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Key figure in CalPERS bribery scandal lived large, died leaving tangle of questions

Living like a high roller right to the bitter end, Alfred Villalobos had himself chauffeured to the shooting range where police say he killed himself last month, putting a bullet through his head.

The man accused of bribing the chief executive of California’s giant public pension fund was staying at the posh Silver Legacy Resort Casino in downtown Reno when he rode a chauffeured limousine Jan. 13 to an indoor shooting range on the outskirts of the city. Once there, he downed two cans of Red Bull purchased from a vending machine, rented a pistol and stepped into the range.

Villalobos, a stocky 71-year-old with jet black hair, fired more than 100 rounds at a silhouette target before shooting himself, according to an investigative report compiled by Reno police. He died a little more than a month before he was supposed to go on trial on bribery charges in California, where he was facing up to 30 years in prison.

Villalobos’ macabre demise effectively ended the federal government’s prosecution of the bribery case that shook the nation’s largest public pension fund – but left a tangle of questions about the finances of the man in the middle of the scandal.

Villalobos amassed great wealth from his dealings with the California Public Employees’ Retirement System, earning $50 million in commissions off the pension fund investments he brokered for his big Wall Street clients. But after the state of California named him in a civil suit in 2010, claiming he bribed his way to his millions, he filed for bankruptcy protection and watched as court officials systematically liquidated his treasures to pay his debts.

His Lake Tahoe mansion was sold, along with a vacation home in Hawaii. Out went the fancy wine collection and the multimillion-dollar art collection. Toward the end, Villalobos was getting by on just $1,800 a month, mostly from Social Security and Medicare, said Sheila Van Duyne, one of his lawyers.

“Everything he had went into the bankruptcy for his creditors,” Van Duyne said.

Yet he wasn’t living like a destitute man. Free on bond, Villalobos spent his final days at one of Reno’s grandest hotels, where he was accorded VIP treatment and had a limousine at his disposal. Long a heavy gambler, he was still wagering thousands of dollars a year at the casinos as recently as 2013, according to tax records filed in U.S. Bankruptcy Court. Up until a few weeks ago, he was living rent-free in a 6,400-square-foot mansion he once owned south of Reno.

“It seemed as though he was never really lacking for anything,” said Christina Lovato, the court-appointed bankruptcy trustee overseeing Villalobos’ finances. “It’s definitely a significant mystery as to what he was living on.”

Villalobos died owing millions to the Internal Revenue Service and other creditors. The Securities and Exchange Commission was suing him, joining the state of California in the line of parties pursuing Villalobos and his money.

Lovato said she isn’t sure if court officials have a complete inventory of the assets that can be sold to pay his debts.

“We’re investigating a lot of things,” she said. “We’re trying to dig as deeply as possible into what may be an asset of the estate.”

In particular, Lovato said she believes Villalobos illegally transferred a valuable asset – his turreted stucco mansion south of Reno – to keep it away from his creditors. This five-bedroom house, now vacant, sits on an acre and a half of land in the exclusive Saddlehorn development. Inside, Villalobos kept much of his artwork, a multimillion-dollar collection of paintings and sculptures. The place itself is worth $1.6 million, according to Zillow.com.

In a lawsuit filed in December, Lovato charged that Villalobos gave the property in November 2013 to his accountant, Daniel Apodaca of Pasadena. Villalobos agreed to this “fraudulent transfer” after Apodaca loaned him $194,000, she said in the suit. Apodaca then let Villalobos live there rent-free for several months.

Trouble is, the home was property of the bankruptcy estate, Lovato said. In effect, it belonged to Villalobos’ creditors. The trustee is demanding that the transfer be reversed and the property returned to the estate.

Apodaca is fighting the claim. In an interview, he said Villalobos, not the bankruptcy estate, owned the property and had every right to hand it over to him.

“It was all done above board,” Apodaca said in an interview. He said Villalobos moved out of the house around Jan. 1.

Rise and fall

Villalobos was an investment banker with a taste for politics. In his early career, he raised money for the California Republican Party, briefly served as Los Angeles’ deputy mayor and served on the CalPERS governing board from 1992 to 1995.

Two years after leaving the board, he was back working in Sacramento. He was a “placement agent” representing big private equity firms, such as Apollo Global Management, seeking business from CalPERS. He was stunningly successful: His clients obtained $4 billion in CalPERS funds in a few short years, and he earned millions in fees.

