UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA
UNITED STATES OF AMERICA
Plaintiff,
V.
JOHN FIFE SYMINGTON, III,
Defendant. |
CR 96
I N D I C T M E N T
[18 U.S.C. $ 1014: False
Statements to Federally
Insured Financial
¤ 1343: Wire Fraud; 18 U.S.C.
¤ 1951: Attempted Extortion;
18 U.S.C. ¤ 152: False
Statements in Bankruptcy
Proceeding; 18 U.S.C. ¤ 2(a):
Aiding and Abetting; 18
U.S.C. ¤ 2(b): Causing Act
to be Done] |
The Grand Jury charges:
INTRODUCTION
At all times relevant to this indictment:
JOHN FIFE SYMINGTON, III
1. Defendant JOHN FIFE SYMINGTON, III ("SYMINGTON") was a commercial real
estate developer, who developed, managed, and, through partnerships, owned interests in
commercial real estate projects. The real estate projects that defendant SYMINGTON
developed were owned by partnerships.
2. Defendant SYMINGTON was the sole shareholder, Chief Executive Officer, and, until
April 1989, the President of The Symington Company ("TSC"). TSC was a real
estate development and property management company located in Phoenix, Arizona. TSC
provided development, property management, and leasing services to the real estate
projects developed by defendant SYMINGTON. TSC received substantial fees and commissions
for these services, a significant portion of which were paid to defendant SYMINGTON in the
form of salary and distributions.
3. The majority of financing to construct defendant SYMINGTON'S real estate projects
came from construction loans that were obtained from banks, savings and loan associations,
and other lenders. The proceeds of these loans were disbursed over time as construction of
a project progressed. Defendant SYMINGTON also obtained permanent loans, which were used
in whole or in part to repay the construction on loans.
4. The construction and permanent loans that defendant SYMINGTON obtained were made tot
he partnerships that owned the projects and were secured by the projects. In many
instances, defendant SYMINGTON, as the developer of a project, was required by the lender
to personally guarantee repayment of all or a portion of a construction or permanent loan
as additional security for the loan.
5. Defendant SYMINGTON also had personal loans and lines of credit, and TSC had a line
of credit that defendant SYMINGTON had personally guaranteed.
6. In April 1988, defendant SYMINGTON announced his candidacy for the office of
Governor of the State of Arizona. On February 26, 1991, defendant SYMINGTON was elected
Governor of Arizona.
PREPARATION AND SUBMISSION OF FALSE PERSONAL FINANCIAL STATEMENTS
7. In order to obtain construction and permanent financing for his real estate
projects, and person projects, and personal and business loans and lines of credit,
defendant SYMINGTON was required to provide lenders with a personal financial statement,
which listed, among other things, defendant SYMINGTON's assets, his liabilities, and his
net worth.
8. Lenders reviewed defendant SYMINGTON's personal financial statements to assess his
success as a developer and to determine if he had the financial resources to honor his
personal guarantees.
9. Between May 1986 and June 1991, defendant SYMINGTON submitted personal financial
statements to various lenders that purported to present his financial condition "as
of" the following dates:
a. April 1, 1986;
b. October 30, 1986;
c. March 31, 1987;
d. November 1, 1987;
e. December 31, 1987
f. December 31, 1988;
g. December 31, 1989; and,
h. December 31, 1990.
10: Defendant SYMINGTON prepared his own personal financial statements with only minor
assistance from his secretary. In a number of instances, he created different versions of
a personal financial statement that had the same "as of" date, but which
contained different net worths. Defendant SYMINGTON instructed his secretary to maintain
records for keeping track of which lender received which version of his personal financial
statements.
11. Prior to submitting a personal financial statement to a lender, defendant SYMINGTON
signed a certification in which he:
a. Guaranteed the accuracy of the personal financial statement with the intent that it
be relied upon by the lender in extending credit;
b. Warranted that he had no known direct or contingent obligations that had not been
set forth on the personal financial statement;
c. Warranted that he had not knowingly withheld any material information of an adverse
nature; and
d. Agreed to notify the lender immediately, in writing, of any unfavorable change in
his financial condition.
12. As defendant SYMINGTON well knew, the personal financial statements that he
submitted to lenders between May 1986 and May 1991 were materially false in that they:
a. Materially overstated defendant SYMINGTON's assets;
b. Materially understated defendant SYMINGTON's liabilities; and,
c. Materially overstated defendant SYMINGTON's net worth.
13. Among other things, the personal financial statements:
a. Substantially overstated the market value of many of defendant SYMINGTON's real
estate projects;
b. Substantially understated the amounts of loans outstanding against many of defendant
SYMINGTON's projects;
c. Substantially overstated defendant SYMINGTON's share of the purported equity in his
projects;
d. Failed to disclose that defendant SYMINGTON had sod or transferred his interest in a
number of his projects.
e. Failed to disclose that defendant SYMINGTON had pledged or encumbered his interest
in a number of his projects;
f. Failed to disclose, and understated, notes payable to others and amounts due to
friends and relatives; and,
g. Failed to disclose that defendant SYMINGTON had personally guaranteed loans other
than construction loans.
