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He earned $53 million opening doors to CalPERS money

Alfred Villalobos has spent years helping Wall Street players gain access to the California Public Employees' Retirement System's vast wealth. What he did for his fees is now part of a CalPERS probe.

November 03, 2009|Marc Lifsher

STATELINE, NEV. — When big investment firms want to tap public pension funds for money, they often put in a call to Alfred J.R. Villalobos.

From a modest office near Lake Tahoe's casinos, Villalobos has spent years helping Wall Street players like Apollo Management gain access to the vast wealth held by the California Public Employees' Retirement System and other funds.

By his own estimate, Villalobos netted his clients at least $16 billion in capital through 2005. His two firms have earned about $53 million in fees from investment funds that did business with CalPERS over the last seven years, records show, a sum that impresses even hardened veterans of state politics.

"I'm blown away by the amount of money he was paid," said former Assembly Speaker Willie Brown Jr., a former CalPERS board member. "Fifty million in seven years is a lot of money."

What exactly does Villalobos do for his paycheck? That question is part of an internal investigation CalPERS announced Oct. 14 and comes amid a broader investigation by state and federal authorities into the activities of intermediaries such as Villalobos in winning pension fund business.

With $200 billion in assets, CalPERS is the nation's largest public pension fund, responsible for ensuring steady retirement checks for 1.6 million state and local government workers, retirees and their families.

Aiming to bolster investment returns, CalPERS and other public pension funds have gone beyond plain-vanilla stocks and bonds in recent years to invest in private equity firms that put money into real estate, leveraged buyouts of companies, commodities and other so-called alternative investments.

Private equity firms compete for this money, which is why outfits including Apollo Management, Ares Capital Corp., Aurora Capital Group and others hire so-called placement agents such as Villalobos.

Using knowledge gained from his years as a state political appointee and CalPERS board member, Villalobos helps clients prepare their sales pitches and then lobbies pension investment staffers and board members to help close the deals.

"It obviously helped him that he knew the players," said J.J. Jelincic, a career CalPERS investment officer.

"As far as I can tell he has not done anything illegal. . . . He probably just used his influence with the board and senior management to help his client."

This year Villalobos burnished his golden connections by hiring former CalPERS Chief Executive Fred Buenrostro as a registered representative, a job that includes making client presentations to CalPERS officials.

"We have been friends for almost two decades," Buenrostro said of Villalobos. He declined to comment further.

CalPERS says it has not ranked placement agents by their volume of business, so it's not known how Villalobos stacks up against his rivals. But CalPERS board members were shocked to learn the size of the fees Villalobos raked in, board President Rob Feckner said Monday.

Feckner added that it was unclear why big firms such as Apollo needed placement agents, given their experience at dealing with pension funds.

Intermediaries like Villalobos can play a useful role in helping smaller private equity funds get a foot in the door at big pension funds like CalPERS, said Santa Monica pension consultant Michael Rosen. But Rosen also worries that the fees earned by Villalobos make it appear as if CalPERS makes investment decisions based on political connections.

"If that's what it takes, it's not right," said Rosen, a principal of Angeles Investment Advisors.

The 65-year-old Villalobos, who declined requests for interviews, has had a long career straddling business and politics.

After graduating from Whittier College in 1965, Villalobos went to work for the state and became active in Republican circles. By 1968 he had become president of the National Economic Development Assn., which lent government money mainly to Latino businesspeople as part of a Nixon administration effort to draw Latinos to the Republican Party.

In 1973, Villalobos established Arvco Capital Research and set up shop as a business consultant, helping minority-owned businesses win government contracts and serving on the board of several banks that focus on Latino customers.

"He was part of a GOP Hispanic group based out of Los Angeles trying to get in the system and be part of the political process," said Jeff Weir, an aide to former U.S. Sen. John Seymour of Orange County. "And since there weren't many Hispanics in the GOP at that time, they were a valuable conduit" to their community.

In 1993, newly elected Los Angeles Mayor Richard J. Riordan, a Republican, tapped Villalobos as his deputy mayor for economic development. Villalobos resigned five months later after a series of damaging disclosures in The Times.

The paper reported that Villalobos had declared personal bankruptcy in 1982, writing off $350,000 in debts instead of trying to work out a court-sanctioned repayment plan.

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