Symington told Congress that, "Prior to the acquisition of the Camelback property, Donald Lewis, then CEO of Southwest, had discussions about Southwest's participation in the SSH Venture with Jack Pallen, then principal supervisory agent assigned to Southwest by the Federal Home Loan Bank Board . . ."
The regulations don't say anything about discussing the deals prior to acquisition. The regulations say specifically the deals must be approved "in advance" and "in writing."
This wasn't a yard-sale purchase of used lawn furniture contemplated by Southwest Savings and Loan. Symington was trying to engineer one of the largest commercial developments in the history of Phoenix. You cannot get federal regulatory approval of such a complicated deal by "discussing" the highlights over a few martinis and a couple of big cigars.
Even so, Symington secured Southwest's vote on the deal before he asked for regulatory approval. Symington told Congress how he met with the FHLBB in November to explain the Esplanade deal and how Southwest wrote to the FHLBB on the matter in December.
By November and December of 1983 the deal was done. Southwest Savings and Loan had voted to capitalize Fife Symington's Esplanade project on September 21, 1983. By November and December of 1983 Symington was attempting to get the federal government to "back date" approval. Symington did not obtain "prior written approval" of the Esplanade project. The violation was flagrant and clear.
Dowd also organized the documents for Congress to explain Symington's failure to get an appraisal for the project that was the largest investment in Southwest's 32-year history. In order to evaluate the investment in the Esplanade, Symington and the other members of the Southwest board relied upon a four-page "letter of opinion" from real estate appraisers, Burke, Hansen and Homan Inc.
In a deal this large, a four-page letter of opinion is such a thin document that it is the accounting equivalent of anorexia.
The federal memorandum that covered Symington's deal called for a full-blown narrative appraisal.
The four-page document executed for Symington was no such thing. Indeed, the appraiser who signed his name to the report acknowledged the truth in the paragraph above his signature: "This is a preliminary opinion of value. A narrative report containing all the data and analyses will be prepared upon your request." Symington and Southwest never requested an appraisal.
Understand that the federal guidelines that describe what an appraisal ought to entail contain more pages than the Esplanade letter of opinion.
In fact, at the end of 1985, when Southwest could no longer fund the Esplanade and Symington was forced into the private sector for continued financing, he had to produce an actual appraisal. It ran to nearly 260 pages.
And yet Symington and Dowd were intransigent in front of Congress, insisting that, "The July 1983 preliminary appraisal complied with FHLBB regulations, [and] was given to the FHLBB by Southwest in January 1984 . . ."
Only a congressman could swallow such nonsense. Attorneys at the RTC had made the absence of an appraisal and the failure to get prior written approval from regulators the basis of their lawsuit. The effort by our governor to cover his tracks by having the federal regulators approve, after the fact, the Esplanade adventure stumbled when the San Francisco office of the FHLBB requested a copy of the appraisal on December 21, 1983. Three weeks later, on January 9, Southwest's CEO, Don Lewis, responded to the federal regulators' demand by forwarding the four-page document from Burke, Hansen and Homan. Lewis did not even bother to try to characterize his anemic numbers sketch as an appraisal. He was honest enough to admit that it was merely "a preliminary opinion of value."
Lewis' explanation is astounding.
"To save money," wrote the CEO of Southwest to the regulators, "this preliminary opinion was not finalized but can be if it would better serve your needs."
In other words, when Southwest and Symington were using depositors' savings, insured by taxpayers, to strike out on the largest investment in the S&L's history, an investment the RTC now describes as the largest single loss in the institution's nearly $1 billion collapse, Symington and his colleagues didn't bother to get a comprehensive appraisal, opting instead to microwave some numbers in order "to save money."
After the San Francisco regulators requested a copy of the Esplanade appraisal, Symington finessed the problem of belated approval by resigning from the board of Southwest. In their appearance before Congress, Symington and Dowd gambled that defiance would overcome any questions on the governor's business dealings.