14. Defendant SYMINGTON made these false representations and omissions of material fact
to create the false and misleading impression that he was a successful real estate
developer with substantial financial resources available to him, and for the purpose of
influencing lenders in their decisions to: (a) provide millions of dollars in construction
and permanent loans for defendant SYMINGTON's real estate projects; and, (b) extend loans
and lines of credit to him and TSC.
COUNTS ONE THROUGH FOUR
(18 U.S.C. ¤¤ 1014, 2(a), 2(b))
15. The Grand Jury repeats and realleges paragraphs 1 through 14 as if fully set forth
herein.
FALSE STATEMENTS TO FIRST INTERSTATE BANK OF ARIZONA
16. At all times relevant to this indictment, First Interstate Bank of Arizona
("FIB") was a bank organized under the laws of the United States, the accounts
of which were insured by the Federal Deposit Insurance Corporation.
17. In or around March, 1987, FIB agreed to make a $2,244,000 construction loan to
J&F Investments X Limited Partnership ("J&F") to construct a retail
shopping center known as Alta Mesa Village. Defendant SYMINGTON was a general partner of
J&F, and he personally guaranteed full repayment of the Alta Mesa Village loan.
18. FIB reviewed and analyzed defendant SYMINGTON's April 1, 1986 personal financial
statement in determining whether to make the Alta Mesa Village loan.
19. In or around December 1987, FIB agreed to increase the amount of the Alta Mesa
Village loan to $2,500,000. Defendant SYMINGTON personally guaranteed full repayment of
the increased amount of the Alta Mesa Village loan.
20. FIB reviewed and analyzed defendant SYMINGTON's March 31, 1987 personal financial
statement in determining whether to increase the amount of the Alta Mesa Village loan.
21. In or around May 1988, FIB agreed to make a $10,000,000 construction loan to
Mercado Developers Limited Partnership. ("MDLP") to be used to construct an
office and retail complex known as the Phoenix Mercado ("the Mercado").
Defendant SYMINGTON was the general partner of MDLP, and he personally guaranteed full
repayment of the Mercado construction loan.
22. FIB reviewed and analyzed defendant SYMINGTON's March 31, 1987 and November 1, 1987
personal financial statements in determining whether to make the Mercado construction
loan.
23. As defendant SYMINGTON well knew, the personal financial statements that he
submitted to FIB contained materially false entries as described in paragraphs 7 through
14 above.
24. From the day it opened in or around June 1988, Alta Mesa Village failed to perform
as projected, and failed to generate sufficient income to make the monthly loan payments
to FIB.
25. Beginning in or around march 1990, defendant SYMINGTON attempted to convince FIB to
reduce the amount of his personal guarantee of the Alta Mesa Village loan, and thereafter
attempted to convince FIB to release him from his guarantee.
26. Between May 1988 and June 1990, FIB disbursed approximately $8.3 million for
construction of the Mercado. In June 1990, FIB was repaid approximately $7.2 million from
the proceeds of a permanent loan, leaving FIB with a "shortfall" of
approximately $1.1 million. Defendant SYMINGTON was responsible for the repayment of this
shortfall under his personal guarantee of the Mercado construction loan.
27. Beginning in or around May 1990, defendant SYMINGTON attempted to convince FIB to
delay repayment of the shortfall. In June 1990, FIB agreed to delay repayment of the
shortfall for one year.
28. Beginning in or around May 1991, defendant SYMINGTON attempted to convince FIB to
delay repayment of the shortfall for another two or three years, and to release him from
his personal guarantee of the Mercado construction loan.
29. On or about the following dates, in the District of Arizona and elsewhere,
defendant SYMINGTON knowingly and willfully made, and caused to be made, the following
materially false statements to FIB, for the purpose of influencing FIB's actions as
described below:
| COUNT |
DATE |
FALSE STATEMENT |
PURPOSE |
ONE
HUNG |
10/86 |
Submission of 4/1/86 personal financial statement containing materially false entries
as described in paragraphs 7 through 14 above |
Obtain construction loans for Alta Mesa Village and Mercado |
TWO
HUNG |
9/10/87 |
Submission of 3/31/87 personal financial statement containing materially false entries
as described in paragraphs 7 through 14 above |
1. Obtain increase in amount of Alta Mesa Village loan 2. Obtain construction loan
for Mercado |
THREE
HUNG |
12/30/87 |
Submission of 11/1/87 personal financial statement containing materially false entries
as described in paragraphs 7 through 14 above |
1. Obtain construction loan for Mercado 2. Comply with Alta Mesa Village loan
agreement |
FOUR
NOT GUILTY |
7/18/91 |
Causing submission of letter falsely
representing that preliminary agreements had been reached with permanent lender on Mercado |
1. Induce FIB to extend time for repayment of Mercado construction loan shortfall 2.
Induce FIB to release defendant SYMINGTON from guarantee of Mercado construction loan |
COUNTS FIVE THROUGH TWELVE
(18 U.S.C. ¤¤ 1014, 2(b))
30. The Grand Jury repeats and realleges paragraphs 1 through 14 as if fully set forth
herein.
