SACRAMENTO (Legal Newsline) - A bankruptcy judge on Tuesday indicated he would block California's lawsuit against former California Public Employees Retirement System board member Alfred Villalobos.

The suit, filed by state Attorney General Jerry Brown, accuses Villalobos of bribing officials with the pension fund.

U.S. Bankruptcy Judge John Peterson suggested at an hour-long hearing that Villalobos' Chapter 11 bankruptcy case trumps the California lawsuit. He won't make a formal ruling for a couple of weeks, according to The Sacramento Bee.

In May, Brown sued Villalobos, his company ARVCO Capital and former CalPERS CEO Federico "Fred" Buenrostro, charging them with fraud.

"Working as a placement agent for ARVCO, Villalobos spent tens of thousands of dollars to lavishly entertain key senior executives at CalPERS, who then influenced the board to authorize investments that generated over $40 million in commissions to Villalobos," Brown said in a statement at the time.

"None of these actions were disclosed as required by law, as state pension holders and taxpayers have every right to expect."

According to Brown's office, Villalobos influenced these CalPERS officials by, among other things, taking two of them on "an around-the-world trip," taking another on a private jet trip to New York, and giving Buenrostro a $300,000 job and a condo when he left the pension fund.

Brown's specific charges allege that Villalobos and ARVCO falsely represented that they had the required securities licenses and complied with all laws; defendants gave, accepted, and failed to disclose gifts; and Villalobos and ARVCO submitted bogus disclosure forms.

The attorney general -- a Democratic candidate for governor in November -- also in May obtained a court order to freeze Villalobos' assets and place them in receivership to recover the more than $40 million in commissions that Villalobos earned during the period alleged in the complaint.

Brown had explained the freeze order was necessary because Villalobos has transferred real estate "suspiciously," "has lost tens of millions of dollars in high-stakes gambling," and maintains more than 20 bank accounts.

Among those assets placed under receivership were two Bentleys, two BMWs, a Hummer H2, artwork worth more than $2.7 million, $6 million in yet-to-be-paid placement-agent commissions, and 14 pieces of real property in California, Nevada and Hawaii, according to the attorney general's office.

But court records show that the assets were released back to Villalobos in August, according to the Bee.

Then, just a month after Brown's office brought the suit, Villalobos filed for bankruptcy -- generally shielding him from any litigation.

California officials sought a ruling from Peterson so they could proceed with their lawsuit, arguing their case is a regulatory action that takes precedence over the bankruptcy.

If the judge does block the lawsuit, the state would likely have to pursue a claim against Villalobos in Nevada bankruptcy court, the Bee reported.

From Legal Newsline: Reach Jessica Karmasek by e-mail at jessica@legalnewsline.com.