CalPERS Official Responds to Fraud Charge

By CATHY BUSSEWITZ
|  Monday, May 10, 2010  |  Updated 5:00 PM PDT
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CalPERS Official Responds to Fraud Charge

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The California Public Employees' Retirement System building in Sacramento, California July 21, 2009. CalPERS, the state's public employees retirement fund, reported a loss of 23.4%, its largest annual loss.

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A former official accused of awarding kickbacks for steering investments made by California's giant pension fund denied fraud allegations against him in a statement Monday.

      State Attorney General Jerry Brown sued Alfred Villalobos, a former member of the California Public Employees Retirement System's board, last week.
     
The civil lawsuit alleges that Villalobos and his company operated without a license when it received at least $47 million in fees for steering CalPERS investments to its clients, and it also set up a system of kickbacks and gifts that included around-the-world trips and a Lake Tahoe condominium.
     
In a statement issued Monday by his attorney, Villalobos denied the charges and said he would be vindicated once the facts come out.
     
"We vigorously deny the allegations made in the California attorney general's complaint," said the statement attributed to Villalobos and his company, ARVCO Capital Research LLC. It was issued by Patterson Belknap Webb & Tyler LLP, the law firm representing the two in the case.
     
The law firm said it has been cooperating with the attorney general's office and other federal and state regulatory agencies since it heard of the investigation.
     
"We are very disappointed that the attorney general proceeded in this fashion, without permitting us to respond beforehand to these serious allegations and to clarify significant factual errors on his part," the firm said.
   
 Brown's office said it subpoenaed ARVCO and Villalobos for documents and testimony during the investigation. ARVCO produced documents, but Villalobos did not.
     
"Villalobos appeared but claimed his Fifth Amendment privilege, refusing to answer any substantive questions, and did not produce records requested from him," Brown's spokeswoman Christina Gasparac said in a written statement.
   
 Federico Buenrostro Jr., another former CalPERS official who was sued, has not responded to telephone messages from The Associated Press.
   
 Though the law firm does not represent Buenrostro, the statement said he also would be vindicated.
     
Villalobos was accused of promising a job and condo to Buenrostro for steering CalPERS investments to ARVCO clients while Buenrostro was still the chief executive of CalPERS.
   
 Brown filed the lawsuit as part of an ongoing investigation into placement agents, which are negotiators hired by money management firms to help them win business from investors. He is seeking to recover more than $40 million in placement agent commissions that Villalobos and ARVCO collected.
   
 Brown also received a court order to freeze Villalobos' assets, including two Bentley automobiles and 14 properties in multiple states, including Hawaii.
     

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