31. During the time relevant to this indictment, Valley National Bank of Arizona
("VNB") was a bank organized under the laws of the United States, the accounts
of which were insured by the Federal Deposit Insurance Corporation.
32. VNB provided loans and lines of credit to defendant SYMINGTON and TSC. As of
January 1988, defendant SYMINGTON had a $600,000 personal revolving line of credit and a
portion of a $600,000 loan outstanding at VNB. In addition, TSC had a $300.000 revolving
line of credit, which defendant SYMINGTON had personally guaranteed.
33. VNB required defendant SYMINGTON to submit annual personal financial statements,
which VNB reviewed and analyzed in determining whether to continue to extend credit to
defendant SYMINGTON and/or TSC. As defendant SYMINGTON well knew, the personal financial
statements that he submitted to VNB contained materially false entries as described in
paragraphs 7 through 14 above.
34. In May 1988, defendant SYMINGTON submitted his December 31, 1987 personal financial
statement to VNB.
35. In January 1989, defendant SYMINGTON submitted his December 31, 1988 personal
financial statement to VNB.
36. In March 1989, VNB increased TSC's line of credit from $300,000 to $400,000.
37. On or about November 21, 1989, VNB agreed to make a $883,324 loan to defendant
SYMINGTON, a portion of which was used to repay the outstanding balance of the earlier
$500,000 loan. As part of the loan agreement, defendant SYMINGTON:
a. Falsely represented and warranted that his December 31, 1988 personal financial
statement was true and correct and fairly presented his financial conditions of that date;
b. Falsely represented and warranted that there had not been any material change in his
financial condition since December 31, 1988; and,
c. Promised to maintain an individual net worth of not less than $4 million during the
term of the loan.
38. In May 1990, defendant SYMINGTON submitted his December 31, 1989 personal financial
statement to VNB.
39. On or about July 24, 1990, VNB agreed to: (a) convert defendant SYMINGTON's
$600,000 personal line of credit into a loan that would not be due until September 1`990;
and, (b) convert TSC's line of credit into a loan to TSC and defendant SYMINGTON that
would not be due until October 1990. To obtain these loans and extensions, defendant
SYMINGTON falsely represented to VNB that there had not been any material adverse change
to his financial condition since December 31, 1989.
40. On or about October 29, 1990, VNB agreed to extend the date for repayment of the
joint TSC/Symington loan. To obtain this extension, defendant SYMINGTON falsely
represented to VNB that there had not been any material adverse change to his financial
condition since December 31, 1989.
41. In fact, two months earlier, on or about August 23, 1990, defendant SYMINGTON had
advised Security Pacific Bank of Arizona ("Security Pacific") that his December
31, 1989 personal financial statement was "materially and dramatically
overstated," and that he did not expect that he would be able to honor an outstanding
financial obligation.
42. In addition, in September 1990, defendant SYMINGTON had represented to FIB that his
net worth had dropped from approximately $11.9 million as of December 31, 1989 to
approximately $4.4 million as of September 19, 1990. At the time, defendant SYMINGTON was
attempting to convince FIB to release him from his personal guarantee of the Alta Mesa
Village loan.
43. On or about the following dates, in the District of Arizona and elsewhere,
defendant SYMINGTON knowingly and willfully made, and caused to be made, the following
materially false statements to VNB, for the purpose of influencing VNB's actions as
described below:
| COUNT |
DATE |
FALSE STATEMENT |
PURPOSE |
FIVE
HUNG |
5/19/88 |
Submission of 12/31/87 personal financial statement containing materially twelve
entries as described in paragraph 7 through 14 above |
1. Obtain renewals of personal line of credit and loan 2. Obtain renewal of TSC
line of credit |
SIX
HUNG |
1/20/89 |
Submission of 12/31/88 personal financial statement containing materially false
entries as described in paragraphs 7 through 14 above |
1. Obtain renewal of personal line of credit and loan 2. Obtain renewal of, and
increase to, TSC line of credit |
SEVEN
HUNG |
11/21/89 |
False representation that 12/31/88 personal financial statement was true and correct
and fairly presented financial condition, and no material adverse change to financial
condition |
Obtain $893,324 personal loan |
EIGHT
HUNG |
5/8/90 |
Submission of 12/31/89 personal financial statement containing materially false
entries as described in paragraphs 7 through 14 above |
1. Comply with existing loan agreements 2. Obtain renewal of personal line of
credit
3. Obtain renewal of TSC line of credit |
NINE
DISMISSED BY JUDGE |
7/24/90 |
False representation of no material adverse change to financial condition |
Convert personal line of credit to loan and extend repayment date |
TEN
|
7/24/90 |
False representation of no material adverse change to financial condition |
Convert TSC line of credit to joint TSC/Symington loan and extend repayment date |
ELEVEN
|
10/29/90 |
False representation of no material adverse change of financial condition |
Obtain extension of joint TSC/Symington loan |
TWELVE
DISMISSED BY JUDGE |
3/14/91 |
Submission of 12/31/90 personal financial statement containing materially false
entries as described in paragraphs 7 through 14 above |
1. Comply with loan agreement 2. Avoid being declared in default for failure to
maintain $4 million net worth
3. Obtain extensions of $893,324 loan and joint TSC/Symington loan |
COUNTS THIRTEEN THROUGH SIXTEEN
(18 U.S.C. ¤¤ 1014, 2(A), 2(B))
44. The Grand Jury repeats and repeats and realleges paragraphs 1 through 14 as if
fully set forth herein.
