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Gambling debts send beleaguered former CalPERS board member back to Bankruptcy Court

Alfred R. Villalobos, who has been named in a state influence-peddling lawsuit, says he owes $5 million to Nevada casinos.

June 15, 2010|By Marc Lifsher, Los Angeles Times

Reporting from Sacramento — Alfred R. Villalobos, the former board member of California's giant public pension fund who has been named in a state influence-peddling lawsuit, has filed for bankruptcy protection, citing almost $5 million in debts to Nevada casinos.

It was the second personal bankruptcy in 28 years for the Nevada businessman who was deputy mayor of Los Angeles for five months in 1993 and a board member of the California Public Employees' Retirement System from 1993 to 1995.

Villalobos listed debts to seven casinos in Stateline, Reno and Las Vegas, as well as $1.1 million in unpaid legal fees, in a June 9 filing in U.S. Bankruptcy Court in Reno.

He did not return telephone calls to his Nevada office on Monday.

He has denied any wrongdoing and has vowed to vigorously fight the state's allegations.

According to court documents, he owes $1.4 million to Caesars Palace in Las Vegas, $1.2 million to Harrah's South Lake Tahoe, $1.1 million to Harrah's Reno, $375,000 to the Atlantis Hotel in Reno, $300,000 to Harvey's South Lake Tahoe, $235,000 to the Peppermill Hotel in Reno and $130,000 to the Eldorado Hotel in Reno.

In its lawsuit, the California attorney general's office accuses Villalobos of securities fraud and influence peddling in connection with his activities as a so-called placement agent, a sales intermediary who brokers deals between CalPERS and Wall Street investment managers.

In the lawsuit filed May 5, the state cited large wagering debts as a reason to put Villalobos' remaining assets under the control of a court-appointed receiver in California.

But his gambling debts are modest compared with what he could wind up owing the state of California as a result of the lawsuit.

Filed in Los Angeles County Superior Court, the suit is asking for as much as $70 million in restitution and an additional $25 million in civil penalties from Villalobos and his firm, Arvco Capital Research, both of Stateline, Nev.

The attorney general's office is opposing the Chapter 11 bankruptcy filing, arguing that Villalobos' assets, including 16 residences, 21 bank accounts, a fleet of luxury automobiles and artwork, should remain with a receiver authorized two weeks ago by a California judge.

"The interests of creditors would be better served by permitting the custodian to continue in possession, custody and control of the property of the debtor," the attorney general said in a brief Friday. "Unrefuted evidence" shows that "the debtor is a prolific gambler and during 2006 and 2007 reported gambling winnings and losses in the amount of tens of millions of dollars."

An initial hearing in the Nevada bankruptcy case is scheduled in Reno on July 19.

Three companies controlled by Villalobos also filed separate pleadings last week for protection from creditors under Chapter 11 of the bankruptcy code.

Over the last dozen years, Villalobos earned more than $50 million in commissions for helping investment managers, including private equity investor Apollo Global Management, close billion-dollar deals with CalPERS and other government pension funds.

The civil suit accuses Villalobos of operating without proper securities licenses and bribing state pension officials with lavish gifts, job offers, resort condominiums and luxury, international travel to influence pension investment decisions at CalPERS.

Former CalPERS Chief Executive Federico Buenrostro Jr., who was also named as a defendant, was the recipient of much of the largesse, the suit said. Buenrostro has also denied the allegations.

In court documents, both men have argued that Villalobos earned legitimate commissions for helping clients get opportunities to manage and collect fees by investing a portion of CalPERS' $200-billion portfolio.

They contend that Villalobos' fees, however large they might have been, were paid by the private investment managers and did not represent a drain on funds used to pay pensions to state and local government retirees and their families. The program has 1.6 million active and retired participants.

Villalobos is requesting federal bankruptcy protection to reorganize his and his companies' finances. The state counters that the move is a meritless legal tactic and that Villalobos doesn't have enough money to successfully emerge from bankruptcy.

Villalobos' bankruptcy is likely to go nowhere, said Ron Rus, a specialist in complex insolvency cases with the Irvine law firm of Rus Miliband & Smith.

"I'd be very surprised," he said, "if the receiver was removed from possession of the assets."

marc.lifsher@latimes.com

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