By 2010, he had amassed a personal fortune estimated in court papers at $62 million. There were assorted condo units and a second mansion, this one at Lake Tahoe, plus a four-bedroom vacation home near the ocean in Maui. He owned a pair of Bentleys and other cars worth a combined $400,000.

Villalobos, who was divorced, spent lavishly on his children and grandchildren, giving them $250,000 in cash gifts and tuition assistance in one 12-month stretch. He donated $100,000 to his alma mater, Whittier College, where he served on the board until 2010 and had a building named after him. He also blew through millions of dollars at the Eldorado, Peppermill and other casinos in northern Nevada.

His downfall began in early 2010. The state of California sued him, claiming that he had bribed then-CalPERS Chief Executive Fred Buenrostro to steer investment dollars to his Wall Street clients, and demanded he surrender tens of millions of dollars. The suit also named as a defendant Buenrostro, who served with Villalobos on the CalPERS board in the ’90s.

Officials said the bribes took many forms. Villalobos hosted and paid for Buenrostro’s wedding at the Tahoe mansion. He took Buenrostro and CalPERS board member Charles Valdes on a 2006 junket that featured stops in Dubai, Hong Kong and Macau. Valdes, who died last fall a few weeks after his live-in boyfriend was accused of beating him, was never charged with any wrongdoing.

Villalobos also promised Buenrostro a $300,000-a-year job with his firm, Arvco Capital, if he ever left CalPERS, according to the lawsuit. The pledge was fulfilled when Buenrostro left the pension fund in May 2008 after falling out of favor with the board.

Villalobos denied any wrongdoing. But the lawsuit prompted Villalobos and his companies to file for bankruptcy in June 2010. His legal troubles were just beginning. He and Buenrostro were sued by the Securities and Exchange Commission, and then a federal grand jury in San Francisco indicted them on charges of forging documents.

The pressure on Villalobos only got worse last July. Buenrostro made a plea bargain with federal prosecutors. In return for what’s expected to be a five-year sentence, he admitted to a sweeping array of crimes that went far beyond forgery. Buenrostro said he accepted one bribe after another to help Villalobos win CalPERS’ business for his clients.

Buenrostro’s plea agreement included a bombshell: In 2007, he said, Villalobos gave him $200,000 in cash, delivered in paper bags and a shoebox at the Hyatt Regency near the Capitol in Sacramento. Three years later as investigators were closing in, Buenrostro said, he accepted another $50,000 payment from Villalobos to buy his silence.

‘Ready to be exonerated’

Even as his legal problems mounted, officials said Villalobos seemed to keep up his lifestyle. Lovato, the bankruptcy trustee, said in an interview that Villalobos “wasn’t necessarily living pursuant to a budget.”

Among her concerns was Villalobos’ persistent gambling. Tax records filed in court show Villalobos won and lost $1.1 million in 2012. He cut back in 2013, but still won and lost $23,000 that year.

“Gambling is a luxury activity, not for a bankrupt,” Lovato’s lawyer Alan Smith said in a recent court filing, arguing that Villalobos’ finances be brought under stricter control.

Villalobos’ associates said they weren’t aware that he was still gambling. Apodaca, the accountant, said Villalobos recently moved out of the mansion in south Reno so it could be sold. At the end of his life, associates said, he was in failing health and scrambling to find a place to live.

“He was limited to very small amounts of money,” attorney Van Duyne said. “He didn’t have a home any longer. He was able to make arrangements to stay in various locations, a combination of friends, family, hotels, that kind of thing.”

Villalobos was living at the Silver Legacy the day he showed up at the gun range. He was “an unregistered guest,” meaning his presence was known only to hotel security and personnel at the registration desk, according to a Reno police report.

Silver Legacy officials declined comment. Ken Adams, a Reno casino industry consultant, said “unregistered” status is something usually conferred on premium customers and likely means Villalobos was staying at the hotel for free.

“Good players get rooms for free,” Adams said.

Villalobos had two rooms on the 35th floor. He was booked to stay through Jan. 16, according to the police report.

On the afternoon of Jan. 13, he summoned a hotel limousine to take him to the Big Shot Indoor Range, located in a warehouse district about 8 miles south of the downtown casinos. According to the Reno police report, the limo dropped him off at 1:15 p.m.

Villalobos was a Big Shot regular, and employees said he was “joking around like normal” as he entered the small lobby area, according to the report. He told employees he was waiting for someone, but nobody showed and he eventually purchased a 50-round box of ammunition, rented a 9 mm Glock 19 handgun and went inside to one of the ranges.

