Roland Arnall, a subprime mortgage magnate who was once one of L.A.’s wealthiest residents, made a lot of promises before he died almost two years ago. Or so say those claiming to have heard them.
His widow, Dawn, isn’t so sure about what he may have promised. And the money to keep those promises might not even be in the estate, according to one lawyer.
The issue has come to the fore as squabbling over the estate has intensified.
A second lawsuit in the matter was filed Feb. 1 by Roland Arnall’s brother, Claude, who claims his brother’s estate owes him $101 million for buying out his half of a mortgage company. The first suit was filed in October by the Jewish charity Chabad of California Inc., claiming the estate owes it millions for construction of an Arnall Family Center because Roland Arnall pledged to bankroll it.
The lawsuits open a window to the world of Roland Arnall, his family relationships, business dealings and charitable activities. They depict casual meetings with handshake deals for gifts of millions and millions of dollars, and family lunches where business matters were discussed at length.
Alas, for recipients of his generosity, there doesn’t seem to be a signature on any dotted line.
“It’s not uncommon that people make commitments to their church or synagogue or immediate family members that don’t end up in writing,” said Marshall Grossman, who represents Chabad in its suit and who had represented Roland Arnall intermittently over three decades.
Claude Arnall’s attorney said that Roland Arnall had already paid off part of the money he had promised to his brother, which he says is evidence that Claude Arnall’s claim is authentic.
“These payments are pretty inexplicable if he wasn’t a 50 percent owner,” said Steve Kerekes, a sole practitioner on the Miracle Mile who is representing Claude Arnall in the suit and is a longtime friend of the Arnall brothers. “Of course, it would be nice to have a written contract.”
Roland Arnall, whose widow lives in Bel-Air Estates, was a pioneer of the subprime mortgage industry through his company, the former Ameriquest Mortgage. The company made billions in the subprime lending boom, and Roland Arnall became one of L.A.’s wealthiest residents.
But when Roland Arnall died in March 2008 at 68, his wealth had dwindled as a result of the collapse of the subprime industry.
Claude Arnall, who lives in a condo on Wilshire Boulevard in the Westwood area and now runs an Irvine-based mortgage lender, claims in court documents that the brothers founded Olympus Mortgage Co. in 2002, a wholesale mortgage lending company owned in an equal partnership. The Los Angeles Superior Court lawsuit alleges Roland Arnall agreed to buy out his brother’s stake in Olympus, an Ameriquest division, in 2004.
All parties concur that no written agreement exists. But Kerekes claims that the $27.4 million Roland Arnall paid to Claude Arnall proves the existence of the deal.
“If you don’t have a written contract, you can prove it from eyewitnesses, behavior of the parties and circumstances,” Kerekes said. “There are several eyewitnesses who worked at Ameriquest and Olympus and are aware of Claude’s ownership.”
An attorney for Dawn Arnall called Claude Arnall’s suit frivolous, and said that she will defend it vigorously.
“This claim, based on an alleged secret verbal agreement, is inconsistent with the facts and completely without merit,” Robert Sacks, a downtown L.A. trust and estate attorney, said in a statement to the Business Journal.
Chabad’s claims
Meanwhile, Chabad, a Jewish charitable organization that Roland Arnall championed for more than three decades, is seeking $17.5 million, the balance due on an $18 million pledge Chabad claims Roland Arnall made in 2004.
Chabad officials said Roland Arnall made the pledge when he asked the Westwood-based organization to build an Arnall Family Center on property it owns on Pico Boulevard in the South Robertson neighborhood.
Sacks has said there are no merits to Chabad’s claims.
Since the Chabad suit was first reported in the Business Journal in October, Dawn Arnall has asked a probate judge to disqualify Grossman from representing Chabad in the case.
Dawn Arnall claims that she had sought legal advice from Grossman after Chabad officials approached her about the alleged $18 million pledge, and Grossman told her that he would not represent Chabad in connection with the dispute.
Grossman dismissed Dawn Arnall’s efforts to get him thrown off the case as an often-abused litigation tactic.
“She suggests that she called me and asked me to represent her against my own client, Chabad, which I have represented for over 30 years. And she claims I agreed to do so,” Grossman said. “That is just sheer silliness, and I have every confidence that the court will recognize it as such.”
Both Dawn Arnall and Claude Arnall declined to answer questions for this article, referring the matter to their attorneys.
