On September 3, 1997 the governor of Arizona was found guilty of 7 felony counts of bank and wire fraud. The jury deadlocked on 11 other charges. He was found not guilty on 3 charges. Sentencing is scheduled for February 2, 1998. It is uncertain whether prosecutors will seek a new trial on the deadlocked counts. Symington was forced to resign and he faces up to 165 years in prison and $6.25 million in fines. But federal sources say the term would likely be in the five to fifteen year range.
The heart of the case was the various financial statements that Symington used to deceive lenders. When Symington wanted loans for real estate projects that would generate millions of dollars of development fees for his company and himself, or when he wanted to extend lines of credit to himself, he represented his financial condition as healthy. When he wanted to renegotiate the terms of loans or be released from personal guarantees or delay default, he represented that he was financially ruined. He made contradictory representations to different lenders at virtually the same time. His secretary, Joyce Riebel, testified that she typed the conflicting financial statements and kept them under lock and key. She would send them to the appropriate banks at the request of her boss.
Fife Symington III comes from a wealthy, influential Maryland family. His great-grandfather was the steel baron, Henry Clay Frick. He received a degree in Dutch Art History from Harvard University. His first wife divorced him because he was never gainfully employed and was in constant debt. He later married Ann Olin Pritzlaff, heiress to The Olin Corporation. On several occasions he relied on his mother and wife to bail him out of financial trouble. He campaigned for governor on his business expertise and his success as a real estate developer, but refused to answer questions relating to the details of his business.
Guilty Verdicts
Camelback Esplanade
Four of the guilty verdicts came from the development project called Camelback Esplanade. The case proved that Symington lied about his financial condition when he drew on funds from loans he obtained from Dai-Ichi Kangyo Bank to build the Esplanade.
Symington was involved in negotiations with the bank to obtain a loan to develop the Camelback Esplanade. Symington wanted to avoid an audit by a CPA, so he insisted that DKB accept an accountant’s compilation letter that was based on a personal financial statement prepared on a Valley National Bank form. The compilation letter from Coopers & Lybrand indicated that they had not conducted an audit, but had only reviewed his methodology in preparing the statement to see if it was consistent with previous statements. Attached to this report is a copy of this letter. Also attached is a copy of a letter from Symington to Coopers in which Symington accepts responsibility for the statement’s representations. He also submitted a 1988 financial statement, which showed a net worth of $10.8 million, and a 1989 statement, which showed a net worth of $11.9 million. Most of the guilty verdicts in this case are based on this 1989 personal financial statement. A copy is attached. DKB accepted the statements and lent Symington’s Esplanade partnership the money. These statements contained material errors and omissions.
These loans had provisions that required Symington to maintain a net worth of at least $4 million. He also had to provide DKB with annual personal financial statements during the terms of the loans. Symington submitted payment requests and borrowers affidavits to DKB to continue drawing on these funds. From May 1987 to June 1992, DKB provided over $120 million in loans.
Symington provided conflicting financial information to another bank during this period. During June and July, 1991, Symington submitted personal financial statements to First Interstate Bank. One statement indicated that as of December 31, 1990, he had a negative net worth of $4.1 million. The other statement indicated a negative net worth of $26.5 million as of May 31, 1991. In August 1991, Coopers & Lybrand completed a statement which showed Symington’s net worth a negative $22.6 million. At the time Symington was trying to negotiate with FIB regarding his personal guarantees of a construction loan. Neither of these statements was provided to DKB. In fact, Symington lied about his financial condition to DKB and continued to submit affidavits and statements, which indicated his net worth was over $4 million.
Valley National Bank
Two of the guilty verdicts related to false financial statements that he submitted to Valley National Bank. VNB provided loans and lines of credit to Symington and his company. VNB required Symington to submit annual personal financial statements, which VNB analyzed in determining whether to extend credit.
On July 24, 1990 and October 29, 1990, Symington falsely represented to VNB that there had not been any material adverse changes to his financial condition since December 31, 1989, in order to obtain loans and credit.
