Federico Buenrostro Jr., former CEO of CalPERS, and former board member Alfred J.R. Villalobos were indicted by a federal grand jury in San Francisco for providing fraudulent documents related to $3 billion in private equity investments made by the $254.9 billion retirement system.
The indictment was filed Thursday in the U.S. District Court in San Francisco by U.S. Attorney Melinda Haag.
Mr. Buenrostro was CEO of CalPERS from 2002 to 2008. Mr. Villalobos served on the CalPERS board from 1992 to 1995.
The indictment mirrors civil charges filed April 23, 2012, by the Securities and Exchange Commission alleging that the two men forged documents at the pension fund to defraud private equity firm Apollo Global Management of $20 million in placement fees by giving Apollo Global the false impression that Sacramento-based CalPERS had signed placement agent fee disclosure letters. Apollo paid placement fees to Mr. Villalobos' placement agent firm, ARVCO Capital Research.
The two also were sued by the California attorney general in May 2010 for allegedly providing gifts and gratuities to CalPERS officials to influence the pension fund's investment decisions.
After retiring from CalPERS in June 2008, Mr. Buenrostro joined ARVCO. The firm filed for bankruptcy protection in June 2010.
Rob Feckner, current CalPERS board president, called it “a happy day for CalPERS” and added that he applauded the U.S. Attorney's Office for taking a stand.
“It's time to put this behind us and bring the people to justice that wronged the system and the taxpayers of California,” he said. He also said he thought adequate safeguards and placement rules have been put in place so something like this will not happen again.
Reporter Randy Diamond also contributed to this story.