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Confirmation of Arnall Is Seen in Wake of Deal

January 24, 2006|Jonathan Peterson | Times Staff Writer

WASHINGTON — Monday's settlement of predatory lending allegations against Ameriquest Mortgage Co. removes the major hurdle that blocked company founder Roland E. Arnall from becoming U.S. ambassador to the Netherlands.

Arnall's confirmation is now expected, although the timing is not yet clear, congressional staffers said. The White House nomination has languished in the Senate since November, after the normally routine appointment flared into a heated partisan dispute.

Senate Democrats, led by Paul S. Sarbanes of Maryland, opposed Arnall as long as Ameriquest remained under investigation by the attorneys general and terms of an accord had yet to be spelled out. Monday's deal transforms the picture in his favor.

"Sen. Sarbanes has indicated that if Mr. Arnall would settle this matter with the attorneys general, he would not object to or seek to block moving forward on this nomination," Jesse Jacobs, a spokesman for Sarbanes, said Monday.

A similar sentiment came from other Democrats on the Senate Foreign Relations Committee. "Because a settlement was reached, Sen. Obama will not seek to block Mr. Arnall's nomination," said Tommy Vietor, a spokesman for Sen. Barack Obama (D-Ill.), one of Arnall's tougher questioners on the panel.

Still, a final roadblock remained late Monday. The Foreign Relations Committee moved Arnall's nomination to the Senate floor after a disputed vote count Nov. 1, so Democrats and Republicans still must settle a procedural tiff before the nominee gets final consideration.

President Bush nominated Arnall for the diplomatic post July 28, but the appointment became controversial as soon as Congress began to consider it and nearly split the foreign relations panel down the middle.

Arnall's backers lauded his personal story, including his success in building Ameriquest into a giant company and his philanthropic efforts, such as helping launch the Simon Wiesenthal Center, a human rights organization that preserves the memory of the Holocaust.

A resident of Holmby Hills, Arnall's personal fortune has been estimated at $3 billion by Forbes magazine.

Arnall, 66, also is known in Washington as an energetic political fundraiser. Once a major donor to former California Gov. Gray Davis, his more recent efforts have taken a Republican turn, and he has become a leading financier of Bush and GOP causes.

Arnall, his immediate family and companies raised more than $12 million for Bush and Republican activities, including the 2004 GOP convention, inaugural celebrations and the Progress for America Voter Fund, a group that produced attack ads aimed at Democratic presidential candidate John Kerry in 2004.

Yet if Arnall's fundraising put him on the radar screen for a Republican appointment, complaints about Ameriquest stood in his way.

Critics on the committee treated him gently -- "Let me say at the outset that you have a very commendable life story, and I have great respect for it," Sarbanes told Arnall at a congressional hearing in October -- but the states' complaints about unfair lending practices by Ameriquest hit a political nerve.

Ameriquest and its sister companies provide higher cost loans for borrowers with credit problems or other issues that prevent them from getting traditional mortgages. A growing number of Americans has been drawn into this marketplace, and claims that Arnall's employees used bait-and-switch and other practices to saddle borrowers with costlier loans than they expected made it difficult for some panel members to approve the financial magnate.

"All of this is what we call predatory lending," Sarbanes declared. "Preying on the lack of knowledge and inexperience of borrowers who are often on the low end of the scale."

The nomination stalled, as Democrats demanded that Ameriquest resolve its issues with the state regulators before they would award Arnall a ticket to the Netherlands.

In an interview last fall, Obama captured the sentiment of his peers -- and the dilemma facing Arnall: "I don't think it sends a good message that an ambassador to an important ally like the Netherlands has a cloud hanging over him."

During Arnall's Oct. 20 appearance on Capitol Hill, Obama also questioned whether it would be a "meaningful recusal" for Arnall to quit his positions at Ameriquest while his wife, Dawn Arnall, retained several top-level company jobs. Arnall said the arrangement met ethical requirements for an ambassador. He resigned his posts, including chairman of Ameriquest's parent company, ACC Capital Holdings Corp., soon after the hearing.

The state probe of his company remained Arnall's main problem with Congress.

Republicans, backed by the White House, were intent on moving Arnall's nomination forward, however. Senate Foreign Relations Committee Chairman Richard G. Lugar (R-Ind.) rejected Sarbanes' views and pushed ahead with a vote Nov. 1.

Just one lawmaker -- Sen. Chuck Hagel (R-Neb.) -- broke with his fellow party members. But that was sufficient to divide the panel in half. When the proxy ballots of absent members were counted, the tally came out to a 9-9 deadlock.

At that point, Lugar took the unusual measure of disallowing the absentee votes, leading to an 8-2 tally in favor of moving the Arnall nomination to the floor for a final vote -- where it has been bottled up ever since.

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