Villalobos rebuts ‘distorted’ lawsuit

In a point by point rebuttal, embattled placement agent Alfred Villalobos has attempted to discredit the California Attorney General’s civil case against him, calling the allegations “inaccurate or misleading”.

“The indisputable facts of this case will show that defendants’ alleged misconduct resulted in absolutely no harm to CalPERS or the investing public,” according to a filing in the Superior Court of California by defendants Villalobos and Federico Buenrostro, the former president of the CalPERS board. “The attorney general has misleadingly portrayed CalPERS as a victim of a fraudulent scheme and now seeks to deprive Villalobos of the means to support himself and to prepare a vigorous defense.”

Alfred Villalobos

California’s attorney general Edmund Brown filed a civil suit against Villalobos, who runs placement firm ARVCO Financial Ventures, and Buenrostro earlier this month, accusing them of fraud. The civil suit seeks $95 million from the defendants for restitution to the pension fund, civil penalties and return of profits.

Among the charges are allegations that Villalobos “attempted to bribe” the head of CalPERS alternative investment programme, Leon Shahinian.

Brown also obtained a court order to freeze Villalobos’ assets and place them in receivership to recover the more than $40 million in commissions Villalobos earned during the period alleged in the complaint.

Villalobos is requesting the court remove the order freezing his assets and eliminate the receivership.

Villalobos and Buenrostro said in the filing many of the charges simply aren’t true. For example, the attorney general accuses Villalobos of giving Buenrostro a condominium to “induce favourable treatment for ARVCO’s clients”. In reality, Villalobos sold the condo to Buenrostro for $600,000, according to the filing.

The attorney general’s lawsuit claims Villalobos failed to disclose its client agreements and fee schedules to CalPERS, but Villalobos and Buenrostro argue the pension “had no policy requiring disclosure of placement agent agreements or fees until May 2009, and even that policy has been suspended”.

Villalobos and Buenrostro also argue California rules requiring disclosure of gifts do not apply to placement agents, and that a lavish trip which CalPERS’ Shahinian took to New York that was paid for by Villalobos was eventually paid for by Apollo Management, which reimbursed the placement agent.

ARVCO Financial Research ceased operations in May 2009, and became ARVCO Financial Ventures, a registered broker-dealer, according to the filing. The renamed entity was “forced” to cease operations on 6 May 2010 because its accounts had been frozen, the filing said.

“Villalobos currently has no access to the money in his bank accounts and no means by which to support himself or to defend himself in this action,” the filing said.

Jenna Gottlieb contributed to this report.