A U.S. Bankruptcy Court judge blocked a California fraud lawsuit that had accused former placement agent Alfred Villalobos with bribing officials at CalPERS to win investment business for his manager clients.
The written decision by Judge John Peterson in U.S. Bankruptcy Court in Reno, Nev., on Monday bars a petition filed by California Attorney General Jerry Brown to allow the state action to proceed simultaneously with Mr. Villalobos’ bankruptcy case.
In May, Mr. Brown filed a civil suit against Mr. Villalobos seeking $95 million in restitution. The suit claimed Mr. Villalobos, who had served on the CalPERS board, tried to bribe officials at the California Public Employees’ Retirement System, Sacramento, with gifts such as luxury travel to help his private equity clients win contracts with the $205.5 billion system.
Mr. Villalobos and co-defendant in the state civil suit, former CalPERS CEO Federico Buenrostro Jr., have insisted that the lawsuit has no merit.
In June, Mr. Villalobos and his company, ARVCO Capital Research, filed for bankruptcy protection. Under federal law, other lawsuits seeking payment from debtors are stayed while those seeking bankruptcy protection reorganize their finances.
Mr. Villalobos’ attorney, Neal Stephens, could not immediately be reached for comment.
Jim Finefrock, a spokesman for Mr. Brown, said Tuesday in a telephone interview that the attorney general’s office would appeal Mr. Peterson’s decision, but the appeal ruling could take up to a year.
The state’s action against Mr. Villalobos could still proceed after bankruptcy proceedings are over, but the bankruptcy case could take several years to resolve, Mr. Finefrock said.
Part of Mr. Peterson’s ruling, however, questioned the strength of the state’s case against Mr. Villalobos. Mr. Peterson said current and former CalPERS officials testified behind closed doors at court hearings in the bankruptcy case and defended the investments they made with Mr. Villalobos’ clients.
“The CalPERS witnesses testified that Mr. Villalobos never bribed, attempted to bribe, defrauded, victimized, manipulated or deceived them in any way,” Mr. Peterson wrote. “The investments at issue are universally regarded as good and appropriate deals.”
CalPERS records show that ARVCO earned tens of millions of dollars in fees from companies that won CalPERS contracts with the firm’s representation, including $42 million from private equity firm Apollo Global Management.
Apollo has not been accused of any wrongdoing, but in an agreement earlier this year with CalPERS officials stated it would no longer use a placement agent in dealings with the system.