It’s unclear how much of Roland Arnall’s assets remained after the total collapse of the subprime mortgage industry.
Dawn Arnall’s attorney, Sacks, said the trust has more than sufficient assets to satisfy all legitimate claims.
But as the suits make their way through the courts, it’s possible that the assets could become public. Both Claude Arnall and Chabad have filed motions seeking an accounting of the trust, claiming they don’t believe the trust has the money to pay.
“The attorneys for Dawn Arnall have told me that there are no assets in the estate,” Grossman said.
Deal making
Roland Arnall and Claude Arnall are the sons of Eastern European Jews who fled to Paris during World War II. The Arnall family later moved to Canada.
Roland Arnall moved to Los Angeles in the late 1950s, and got his start in the financial services industry in 1979 when he founded Long Beach Savings & Loan, Ameriquest’s predecessor company.
During the next two decades, he built his mortgage lending empire. Considered a pioneer in subprime mortgages, he was an early user of computer programs to target potential customers. He founded ACC Capital Holdings, which served as a holding company for several of his subprime mortgage companies, including Ameriquest Mortgage Corp., Town & Country, Argent and Long Beach Acceptance Corp., each of which specialized in different areas of the subprime market.
According to Claude Arnall’s lawsuit, his brother had suggested in 2002 that they launch Olympus Mortgage Co., which acted as a wholesaler of subprime mortgages. Claude Arnall was running World Financial Services Corp. at the time, and Roland Arnall asked him to shut it down and instead oversee Olympus in exchange for 50 percent ownership.
Kerekes said that Dawn Arnall knew of the agreement between the brothers.
“She was present when it was discussed on numerous occasions, at lunches and dinner, both before Olympus was opened and while it was running,” Kerekes said.
Thanks to the subprime boom, Olympus grew from five employees to 350. It did more than $3 billion in business a year.
In 2004, Claude Arnall claims Roland Arnall agreed to buy his stake in Olympus for $50 million, plus $44.8 million in profits that had not been distributed to Claude Arnall at the time.
Before Roland Arnall’s death, Claude Arnall claims he received payments of $27.4 million toward the buyout. (The suit seeks $101 million because it includes interest on the unpaid amount.)
Building wealth
Roland Arnall landed on the Business Journal’s list of Wealthiest Angelenos in 2004 with an estimated net worth of $1.2 billion. In 2005, his fortune skyrocketed by 75 percent to $2.1 billion.
But in 2006, the Business Journal estimated that his net worth dropped by 14 percent to $1.8 billion as the subprime lending sector began its historic meltdown.
At the time, Ameriquest was facing accusations of predatory lending practices, and state prosecutors and lending regulators began investigating claims that Ameriquest overcharged and defrauded consumers. The company agreed in January 2006 to pay $325 million to settle the allegations without admitting any wrongdoing.
Roland Arnall’s campaign contributions to President Bush led to a U.S. ambassadorship to the Netherlands. But his Senate confirmation was delayed until his company agreed to the settlement. He went to his post in March 2006.
About that time, Roland Arnall allegedly told Claude Arnall “that money was tight because of the settlement that had been made with the various attorneys general,” and that he couldn’t pay the balance of the buyout until later.
Roland Arnall’s personal fortune continued eroding by the downturn of the subprime industry. In 2007, he fell off the Business Journal’s Wealthiest Angelenos list and ACC Capital Holdings, Ameriquest’s parent, was swallowed up by Citigroup Inc.
At the time of Ameriquest’s demise, Roland Arnall was in the Netherlands. He returned to California on a family visit in 2008, and then died shortly after he was diagnosed with throat cancer.
According to Claude Arnall’s suit, he met with Dawn Arnall and Phil Holthouse, who had been Roland Arnall’s tax accountant and a member of Ameriquest’s board, shortly after Roland Arnall’s death. Claude Arnall claims he wanted to know when he’d get the rest of the Olympus money. However, Dawn Arnall would not acknowledge the buyout agreement because he didn’t have anything in writing, the suit states.
Claude Arnall’s attorney, Kerekes, said the Arnall brothers had a close relationship, and that his client has wanted to resolve the matter.
“It was a tight-knit family, they all got along well,” Kerekes said. “When Roland passed away, and this money remained owed, Claude went to Roland’s wife and tried to settle it but they couldn’t resolve it. I would tend to believe she doesn’t want to pay it, but I don’t know her thoughts.”
