LOS ANGELES (CN) – Former top California pension fund officials accepted lavish gifts in exchange for influencing investments that allowed a former CalPERS board member to pocket more than $47 million in “undisclosed and unlawful” commissions, Attorney General Edmund Brown claims in Superior Court.
The state accuses Alfred R. Villalobos, a former deputy mayor and CalPERS board member, of using his close relationship with former CalPERS CEO Federico “Fred” Buenrostro to secure business for investment firms.
Villalobos hosted and “substantially subsidized” Buenrostro’s 2004 wedding in Lake Tahoe, according to the complaint, and gave him a $300,000 job and a condo when he left the pension fund.
Villalobos and his company, Arvco Capital Research, received more than $47 million in “undisclosed and unlawful commissions for selling approximately $4.8 billion worth of securities to CalPERS,” the lawsuit states.
The gifts allegedly included a round-the-world trip for Villalobos, Buenrostro and former board member Chuck Valdes, who is not named as a defendant. Villalobos also arranged for Valdes to attend the 2006 Oscars, threw Christmas parties at his Lake Tahoe home, and whisked investment officer Leon Shahinian to New York on a private jet, Brown claims. (Shahinian is not a party to the complaint.)
When Shahinian returned to Sacrament, Brown claims, he received three bottles of champagne, including one that cost $200.
A month later, Shahinian allegedly urged the CalPERS board to authorize a $700 million investment in Apollo Global Management, Villalobos’ biggest client.
Villalobos and Arvco never disclosed the gifts to CalPERS officials or the commissions they received in return, the lawsuit claims.
“CalPERS was shocked when it learned of the magnitude of those fees after they came to light,” the lawsuit states.
Brown accuses Villalobos and Arvco of securities fraud, bribery and acting as unlicensed broker-dealers. He says Buenrostro committed fraud, accepted bribes and received gifts without disclosing them.
He demands an order forcing the defendants to disgorge their profits and pay at least $50 million in civil penalties and $70 million in restitution. Brown obtained a Superior Court order Wednesday freezing Villalobos’ bank accounts and other assets.
In his petition for the temporary restraining order, Brown said Villalobos “engaged in a number of suspicious real estate transfers and continued to engage in frequent high-stakes gambling.”