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Police issue search warrants for five sites in three counties in connection with Milwaukie homeowner involved in local property line dispute

PMG PHOTO: JAIME VALDEZ - Mortgage broker Charles Arnell, whose Milwaukie property, above, drew controversy and headlines earlier this year, now is under investigation by the Oregon State Police under suspicion of operating a marijuana grow operation that allegedly is shipping to other states in violation of state and federal law.

A property that's been in the news over a neighborhood dispute in Milwaukie now has become part of a police investigation encompassing Multnomah, Washington and Clackamas counties.

Last year, mortgage broker Charles Arnell, husband of a prominent Portland jeweler, complained to the Milwaukie City Council that people were trying to "case" his house for burglaries in the Island Station neighborhood. He was responding to neighbors' concerns that the couple had encroached onto city parkland.

Weeks later, his wife, Judith, filed for a stalking order against a neighborhood activist who'd been walking in the city's Spring Park Natural Area near their property, trying to highlight the property line. She'd even included photos taken of the activist, Milo Denham, using a surveillance camera affixed to the top of a flagpole in their backyard. A judge characterized the stalking order as a misguided abuse of the process.

Now, Charles Arnell is among several residents under investigation by the Oregon State Police under suspicion of operating a marijuana grow operation that allegedly is shipping to other states in violation of state and federal law, documents show. His wife, who filed for divorce on Sept. 4, is not implicated in any wrongdoing, according to the records.

Arnell, contacted by the Portland Tribune, said he couldn't comment on the pending matter other than to say any police attention is misguided. "There's proper licensing for hemp and everything else, so they're way off-base. I have licenses," he said.

Arnell has not been arrested or charged, though he and several associates were searched and their cell phones' information extracted. Though no marijuana was being grown there, several computers were confiscated by police from the Arnells' luxury home on Southwest 18th Avenue, with a view of Elk Rock Island, as was a money counting machine, records show.

PMG FILE PHOTO - Charles Arnell testifying at public hearing.

Police and local prosecutors declined to comment other than to confirm the investigation is ongoing.

The case provides a close-up view of how, despite the legalization of marijuana for personal recreational use, police are still trying to fight its illegal export to other states — including the execution of search warrants against five properties on Aug. 7, all associated with the investigation of Arnell. They were spread across Clackamas, Multnomah and Washington counties.

Export is big business

One of the arguments to Oregonians for legalization in 2014 was that the state would benefit from taxes it collects.

But a report released by a federally funded drug task force last year said Oregon produces far more marijuana than it uses, fueling massive, untaxed exports to states where marijuana remains illegal.

While local police have de-emphasized marijuana enforcement relative to the pre-legalization years, they still try to crack down on illegal exports.

And they are finding that legalization and medical marijuana are helping disguise some of the booming export operations.

In late 2018, Arnell came to their attention. A Portland Police Bureau informant told Oregon State Police that Arnell had been operating a marijuana export business since about 2012. The informant claimed Arnell makes "around $50,000 a month exporting marijuana from Oregon to New York, Florida, Utah, North Carolina and Georgia," according to a police report.

A warrant to Arnell's cell phone turned up text messages that appeared to relate to marijuana cultivation, such as "I couldn't find a big enough DD to clone at this time," which police said referred to Double Diesel, a variety of marijuana.

They followed him and tracked connections to several other alleged co-conspirators and properties, including several grow operations. They found additional evidence, too.

A warehouse owner sued Arnell in May after an apparent grow of some kind allegedly damaged the warehouse.

Still, another property was the subject of an application to grow hemp, but according to the Oregon State Police search warrant affidavit, this was "consistent with his modus operandi of using a seemingly legitimate business as a front for his illicit activities."

One property exhibited power consumption that was "15 times that of a similarly sized neighbor."

While another property, disguised as an auto body shop, has power usage "over nine times that of a similar company," according to the report.

Tumultuous decade

Charles Arnell co-authored a book on snowboarding and, in 2001 went into real estate. He founded Pura Vida Sprouts, Meridian Tree Farms and other companies.

The investigation, which neighbors have been buzzing about for weeks, is the latest chapter in a tumultuous period for Arnell and his wife.

Starting in 2007, he faced several lawsuits for unpaid debts. And he fought cancer.

In 2011, he filed for Chapter 7 federal bankruptcy in the U.S. Bankruptcy Court for the District of Oregon, reporting assets of an estimated $1.64 million and liabilities of $5.05 million, court records show.

At the time, he owned seven properties, of which he foreclosed on five, according to research by the Oregon State Police. Beginning in 2012, Arnell began purchasing property again, including two properties that police suspect were used for the alleged export operation, according to the police report.

Police argued in reports that Arnell might have committed "racketeering" by reinvesting the proceeds from marijuana into properties used to grow it.

In 2013, Arnell's wife sued KeyBank to block foreclosure on the building she owned that housed Judith Arnell jewelers in the Pearl District, only to have a federal judge throw out the case in June 2017.

In November 2017, Judith closed her jewelry store on Southwest Broadway downtown. In media accounts she blamed a decline in business on the number of homeless people in the area. She relocated her business downtown in 2018.

Arnell's wife did not immediately respond to a request for comment. There's no indication she was aware of the alleged export business.

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