Judge refuses to unfreeze Alfred Villalobos’ assets
A state judge on Friday cited a long history of high-stakes gambling losses as a principal reason for denying a request from Nevada pension fund marketing intermediary Alfred R. Villalobos to lift a court-ordered freeze on his assets.
Villalobos, who attended the hearing but did not speak, is a central figure in state and federal investigations of the role of investment go-betweens at public pension funds. His assets were frozen, through a court-appointed receiver, as part of a fraud lawsuit filed against him by the California attorney general’s office.
Villalobos’ attorneys said he needed his assets unblocked to get the money he needs to defend himself in the lawsuit. But the state opposed the move, saying he is a heavy gambler and could lose the money betting.
The judge agreed. “This isn’t your normal type of gambler,” said Los Angeles County Superior Court Judge John H. Reid during a morning hearing in Santa Monica. “It’s highly improbable” that he would stop gambling.
This mirrors the attorney general’s arguments that the Incline Village, Nev., resident has a history of high-stakes gambling. He was “such a good customer that Harrah’s Casino provided a complimentary penthouse suite to him for 20 months” in Stateline, Nev., while repairs were being made to his mansion in nearby Zephyr Cove, the state said.
The judge said he was particularly troubled to find out that Villalobos ran up a $670,000 gambling debt with the El Dorado casino in Reno. “That’s more than I make,” he said.
The civil case against Villalobos, which seeks up to $70 million in restitution and $25 million in penalties, also names as a defendant Federico Buenrostro Jr., the chief executive of the California Public Employees’ Retirement System between 2002 and 2008.
The lawsuit alleges that Villalobos, aided by Buenrostro, lavished CalPERS officials with gifts, free trips and expensive entertainment to influence them to award billions of dollars’ worth of pension fund investments to his clients, including such major Wall Street private equity managers as Apollo Global Management. Villalobos was paid more than $47 million in commissions for his activities as a so-called placement agent. The suit also accuses Villalobos and his company, Arvco Capital Research, of fraudulently engaging in securities business without licenses.
Villalobos denied the accusations in the lawsuit, saying he took no money from CalPERS and did no harm to the pension system or its members. Wearing a dark pinstriped suit, Villalobos was visibly upset with the state’s allegations, at times shaking his head in disagreement during the proceedings.
His attorneys attempted to convey to the judge that the receivership is overly restrictive. One of his lawyers, Daniel S. Ruzumna, said the freeze on Villalobos’ possessions, such as bank accounts, 15 homes, a fleet of Bentley, BMW and Hummer automobiles and an extensive art collection, was “unprecedented” in California law.
“I don’t think there’s a basis to continue these onerous restraints,” Ruzumna said. “If you freeze all of a person’s assets, they don’t have enough money to survive.”
The judge, however, said that the receivership allowed Villalobos’ relatives to continue living in the homes. “I think that’s appropriate. It’s a concession that allows him to live a fairly normal life,” Reid said.
In the end, the judge said that the receiver, David Pasternak, should remain in place. The ruling, said Atty. Gen. Jerry Brown, allows the state to “now move forward to recover the millions of dollars Villalobos made as part of his fraudulent scheme to improperly influence public pension fund investments.”
When the proceedings wrapped up, Villalobos left the courtroom wearing dark sunglasses, refusing to speak to anyone other than the lawyers who flanked him.
“Obviously, the judge didn’t agree with us,” said Ruzumna, on his way out of the courthouse. “But hopefully he’ll see things differently next time.”
The next hearing is slated for Aug. 23 in Santa Monica.
The continuing scandal over alleged influence peddling by Villalobos and possibly other placement agents at CalPERS has spurred proposed legislation aimed at curbing gift giving and the payment of huge commissions by placement agents.
A CalPERS-backed bill that would require placement agents to register as lobbyists and ban fees that are based on a percentage on investment deals is slowly making its way through the Legislature in the face of strong opposition from the securities and banking industries.
On Friday, the bill, AB 1743 by Assemblyman Edward Hernandez (D-West Covina), was approved by the Assembly Appropriations Committee with Democratic support on a party-line vote. The measure now moves to the full Assembly.