Former CalPERS Official Villalobos Denies Fraud Accusations

(May 11, 2010) — A former board member of the $209.1 billion California Public Employees’ Retirement System (CalPERS),  Alfred R. Villalobos, vows vindication after the fund’s suit alleged he and another former fund official engaged in a scheme to obtain business for investment firms, providing pension officials with luxury trips and other gifts.

While allegedly being courted by Villalobos, the suit claims that the then CalPERS CEO enjoyed $100,000 casino tabs, private jets, limousines and $200 bottles of champagne, among other lucrative gifts.

Villalobos criticized the state Attorney General Jerry Brown’s tactics in bringing the civil fraud lawsuit, according to the Los Angeles Times.

“We have cooperated with the attorney general’s office and all other federal and state regulatory agencies since we learned of this investigation,” Villalobos said in a statement, according to the LA Times. Villalobos defended both himself and his company, Arvco Capital Research, lambasting the allegations by Brown for being filled with serious and significant factual errors. However, Villalobos failed to explain the details of those errors and predicted he, his firm and Villalobos would be “completely vindicated.”

The lawsuit, which puts another spotlight on the the rise of placement-agent activity, alleges that Villalobos, hired by private-equity firms to secure CalPERS investments, and his company, Arvco Capital Research, obtained more than $47 million in unlawful commissions for selling about $4.8 billion of securities to CalPERS from 2005 to 2009. As a so-called placement agent, Villalobos used his connections from the pension board to help forge relationships with private equity investment managers on Wall Street, helping them win billions of dollars’ worth of deals with the largest pension in the US.

The suit seeks civil penalties, disgorgement of profits and restitution to state pension fund investors of $95 million from Villalobos and business associate Federico Buenrostro Jr., a former CalPERS chief executive also sued by the state.

Brown is seeking to recover the tens of millions of dollars in placement agent commissions that Villalobos and ARVCO collected — up to $25 million in penalties and $70 million in restitution to the CalPERS fund. The attorney general also received a court order to freeze Villalobos’ assets, including two Bentley automobiles and 14 properties in multiple states, including Hawaii, the AP reported.