LAS VEGAS (CN) – The former CEO of the California Public Employees’ Retirement System and a crony schemed to defraud an investment firm of $20 million in fees to the crony’s placement agents, the SEC claims in Federal Court.
The SEC sued former CalPERS CEO Frederico Buenrostro and his friend, Alfred J.R. Villalobos, and Buenrostro’s company’s ARVCO Capital Research and ARVCO Financial Ventures. CalPERS is the largest public pension fund in the United States.
Buenrostro, 62, and Villalobos, 68, both live in Zephyr Cove, Nev. Villalobos founded and managed the ARVCO defendants and Buenrostro went to work for them the day after he retired from CalPERS, according to the complaint.
“Buenrostro and his friend Alfred J.R. Villalobos fabricated documents given to New York-based private equity firm Apollo Global Management,” the SEC said in a statement announcing the lawsuit. “Those documents gave Apollo the false impression that CalPERS had reviewed and signed placement agent fee disclosure letters in accordance with its established procedures. In fact, Buenrostro and Villalobos intentionally bypassed those procedures to induce Apollo to pay placement agent fees to Villalobos’s firms. The false letters bearing a fake CalPERS logo and Buenrostro’s signature were provided to Apollo, which then went ahead with the payments.
“‘Buenrostro and Villalobos not only tricked Apollo into paying more than $20 million in placement agent fees it would not otherwise have paid, but also undermined procedures designed to ensure that investors like CalPERS have full disclosure of such fees,'” the SEC’s associate regional director in Los Angeles, John McCoy III, said in the statement.
Apollo is not a party to the complaint, which states: “Operating through two of his companies, ARVCO Capital Research, LLC and ARVCO Financial Ventures, LLC (collectively, ‘ARVCO’), Villalobos generated more than $70 million in placement agent fees over an approximately 10 year period, at least $58 million of which was related to CalPERS’ investments.”
The SEC seeks disgorgement, penalties and injunctions.
CalPERS manages retirement benefits for 1.6 million California retirees and their families. It pays more than $15 billion a year in health and retirement benefits and its assets came to nearly $180 billion in December 2008, down from its peak of $261 billion in October 2007, according to the San Francisco Chronicle.