Did D.A. Give Argyros a Break in Tenant Case?

George Argyros may not be able to get to Madrid quickly enough. Somewhere in Washington, D.C., his nomination to be the next U.S. ambassador to Spain awaits a hearing date. Meanwhile, his Orange County property management company faces consumer-fraud allegations that could lead right into Argyros’ office.

If that happens, he can and should kiss his ambassadorship goodbye.

Against that backdrop, a classic political question begs to be answered: Did Argyros, arguably the county’s most influential political power broker, get an undeserved favor from Dist. Atty. Tony Rackauckas?

The question is a no-brainer to Steve Douglass, a former 30-year Downey Police Department supervisor, but most recently an investigator for the Orange County district attorney’s office. Douglass, 57, who quit the D.A.’s office in March, was the sole investigator in a 15-month consumer-fraud probe into allegations that Argyros’ company, Arnel Management Co., systematically withheld tenants’ security deposits.

Douglass says his investigation convinced him that Arnel, with Argyros’ knowledge, ripped off tenants for years. The investigation, conducted under veteran Deputy Dist. Atty. Wendy Brough, led to a civil complaint earlier this year that named both Arnel and Argyros.

Enter Rackauckas.

After reviewing the evidence, he ordered Argyros’ name removed. The case then was filed, but Rackauckas also reversed that action, saying the case had been filed prematurely--that is, before settlement talks had been exhausted. He then assigned a new negotiating team.

That was six months ago. Then, in April, Rackauckas sent the case to the California attorney general’s office, saying he was doing so to avoid the appearance of impropriety.

Although conceding that Rackauckas has the authority to take the actions he did, Douglass says they were unjustified and likely done for political reasons.

Rackauckas says Douglass isn’t an attorney and, therefore, isn’t qualified to assess his decision-making. He denies giving Argyros a break and agrees that the evidence Douglass gathered against Argyros’ company is strong.

Former Employee Raises Questions About Case

Douglass worked closely with Brough, whose tenure in consumer fraud dates to the mid-1980s. She could add much-needed perspective to this dispute, but she declined to comment, referring me instead to Rackauckas’ spokeswoman.

We are left then with Douglass and Rackauckas, and I spoke to both at some length last week. Each began by saying the same thing: They approached the case with a neutral eye toward Argyros, who is a major Republican Party fund-raiser and personal friend of President Bush. Douglass, in fact, says he didn’t know who Argyros was when he got the case.

“In the beginning, we realized that if all we had were tenants saying they got ripped off and Arnel Management saying ‘No, these were legitimate charges,’ how do you prove that?” Douglass says. “We knew that kind of case would never go very far.

“So we started talking to former employees and we were told it was systematically done. Some were surprised there hadn’t been legal action taken more quickly. Some said they quit because they couldn’t stomach what the company had done. There were few, and I mean very few, who felt that what the company was doing was honest.”

Douglass wouldn’t detail the evidence that he says implicates Argyros. “That decision [to name him in the complaint] wasn’t made early on, because we didn’t have enough evidence, but at some point during the investigation, there was enough evidence to convince us he should be charged, and he was named on the complaint.”

Douglass says it was obvious that because of Argyros’ high profile as a businessman, political figure and community activist, the decision was fraught with implications.

“If you don’t have enough to charge the owner of a company, you don’t charge him,” Douglass says. “If you’ve got enough, you do. After having the evidence and everybody [in the consumer fraud office] agreeing it should be done, and you do it and then you’re told to take the person’s name off the complaint, I’ve never seen it happen before and I’ve never talked to anyone who’d seen it happen before.”

He says Argyros’ attorneys refused to make counteroffers after the D.A.’s office indicated it would seek $5.3 million in restitution and fines. That, Douglass says, led to the filing of the complaint.

Douglass, who quit shortly after the controversy surfaced last spring, is in the process of moving out of California with his family. He quit mainly to spend more time with his ailing wife, and not over the case, he says.

D.A.: Evidence Didn’t Warrant Listing Argyros

Rackauckas says Douglass has misrepresented the situation.

His decision to remove Argyros’ name, he acknowledges, was one over which reasonable attorneys might differ.

Initially, Rackauckas monitored the case from afar, he says. If his office was considering naming such a high-profile person in a complaint, he says, he wanted to be sure the case was solid and winnable.

In the end, he says, he simply didn’t think the evidence warranted naming Argyros. “I’ve handled well over 100 cases, bringing them to trial as a prosecutor. And as a judge, I’ve seen another 300 to 400 in court,” Rackauckas says. “And I’ve seen strong evidence fade out in court. I felt we had a strong case against the company and it would weaken the case [to include Argyros]. As a matter of proof, it was not that strong against him; it was strong against the company and we could accomplish our purposes better by bringing it against the company.”

Rackauckas blames the filing of the complaint on a miscommunication in his office. He withdrew it, he says, because he wanted to avoid a protracted court battle. He won’t disclose the nature of any settlement talks under his supervision but says published reports that he was willing to settle for $100,000 are ridiculous.

Rackauckas insists that his terms would have included both restitution and a fine, as well as assurances the practices would stop.

Investigators and attorneys, he says, often disagree on the strength of the evidence.

Rackauckas insists--and Douglass concurs--that he has the authority to intervene in cases. Rackauckas says, for example, he signs off on all death-penalty cases in Orange County.

“I don’t have hesitancy in bringing a case against somebody,” Rackauckas says. “It doesn’t really matter to me who it is. We want to be careful to be sure those cases we bring are well-founded.”

Allan Stokke, who represents Argyros and his company, declined to comment. He says his clients are “trying to avoid trying this case in the newspapers.”

Readers can draw their own conclusions. I don’t know the details of the case Douglass put together, but I have a few thoughts.

State Attorney General May Uncover Answers

I’d expect Rackauckas to monitor a case like this. His decision to expunge Argyros’ name raises suspicion but isn’t, to my way of thinking, automatically improper.

Perhaps it is legally sound. And it must be said loudly that none of the evidence or witnesses Douglass put together has been subjected to cross-examination.

I feel as strongly, however, that Douglass’ remarks shouldn’t be dismissed out of hand. It’s telling, I think, that the only part of the investigation Rackauckas minimizes is the part implicating Argyros.

Douglass isn’t an attorney, but Brough is, and she, presumably, believed the evidence implicated Argyros because she filed the complaint.

We all want to know who’s right. Is Douglass talking out of school? Has our district attorney knowingly subverted justice by letting a powerful Republican Party figure off the hook?

We may never know, but a signpost down the road should help. The state attorney general’s office is reviewing the case. Its findings may clarify things.

Although the state attorney general’s office is run by a Democrat, Rackauckas, a Republican who would be up for reelection next year, says he trusts that the investigation will be fair.

A final thought: If one thing Douglass and Rackauckas agree on is correct--namely, that Arnel has systematically taken advantage of thousands of tenants over the years--people from Orange County to Washington, D.C., should ask hard questions about its owner.

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Dana Parsons’ column appears Wednesdays, Fridays and Sundays. Readers may reach Parsons by calling (714) 966-7821 or by writing to him at The Times’ Orange County edition, 1375 Sunflower Ave., Costa Mesa, CA 92626, or by e-mail to dana.parsons@latimes.com.