Official’s Past Includes Lawsuits, Bankruptcy : Business: L.A. deputy mayor concedes debt problems but says accusations of misconduct are groundless.

The man appointed by Mayor Richard Riordan to make Los Angeles more business-friendly has himself had a checkered business career, marked by a personal bankruptcy and the complaints of people who say he took advantage of them financially.

Alfred R. Villalobos, the city’s deputy mayor for economic development, was repeatedly sued by creditors until he declared personal bankruptcy in 1982. In filing, he wrote off about $350,000 in debts rather than attempting to pay his bills under court supervision.

He has been sued several times by business associates accusing him of fraud or other financial misdeeds, although no court has ever found him culpable of such misconduct.

Villalobos, 49, acknowledges his debt problems but says the accusations against him have been groundless--made by whiners unwilling to accept responsibility for life’s defeats.

“I know what it is to be successful and then fail,” Villalobos said. “I don’t think it’s fair for someone to hold me responsible for their personal business failures.”

Over a 10-year span in the 1970s and early 1980s, public records show that Villalobos was sued successfully by a dozen creditors--including banks, medical professionals, a lawyer, credit services and the Diners Club. Most of the debts were under $1,000; some eventually were paid.

Although Villalobos first made a name for himself as a consultant who could arrange Small Business Administration loans, one of the debts he walked away from in his bankruptcy was the $60,000 balance on his own SBA loan. He also did not repay $14,000 in student loans--including one from a bank for which he served as a director.

Another bank where he served as a director later foreclosed on his house.

Villalobos said in an interview that a U.S. Bankruptcy Court trustee told him he had no choice but to write off--rather than attempt to repay--his debts because he had “no proof of employment.”

But David Gill, the court-appointed trustee in the case, said Villalobos’ contention “makes absolutely no sense. . . . It doesn’t seem to be reasonable that such a conversation could have occurred.”

Riordan named Villalobos to the deputy mayor’s post in July, in part at the urging of Los Angeles City Councilman Richard Alatorre, who described Villalobos--someone he has known nearly 30 years--as “smart, a self-starter who is used to getting things done.”

The post is central to Riordan’s objective of returning Los Angeles to economic health by attracting and retaining business. Riordan wants to make the city more “friendly” to business by streamlining bureaucratic processes, such as obtaining permits; Villalobos says his job is to be an advocate.

Soon after his appointment, The Times reported that Villalobos had been sued in 1991 by a Lake Tahoe casino for running up $30,000 in gambling debts over a single weekend and failing to pay. The suit was dismissed in 1992 when Villalobos paid the debt 2 1/2 years after it was incurred.

Riordan, who top aides said was informed of the suit only after Villalobos became deputy mayor, stood by him.

Villalobos initially downplayed the episode, telling The Times that the weekend, on the New Year’s holiday in 1989, was an aberration.

But questions about his gambling had been raised in court before. In 1979 testimony in an unrelated debt-collection suit, Villalobos stated flatly: “I do not gamble.” In that same lawsuit, however, he testified that he had not visited Las Vegas in 1976; lawyers for his creditor produced the records of a hotel-casino showing he spent 20 days there that year.

In an interview for this article, Villalobos was asked to put his gambling in perspective. He said he was a sufficiently large gambler for casinos to repeatedly “comp” him--that is, provide him with free hotel services. But he said he had “pretty much” given up gambling after his big loss in 1989. He said gambling played no role in any of his business reversals.

In the resume he hands out, and in interviews with The Times, Villalobos has exaggerated or omitted key details of his past.

His resume, for example, leaves out his job as president of Cal-Financial Services, an ill-starred company that lost money during his tenure.

Villalobos also told The Times that he had been sued only three times, but public records show that he has been sued 18 times in Los Angeles and Orange County courts. Villalobos explained he was not counting creditors’ lawsuits. And he said he had gone to Loyola Law School for more than a year; a school spokesman said records show he attended for only three months. Villalobos said he would not dispute school records.

