Figure in CalPERS corruption case apparently commits suicide

Sacramento Bee Jan. 14, 2014

SAN FRANCISCO

In failing health and facing up to 30 years in prison, businessman Alfred Villalobos apparently committed suicide before going on trial in connection with the bribery scandal at CalPERS.

Villalobos’ attorneys, appearing at a pre-trial hearing in U.S. District Court on Wednesday, disclosed that Villalobos died the day before. His death ends the government’s criminal case against the Nevada businessman –and largely closes the books on a corruption scandal that roiled the nation’s largest public pension fund.

Lt. Albert Snover of the Reno police department said Villalobos’ death is being investigated as a suicide. No further details were available.

Villalobos’ death leaves one matter outstanding in the criminal case stemming from the CalPERS corruption probe. The pension fund’s former chief executive, Fred Buenrostro, who has admitted taking more than $250,000 in bribes from Villalobos, is still scheduled to be sentenced in May for his crime.

Villalobos, 71, was in poor health for some time, although his lawyer Bruce Funk wouldn’t go into details about his client’s death. Funk had been preparing to ask the judge for a delay in Villalobos’ trial, set for next month, because of Villalobos’ illness. Instead, he told the judge that Villalobos was dead.

Funk wouldn’t comment on the suicide report.

“He had a prolonged illness that was quite painful,” Funk said after the brief court hearing. “He was very much looking forward to exonerating himself.” Villalobos died Tuesday afternoon in Reno, where he’s lived the past several years, Funk said.

Buenrostro declined comment about his longtime friend when reached by The Sacramento Bee. His lawyer, William Portanova, said Villalobos’ death “won’t have any effect on Fred’s case.” Buenrostro is expected to get a five-year sentence after pleading guilty last July to accepting bribes.

“Fred early on made a conscious decision to tell the truth...and that is unchanged,” Portanova said. “He’s a different man.”

Portanova added that Buenrostro has spent the past several months feeding prosecutors information about Villalobos and has been “instrumental in building the case” against the Nevada businessman.

Prosecutor Timothy Lucey, an assistant U.S. attorney, rushed out of the courtroom as the hearing ended and couldn’t be reached for comment afterward.

Villalobos was accused of bribing Buenrostro to gain favor for his investment-firm clients. An investigative report commissioned by CalPERS concluded that Villalobos’ bribes didn’t actually steer any pension fund dollars to his clients, but his work probably undermined CalPERS’ negotiators and enabled the investment firms to get more favorable deal terms. That likely cost CalPERS millions of dollars in additional management fees paid to those firms, said the report, written by Washington securities lawyer Philip Khinda.

Villalobos’ activities formed the cornerstone of a corruption case that rocked CalPERS when it unfolded in 2009. Its reputation damaged, the pension fund instituted multiple reforms, including a ban on commission payments to “placement agents,” such as Villalobos, who help investment clients do business with CalPERS.

Brad Pacheco, spokesman for the California Public Empoyees’ Retirement System, issued a terse statement Wednesday that didn’t mention Villalobos, who was a CalPERS board member in the early 1990s. Pacheco said CalPERS remains “focused on supporting law enforcement authorities as they pursue bringing to justice those who broke the law.”

Former Assemblyman Dave Elder, who represents some public employees unions before CalPERS, called Villalobos’ death unfortunate because the whole story won’t come out now. “It’s very unfortunate that this didn’t go to trial,” Elder said.

Years after leaving the CalPERS board, Villalobos returned to Sacramento repeatedly, representing Apollo Global Management and other big-name private equity firms seeking investment dollars from the big pension fund. His activities rankled some officials on the CalPERS investment staff but he cultivated key allies, including Buenrostro and longtime board member Charles Valdes, who died recently.

There was no evidence that Villalobos’ clients were aware of any wrongdoing.

Prosecutors said Villalobos gave Buenrostro more than $250,000 in bribes. That included $200,000 in cash, delivered at the Hyatt hotel across the street from the Capitol in 2007, and a $50,000 check to buy Buenrostro’s silence as investigators closed in.

In addition, prosecutors said Villalobos paid for Buenrostro’s wedding and took Buenrostro and Valdes on an all-expenses-paid junket to Europe and Asia in 2006. Buenrostro also admitted taking casino chips and other favors from Villalobos, who won and lost hundreds of thousands of dollars at Lake Tahoe casinos over the years.

Valdes was never charged with any wrongdoing.

Court records also show that Villalobos promised Buenrostro a job with his investment company, Arvco Capital, if he ever left CalPERS. The pledge was fulfilled shortly after Buenrostro, who had fallen out of favor with the CalPERS governing board, left the pension fund in mid 2008.

A video of the wedding, which took place at Villalobos’ Tahoe mansion, showed Buenrostro embracing Villalobos during the reception. But the last time the two men appeared together in court, they stood ten feet apart and pointedly didn’t look at one another. The occasion was a hearing in San Francisco last summer, during which Portanova announced that Buenrostro was prepared to plead guilty and testify against Villalobos.

Villalobos that day walked into court with the aid of two metal canes, and his breathing appeared difficult.

His lawyers, in court filings, have said Villalobos had been in poor health since 2011, with maladies that included a heart condition and neurological problems. His trial, originally set for last spring, was delayed because of health issues.

In a court filing earlier this week, Funk said Villalobos had been in and out of emergency rooms in recent months, and he wouldn’t be ready to go to trial as scheduled Feb. 23.

“Mr. Villalobos is not physically or mentally able to participate in his defense, or to even sit through a trial,” Funk wrote.

The Washoe County, Nev., medical examiner’s office hasn’t yet issued a death certificate or made a ruling on cause of death, said Rudy Bein, a supervisor in the office.

Another Villalobos lawyer, Sheila Van Duyne, said from her office in Reno that Villalobos was in “constant, relentless pain over the past year and a half.” She said the government’s prosecution “took its toll” on Villalobos.

“It greatly pained him,” she said. “He was being prosecuted for a victimless crime.” Villalobos leaves three children and several grandchildren, she said.

A former deputy mayor of Los Angeles, Villalobos became a Republican activist who was appointed to the state Personnel Board by then-Gov. Pete Wilson. He parlayed that appointment into a three-year term on the CalPERS board, ending in 1995.

Two years after leaving CalPERS, he turned up at the pension fund’s offices seeking an investment deal for a Texas financial firm. His role became controversial, but the deal was approved. According to court records, he earned most of his commissions during a three-year spree ending in 2008.

Authorities had been hounding Villalobos for several years. The state of California sued him and Buenrostro in 2010, prompting Villalobos to file for bankruptcy. The Securities and Exchange Commission sued both men in 2012 over alleged falsification of investment documents. Both cases remain pending.