Figure in Illegal State Fund Loan Agrees to Admit Extortion Guilt

A key figure in an illegal $50-million loan from the State Teachers’ Retirement System pension fund has agreed to plead guilty to two counts of extortion and will continue to cooperate with the government as a witness, the U.S. attorney’s office said Wednesday.

The defendant is Anthony J. Truex, a Beverly Hills lawyer who is charged with helping siphon off more than $1.5 million from the loan and passing a portion of it to Gilbert W. Chilton, former head of the pension fund.

Chilton disappeared in February, 1983, and is being sought by the FBI on bribery charges.

Truex was scheduled to enter his plea Wednesday but the court hearing was delayed because Truex was injured recently in an automobile accident.

Prosecutors indicated that Truex has been aiding them for some time. Truex was not indicted until January of this year, but court documents filed Wednesday showed that the plea agreement was worked out three years ago. A 1983 letter signed by Truex and his attorney, Gordon Rose, and by Assistant U.S. Atty. George L. O’Connell, calls for Truex to enter the two guilty pleas and for the government to protect Truex under the federal Witness Protection Program should his safety be endangered.

At the time, it was believed by the prosecutors and Truex that Truex was in danger. “It is understood that there are potential risks to Truex as a result of his cooperation,” the letter said.

But one of the prosecutors, Assistant U.S. Atty. David F. Levi, said Wednesday that the threat related to Truex’s possible testimony against Henry J. Raymond, a now-deceased convicted swindler who operated a small Colorado oil company, Txpacco Inc., that received the retirement system loan.

Raymond died of natural causes.

The complicated case involves allegations that Raymond agreed to pay more than $1.5 million to Chilton and Truex in return for their help in securing the loan.

Chilton engineered the loan with the help of state Controller Ken Cory when the two sat on a special retirement system investment committee. Cory, who announced last month that he will not seek reelection, has not been implicated in the criminal action.

The deal put together by Chilton and Cory in 1982 called for a $50-million loan to go to Txpacco, with $39 million of that invested in relatively safe government bonds to protect the state’s interest. The other $11 million was to be used by Txpacco to drill at least 14 oil wells in West Texas, with the state holding a partnership interest.

Cory defended the creative investment scheme on the grounds that the pension system could not lose money because the full $50 million will be returned when the bonds mature by the year 2009, but could in fact profit handsomely if the oil wells proved productive.

Since then, the oil company has defaulted on the loan.