Although Villalobos stated that he personally gave contributions totaling the $25,000 limit during the 1992 election campaign, Federal Election Commission records say he gave less than $8,000 to all federal officeholders in 1991 and 1992.

“I didn’t mean that I gave the limit personally,” Villalobos said, explaining that he had been misunderstood by a reporter. “I think what I said is that I raised a lot of money.”

Villalobos has a reputation as an able fund-raiser among Latinos who support Republican causes.

He began in politics in 1964, working behind the scenes in a state Assembly race in Hacienda Heights, then moved on to consultant jobs in the Administration of Gov. Ronald Reagan. Within a few years, he had a top job in a private, nonprofit corporation that lent government money mainly to Latino business people as a key part of a Nixon Administration effort to draw Latinos to the Republican Party.

That is where Al Zapanta--a retired Atlantic Richfield Co. executive who, like Villalobos, is a prominent Mexican-American Republican--first became aware of him. Zapanta said he always has kept his distance because of Villalobos’ reputation for relying on political contacts to yield business benefits for himself.

“What has he ever done except raise money for politicians?” Zapanta said. “Ask him who he has developed economically.”

Villalobos, who dismisses Zapanta as an ill-informed critic he barely knows, ticks off several public-sector economic development efforts: his leadership of the Nixon-era nonprofit corporation, which he says taught Latinos to get government loans and contracts and help nonprofit organizations start profit-making subsidiaries; a 1970s stint on a federal advisory board, where he said he tried unsuccessfully to make job-training programs more accountable, and 1990s service on a county board, where he said he has tried to make child-support collections more efficient.

In private business affairs, he has marketed himself as someone with useful political contacts, according to his associates and his own resume. The list of personal references on that resume includes Gov. Pete Wilson, the state attorney general, three state legislators, two members of Congress, a former U.S. senator, a Los Angeles county supervisor and two Los Angeles City Council members.

“He really surprises me at the amount of people he knows in high places,” said George Ortiz, who hired Villalobos as a consultant last year to help a group of private California anti-poverty agencies expand. “He’s very connected.”

Villalobos has staged fund-raisers in his Tarzana home for, among others, former President George Bush and Wilson, who this year named him to a paid, part-time position on the state personnel board, which administers California’s civil service system.

Citing his business background, that board in turn named Villalobos as its representative on the governing body of CalPERS, the state’s public employees’ pension fund, which has assets of $80 billion. Villalobos has pledged to carve out a larger role for minority-owned firms in managing those assets.

Villalobos, an independent financial consultant before becoming deputy mayor, said he has mainly had satisfied clients in the private sector but that confidentiality understandings barred him from disclosing most of their names.

He mentioned several, however: Joe Sanchez, a founder of the Mexican-American Grocers Assn., who said Villalobos did a professional job in helping him buy a bankrupt sausage factory in 1983; a New York City financial consultant, now deceased, whom Villalobos said he trained, and a Los Angeles operator of parking lots whom Villalobos said he helped launch in business 20 years ago. The parking lot operator did not return calls from The Times.

A fourth, Jose Canchola--a Nogales, Ariz., McDonald’s franchisee who has gone on to become the city’s mayor--reported enthusiastically that Villalobos, in the early 1970s, had helped him on the road to becoming a millionaire by advising him how to buy his first restaurant and arranging the financing for others.

“He helped put me in the right direction,” recalled Canchola. “I have nothing but the highest regard for the man.”

Not all of Villalobos’ clients have been so pleased.

Consider Fred H. Massey, who said he was an engineer looking for a career change in 1978 when he met Villalobos.

Massey said he wanted to buy a Jim’s Burgers restaurant in South-Central Los Angeles and was negotiating with the owner, Robert E. Collins, when Collins suggested he could use the advice of an expert.

Collins, a locally prominent Republican who was also a Los Angeles airport commissioner, recommended Villalobos, who had sold him the restaurant on behalf of the previous owner the year before.