FALSE STATEMENTS TO DAI-ICHI KANGYO BANK, LIMITED
45. At all times relevant to this indictment, Dai-Ichi Kangyo Bank, Limited, New York
Branch ("DKB") was a branch of a foreign banking corporation licensed to operate
under the laws of the State of New York and the Untied States. Among other things, DKB
provided loans to finance commercial real estate developments in the United States.
46. In September 1983, a partnership consisting of defendant SYMINGTON and others
purchased a parcel of land that later became the site for the Camelback Esplanade
("the Esplanade"), a project consisting of two office towers and a Ritz-Carlton
Hotel.
47. Defendant SYMINGTON was the developer of the Esplanade, and a general partner in
the partnerships that developed and owned the office towers and the hotel.
48. In May 1987, DKB agreed to make two loans totaling $77,000,000 to construct, and
fund the initial operations of, the first office tower and the Ritz-Carlton Hotel.
49. In August 1988, DKB agreed to make a $50,000,000 loan to construct, and fund the
initial operations of, the second office tower.
50. As part of the DKB loan documents, defendant SYMINGTON:
a. Agreed to guarantee repayment of up to $9 million of the DKB loans;
b. Agreed to be responsible, along with his partners, for the payment of the operating
expenses of the office towers and the hotel;
c. Promised to provide DKB with annual personal financial statements during the terms
of the loans;
d. Promised to maintain a net worth of at least $4 million at all times during the
terms of the loans; and,
e. Agreed that his failure to maintain a net worth of $4 million would constitute an
event of default.
51. Between May 1987 and June 1992, DKB disbursed in excess of $120 million to be used
to construct and fund the initial operations of the office towers and the hotel.
52. To obtain monthly loan disbursements from DKB, defendant SYMINGTON submitted
payment requests and borrower's affidavits in which he falsely certified, among other
things, that his prior representations under the loan documents were still correct as of
the date of the payment request, and that there had not been any occurrence constituting
an event of default under the DKB loan documents.
53. As defendant SYMINGTON well knew, the payment requests and borrower's affidavits
that the submitted to DKB after his election in February 1991 were materially false in
that his net worth was well below $4 million, and, as a consequence, he was in default of
the DKB loans.
54. In fact, on or about June 26, 1991, defendant SYMINGTON submitted, and caused to be
submitted, to FIB a personal financial statement that represented that his net worth was
approximately negative $4.1 million as of December 31, 1990. At the time, defendant
SYMINGTON was engaged in negotiations with FIB regarding his personal guarantee of the
Alta Mesa Village construction loan and the outstanding balance of the Mercado
construction loan shortfall. This personal financial statement was not provided to DKB.
55. On or about July 18, 1991, defendant SYMINGTON submitted, and caused to be
submitted, to FIB an unsigned personal financial statement that represented that his net
worth was approximately negative $26.5 million as of May 31, 1991. This personal financial
statement also was not provided to DKB.
56. In or around late July 1991, unbeknownst to DKB, defendant SYMINGTON hired Coopers
and Lybrand ("C&L"), a national accounting firm, to prepare a statement of
his financial condition to demonstrate to lenders that he would not be able to repay his
debts or honor his personal guarantees.
57. On or about August 6, 1991, C&L completed a statement of defendant SYMINGTON's
net worth was approximately negative $22.6 million as of May 31, 1991 ("the C&L
statement"). Defendant SYMINGTON caused the C&L statement to be submitted to
certain lenders with whom he was attempting to renegotiate his debts and/or obtain
releases from his guarantees. The C&L statement was not provided to DKB.
58. On or about May 4, 1992, DKB requested that defendant SYMINGTON provided a copy of
his December 31, 1990 personal financial statement. On or about May 14, 1992, defendant
SYMINGTON responded by sending DKB a letter in which he falsely represented that his net
worth ass of December 31, 19909 had been $5,368,000.
