Fred R. Buenrostro, former CEO of CalPERS, and former board member Alfred J.R. Villalobos on Monday were charged by the SEC with forging documents at the pension fund to defraud private equity firm Apollo Global Management of $20 million in placement fees.
According to the complaint filed in U.S. District Court in Reno, Nev., Messrs. Buenrostro and Villalobos fabricated documents that gave Apollo Global the false impression that the California Public Employees' Retirement System, Sacramento, had signed placement agent fee disclosure letters. Apollo then paid placement fees to Mr. Villalobos' placement agent firm, ARVCO Capital Research.
According to the SEC complaint, the first forged document prepared by Mr. Buenrostro in January 2008 did not correctly spell the retirement system's name, referring to it as the “California Public Employees Retirement Fund.”
After retiring from the $235.2 billion retirement system in June 2008, Mr. Buenrostro joined ARVCO Capital Research, a placement agent for private equity funds and other money managers that filed for bankruptcy in June 2010.
Mr. Buenrostro was CEO of CalPERS from 2002 through 2008. Mr. Villalobos served on the CalPERS board from 1992 to 1995.
Mr. Buenrostro's attorney, William H. Kimball, said in an interview that his client “strongly denies any suggestion that he was involved in any type of fraudulent or illegal conduct.”
Messrs. Buenrostro and Villalobos were indicted on state corruption charges in a civil complaint filed by the California attorney general's office in May 2010. The two are awaiting trial. The complaint seeks restitution to the pension fund of a total of $95 million from Messrs. Buenrostro and Villalobos as well as unspecified civil penalties.
Anne Stausboll, CalPERS CEO, said at a Monday afternoon news briefing that criminal investigations by state and federal officials against the two men are continuing and that CalPERS is cooperating.
Ms. Stausboll applauded the SEC action. “It brings us one step closer to closing this chapter in our history,” she said.
The CalPERS board and executive staff have made sweeping changes over the last several years at the retirement system to ensure that highest ethical standards are maintained, Ms. Stausboll said.
Ms. Stausboll also said she is no longer involved in CalPERS' investment decisions, deferring to Joe Dear, CalPERS chief investment officer, to ensure that the CEO cannot meddle in investment matters.