Our Man for Madrid

President Bush wants real estate tycoon George Argyros to be America's next ambassador to Spain -- even though thousands of his tenants are suing him for allegedly bilking them out of millions of dollars.

| Fri Nov. 9, 2001 1:00 AM PST

George Argyros, President George W. Bush's pick to be the next US ambassador to Spain, breezed through his only appearance before congressional lawmakers. Only three members of the Senate committee reviewing his nomination showed up for the session on Oct. 31, and they asked only one question of the California billionaire.

Happily for Argyros, a Southern California real estate developer and landlord, that question was not in Spanish, a language he does not speak. More importantly, perhaps, the question had nothing to do with allegations of rent gouging which have followed Argyros for the last two years.

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Last September, the California Attorney General's office reached a settlement with the Argyros-owned Arnel Management Co. under which the firm was ordered to pay $1.1 million to tenants who claimed Arnel illegally withheld millions of dollars in security deposits. Some of those tenants are still suing Arnel for millions more.

The tenants' individual claims rarely exceeded more than a few hundred dollars, although one of the pending lawsuits is seeking $32 million in damages.

"If in fact everything that's been alleged is true, then it's a big deal," says Elizabeth Pierson, president of the non-profit Orange County Fair Housing Council. "It's a lot of money from a lot of people. We're talking about millions of dollars over the years."

The Senate Foreign Relations committee will vote on Argyros' nomination next week. Given the kind treatment he has received to date, his nomination seems assured. The sole question he was asked during the initial hearing was: "What is the most important issue you will face as ambassador to Spain?" Argyros replied: "The most important one is strengthening our continuing relationship with Spain and also work on terrorism issues."

Why didn't Argyros' questionable business practices come up? Committee spokesperson Lynn Weil said the senators had already been briefed on the issue and chose not to delve into it further.

"Staff members did their homework and informed members of the committee on the background of this case," says Weil. Prior to the hearing, she says, staff members had questioned Argyros about his legal troubles. By the time the hearing rolled around, says Weil, "the senators felt that there were no further questions to be asked." A spokesperson for Argyros said he would not comment until after the final vote on his nomination.

Argyros is best known as the former owner of the Seattle Mariners. In Republican circles, however, he is known as the man who raised a reported $30 million for Bush's campaign coffers. Rewarding campaign contributors with ambassadorial posts is a longstanding practice in Washington, and Bush seems unlikely to break with that tradition. So the fact that Argyros doesn't speak Spanish and has no diplomatic resume at all probably won't disqualify him.

Neither, it now seems, will the allegations of his tenants. In the fall of 1999, their complaints led to an investigation by the Orange County district attorney's office. The district attorney's report, leaked to local newspapers last winter, details a history of apparent gouging at all 19 of Arnel Management's properties, which together contain over 5000 rental units.

The report found that when the mostly low and middle-income tenants moved out, they were often charged hundreds of dollars for unnecessary repairs instead of getting their deposits back. James Trush, a lawyer representing four individual former Arnel tenants in two class action suits, says the company regularly charged tenants two or three times more than they actually paid contractors for services such as carpet cleaning and painting. Trush says Arnel even "had a bonus program that they paid to their maintenance people -- the more they charged, the more they earned."

The claims against Argyros' company are not limited to those involving the single deposit scam. One lawsuit alleges that Arnel's tenants received their utility bills from a shell company, created and owned by Argyros. The suit claims that the shell company added a $3 monthly service fee onto tenants' bills, levied illegal late fees and charged individual tenants for the utility costs of common areas, such as the manager's office.

Nor is it only blue-collar renters that have complaints about Argyros. In 1999, Argyros and several other defendants were fined $1.75 million for using improperly mixed concrete while building a development of luxury homes in Yorba Linda, Calif. Within a few years of their construction, the homes' cement foundations began disintegrating.

Through it all, Argyros has himself managed to stay out of serious legal trouble. The Orange County District Attorney's office filed criminal charges last December, but the district attorney himself -- who received a $1,000 contribution from Argyros' company, according to The Los Angeles Times -- ordered them withdrawn, claiming they had been filed by mistake while his office was still negotiating with Argyros. The investigation was briefly revived by the state attorney general's office, which ultimately negotiated the $1.1 million settlement with Argyros in September. Under the terms of that agreement, Argyros did not admit to any wrongdoing.

While his tenants keep up the fight in California courts, there is no indication Argyros will face a tough time in Washington. After the committee vote next week, Argyros' nomination heads to the full Senate. Argyros' wife, The Los Angeles Times reports, is already looking forward to dancing the flamenco.

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