Federico Buenrostro, the former CEO of CalPERS, will plead guilty to corruption charges and testify against his co-defendant, former CalPERS board member Alfred Villalobos, in federal court, Mr. Buenrostro's lawyer William Portanova said Tuesday.
Mr. Buenrostro, who was CEO of the $296.3 billion pension fund from 2002 to 2008, and Mr. Villalobos, a former board member turned placement agent, are charged with a variety of federal charges, including conspiracy to commit mail and wire fraud.
The charges stem from an alleged scheme involving the creation of false documents by Mr. Buenrostro that helped Mr. Villalobos, who was a placement agent representing Apollo Global Management, receive $14 million in fees. The California Public Employees' Retirement System, Sacramento, had made a $3 billion investment with Apollo that was tied to the fees.
Mr. Portanova said in an interview that Mr. Buenrostro told U.S. District Court Judge Charles Breyer in San Francisco on Monday that he was cooperating with the Justice Department and that he will be pleading guilty.
A full accounting of the events that transpired between Mr. Buenrostro and Mr. Villalobos will be detailed in a plea agreement to be presented at a July 11 hearing, Mr. Portanova said.
“The details will be interesting to say the least,” he said. “It will show the patterns of corruption people can fall into.”
Mr. Portanova said he told his client that “it is never too late to do the right thing.”
Mr. Buenrostro faces prison time, but his lawyer said his client is hopeful that his cooperation will be taken in account when sentencing occurs.
The trial against Mr. Buenrostro and Mr. Villalobos was scheduled for late July, but Mr. Portanova said he expects for it to be delayed until the fall. State civil charges against the two men are still pending.
The scandal saw the resignation of the head of CalPERS' equity program, Leon Shahinian, who was named in the state suit as using a private jet and staying in a hotel suite arranged by Mr. Villalobos to attend a 2007 event in New York honoring Apollo founder Leon Black. Subsequently, CalPERS hired an outside law firm, which found other investment staffers were being wined and dined by private equity officials.
Mr. Villalobos served on the CalPERS board from 1993 to 1995 before becoming a placement agent.