Control Freak
DA report alleges ambassador-designee Argyros paid bonuses to employees who
ripped off tenants
by R. Scott Moxley
George Argyros is busy taking beginner diplomacy courses, struggling with
basic Spanish lessons, and likely dreaming of the day he’s sworn in as the
next U.S. ambassador to Spain.
But before Argyros packs for Madrid, the temperamental Newport Beach
businessman—who is worth between $600 million and $1 billion—may want to
ponder ways to survive what could be an ugly U.S. Senate hearing on his
nomination.
A previously undisclosed law-enforcement report obtained by the OC Weekly
unequivocally concluded that a "heavy-handed" Argyros personally directed a
massive, "systematic rip-off scheme" to defraud thousands of poor and
middle-class tenants who occupied nearly 5,000 apartments he owns in Orange
County.
Specifically, the report details evidence that the ambassador-designee:
•Rewarded employees with bonuses for illegally withholding security deposits,
overcharging tenants for apartment repairs and billing tenants for imaginary
expenses;
•Reprimanded employees when they did not defraud tenants;
•Angrily complained to top managers on at least two occasions that they were
not sufficiently padding tenant charges.
Argyros was also consumed—perhaps even neurotic—about money. According to
investigators, he once made an international call from his yacht in Greece to
an Orange County employee to see if one tenant had paid a $25 late fee.
Deputy District Attorney Wendy Brough, who wrote the detailed report after a
13-month investigation, did not mince words about Argyros’ behind-the-scenes
role."He is personally liable and should be barred [from similar business
practices] by injunction," Brough wrote.
Brough was skeptical about Argyros’ ability to reform himself. She noted "a
long history of violations dating to 1980," when Argyros paid a fine and
promised to reform his rental practices.
Since the scandal was first reported on Feb. 6 by The Orange County Register
’s Bill Rams, Argyros’ lawyers and associates have strenuously denied that
Arnel Management Co. has committed any crime. They have also argued the case
should not spur pesky inquiries into Argyros’ business practices while his
nomination is at a critical juncture.
But such sentiment appears hallucinatory. Congressional sources in
Washington, D.C., said the scandal could prompt the powerful Senate Foreign
Relations Committee, headed by Senator Joseph Biden (D-Delaware), to deem
Argyros unfit to serve in the high-profile overseas post. California Senator
Barbara Boxer, another Democrat, is also on the committee. Her office
declined comment, but sources say that Boxer and other senators have taken an
interest in the nomination.
No hearing date has been set for Argyros, who has no known diplomatic skills
but who has contributed several million dollars to Republican Party
candidates. Argyros’ supporters say he raised $50 million for George W.
Bush’s successful presidential campaign. (Argyros did not return calls for
this story.)
The Bush White House says it reviewed the backgrounds of all ambassadorial
nominees and was satisfied.
It is unlikely that the civil case against Argyros and his company will be
settled before Senate confirmation hearings. That’s owing to the case’s
tortured history. DA investigators completed their first draft of the suit
against Argyros in December. But their boss, Orange County District Attorney
Anthony J. "Tony" Rackauckas, an Argyros pal and close political ally,
ordered Brough to rewrite the suit, this time without naming Argyros
specifically.
"To remove his name from the complaint is totally inappropriate, totally
outside the normal procedure in a case like this," said Stephen Douglass, an
investigator who has since left the DA’s office. "Everybody [on the case] was
very upset."
Nevertheless, the staff obliged Rackauckas, redrafted the suit, and on Feb.
1, officially filed it in the county courthouse. But then Rackauckas
intervened again: in an unprecedented move, the DA pulled the suit 90 minutes
after it was filed and ordered it removed from public inspection. His
explanation: the investigation was incomplete.
The case against Argyros might still be secret if not for the anonymous
source who leaked it to the Register. Publication of the suit there led
Rackauckas to refer the case to state Attorney General Bill Lockyer. While
the attorney general’s office investigates, private attorneys have filed
three separate civil suits on behalf of Argyros’ former tenants. One of those
suits reportedly seeks damages of $96 million.
Ex-investigator Douglass says it’s possible the months-long delay in filing
the DA’s case was Rackauckas’ way of protecting Argyros’ pending
ambassadorial nomination.
"Tony was doing a lot of favors for Argyros in the case," Douglass said. "We
were told to wait, wait, wait. We were always puzzled by the delays. And then
we heard about the nomination for the first time, and we said, ‘Bingo.’"
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www.nytimes.com
June 28, 2001
Emergency Agency Flight Draws Criticism
WASHINGTON, June 27 — Joe Allbaugh, the director of the Federal Emergency
Management Agency, turned a routine business trip to Florida and Puerto Rico
last week into a controversial $340,000 flight on one of the nation's most
sophisticated flying command centers, designed for use in national
emergencies.
