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Loan Exec to Resign If Named U.S. Envoy

Ameriquest founder's vow to hand his empire to his wife to avoid conflict raises doubts.

September 16, 2005|E. Scott Reckard and Jonathan Peterson | Times Staff Writers

Roland E. Arnall took a small thrift and turned it into one of the nation's largest mortgage lenders. Now, the Los Angeles billionaire faces what could be an even tougher job: putting his wife in charge of his empire, and not talking business with her.

Arnall says it won't be a problem, promising in a government filing that he will resign as chairman of Orange-based Ameriquest Capital Corp. and give his wife, Dawn, control of his companies if he is confirmed as ambassador to the Netherlands.

The proposal is drawing skepticism from at least one watchdog group.

"I don't know how you can recuse yourself from a conversation with your wife," said Bill Allison, spokesman for the nonprofit Center for Public Integrity in Washington. "I've tried it, and it hasn't worked for me."

In his filing with the U.S. Office of Government Ethics, Arnall said his wife would become Ameriquest's chairwoman (she is now co-chair). Dawn Arnall also would assume the management and director posts he holds at five other companies, including RoDa Drilling Co., an oil company that paid him $101 million in dividends last year, according to the filing.

"During my appointment I will provide no service to any of the [companies], nor will I discuss the management or operations of any of these entities with my spouse," the 66-year-old Arnall wrote.

Allison said it "strains credulity" to believe that Arnall wouldn't discuss business with his 47-year-old wife.

"It's hard for me to imagine that she's not going to need or want to talk, at some point, to the person who previously held the job -- and that's her husband," he said.

The Office of Government Ethics has said the handoff would satisfy rules to prevent conflicts of interest, Ameriquest said in a statement, although officials at that department declined to make a public comment Thursday.

The Arnalls have emerged in recent years as among the leading financial backers of President Bush, California Gov. Arnold Schwarzenegger and Republican causes. The president nominated Roland Arnall on July 28 for the Dutch ambassadorship, which requires confirmation by the Senate. The Senate Foreign Relations Committee has not yet scheduled a hearing.

The committee is expected to question Arnall on the lending practices of Ameriquest Capital's subsidiaries, Ameriquest Mortgage and Argent. Together, these companies -- which evolved from a Long Beach thrift that Arnall founded in 1979 -- have become the nation's largest originator of so-called sub-prime mortgages for borrowers with bad credit or other issues that prevent them from obtaining lower-cost prime loans.

Ameriquest maintains that it adheres to a series of "best practices" to ensure fair treatment of customers, but it has repeatedly been the target of lawsuits involving charges of deceptive lending practices.

Without admitting wrongdoing, Ameriquest recently agreed to pay as much as $50 million to settle a class-action lawsuit representing borrowers in California and three other states, and it has earmarked $325 million to settle concerns raised by a task force of regulators from 30 states.

The company is privately held, and Arnall's disclosure to the government provides the first glimpse into his fortune.

In the 52-page filing, Arnall detailed extensive investments in apartments, hotels, oil, film production and other ventures, including two Boca Raton, Fla., businesses that distribute baby wipes and clip-on sunglasses. Real estate partnerships paid Arnall about $42 million in dividends in 2004.

The precise value of his holdings and earnings cannot be determined because the form asks for only a range.

His investments in Ameriquest Capital and five subsidiaries are each valued at more than $50 million, and each paid out more than $5 million in dividends last year. He also earned $1.5 million in salary.

He said he would continue to receive "passive investment income" from his investments if his nomination was approved.

Government officials such as ambassadors are barred from acting on official matters in which they have a private financial interest. Other rules prohibit such officials from having any earned income. However, the rules do not necessarily prohibit income on investments.

Most ambassador nominees are approved without a battle, but there have been noteworthy exceptions.

Most recently, the nomination of John R. Bolton as ambassador to the United Nations met resistance from Senate Democrats, who questioned his fitness for the job. Bush ultimately gave Bolton a recess appointment without Senate confirmation.

In the late 1990s, the late Sen. Jesse Helms (R-N.C.) used his chairmanship of the Foreign Relations Committee to block a gay nominee for ambassador to Luxembourg (President Clinton ultimately bypassed the block with a recess appointment). In 2000 Helms derailed a nominee for ambassador to Kuwait who had worked for a general that Helms scorned.

In 1992, Sen. Paul Sarbanes (D-Md.) blocked Donald H. Alexander, a nominee of President George H.W. Bush, from becoming an ambassador because Sarbanes was concerned about a $100,000 donation that Alexander had made to the Republican Party around the same time he sought the diplomatic post.

The job at issue: ambassador to the Netherlands.

Peterson reported from Washington and Reckard from Orange County.

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