Massey wound up suing them both for fraud, claiming in a Los Angeles Superior Court lawsuit that they inflated the restaurant’s gross receipts--and thus the worth of the restaurant--by a factor of five, while concealing some restaurant debts.

“I was snookered,” Massey said.

In a settlement, he said, Collins agreed to a compromise on the price. Collins did not return phone calls from The Times, and the settlement documents are not in court files.

Villalobos disputed Massey’s account, saying he merely advised Massey on financing and never made any representations about what the restaurant was worth. Villalobos and Massey agree that Villalobos paid nothing in the settlement.

The year after the transaction with Massey, Villalobos arranged the last in a long string of big loans on which he earned tens of thousands of dollars in commissions for a commercial drapery company in Los Angeles, according to court documents. In short-term financing that Villalobos arranged for the company, a key employee of the firm, Betty Jaggars, pledged her residence as security.

Jaggars claimed in a Los Angeles Superior Court lawsuit that Villalobos told her that her residence would not be at risk, because the bank would merely hold--rather than record--its deed on her property.

But the bank did record the deed. When expected longer-term financing did not materialize, her company was not able to make its payments on the short-term loan. As a result, the bank foreclosed on Jaggars’ house.

At the trial, Villalobos denied promising Jaggars that the deed would not be recorded. A judge found in favor of Villalobos, who acted as his own attorney, ruling that Jaggars knowingly had taken a risk and lost.

At the same time Villalobos was arranging the loan backed by Jaggars, he became a consultant for Cal-Financial Services Inc., a La Habra-based company that formed partnerships of small investors to buy properties.

Villalobos was brought in to help the company buy a bank. Two attempts failed in 1979. The next year, Villalobos accepted a job as Cal-Financial’s president while it tried unsuccessfully to build a hotel near the Tucson, Ariz., airport.

Investors in the company said these episodes were the first in a series of financial reversals that led three years later to insolvency.

The company’s lawyer, Neal Falley, said he was surprised to learn that Villalobos had triumphed over his business reversals and succeeded to the point of being named a deputy mayor.

“I almost fell off the chair,” Falley said. “Did anybody do a background check? . . . I’m not saying he did anything illegal. But from a financial standpoint . . . he was all flash and no cash.”

Villalobos has acknowledged using Cal-Financial as a source of cash. In the less than two years he was associated with the firm, Villalobos spelled out in his bankruptcy filing, he accumulated $66,000 in unpaid, unsecured loans from its founder, Thomas Puderbaugh; $20,000 in unpaid, unsecured loans from Cal-Financial itself, and an unpaid loan from the firm of at least $50,000, secured by a trust deed that turned out to be worthless.

The last point became evident when the successor to Santa Ana State Bank, where Villalobos had been a director, foreclosed on his Hacienda Heights house in 1982, after he had struggled for years to keep up his mortgage payments.

At foreclosure, the house sold for only enough to pay back Santa Ana and an earlier mortgage holder. Cal-Financial investors got nothing.

In those days, Villalobos paid almost all his bills--even his car payments--in cash, he testified in one lawsuit, sometimes carrying thousands of dollars at a time. He got around town in a Cadillac limousine, often driven by a uniformed chauffeur.

Puderbaugh, Cal-Financial’s founder, said in later court testimony that he did not blame Villalobos for the company’s troubles. In fact, he said, he loved Villalobos like a brother.

But Puderbaugh testified that he feared for himself and his family if he talked about Villalobos’ financial affairs. Puderbaugh said he could not cite any specific statements by Villalobos that caused his fear. “I can only say that it’s indirect innuendoes regarding all kinds of political connections, Mexican Mafia connections,” he testified.

In a recent interview, Puderbaugh said that he was not referring to the prison gang by that name, but rather to something “like the Italian Mafia. . . . I think he knows people in that world.”

“That’s absurd, absolutely absurd,” Villalobos said in an interview at his City Hall office. “He’s a liar and a hypocrite. He tried to make me a scapegoat with his shareholders and investors. But they knew I wasn’t the problem. It was Tom.”

