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Former CalPERS official accused of fraud vows vindication

Alfred R. Villalobos, who helped guide billions of dollars' worth of deals between investment firms and the state pension fund, criticizes attorney general's tactics.

May 11, 2010|By Marc Lifsher, Los Angeles Times

Reporting from Sacramento —

A former board member of the California Public Employees' Retirement System denied state allegations that he improperly provided gifts and gratuities to pension fund officials in wooing their business on behalf of investment firms.

Alfred R. Villalobos, who made more than $47 million as the go-between in billions of dollars' worth of transactions, also criticized state Atty. Gen. Jerry Brown's tactics in bringing the civil fraud lawsuit.

"We have cooperated with the attorney general's office and all other federal and state regulatory agencies since we learned of this investigation," he said in a statement for himself and his Stateline, Nev., firm, Arvco Capital Research.

"We are very disappointed that the attorney general proceeded in this fashion, without permitting us to respond beforehand to these serious allegations and to clarify significant factual errors on his part."

But Villalobos did not explain what those factual errors were.

Villalobos predicted that he, his firm and business associate Federico Buenrostro Jr., a former CalPERS chief executive also sued by the state, would be "completely vindicated."

The state prosecutor's office disputed Villalobos' assertion that he cooperated with the investigation.

Arvco complied with a state subpoena to produce documents, but Villalobos asserted his 5th Amendment privilege not to testify against himself, the attorney general's office said.

Villalobos refused "to answer any substantive questions and did not produce records requested from him," the attorney general's office said in a statement.

Villalobos, Buenrostro and Arvco are accused of engaging in fraud by lavishing pension fund officials with expensive gifts to influence their investment decisions.

The lawsuit seeks as much as $25 million in penalties and $70 million in restitution to the CalPERS fund.

The lawsuit also accused Villalobos and his firm of selling securities without a license. A Los Angeles County Superior Court judge froze Villalobos' assets, including bank accounts, real estate and luxury automobiles, and put them under the control of a court-appointed receiver. Such a step was necessary, the state argued, to prevent Villalobos from disposing of the property.

As a so-called placement agent, Villalobos used his connections, originally forged when he served on the CalPERS board in the early 1990s, to help Wall Street private equity investment managers win billions of dollars' worth of deals with CalPERS, the country's biggest government employee pension fund, the lawsuit said.

Villalobos' earnings came from "undisclosed and unlawful commissions" involved in the sale of about $4.8 billion worth of CalPERS securities from 2005 to 2009, the suit alleged.

Buenrostro, a Villalobos friend for 20 years, used his power and influence as CalPERS chief executive from 2002 to 2008 to assist Villalobos in pressuring CalPERS board members and staff to invest with Arvco's clients, the lawsuit said.

Buenrostro went to work as an Arvco consultant just a day after he retired from CalPERS. He was paid a $300,000 consulting fee and given title to a Lake Tahoe condominium formerly owned by Villalobos.

Buenrostro did not respond to calls to his residence in Zephyr Cove, Nev.

CalPERS declined to comment on Villalobos' statement.

marc.lifsher@latimes.com

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