D.A. Turns Over Argyros Case to State Atty. Gen.

Orange County Dist. Atty. Tony Rackauckas on Friday asked the state attorney general to take over a consumer-protection case against apartment owner George Argyros, a powerful Republican who supported his campaign.

The move comes more than two months after Rackauckas ordered his prosecutors to withdraw a lawsuit against Argyros’ company, Arnel Management Co., saying he wanted more time to negotiate an out-of-court settlement. The case involves claims by potentially thousands of tenants who say Arnel cheated them out of security deposits.

Rackauckas issued a statement Friday saying he was handing off the case “in order to ensure the perception of fairness.”

The district attorney had been widely criticized for his personal involvement in the case. Argyros and Rackauckas worked together against Measure F, which sought to stop a commercial airport at the former El Toro Marine base. The district attorney also accepted a $1,000 political contribution from Argyros’ company in 1998. Argyros was appointed this week to be ambassador to Spain.

Rackauckas assigned the case to a senior prosecutor in February, but negotiations failed to produce a settlement. The discussions hit a snag on several issues, particularly the $3 million in fines and restitution prosecutors were seeking, according to a source familiar with the case. At one point, Arnel attorneys accused Rackauckas of seeking a heavy fine to avert more criticism, the source said.

One former tenant welcomed the involvement of the attorney general.

“That’s real good; it eliminates a conflict,” said former Arnel tenant Terry Wiesner. “As soon as you hear somebody paid money to support someone, that raises doubts. I just feel better having an independent body handling it.”

Rackauckas denied that Argyros’ political support had any impact on his handling of the case.

“To suggest that a $1,000 contribution by somebody like Mr. Argyros would influence a decision in this case is ridiculous,” Rackauckas said.

It was unclear Friday how the district attorney’s withdrawal would affect the case. Attorney general spokesman Nathan Barankin said his office has already assigned an attorney to the case. Rackauckas vowed to work with state prosecutors to assure a smooth transition.

In addition to an expected lawsuit by the attorney general, Arnel faces a class-action lawsuit that could involve former tenants. The company allegedly kept security deposits for false and inflated claims.

Allan A. Sigel, a lawyer who filed a civil lawsuit against Arnel, said he hopes to work with the attorney general’s staff in seeking restitution for tenants.

“The conduct of Arnel Management was quite egregious. They took people’s money, representing they would refund it, and they didn’t give the money back and, in many cases, asked for more,” he said.

The attorney for Arnel could not be reached for comment.

Sigel said Rackauckas made the right decision in stepping aside.

“It would be poor public relations to pursue something against a person who contributed to his campaign,” Sigel said.