On June 19, Mr. Allbaugh flew aboard the plane, a customized military version
of a Boeing 747 known as the National Airborne Operations Center (NAOC), from
Washington to Miami and San Juan, P.R. The purpose of the trip was to tour
the National Hurricane Center in Coral Gables, Fla., and to meet with the
governor of Puerto Rico.
The agency's director is authorized to use the airborne command post to
oversee response to disasters and to provide communications when ground links
are destroyed by fire, flood or wind.
The director is encouraged to accompany Air Force personnel on a regularly
scheduled training mission to familiarize himself with the plane's
operations. But past directors have not ordered special missions for that
purpose, officials at the agency and the Pentagon said.
The plane is a close cousin of the "Doomsday Plane" to be used by the
president and top military officials to direct a nuclear war after the first
strike. Mr. Allbaugh's use of the aircraft, which is operated by the Air
Force, angered some career employees at the emergency agency, who discussed
the matter on the condition that they not be identified.
"People are upset about this at the agency," said one agency staff member.
"The feeling is that this was a blatant misuse of the plane and taxpayer
money."
Dorrance Smith, an agency spokesman, said that Mr. Allbaugh used the airborne
command center on his trip to Florida and Puerto Rico on the recommendation
of his staff. With hurricane season under way, Mr. Allbaugh's staff
recommended that the new director receive training on the communications
command aircraft quickly, Mr. Smith said.
The floods in Texas from Tropical Storm Allison this month added to the sense
of urgency for the director to be trained on the plane's capabilities, Mr.
Smith said. "It was my understanding that the staff recommended that the
director do this," Mr. Smith said. "He had been director for about 120 days,
and there was an urgency because he hadn't received the training yet. This is
something that he was told needed to be done sooner rather than later."
Mr. Smith said Mr. Allbaugh did not engage in any personal or leisure
activities while using the emergency aircraft, and used his time on board to
familiarize himself with how the agency would use the aircraft.
The agency considered charging the cost of the command post flight to
disaster relief programs for Puerto Rico, an agency official said.
Mr. Smith said the agency was debating how it would pay for the flight. He
said the agency would not charge Puerto Rican disaster relief programs, and
might seek to have the Pentagon pay. Pentagon officials said today that they
expected the agency to pay for it.
The criticism of Mr. Allbaugh's trip contrasts with the image he honed in
last year's presidential campaign, when he gained a reputation as Mr. Bush's
frugal enforcer while he was campaign manager. Among other things, he told
campaign workers to take cheap flights as they traveled around the nation. He
encouraged campaign staff members to share hotel rooms and had a reputation
for being stingy in ordering food for political and fund-raising events.
The devastation to South Florida from Hurricane Andrew in 1992 is cited as an
example in which the airborne command post would fit with the agency's
mission. Not only could an emergency agency team use the aircraft to
communicate on the way to the devastated area, but officials could use the
plane as a communications post and headquarters on the ground in the early
stages of disaster relief efforts.
Agency employees angry about Mr. Allbaugh's use of the plane contend that he
ordered his flight outside of the normal training schedule, thus saddling the
agency with hundreds of thousands of dollars in costs.
Under an agreement between the agency and the Joint Chiefs of Staff, the
emergency management agency has the right to use the command aircraft in
disasters, as well as for periodic training.
Normally, agency officials train on the plane at the same time that the air
crew conducts a training mission, with the Pentagon assuming the cost.
But Pentagon officials said that last week's flight was not a normal training
mission for the air crew, and the $23,542 hourly cost of the mission would be
billed to the disaster relief agency.
"FEMA exercises are normally conducted in conjunction with NAOC training
exercises," a Pentagon spokesman said, and paid for by the military. But the
spokesman said that last week's flight "was not conducted in conjunction with
a NAOC training exercise."
Pentagon officials said the agency's written request for the June 19 flight
indicated that it was not a training mission for the agency, either. The
request said the aircraft was needed by the relief agency in response to
natural disasters in Florida, Puerto Rico, Texas and Louisiana. A Pentagon
official said that the request stated that it was to be used as "a working
platform" by the agency.
Mr. Allbaugh was accompanied on the trip by about three staff members, Mr.
Smith said.
He said Mr. Allbaugh flew on the NAOC from Andrews Air Force Base to Miami
International Airport on June 19, and toured the National Hurricane Center in
suburban Coral Gables. That afternoon, he flew on the aircraft to a Puerto
Rican National Guard base in San Juan, and met with Gov. Sila M. Calderón and
Puerto Rico's emergency management director, Ileana Rivera.
Mr. Allbaugh stayed overnight, and on the next morning flew on a different
government aircraft to the Virgin Islands, where he toured an agency office.
He then flew back to San Juan, and from there went to Houston on a separate
Air Force plane.
The use of government aircraft by political appointees has sometimes been
controversial in past administrations.
In the Clinton administration, David Watkins, then the director of the White
House office of administration, resigned after he took a presidential
helicopter from Washington to play golf in Maryland.
The White House chief of staff in the first Bush administration, John Sununu,
came under attack for his use of government planes and limousines for
personal and political purposes.
