BULL STREET – The art of the Con

Politics, the Good, the Bad and the Symington

Governor Symington was born into wealth; his great-grandfather was one of America’s classic steel barons.  Symington went to right schools, met the right people and did all the right things.  These included graduating from Harvard, and marrying Ann Olin Pritzlaff, none other than the heiress to the Olin fortune.  Although the story sounds pretty rosy, it was not. Symington’s previous wife got rid of him for being a n’ere-do-well who never held a job.  His mother and second wife were continually bailing him out of financial tight spots. Naturally, his Arizona gubernatorial campaign was based on his business expertise and his success as a real estate developer, which did not exist.  This, at a time when every loan that Symington had was already underwater and the only things keeping him alive were his fraudulent bank filings, his mother’s kindness, and his wife’s money. He adamantly  refused to answer questions relating to the details of his business during his campaign although he ran on it.

Symington was really a developer first and a politician second. He had gotten into deep trouble when the real estate market in Phoenix went south. In his anxiety to save the company he prepared financial statements that, to be kind, did not accurately reflect his financial condition.  Interestingly enough, Symington’s campaign treasurer, John Yeoman,  was a Coopers & Lybrand partner.  The Governor was pushing a state cost reduction program called State Long-term Improved Management (SLIM). The Governor’s Deputy Chief of Staff, George Leckie, was kind enough to let Coopers, through Yeoman, know exactly what the competition was bidding to get this contract. Coopers received illegal information that caused them to drop their bid by $440, 000, and not surprisingly, they won the contract.

In order to repay Symington’s kindness in rigging the bid for them, Coopers, started reducing the fees that Symington owed them, in effect creating a rather hard to trace kickback.  In spite of the cover-up, somehow or other, the District Attorney smelled a rat and began investigating the untoward situation.  It turns out that when the District Attorney started to question a Coopers’ secretary of Yeoman’s, she just couldn’t wait to tell the state government what was going on.  She gave them chapter and verse about what had happened. Through the secretary or through a quirk, the District Attorney also came up with a “spreadsheet that 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.” ([152])

When all was said and done, Symington bought the farm, Leckie and Yeoman were indicted, and Coopers coughed up almost $2 million. Yeoman died in a motor accident, and Leckie walked because once Yeoman died, there was no one to testify against him.

Talking about secretarial canaries, Symington also had a secretary who sang her little heart out at the first opportunity.  Her name was Joyce Riebel, and she indicated in her exuberant testimony that she kept a number of different financial statements in her drawer.  Each one contained information that was created to satisfy a different lender.  When one of the banks needed an updated financial statement, Riebel was instructed to mail out the appropriate statement to the requesting bank.  No two of the statements were ever the same and in court, Symington was proven to have given statements showing materially different net worth statements to every institution that he had borrowed money from.  

As a result of the open and shut case presented by Arizona Attorney General Janet Napolitano, Symington was convicted on seven counts of bank and wire fraud. He also resigned as Governor when the indictments came down. “Prosecutors alleged that Symington gave false personal financial statements to lenders to get millions of dollars in loans to fund his failing projects in the 1980s and early ‘90s. Symington prepared some of the statements and others were prepared or reviewed by his accountants. (Coopers & Lybrand) Symington contended that his inflated net worth and other mistakes in the documents were unintentional and should have been caught by Cooper’s accountants ([153])  We don’t feel that the Symington incident is going to teach us anything new about creative accounting and thus will not dwell on the matter.  This is an instance of pure greed and avarice on the part of the accountants and a real estate developer turned politician. We will close one of the most sordid episodes in this memorandum with a quote that seems to put everything in wonderful perspective.“

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 Dai-Ichi Kangyo Bank (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.”

In the, there ain’t any justice department, soon after Symington’s trial, he filled bankruptcy stating that he had maybe $50 - $60 thousand in assets against more than $25 million in liabilities. His mother died six month later leaving him tens of million of dollars in untouchable trusts. When Symington gets out of jail, whenever that may be,  he will once again be able to lead the good life.

Things worked out for Coopers as well. They hadn’t been doing to well and were able to arrange a last minute merger with our Pricewaterhouse that saved their bacon. I guess you can really say that crime pays big dividends.

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