy trial, where one key question is not whether Symington lied, but rather why the money manager of the pension funds didn't catch Symington lying.
Symington's defense centers on an arcane legal definition of fraud -- one that differs significantly from the standard applied in Symington's criminal fraud trial. In the criminal case -- a jury convicted Symington on multiple counts in 1997, but an appellate court threw out the case in 1999 -- federal prosecutors only had to prove that Symington's fraudulent financial statements were "material," factors in his acquisition of loans he would never repay.
There is a different standard in the bankruptcy case. Simple materiality doesn't hold here. If Symington can prove that the pension funds' money manager, San Francisco-based McMorgan and Company, did not perform sufficient "due diligence" in checking out his bogus financial statement, then Symington might get off the hook. The court would in all likelihood wipe out his debt.
Which brings us back to 68-year-old Bill Dereschuk, who attends the trial every day, sitting expressionless for hours with his arms folded over his ample belly. He usually wears blue jeans, a simple shirt, jogging shoes with Velcro straps and occasionally a windbreaker emblazoned with a "Waddell Dam" insignia.
Dereschuk is a retired operator of earthmoving equipment. His deft maneuvering of "dozers and scrapers" helped carve Waddell Dam out of the desert. For years he arose before dawn to craft sites for Valley residential developments, shopping centers, public works and parkways. He says he never earned more than $35,000 a year for his toils, and with a wife and three children to support he couldn't save much for his retirement. But as a loyal member of Operating Engineers Local 428, Dereschuk had counted on his union pension fund, which was entrusted to the board of trustees of Local 428.
Like practically everyone else in Local 428, Dereschuk initially assumed his precious pension was being safely invested.
But now he sees things differently.
The Mercado loan debacle is one in a long line of scandals Dereschuk discovered in the mismanagement of Local 428's pension fund. And he blames the six-member board of trustees (three are contractors; three are union members) for hiring the high-priced attorneys and money managers whom Dereschuk says have looted his pension fund. He says high overhead and lousy real estate loans caused the fund to perform poorly for several years, even in a Wall Street bull market. In 1998, the fund's net assets jumped $5 million, but Dereschuk says pensioners got nothing to show for it. (Last week, Dennis Teel, a union official, assured me that a spokesman would call me with responses to Dereschuk's allegations, but no spokesman ever called.)
Now Dereschuk and several other disgruntled members of Local 428 want to dissolve the $80 million fund and parcel out the cash to approximately 3,000 operating engineers.
Dereschuk figures it will be much easier to break up the pension fund if Fife Symington wins this trial.
"If Fife wins, we win. Then we can sue the trustees for breach of fiduciary duty and get rid of them once and for all," Dereschuk says, perhaps naively.
Of course, Dereschuk, who grew up poor on a Minnesota dairy farm and has struggled all his life to feed his family, does not absolve Symington. He is well aware that Symington is the high-living heir to a Frick fortune who lied on a financial statement to con Dereschuk's pension fund.
It's just that Dereschuk is focused on getting rid of the trustees and attorneys and money managers who he says have fed off his retirement fund. He will show anyone who is interested U.S. Labor Department documents that bolster his case: From 1990 to 1998, the last year for which figures are available, attorneys for the trustees and money managers for the trustees have charged Local 428 more than $6 million. That's $6 million that Dereschuk figures might have been more appropriately invested in Wall Street stocks and bonds.
Of the $6 million, Local 428 paid approximately $853,518 from 1995 to 1998 to Phoenix attorney Michael Manning, who represents the pension funds in state and federal courts in a no-holds-barred effort to recover the Mercado debt from Fife Symington.