59. On or about the following dates, n the District of Arizona and elsewhere, defendant
SYMINGTON knowingly and willfully made, and caused to be made, the following materially
false statements to DKB, for the purpose of influencing DKB's actions as described below:
| COUNT |
DATE |
FALSE STATEMENT |
PURPOSE |
THIRTEEN
|
7/10/91 |
Submission of materially false request for advance and borrower's affidavit |
1. Avoid being declared in default for failure to maintain $4 million net worth 2.
Obtain a $537,754 loan disbursement |
FOURTEEN
|
11/8/91 |
Submission of materially false request for advance and borrower's affidavit |
1. Avoid being declared in default for failure to maintain $4 million net worth 2.
Obtain a $761,318 loan disbursement |
FIFTEEN
|
4/8/92 |
Submission of materially false request for advance and borrower's affidavit |
1. Avoid being declared in default for failure to maintain $4 million net worth 2.
Obtain a $60,223 loan disbursement |
SIXTEEN
|
5/14/92 |
Submission of letter falsely representing that defendant SYMINGTON's net worth as of
12/31/90 had been $5,368,000 |
1. Prevent discovery of defendant SYMINGTON's earlier false statements 2. Defer
possible legal action for undisclosed earlier default |
COUNTS SEVENTEEN THROUGH TWENTY
(18 U.S.C. ¤¤ 1343, 2(B))
60. The Grand Jury repeats and realleges paragraphs 1 through 14 as if fully set forth
herein.
THE SCHEME TO DEFRAUD CREI AND CITIBANK
61. At all times relevant to this indictment, Citicorp Real Estate, Inc.
("CREI") was a wholly owned subsidiary of Citibank, North America
("Citibank"), the accounts of which were insured by the Federal Deposit
Insurance Corporation. CREI was in the business of making commercial real estate loans.
From 1985 until December 1990, CREI had offices in Phoenix, Arizona.
62. Beginning in or around 1989, and continuing through at least 1992, within the
District of Arizona and elsewhere, defendant SYMINGTON, aided and abetted by others known
and unknown to the Grand Jury, devised, engaged in, and carried out a scheme to defraud,
and to obtain money or property belonging to CREI and Citibank, by means of false and
fraudulent pretenses, representations, and promises, and the concealment of material
facts.
63. Defendant SYMINGTON, aided and abetted by others known and unknown to the Grand
Jury, carried out the scheme to defraud as follows:
64. On or about June 12, 1989, the 5050 Building Limited Partnership ("5050
Limited") was formed for the purpose of constructing a new office building at 5050
North 40th Street in Phoenix, Arizona ("the new 5050 building"). Defendant
SYMINGTON was the general partner of 5050 Limited.
65. In or around the spring of 1989, Defendant SYMINGTON applied to CREI on behalf of
5050 Limited for a $10,565,000 construction loan.
66. As part of the loan application process, defendant SYMINGTON provided CREI with his
December 31, 1987 and December 31, 1988 personal financial statements. CREI reviewed and
analyzed these personal financial statements in determining whether to make the loan to
5050 Limited. As defendant SYMINGTON well knew, these personal financial statements
contained materially false entries as described in paragraphs 7 through 14 above.
67. Prior to the loan closing; CREI informed defendant SYMINGTON that it would not make
the loan unless he, TSC, and 5050 Limited agreed that they would, at all times throughout
the term of the loan, have $500,000 in cash or cash equivalent assets available to them.
68. In response, defendant SYMINGTON falsely represented to CREI that the $650,000 in
"readily marketable securities" listed on his December 31, 1988 personal
financial statement were available to him, concealing the following material facts from
CREI:
a. Defendant SYMINGTON did not own or control the securities;
b. The securities were held in four irrevocable spendthrift trusts;
c. Defendant SYMINGTON could not sell, pledge, or assign the securities;
d. Creditors could not attach, encumber, or force the sale of the securities;
e. That while defendant SYMINGTON could petition the trustee for distributions from the
trusts, the trustee had complete discretion to grant or deny a request; and,
f. The trustee could not make distributions from the trusts to help defendant SYMINGTON
in his business.
69. On or about August 10, 1989, CREI made a $10,565,000 loan to 5050 Limited to
finance construction of the new 5050 building. Defendant SYMINGTON personally guaranteed
repayment of a portion of the loan.
70. As part of the loan agreement, defendant SYMINGTON:
a.Falsely represented and warranted that the personal financial statements previously
provided to CREI were true, correct, and complete as of the date of the statements;
b. Falsely represented and warranted that his personal financial statements fairly
presented his financial condition at the time they were presented;
c. Falsely represented and warranted that there had not been any material adverse
change to his financial condition since the date of the last personal financial statement;
and,
d. Falsely represented that he, TSC, and 5050 Limited had $500,000 in cash or cash
equivalents assets (including marketable securities).
71. As a further part of the loan agreement, defendant SYMINGTON:
a. Promised to provide CREI with an annual personal financial statement within 120 days
after the end of each year during the term of the loan;
b. Promised that he, TSC, and 5050 Limited would, at all times throughout the term of
the loan, have at least $500,000 of cash or cash equivalents assets (including marketable
securities); and,
c. Promised to provide quarterly certifications to CREI demonstrating that he, TSC, and
5050 Limited were in compliance with the preceding loan provision.
72. On or about April 30, 1990, defendant SYMINGTON submitted his December 31, 1989
personal financial statement to CREI as required by the CREI loan agreement. As defendant
SYMINGTON well knew, this personal financial statement contained materially false entries
as described in paragraphs 7 through 14 above.
