The $288 billion California Public Employees’ Retirement System was rocked on July 10 when it was learned that former CEO Federico Buenrostro had cut a plea bargain with the Justice Department to turn “state’s evidence” regarding steering $14 million in placement fees to former board member Alfred Villalobos in exchange for cash bribes and gifts.
Buenrostro led America’s largest pension fund from 2002 to 2008. He entered a guilty plea in the Federal District Court of San Francisco on July 11 for taking bribes from Alfred Villalobos, an ex-CalPERS board member, to broker a $3 billion CalPERS investment in Apollo Global Management LLC private equity funds. Both Buenrostro and Villalobos were indicted on March 18th.
There was no law that forbids Villalobos from collecting $48 million commission from Apollo, as long as he, as placement agent, disclosed the fee to CalPERS as the customer. It was determined by prosecutors that Villalobos lied to Apollo about having disclosed the fee to CalPERS.
Villalobos actually pocketed a total of $58 million, because he also allegedly pushed CalPERS into deals on behalf of four additional clients: Relational, CIM Ares, and Aurora Capital. Buenrostro allegedly aided and abetted all of the placements by waiving the CalPERS requirement that Villalobos be a registered with the SEC as a broker-dealer.
Villalobos and Buenrostro also allegedly partnered with Charles Valdes, a CalPERS board member and chairman of the investment committee. Valdes allegedly received illegal political donations from Villalobos’ firm for agreeing to waive certain restrictions on the types and amounts of investments that CalPERS could buy from Villalobos.
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