monopoly_money.jpgA former chief executive of the California Public Employees Retirement System and an investment placement agent have been indicted by a federal grand jury in San Francisco on conspiracy charges related to allegedly fraudulent letters concerning $14 million in fees.

The system, known as CalPERS, is the nation’s largest pension fund, with $255 billion in assets. It provides pension and health benefits to 1.6 million current and retired public workers.

Former CEO Frederico Buenrostro, 64, of Sacramento, and former agent Alfred Villalobos, 69, of Reno, are accused of conspiring to deceive federal investigators and conspiring to commit fraud in connection with letters related to $14 million in fees received by Villalobos.

Villalobos received the fees from a private equity firm, Apollo Global Management LLC, for a $3 billion investment CalPERS made in funds managed by New York-based Apollo in 2007 and 2008.

The indictment was issued on March 14 and announced by U.S. Attorney Melinda Haag today after the two men made initial appearances before a federal magistrate in San Francisco. Both were released on $500,000 personal bonds.

The indictment alleges that Buenrostro and Villalobos fabricated investor disclosure letters that falsely stated CalPERS was aware of fees that Villalobos had arranged to be paid by Apollo.

As a result of the letters, Apollo paid $14 million to Villalobos’s company, ARVCO Capital Research LLC, the indictment says.

Buenrostro was chief executive officer of CalPERS from 2002 to 2008. The day after he left CalPERS, he began working for Villalobos, on July 1, 2008. Villalobos was a member of the CalPERS board from 1992 to 1995.

The two men have previously been sued for fraud in civil lawsuits filed by the state attorney general’s office in Los Angeles County Superior Court in 2010 and by the U.S. Securities and Exchange Commission in federal court in Las Vegas in 2012. Both lawsuits are pending.

CalPERS Board President Rob Feckner said, “This long-awaited indictment of two former officials is another step on the road toward justice for California’s taxpayers, public employees and for all of CalPERS staff and stakeholders.

“This type of behavior has no place in our organization,” Feckner said in a statement.
Feckner said CalPERS has been implementing a series of reforms recommended in an outside law firm’s review of its use of placement agents.

The indictment charges Buenrostro and Villalobos each with one count of conspiring to deceive agents in the SEC civil investigation and an FBI criminal probe, one count of engaging in deceit, and one count of conspiring to commit mail and wire fraud related to the letters.

The former CEO is additionally accused of two counts of making a false statement to investigators in 2012 and obstructing justice.

Buenrostro and Villalobos are due to return to court on March 25 and April 9, respectively, for arraignment, further bail hearings and identification of their defense lawyers.

They will appear before U.S. District Judge Charles Breyer, the trial judge assigned to the case, for a status conference on May 8.

The charge of conspiracy to commit mail and wire fraud carries a maximum sentence of 20 years in prison upon conviction. The other counts each have a maximum penalty of five years in prison.

Julia Cheever, Bay City News

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