73. On or about October 31, 1989, May 4, 1990, and September 5, 1990, defendant
SYMINGTON sent letters to CREI that were intended to, and did, create the false impression
that the "readily marketable securities" listed on his December 31, 1988 and
December 31, 1989 personal financial statements satisfied the requirements that he, TSC,
and 5050 Limited have at least $500,000 in cash or cash equivalent assets available to
them.
74. Between August 1989 and June 1992, CREI distributed in accounts of $8 million in
loan payments to 5050 Limited. To obtain distributions of the CREI loan; defendant
SYMINGTON falsely certified to CREI on a monthly basis, through August 1991, that all of
the representations contained in the loan agreement remained true and correct.
75. Following his election in February 1991, defendant SYMINGTON attempted to convince
CREI that he did not have sufficient assets to honor his personal guarantee and therefore
CREI should release him from his guarantee.
76. In or about September 1991, CREI received a copy of the C&L statement that
reported that defendant SYMINGTON's net worth was approximately negative $22.6 million as
of May 31, 1991. After reviewing the C&L statement, CREI requested a copy of defendant
SYMINGTON's December 31, 1990 personal financial statement.
77. On or about November 22, 1991, defendant SYMINGTON sent CREI a letter in which he
falsely represented that a December 31, 1990 personal financial statement had not been
prepared. In fact, as defendant SYMINGTON well knew, he had prepared two personal
financial statements dated as of December 31, 1990; one showing a net worth of
approximately positive $5.3 million that had been submitted to VNB on or about May 14,
1991, and another showing a net worth of approximately negative $4.1 million that had been
submitted to FIB on or about June 26, 1991.
78. On or about the dates set forth below, within the District of Arizona and
elsewhere, defendant SYMINGTON, aided and abetted by others known and unknown in the Grand
Jury, for the purpose of executing the above described scheme to defraud, caused the
following transmissions by wire communication in interstate commerce between the District
of Arizona and elsewhere:
| COUNT |
DATE |
WIRE TRANSMISSION |
SEVENTEEN
HUNG |
7/19/90 |
Interstate wire transfer of $465,430 from Citibank in Delaware to 5050 Limited account
at VNB in Arizona |
EIGHTEEN
HUNG |
11/26/90 |
Interstate wire transfer of $19,983 from Citibank in Delaware to 5050 Limited account
at VNB in Arizona |
NINETEEN
HUNG |
11/22/91 |
Telefax from defendant SYMINGTON in Arizona to CREI in California representing that a
12/31/90 financial statement had not been prepared |
TWENTY
NOT GUILTY |
12/13/91 |
Interstate wire transfer of $350,464 from Citibank in Delaware to 5050 Limited account
at VNB in Arizona |
COUNT TWENTY-ONE
(18 U.S.C. ¤¤ 1343, 2(B))
79. The Grand Jury repeats and realleges paragraphs 1 through as set if fully sent
forth herein.
80. During the time relevant to this indictment, the Arizona Laborers, Teamsters, and
Cement Masons Local No. 395, the Arizona Operating Engineers, and the Arizona State
Carpenters (collectively referred to as "the Arizona labor unions") were trade
unions organized and located in the State of Arizona. The Arizona labor uniform consisted
of carpenters, persons, and craftsmen working in Arizona and elsewhere.
81. The Arizona labor unions established and maintained six pension funds ("the
pension funds") for the purpose of providing benefits to their members.
82. MH Investment Counsel ("MH") was an investment advisor and pension fund
manager located in Phoenix, Arizona. MH was in the business of providing investment advice
to pension funds. From in or around 1986, until in or around December 1988. MH managed the
assets of the pension funds and was responsible for investing those assets.
83. McMorgan & Company ("McMorgan") was an investment advisor and pension
fund manager located in San Francisco, California. In or around January 1989, McMorgan
replaced MH as the investment advisor to the pension funds. From in or around January 1989
to the present, McMorgan has managed the assets of the pension funds and has been
responsible for investing those assets.
84. Beginning in or around 1987, and continuing until at least in or around October
1991, within the District of Arizona and elsewhere, defendant SYMINGTON, and others known
and unknown to the Grand Jury, devised, engaged in, and carried out a scheme to defraud,
and to obtain money or property in the custody and control of the pension funds and
McMorgan, by means of false and fraudulent pretenses, representations, and promises, and
the concealment of material facts.
85. Defendant SYMINGTON, aided and abetted by others known and unknown to the Grand
Jury, carried out the scheme to defraud as follows:
86. On or about March 29, 1986, Mercado Developer Partners ("Mercado
Developers") was formed to develop and own the Mercado. In or about May 1988, a new
partnership called Mercado Developers Limited Partnership ("MDLP") was formed to
own and operate the Mercado. Defendant SYMINGTON was the general partner of both Mercado
Developers and MDLP.
87. In or around 1987, defendant SYMINGTON applied to MH on behalf of Mercado
Developers for a permanent loan for the Mercado. As part of the loan application process,
defendant SYMINGTON provided MH with his March 31, 1987 personal financial statement. As
defendant SYMINGTON well knew, this personal financial statement contained materially
false entries as described in paragraphs 7 through 14 above.
