The late Alfred Villalobos, the central figure in the CalPERS bribery case, always insisted he did nothing wrong and he didn’t owe the state of California a dime.
Now it appears Villalobos and his defunct company won’t be paying the state anything to settle civil fraud claims filed six years ago, officials connected with the case said Tuesday.
Even as a federal bankruptcy judge Tuesday approved the state’s $20 million settlement with Villalobos’ defunct company, it was clear that the Villalobos bankruptcy estate doesn’t have nearly enough money to make good on the state’s claim.
Alan Smith, attorney for the bankruptcy trustee overseeing Villalobos’ assets, said other claims hold a higher priority in the bankruptcy pecking order, including millions of dollars in lawyers’ fees and a federal income tax bill that could be around $2.5 million. Legal fees, tax debts and claims held by creditors with security, or collateral, get paid ahead of unsecured claims such as the state’s.
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Smith added that it didn’t help that Villalobos’ fortune, which Villalobos once estimated at $62 million, wound up being worth considerably less.
“The value was probably overstated,” Smith said in an interview after the brief hearing in U.S. Bankruptcy Court.
Former Attorney General Jerry Brown sued Villalobos, his company and former CalPERS Chief Executive Fred Buenrostro in Los Angeles Superior Court in 2010, claiming they defrauded the state by scheming to steer pension investments to Villalobos’ clients.
Buenrostro settled his portion of the lawsuit in February by agreeing to forfeit $250,000 in five yearly installments, set to begin after he completes his prison term. Buenrostro pleaded guilty to criminal charges of taking bribes from Villalobos and is expected to receive up to five years in prison when he is sentenced May 18 in U.S. District Court in San Francisco.
Villalobos shot himself to death at a Reno gun range in January 2015, shortly before he was scheduled to stand trial in the criminal case.
Brown’s successor, Attorney General Kamala Harris, continued to pursue the civil lawsuit even though Villalobos was dead and his company, Arvco Capital Research, went out of business years earlier. The $20 million settlement was disclosed in court papers a month ago.
“Californians deserve accountability for public corruption, and the DOJ (state Department of Justice) is tasked with investigation and prosecution of these abuses to the full extent of the law,” said Rachele Huennekens, spokeswoman for the attorney general’s office.
In approving the settlement, U.S. bankruptcy Judge Gregory Zive acknowledged that no money is likely to change hands. “There’s not going to be a distribution in all likelihood” to unsecured creditors such as the state, he said.
The settlement includes an injunction against Villalobos and Arvco prohibiting future fraudulent behavior, which the judge said carries “absolutely no materiality” because of Villalobos’ death and Arvco’s demise.
Villalobos and Arvco filed for bankruptcy in Reno shortly after the state filed its lawsuit. In his bankruptcy papers, he claimed to own $29 million worth of real estate and another $33 million in other assets. But those assertions proved hollow as properties began to be liquidated. His $10 million Lake Tahoe mansion, for instance, fetched less than $2 million in a “short sale” that generated no money for the bankruptcy creditors.