In fact, in August 1990, Symington informed Security Pacific Bank of Arizona that his December 31, 1989 personal financial was "materially and dramatically overstated," and that he did not expect to be able to honor an outstanding financial obligation. Also, in September 1990, Symington was trying to get FIB to release him from a personal guarantee of a loan. He informed FIB that his net worth had dropped from $11.9 million as of December 31, 1989 to $4.4 million as of September 19, 1990.
Mercado
The jury found Symington guilty of defrauding six union pension funds when he obtained a $10 million dollar loan for the Mercado shopping mall project in downtown Phoenix. He also used the 1989 financial statement along with other fraudulent statements.
Other Scandals
Project SLIM
During Symington’s term as Governor, he initiated Project SLIM (State Long-Term Improved Management). It was a cost reduction program for state government. George Leckie, the governor’s Deputy Chief of Staff, was on the committee that awarded the state contract. John Yeoman, the governor’s campaign treasurer, was a partner with Coopers & Lybrand. Coopers won the contract when it dropped its bid at the last second by $440,000. The District Attorney investigated and discovered evidence that Leckie had leaked the bid of its competitors to Coopers through Yeoman. This evidence was obtained when they questioned John Yeoman’s secretary. The District Attorney also found a spreadsheet, which mapped how the firm reduced its bid by $440,000. It was dated two days before the selection committee advised all bidders to whittle their bottom lines. They also found that after Coopers illegally obtained the Project SLIM contract, they began slashing the fees that Symington owed them. Leckie and Yeoman were indicted for bid rigging fraud. Coopers & Lybrand settled for more than $2 million. Leckie was found not guilty because Yeoman died in a car accident, and the judge would not allow his confession into evidence.
Southwest Savings & Loan
During the early 1980’s, Southwest Savings & Loan financed Symington’s development company. Symington was also on the board of directors. In September 1983, Symington convinced the board of directors of Southwest to invest $30 million to purchase 20 acres. Symington wanted the land to build the Camelback Esplanade hotel, retail, office and residential complex. Southwest was crippled when it made the investment in the Esplanade. The project was mismanaged, and no formal accounting records existed. Symington paid himself $2.2 million in development fees. The board should have seized control of the project, but instead they shifted the management of the Esplanade to a subsidiary headed by Symington. Southwest Savings & Loan failed in 1989 and the Esplanade investment was its largest loss at more than $21.6 million. Symington was sued by the Resolution Trust Corporation for his role in the failure of Southwest, a collapse that cost taxpayers $1 billion.
In September 1995, after returning from a vacation in Paris, Symington filed for Chapter 7 bankruptcy. He claimed debts of $25 million and assets of $61,795. Shortly after, his mother died and left him with trusts worth tens of millions of dollars. These trusts are exempt because she died more than six months after her son filed for bankruptcy.
There are many other scandals involving Symington that I did not include in this report, including the indictments to which the jury could not reach a decision on. My best source of information came from the Phoenix New Times site. This report is a summary of articles by John Dougherty, Michael Lacey, Terry Greene Sterling, and Amy Silverman of the Phoenix New Times.
All information pertaining to this assignment was located at the following internet sites:
http://www.phoenixnewtimes.com/extra/fife/index.html This newspaper site includes a list of articles on Fife Symington from 1/23/91 to the present.
http://www.azcentral.com/news/symington/index.html This newspaper site includes articles on Fife Symington. This newspaper is not as thorough and informative as the Phoenix News.
http://www.azfamily.com/misc/verdict.html List of jury decisions
http://www.mojones.com/mother_jones/JA96/davis_jump2.html Article on Southwest Savings & Loan
http://desert.net/tw/05-30-96/smith.htm An opinion from Jeff Smith, "Lock Him Up, It’s Time Fife Symington Paid for his Dishonesty"
Inventory Fraud - Don't Be Left Scratching Your Head
