Former CalPERS CEO Federico R. Buenrostro pleaded guilty Friday to a charge of conspiracy to commit bribery and fraud, admitting he received $200,000 in cash bribes — in paper bags and a shoe box — from placement agent Alfred Villalobos as part of a plan to influence CalPERS’ investment decisions.
It was the first time it has been disclosed that Mr. Buenrostro took cash bribes from Mr. Villalobos, a former CalPERS board member.
Mr. Buenrostro said he personally tried to influence members of the CalPERS board and the CalPERS investment staff to make investments in funds, as directed by Mr. Villalobos, and provided him with confidential inside information.
Mr. Buenrostro made the written disclosures as part of a plea agreement with federal law enforcement authorities. He faces up to five years in prison and a $250,000 fine, but his sentence could be reduced as part of the plea agreement. Sentencing is set for Jan. 7.
Mr. Buenrostro, 64, had maintained his innocence since charges first were brought against him in 2009.
Officials of the $300.9 billion California Public Employees’ Retirement System, Sacramento, said in an unsigned statement: “We condemn the misconduct and ethical breaches admitted today by Mr. Buenrostro. The violation of the sacred trust of our members, employers and the public can’t be tolerated, and that trust must never be compromised.”
Mr. Buenrostro told U.S. District Judge Charles Breyer in San Francisco that he understood the plea deal’s terms, including that he testify against Mr. Villalobos. He made no further verbal statement. Mr. Villalobos’ trial is expected to begin in the fall.
In the written disclosure, he detailed how he received cash payments and other bribes from Mr. Villalobos.
Mr. Buenrostro said that on separate occasions in 2007, he received two $50,000 payments in paper bags and another $100,000 payment in a shoe box.
Mr. Buenrostro said Mr. Villalobos advised him not to deposit the funds in amounts larger than $10,000 in order to avoid bank reports of the transactions.
He said that throughout 2007, “I continued to provide Villalobos with access to CalPERS confidential information relating to investments and other proprietary matters, while also continuing my efforts to influence CalPERS investment staff and CalPERS board, as directed by Villalobos, on matters including the funds selected for investment and the amounts to be invested in such funds, to benefit Villalobos, and his current and prospective clients, investment consultants and other associates.”
Mr. Buenrostro did not identify the specific funds and investments.
An investigative report commissioned in 2009 by CalPERS had said it was unlikely Mr. Buenrostro was able to steer investment contracts to Mr. Villalobos’ clients, but acknowledged those clients could have charged CalPERS additional fees to make up for their compensation to the former board member turned placement agent.
Mr. Buenrostro, in the statement, also admitted he wrote unauthorized letters to Apollo Global Management in January 2008 that enabled Mr. Villalobos to receive $14 million in fees.
“I signed those papers in the capacity as CEO of CalPERS, not for the benefit of CalPERS, not for the benefit of the citizens of the state of California, but instead to further my corrupt relationship with Mr. Villalobos,” he said.
Mr. Buenrostro remained at the retirement system until mid-2008, when he was fired for performance issues.
He also disclosed in the agreement that after he left CalPERS Mr. Villalobos hired him to work for his consulting firm, ARVCO, with a salary of around $300,000 a year. He said on his first day of work around July 1, 2008, Mr. Villalobos deposited $25,000 into his checking account. In addition to his salary, he said, he also received a $20,000 gold Rolex watch from Mr. Villalobos.
“There is no question that the chickens have come to roost for Mr. Buenrostro,” his lawyer, William Portanova, said following the court hearing. “He is starting a new chapter in his life. He is a 64-year-old man who is ready to tell all.”
Mr. Buenrostro could have faced up to 40 years in prison if he had gone to trial.