The year after he left Cal-Financial, Villalobos declared bankruptcy--a step he described as a humiliation that nonetheless was necessary so he could spend more time with his children.

Villalobos explained that he had taken custody of his four children following his 1974 divorce. “I basically junked my career,” he said. His debts grew huge, and he said he faced a choice of working long hours to pay them back or working less and spending more time with his kids. He chose the latter.

“I didn’t run my life thinking whatever I do is someday going to be headlines in the L.A. Times,” Villalobos said.

By 1986, his family situation had changed. At least two of his children were grown and had left home. And although he had adopted another, he was managing to get back on his feet. Public records show that he reopened his bankruptcy to write off some more old debts, then borrowed $304,000 to buy the 4,400-square-foot, five-bedroom house in Tarzana where he still lives.

The next year, Villalobos got involved in a massive government project--building the nation’s largest single-level mail processing center, a 74-acre complex at Central and Florence avenues in South-Central Los Angeles.

He told The Times that he was trying to help Lupe Yniguez, a drywalling contractor who was attempting to break into the big time.

But Yniguez, of Fountain Valley, told U.S. postal inspectors that after helping him get the $3-million job as a minority contractor, Villalobos turned on him, using a power of attorney to force him off the job. Then, Yniguez said, Villalobos ran up debts to the Internal Revenue Service in the name of Yniguez’s firm--debts for which Yniguez remained personally responsible.

“That’s kind of dirty,” Yniguez said in an interview.

Yniguez told postal inspectors he had retained Villalobos at the recommendation of an affirmative-action consultant, in hopes of qualifying for a performance bond. Villalobos instead persuaded Yniguez’s general contractor, J. W. Bateson & Co., to accept a letter of credit for $400,000. Then he brought in some associates--including David Lizarraga, head of the East Los Angeles Community Union--to back the letter by putting their own $400,000 at risk.

Yniguez told The Times that he carried through on a promise to pay the investors $100,000. He said Villalobos also got a document that gave Villalobos a power of attorney over Yniguez’s firm, A & Y Building Corp.

Soon thereafter, Yniguez told postal inspectors, Villalobos exercised that power to kick him off the job. Over the next few months, $235,000 in payroll withholding taxes went unpaid, and some drywallers’ paychecks began bouncing.

Even now, postal inspectors say they are not sure who caused these problems. They say their investigation into Yniguez’s allegations was short-circuited because A & Y’s files for the period could not be found.

Carpenters union officials and workers--who recall Villalobos arriving at the construction site only occasionally, but always in a limousine--also were puzzled by the bounced checks. They said they complained to Bateson on behalf of their members, but were told that Bateson was passing along payroll funds to A & Y. Why A & Y was failing to pay out those funds remained a mystery.

The postal inspectors who interviewed Yniguez never asked Villalobos what happened; they said they could not recall why. They said they were intrigued with Yniguez’s story. But it was a sidelight to their primary mission: finding out whether cost overruns in building the postal facility were justified.

Offering a far different account than Yniguez’s, Villalobos told The Times that Yniguez had run into trouble on the job right away. Bateson--not he--reacted by asking Yniguez to remove himself because of incompetence, Villalobos said, adding that Yniguez then put a manager in charge of day-to-day operations at the job site.

Villalobos and the manager, however, said Yniguez retained control over A & Y’s purse strings--although Villalobos said he could not remember whether he had the power of attorney Yniguez described that would have allowed him to exercise control.

Villalobos said he knew nothing about any bounced paychecks or failure to pay withholding taxes and had nothing to do with A & Y’s “business or their accounting or their financial matters.”

When Yniguez encountered trouble completing the job on schedule, Villalobos said, his only concern was protecting the $400,000 that he and his investors had put at risk.

Villalobos said he emerged from the experience with no profit. And contrary to Yniguez’s claim, Villalobos said Yniguez “never paid a dime” to the investors.

“If there was a victim here,” Villalobos said, “it’s me.”