88. On or about October 13, 1987, MH issued a commitment to provide a $10,000,000
permanent loan to MDLP once construction of the Mercado was complete. The loan commitment
set forth certain conditions that had to be met before the pension funds would be
obligated to make the permanent loan. As part of the conditions of the loan commitment,
defendant SYMINGTON:
a. Agreed to submit an updated personal financial statement to MH within 30 days of the
signing of the loan commitment, which occurred on October 13, 1987;
b. Agreed to submit an updated personal financial statement to MH not more than six
months prior to the closing of the permanent loan;
c. Agreed that MH had to approve his initial and updated personal financial statements;
and,
d. Agreed that if he was not paying his debts as they became due, or if he became
insolvent, the pension funds could terminate the loan commitment.
89. On or about November 11, 1987, defendant SYMINGTON caused his November 1, 1987
personal financial statement to be submitted to MH as required by the loan commitment. As
defendant SYMINGTON well knew, this statement contained materially false entries as
described in paragraphs 7 through 14 above.
90. After becoming the investment advisor to the pension funds in January 1989,
McMorgan concluded that the Mercado permanent loan was not a prudent investment for the
pension funds. However, McMorgan also concluded that the pension funds were required to
make the permanent loan, unless MDLP or defendant SYMINGTON failed to meet any of the
conditions of the loan commitment.
91. On or about May 4, 1990, defendant SYMINGTON submitted his December 31, 1989
personal financial statement to McMorgan to satisfy the condition of the loan commitment
that he provide an updated personal financial statement prior to the closing of the
permanent loan. The personal financial statement reported that defendant SYMINGTON's net
worth was approximately $11.9 million as of December 31, 1989, which was greater than the
net worth that defendant SYMINGTON had reported in his March 31, 1987 and November 1, 1987
personal financial statements that he had previously submitted to MH.
92. As defendant SYMINGTON well knew, his December 31, 1989 personal financial
statement contained materially false entries as described in paragraphs 7 through 14
above, and his net worth as of December 31, 1989 and May 4, 1990 was dramatically less
than $11.9 million.
93. After reviewing defendant SYMINGTON's December 31, 1989 personal financial
statement, McMorgan concluded that the pension funds had no option but to fund the
permanent loan. If McMorgan and the pension funds had known that defendant SYMINGTON's
December 31, 1989 personal financial statement substantially overstated his net worth, the
pension funds would not have made the Mercado permanent loan.
94. On or about June 27, 1990, based upon its review of defendant SYMINGTON's December
31, 1989 personal financial statement, McMorgan sent a letter to MDLP confirming that:
a. Defendant SYMINGTON's December 31, 1989 personal financial statement salified the
requirement of the loan commitment that defendant SYMINGTON provide an updated personal
financial statement to the pension funds prior to the closing of the permanent loan; and,
b. There had been no material adverse change to the financial condition of defendant
SYMINGTON since the loan commitment was issued in October 1987.
95. On or about June 29, 1990, defendant SYMINGTON signed a personal guarantee, in
which he guaranteed full repayment of the permanent loan. In the guarantee, defendant
SYMINGTON:
a. Falsely represented and warranted that his December 31, 1989 personal financial
statement was true and correct; and,
b. Falsely represented and warranted that there had not been any material adverse
change to his financial condition since December 31, 1989.
96. In fact, three days earlier, on June 26, 1990, defendant SYMINGTON had represented
to FIB that:
a. The "current depression in the real estate market" made it difficult to
determine "real asset value;"
b. Any evaluation of the value of his assets was "highly subjective;"
c. His December 31, 1989 personal financial statement was only a "best
efforts" evaluation of his financial condition; and,
d. The $791,000 in "readily marketable securities" listed on his December 31,
1989 personal financial statement were held in four trusts, each of which contained a
"very restrictive" spendthrift provision.
97. At the time defendant SYMINGTON made these representations to FIB, he was
attempting to convince FIB to defer repayment of the Mercado construction loan shortfall.
98. On or about June 29, 1990, the Mercado permanent loan closed. That day, the pension
funds distributed $10,000,000, approximately $7.2 million of which was paid to FIB. Most
of the balance of the permanent loan was disbursed between June 29, 1990 and July 1991.
USE OF INTERSTATE WIRES
99. On or about June 29, 1990, within the District of Arizona and elsewhere, defendant
SYMINGTON, aided and abetted by others known and unknown to the Grand Jury, for the
purpose of executing the above-described scheme to defraud, caused an interstate wire
communication and transfer of $10,000,000 from Security Pacific in Arizona, to the Federal
Reserve in California, and then to VNB in Arizona.
COUNT TWENTY-TWO NOT GUILTY
(18 U.S.C. ¤¤ 1951, 2)
100. The Grand Jury repeats and realleges paragraphs 1 through 6 and 80 through 98 as
if fully set forth herein.
ATTEMPTED EXTORTION OF THE PENSION FUNDS AND MCMORGAN
101. At all times relevant to this indictment, the pension funds and McMorgan were
engaged in interstate commerce and their activities affected interstate commerce.
