Administration January 3, 2004

AZ Court Holds Pension Waited Too Long To File Suit

March 1, 2004 (PLANSPONSOR.com) - The Arizona Supreme Court has upheld a lower court's ruling that Union pension funds waited too long to file suit seeking reimbursement for funds that were poured into a failed investment project with former Governor Fife Symington and his accounting firm.

Reported by

Eric Hazard

The high court agreed with the Court of Appeals, which early had ruled in favor of Coopers & Lybrand, the ex-governor’s accounting firm. Coopers & Lybrand argued that Union pension funds knew of their potential claims as far back as 1991, and by filing suit in 1998, had waited too long. The pension funds had argued that the deadline for filing suit should be waived because the accounting firm fraudulently concealed its alleged wrongdoing, according to an Arizona Daily Sun story.

The pension funds’ contention was later upheld by a bankruptcy judge that found that Symington provided the pension funds with false financial statements, denying him discharge of the debt. However, a deal between the funds and the former governor limits his liability to only $2 million.

As for the delay in filing suit, the pension funds admitted that they knew in 1991 that Coopers was Symington’s accountants, concluded that they might be dealing with fraud in connection with his financial statements but decided it would be imprudent to expend assets to independently investigate Symington’s financial condition. The appeals courts’ opinion also said the funds did not request any information from Coopers about its services until early 1996.

“The pension funds knew that they were injured when the Mercado loan went into default in July 1992,” the lower court’s ruling said. Further, the opinion said when the funds compared the 1991 compilation report prepared by Coopers with Symington’s earlier financial statement they knew they were the victims of fraud.

Even though the pension fund will not be able to recover the full $17.4 million investment they claimed was lost in the Mercado retail project in downtownPhoenix, there is still a separate suit pending againstWells Fargo Bank claiming that it played a role in their loss of funds. Originally, the pension funds provided $10 million for the project to a Symington-led partnership. The partnership later defaulted and the governor, who had personally guaranteed the loan, filed for protection from creditors in US Bankruptcy Court.