Case of the Reluctant D.A.

Complaints about the retention of security deposits make up 12% of the landlord-tenant calls received by the Fair Housing Council of Orange County, a private nonprofit agency that provides information about housing laws to both landlords and tenants. This amounts to more than 3,000 calls a year about security deposits alone. The state law governing security deposits is simple. Landlords may retain a tenant’s security deposit for unpaid rent, reasonable cleaning costs and damages beyond normal wear and tear.

So why do we receive so many complaints about security deposits from former tenants of apartments managed by Arnel Management Co.? The company, owned by George Argyros, has been accused by former tenants and an investigator for the Orange County district attorney’s office of stealing security deposits from tenants for bogus damage claims and excessive repair costs. Argyros is a major Republican party fund-raiser and was recently nominated by President Bush as ambassador to Spain.

Don’t most landlords at some time have a security deposit dispute with prior tenants? Probably. So why did the district attorney’s office investigate what is normally a civil dispute?

The differences are the number of complaints, the consistency of the complaints, the amount of money in dispute in each complaint and the total amount of money involved in this case. If you add up all the disputes, this case involves potentially millions of dollars allegedly taken from thousands of people over a 15-to 20-year period.

Over the years, the council received a disproportionate number of security deposit complaints from former Arnel Management tenants, and the amounts in dispute were consistently larger than other security deposit disputes. This by itself is not proof of wrongdoing, but it does raise concerns.

The Fair Housing Council addressed these concerns by providing complaining tenants with information about their rights under landlord-tenant laws and advised them of their option of resolving disputes through Small Claims Court and mediation. We also assisted former Arnel Management tenants with making complaints to the district attorney’s office.

The office investigated, according to a July 29 column in The Times by Dana Parsons, who interviewed Steve Douglass, the district attorney’s lead investigator in the case. Douglass said he believed the evidence warranted filing charges against both Argyros and Arnel Management but that Dist. Atty. Tony Rackauckas refused to include Argyros’ name in the complaint. The district attorney later withdrew the complaint against Arnel Management altogether, saying it had been filed prematurely.

This unusual procedure and the actions of Rackauckas should be addressed by the state attorney general’s office. According to the column, Rackauckas said the case had been filed in error when negotiations were not complete, and he ordered Argyros’ name removed because he did not believe the evidence warranted naming him. He also said he believed that including Argyros’ name would weaken the case.

Argyros contributed to Rackauckas’ 1998 political campaign. The issue now is, will Argyros and Arnel Management be held to the same standards as other citizens without political influence?

At this point, a class-action lawsuit for $96 million has been filed by former tenants based upon the same allegations originally made by the district attorney’s office.

Because there was a perception of a conflict of interest in the district attorney’s office, Rackauckas referred the case to the state attorney general’s office in April. Rackauckas should now cooperate fully and encourage the state to continue the investigation and resolve the case. The attorney general should also investigate whether the actions of Rackauckas were within the parameters of his job. Argyros should not be treated differently than any other person.

The guilt or innocence of Arnel Management should be left to the justice system. It is wrong to convict anyone based on media reports. We must keep an open mind, because the accusations have not been proved. On the other hand, the residents of Orange County have a right to have charges heard by a court if evidence exists as outlined in the complaint filed, then withdrawn, by the district attorney’s office.

In any event, Arnel Management should do the right thing now and agree to revamp their policy regarding security deposits, permit random monitoring of their files by an independent agency and ultimately provide restitution to former tenants.