By Evan Halper, Los Angeles Times
November 16, 2010|8:48 p.m.

Reporting from Sacramento —

State prosecutors are preparing for possible action against another financial firm that does business with California’s scandal-tarnished pension fund, newly disclosed documents show.

In a letter this week to the California Public Employees Retirement System, officials at the state attorney general’s office stated they are at “a very sensitive stage” of an investigation into a financial firm doing business with the pension fund. The prosecutors did not identify the firm and requested that CalPERS not disclose any documents related to the investigation. The letter came in connection with a lawsuit filed by The Times seeking disclosure of CalPERS documents under the state’s Public Records Act.

The newly disclosed investigation appears to be in addition to an existing state civil complaint against Alfred Villalobos, a former CalPERS board member who earned tens of millions of dollars using his connections to help investment companies land CalPERS contracts. That complaint, filed in Los Angeles County Superior Court accuses Villalobos of employing fraudulent business practices and alleges that he used “gifts and gratuities” to cultivate “improper relationships” with key officials at CalPERS.

The gifts allegedly included a condominium, luxury trips and lucrative employment in Villalobos’ firm.

In their letter to CalPERS, the attorney general’s office asks that the pension agency “refrain from disclosing any records exchanged between our office and CalPERS related to an ongoing investigation we have regarding another business that did business with CalPERS. This investigation is at a very sensitive stage and for this reason we are requesting that CalPERS withhold these records at present time.”

The letter did, however, advise CalPERS to release documents related to Villalobos which the pension system had refused to produce.

The Times is seeking to force CalPERS to disclose as many as 2,000 documents related to deals tied to politically connected consultants and investment advisors. Among the documents CalPERS has refused to disclose are some correspondence with law enforcement agencies. The pension fund is also keeping secret hundreds of research reports, staff and consultant memos, financial analyses and other documents that would shed light on how and why it came to invest in politically connected companies.

Fund officials say disclosure of the documents would reveal the trade secrets of their investment partners.

The documents that CalPERS is keeping secret include records related to its dealings with such investment figures as Los Angeles venture capitalist Elliot Broidy, who pleaded guilty in December in New York to paying $1 million in bribes to get pension business in that state; and powerful Sacramento lobbyist Darius Anderson, whose firm paid $500,000 as part of a settlement with the New York prosecutors investigating “pay-to-play” practices.

Neither Broidy nor Anderson has been the target of litigation filed to date by California state attorneys.

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