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Ruling clears way for fraud suit against former CalPERS official

A bankruptcy judge approves a plan to liquidate the estate of former CalPERS board member Alfred J.R. Villalobos, who is accused of using gifts and trips to influence investment decisions.

December 31, 2011|By Marc Lifsher, Los Angeles Times
  • Alfred Villalobos, above, and former CalPERS Chief Executive Federico Buenrostro Jr. are accused of securities fraud, selling securities without required broker-dealer licenses and violating Californias unfair competition law.
Alfred Villalobos, above, and former CalPERS Chief Executive Federico… (Allen J. Schaben/ Los Angeles…)

Reporting from Sacramento — A federal judge has approved a plan to liquidate the estate of Alfred J.R. Villalobos, former board member of the California Public Employees' Retirement System, the state's biggest public pension fund.

The action by a U.S. Bankruptcy Court judge in Reno, Nev., ended an 18-month bankruptcy proceeding and cleared the way for the state to pursue a fraud lawsuit against Villalobos, who the state alleges plied pension fund officials with luxury trips and gifts to influence investment decisions.

Villalobos, who also served a short stint as deputy mayor of Los Angeles under Mayor Richard Riordan in the 1990s, was paid more than $47 million by private investment fund managers to help them win CalPERS business.

The judge on Friday approved a petition from Villalobos and three companies he controls to pay about $17 million to dozens of creditors, including lawyers, accountants, banks, the Internal Revenue Service and Lake Tahoe gambling casinos.

"This means there's finality to the bankruptcy," said Lynda Gledhill, a spokeswoman for California Atty. Gen. Kamala D. Harris. "It's caused us some delay, but now we can continue our lawsuit in state court."

The state's complaint accuses Villalobos and former CalPERS Chief Executive Federico Buenrostro Jr. of committing securities fraud, selling securities without required broker-dealer licenses and violating California's unfair competition law.

A trial for Buenrostro, who retired from government service in 2008 and became a business associate of Villalobos, has been set for May. Villalobos' trial is expected to start later in the year.

The California attorney general's complaint in the case against the two men and their companies seeks $95 million in civil penalties, the return of profits and payment of restitution to the pension fund.

According to the liquidation agreement, Villalobos no longer has access to those kind of funds. When Villalobos filed for bankruptcy in 2010, his assets included a Lake Tahoe mansion and 15 other residences, 21 bank accounts, a fleet of luxury automobiles, artwork and a collection of French Bordeaux wine.

Lawyers for Villalobos did not respond to requests for comment. Villalobos and Buenrostro have denied any wrongdoing.

Villalobos' activities as a so-called placement agent are also being investigated by the U.S. Securities and Exchange Commission and the Department of Justice, according to court records and an internal CalPERS investigation.

marc.lifsher@latimes.com

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