After a while, Villalobos came back into the lobby. He showed off his silhouette target, which he had perforated with bullet holes, and rolled it up with a rubber band and placed it in his jacket. He bought a second 50-round box of ammo, went through that, came out, bought a third box and headed back into the range.

Four minutes later, another customer was leaving the range and noticed Villalobos. He was slumped against a wall with a gun in his lap and blood pouring out of the right side of his head.

Big Shot employees called for an ambulance and ushered the remaining customers out of the building. Paramedics arrived but were unable to revive Villalobos.

No suicide note was found “to my knowledge,” said Reno police spokesman Tim Broadway.

Villalobos was scheduled to go on trial Feb. 23 in San Francisco. His lawyers describe him as an honest man who was determined to prove his innocence.

While they wouldn’t comment directly on the police reports of suicide, they said Villalobos was increasingly unable to cope with neurological and heart ailments that hospitalized him numerous times over the past few years. His attorneys have never specified the illnesses afflicting him.

“He was full of confidence and was ready to be exonerated,” said his criminal defense lawyer, Bruce Funk of San Jose. “Nothing changed that, except his illness.” Funk was seeking to have Villalobos’ trial delayed.

A ‘very dear’ painting

Villalobos died still owing millions of dollars to his creditors. The IRS was after him for $2.6 million. His debts to various casinos in Reno, Tahoe and Las Vegas totaled $3.5 million. The state of California was coming after him for millions of dollars, and the SEC had its lawsuit pending.

Slowly but inexorably, the Villalobos financial empire was being dissolved to pay creditors.

The vacation home in Hawaii went for $2.8 million. Ten vacant lots in Zephyr Cove sold for a combined $250,000, and a townhouse in Stateline sold for $625,000.

Some deals didn’t go quite as planned. The mansion at Zephyr Cove where Villalobos hosted Buenrostro’s wedding was supposed to be worth $10 million but was unloaded in a “short sale” for just $1.9 million last summer. Because it was a short sale, all the proceeds went to the bank and nothing to the creditors.

Villalobos’ wine collection – hundreds of bottles of Mouton Rothschilds, Lafite and other high-end brands – fetched $221,000.

Then there was his treasure trove of art, a collection so vast that it had its own corporation, Arvco Art Inc., and its own bankruptcy case. Valued at $3 million, it, too, was being liquidated.

Most recently, three of his paintings sold last July for a combined $34,750 at a massive Western art sale attended by hundreds at the Peppermill Casino in Reno. The crown jewel was an oil painting called “Los Angeles” by the late Marjorie Reed, depicting a stage coach rushing past a church.

Although Reed wasn’t considered a major artist, “Los Angeles” was her best-known work, said Mike Overby of Coeur d’Alene Art Auction, which handled the sale. The piece, measuring 60 by 72 inches, went for $18,000 to a private collector.

Lovato said the painting used to hang in Villalobos’ home in south Reno, the property that’s now in dispute. She said Villalobos was surely sad to see the painting go; it was among his favorites.

“It was a very dear piece,” she said.

Call The Bee’s Dale Kasler, (916) 321-1066. Follow him on Twitter @dakasler.

Who was Alfred Villalobos?

Businessman: Investment banker in California and Nevada for more than 30 years.

Politico: Republican fundraiser; former Los Angeles deputy mayor; state appointee under Gov. Pete Wilson. CalPERS board member, 1992-95.

Agent: Marketing rep for private equity firms; earned $50 million-plus in fees from CalPERS investment deals, 1997-2008.

Defendant: Sued by California attorney general; driven into bankruptcy; indicted for bribery. Allegedly gave head of CalPERS more than $250,000 in bribes. Dead of apparent suicide one month before trial.

What happens now?

Alfred Villalobos’ death doesn’t end CalPERS’ bribery scandal. Here’s what’s left:

▪  Co-defendant Fred Buenrostro, former CEO of CalPERS, is to be sentenced May 13. Five-year term expected after guilty plea.

▪  Villalobos’ tangled finances will continue to be unwound in U.S. Bankruptcy Court in Reno. Assets are being sold, and investigations continue into possible illegal transfers of assets. Court officials are suing three of his former private-equity clients for more than $8 million in fees they refused to pay after bribery allegations surfaced.

▪  Securities and Exchange Commission expects to continue 2012 lawsuit over alleged doctoring of documents by Villalobos and Buenrostro. California attorney general has case pending against both men.

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