Alfred Villalobos, the central figure in the California Public Employees' Retirement System bribery investigation, has won and lost millions gambling in Nevada's casinos.
Now he's suing two of his favorite haunts for $600,000, demanding his money back.
The lawsuits, filed last week in U.S. Bankruptcy Court, are an outgrowth of the Lake Tahoe businessman's 2-year-old bankruptcy case.
Villalobos is trying to retrieve money he paid to the two casinos to settle gambling debts in April 2010, about two months before he filed for Chapter 11 protection.
Villalobos wants the Eldorado Hotel Casino in Reno to return $500,000. He wants $100,000 back from the MontBleu Resort Casino & Spa at Lake Tahoe.
If Villalobos wins, he doesn't keep the money. The funds would be distributed among his various unsecured creditors.
So why is he bothering to sue? Because he has little choice. A debtor has a legal obligation to make sure creditors are paid as much as possible and everyone is treated fairly.
He "has a duty to pursue those claims," said Henk Taylor, a Phoenix bankruptcy lawyer who isn't involved in the Villalobos case.
The two casinos declined to comment, and Villalobos' lawyer could not be reached.
The $600,000 is in play because of the timing of Villalobos' payments. Federal law generally frowns on debtors paying selected creditors fewer than 90 days before they file for bankruptcy. Villalobos paid the gambling debts 43 days before filing.
As it was, he still owed $4.6 million to a handful of casinos when he made his bankruptcy filing.
Villalobos sought bankruptcy protection about a month after California officials sued him for $95 million, accusing him of bribing CalPERS officials to win investment deals for his Wall Street clients. Also sued was Fred Buenrostro, former chief executive at CalPERS.
Villalobos' gambling habits figured into the state's lawsuit. A judge froze his assets out of fear that Villalobos would gamble away his fortune, leaving nothing for the state. The freeze was later lifted, however.
If he wins the $600,000 from the casinos, it would be added to the bankruptcy estate that is being divided up by creditors. Villalobos is selling off real estate, artwork and other assets to pay creditors.
The estate is worth anywhere from $11 million to $24.9 million, according to Jeffrey Hartman, an attorney for Villalobos' unsecured creditors.
California officials don't expect to collect anything from the bankruptcy. Instead, they're still pursuing the suit against Villalobos and Buenrostro, said Lynda Gledhill, spokeswoman for Attorney General Kamala Harris.
The two men have denied any wrongdoing. They were also sued two months ago, in connection with the same alleged bribery scheme, by the Securities and Exchange Commission.