102. At all times relevant to this indictment, Arizona State University
("AS") was a state university operating under a charter of the State of Arizona.
As a state operated institution, AS"s budget was funded and approved by the Arizona
Legislature.
103. On or about June 26, 1990, AS signed a five year lease with MDLP for space at the
Mercado. Under the terms of the lease, AS could cancel the lease at any time if the
Arizona Legislature failed to appropriate sufficient funds to make the lease payments.
From July 1990 through at least October 1991, AS was the largest tenant of the Mercado.
104. From the day it opened in May 1990, the Mercado failed to perform as projected,
and failed to generate sufficient income to make the monthly payments on the $10,000,000
permanent loan. Pursuant to the terms of his personal guarantee, defendant SYMINGTON was
responsible for repayment of the permanent loan, if MDLP failed to make monthly loan
payments to the pension funds as required by the loan agreement.
105. In May 1991, after defendant SYMINGTON became Governor, TSC asked McMorgan to
modify the terms of the permanent loan to accept smaller loan payments. McMorgan rejected
TSC's request, and informed TSC that McMorgan expected the loan to be kept current based
upon defendant SYMINGTON's personal guarantee.
106. Beginning in August 1991, MDLP failed to make its loan payments to the pension
funds as required by the loan agreement.
107. Between July 1991 and October 1991, defendant SYMINGTON, aided and abetted by
others known and unknown to the Grand Jury, did knowingly, willfully, and unlawfully
attempt to obstruct, delay, and affect interstate commerce by extortion of the pension
funds and McMorgan through the wrongful use of fear and under color of official right, as
follows:
108. Defendant SYMINGTON represented that he would take or withhold official action
that could result in, among other things, the termination of the AS lease, unless McMorgan
and the pension funds agreed:
a. To accept smaller monthly loan payments;
b. To release defendant SYMINGTON from his personal guarantee; and,
c. Not to file a notice of default and initiate foreclosure proceedings, or to delay
filing a notice of default and initiating foreclosure proceedings, notwithstanding MDLP's
failure to make monthly loan payments as required by the loan agreement.
109. Defendant SYMINGTON threatened to cause economic harm to the pension funds by,
among other things, threatening to cause the termination of the AS lease, and threatening
to steer away prospective tenants from the Mercado, unless the pension funds and McMorgan
agreed to defendant SYMINGTON's demands as described in the preceding paragraph.
COUNT TWENTY-THREE HUNG
(18 U.S.C. ¤ 152)
110. The Grand Jury repeats and realleges paragraphs 1 through 14 as if fully set forth
herein.
111. On or about September 20, 1995, defendant SYMINGTON filed for bankruptcy
protection in United States Bankruptcy Court for the District of Arizona in a case
entitled In re: J. Fife Symington III, debtor, case no. 95-8397PHXGBN.
112. On or about October 31, 1995, in the District of Arizona, defendant SYMINGTON
knowingly and fraudulently made material false statements under oath in relation to his
bankruptcy proceeding. Specifically, defendant SYMINGTON made the following statements
under oath during the course of a debtor's examination before the bankruptcy trustee and
defendant SYMINGTON's creditors, the underlined portions of which were false:
Q: Governor, is exhibit 341-04 (defendant SYMINGTON's December 31, 1989 personal
financial statement) a true and accurate statement of your financial condition as of
December 31, 1989?
A: I believe it is.
Q: Do you have any reason to believe that his was not an accurate statement of your
financial condition?
A: I believe that it represented an accurate picture of my financial condition.
Q: Now May 4th (1990), you indicated there by your signature that you still had a
positive equity in Van Buren Business Center for $400,000 correct?
A: That's correct.
Q: Was that an accurate statement of your equity value as of that point?
A: I believe it to be, yes.
Q: Any reason to believe that it was worth, significantly less than that?
A: Well it certainly turned out to be that way with most of the real estate in the
Phoenix community after the great depression, but at the time I believed that to be
correct.
* * *
Q: . . . You list as your equity interest in December 1989, and then again for May
1990, that your interest in Scottsdale Centre is a positive million dollars. Do you see
that?
A: Yes.
Q: Was that an accurate statement of that project's value to your personal financial
statement as of 12/31/89?
A: I believe that to be the case, yes . . . .
Q: Was that an accurate statement of that project's value to your personal financial
statement as of May 4th 1990?
A: I believe which -- when I signed the certification on my financial statements. I was
confirming that to the best of my belief and knowledge that these values were accurate
values.
113. As defendant SYMINGTON well knew, the underlined statements were false in that:
a. His December 31, 1989 personal financial statement was not true and correct and did
not fairly present his financial condition as of that date;
b. The value of his equity in the Van Buren Industrial Center as of December 31, 1989
and May 4, 1990 was, in fact, substantially less than $400,000; and,
c. The value of his equity in the Scottsdale Centre as of December 31, 1989 and May 4,
1990 was, in fact, substantially less than $1,000,000. |
