A Systematic Rip-Off

Three weeks ago, the Orange County district attorney's office officially filed—and then 30 minutes later, suspiciously withdrew—a massive consumer-fraud lawsuit against a company owned by powerful, Newport Beach real-estate developer George Leon Argyros.

With a net worth topping $100 million, Argyros is one of the most prolific contributors to conservative political causes in the county and, after donating untold millions of dollars to Chapman University, was named chairman of the school's board of trustees. But the man who travels in a chauffeur-driven Rolls-Royce, flies in personal jets and sails aboard a 100-foot private yacht is best known for his stubborn demand that Orange County build an international airport near residential Irvine. Not inconsequentially, the Detroit native is also a longtime acquaintance of, big contributor to and political adviser for Tony Rackauckas, OC's Republican district attorney.

DA spokesperson Tori Richards told other reporters that the decades-old relationship between Argyros and Rackauckas—both of whom have been active in the same local GOP circles since the 1970s—was not a factor in the case's puzzling disappearance from public view. In a moment of what might have been unintended candor, Richards did admit to The Orange County Register that the DA decided he wanted to give Argyros and his Arnel Management Co. additional chances to settle the case behind closed doors rather than in an open courtroom.

“This stinks,” said one source intimately familiar with the DA's office. “They are trying to make it look as if pulling the case was a routine, by-the-book action. That's highly doubtful.”

Argyros—who has from time to time popped up on Forbes magazine's list of wealthiest Americans—once owned AirCal as well as the Seattle Mariners baseball team. He did not respond to calls from the Weekly.

The Register's Bill Rams and Andrew Bluth, who broke the story on Feb. 6, reported that prosecutors found “thousands of incidents” in which Argyros' Arnel Management Co. illegally overcharged tenants for repairs, shortchanged them on deposit refunds or simply billed them for fictitious expenses. For example, during a six-month period in 1999, Argyros' company charged 406 Orange County tenants $193 each for painting apartments after they had moved out when the actual cost was $67. In another example, 564 tenants were charged an average of $84 for cleaning when the true cost was never more than $37.

In internal Arnel documents reviewed by Rams and Bluth, prosecutors in the DA's consumer-protection unit did not mince words about the case. They called the business tactic “a systematic rip-off.” The DA's investigators say they found evidence that Arnel Management Co.—which owns 18 local apartment complexes with more than 4,500 units—targeted tenants with Vietnamese names with additional charges. If true, that particular tidbit is ironic because Argyros' pet Republican candidates have historically used Vietnamese voters to maintain political power in Orange County.

In a May 1998 interview with the Orange County edition of the Los Angeles Times—a paper that has oddly still not bothered to inform its readers of the high-profile case—Argyros summed up his philosophy this way: “I have been focused always, from a business standpoint, on cash flow.”

Apparently, Argyros' cash flow has been at least partially dependent on questionable business practices. Steve Tran, a Vietnamese-born U.S. citizen who works in a nail salon, told the Weekly that for the past six months, Arnel Management Co. has sent him a monthly bill for $157, plus $83 in interest. Tran says he has never heard of Arnel or even Argyros. He has written letters asking the company to provide an itemization for the charges.

“I do not owe any money to Arnel Management Co.,” Tran wrote in January. “I have just spent the past three months trying to clear up all the wrong information on my credit report, and as of this date, the only bad mark on my report is from your firm.”

In response, Arnel has sent threatening form letters demanding that the debt be paid or Tran's

credit will continue to be marred. Nor has Arnel been cooperative in telephone conversations. Tran said the company's representatives repeatedly hang up on him after he has demanded an explanation.

“Those people are so rude,” said Tran. “They won't tell me what they are doing, or why they are doing this to me. I want them to either show me the real bills or correct my credit report. All they do is send me another bill. It is not fair.”

Jennifer Pearlstein, a former Arnel Management Co. collections-department employee, alleged that Vietnamese-Americans were targeted and were the ones most likely to pay the fictional bills without a fight. But Pearlstein said her job was to “try to collect extra money from as many tenants as possible,” regardless of ethnicity.

Pearlstein said Arnel's practices bordered on the absurd. “I remember we billed one guy hundreds of dollars for damages to his apartment,” she told the Weekly. “There was a long list of damages the company claimed the guy did. I remember this so well because the guy showed me a videotape of the apartment he made before he returned the key. The place was spotless, totally spotless. None of the claims on our list existed. Not one.”

Pearlstein quit after six months. “It was a horrible job,” she said. “A majority of the people never damaged their apartments. But that didn't matter. They still got bills. That was standard practice.”

Former Arnel tenants and other consumers who believe they have been screwed can leave a message at the district attorney's consumer hot line at (714) 347-8873. If Rackauckas' crew isn't helpful, call me at (714) 825-8433.

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