A former chief executive officer of the California Public Employees Retirement System—the nation’s largest public pension fund—pleaded guilty in federal court in San Francisco today to conspiring to accept bribes to influence the fund’s investments.
Frederico Buenrostro, 65, of Sacramento, admitted during his guilty plea that he accepted $200,000 in cash in 2007 and a check for $50,000 in 2010 from investment placement agent Alfred Villalobos, 70, of Reno.
The former CEO said in a written plea agreement that Villalobos gave him two installments of $50,000 in cash in paper bags and another payment of $100,000 in a shoebox in meetings at the Hyatt Hotel across from the state Capitol in Sacramento in 2007.
The bribes, Buenrostro said in the agreement, were “in exchange for the exercise of my powers and duties as CEO over CalPERS’ financial transactions, investment operations, and internal deliberations for the benefit of Villalobos.”
Buenrostro was CEO of CalPERS from late 2002 until May 2008. The fund has $300 billion in assets and provides pension and health benefits to 1.6 million current and retired public workers.
He pleaded guilty before U.S. District Judge Charles Breyer to one count of conspiring to accept bribes and defraud the citizens of California of his honest services.
Buenrostro will be sentenced by Breyer on Jan. 7 and faces a possible maximum penalty of five years in prison, as well as a fine of up to twice the amount of loss caused to the fund and an order of restitution.
Villalobos is awaiting trial on charges of conspiring to deceive government investigators, falsifying facts about investor disclosure letters and conspiring to commit fraud. Breyer today scheduled a status conference for Villalobos on Aug. 8.
As part of the plea agreement, Buenrostro agreed to cooperate with federal prosecutors, which would include possible testimony in Villalobos’ future trial.
Buenrostro was originally indicted together with Villalobos last year on the same three charges as well as two additional charges that Buenrostro lied to federal investigators and obstructed justice in 2012. The five original counts against Buenrostro carried a possible maximum sentence of 40 years in prison upon conviction.
Those charges against Buenrostro were dropped as part of the agreement and replaced with the new conspiracy count, filed by prosecutors today.
CAlPERS issued a statement saying, “We condemn the misconduct and ethical breaches admitted today by Mr. Buenrostro. The violation of the sacred trust of our members, employers, and the public can’t be tolerated, and that trust must never be compromised.
“CalPERS has taken aggressive steps to implement policies and reforms that strengthen accountability and ensure full transparency,” the agency said.
Villalobos served on the CalPERS board from 1992 to 1995 and then founded an investment placement business known as ARVCO, which received fees from private equity funds when CalPERS invested in those funds.
Buenrostro said in the agreement that in exchange for the bribes, he gave Villalobos confidential information about CalPERS investments and carried out efforts “to influence the CalPERS investment staff and CalPERS Board, as directed by Villalobos.”
He admitted in the document that he and Villalobos created fraudulent documents in order to obtain $14 million in placement fees that ARVCO was paid by New York-based Apollo Global Management, a private equity firm, between 2008 and 2010.
U.S. Attorney Melinda Haag said Apollo, working with Villalobos through ARVCO as a placement agent, secured $3 billion in investments by CalPERS.
Buenrostro also admitted that Villalobos hosted his wedding at his Nevada home in 2004 and paid for his trips to Nevado casinos and to overseas business meetings in 2005 and 2006. After Buenrostro left CalPERS, Villalobos hired him to work for AVCO and paid him $387,500 between 2008 and 2010.
Although Buenrostro did not plead guilty to a charge of lying to government agents, he acknowledged in the plea agreement that he lied to investigators from the state of California, the FBI and the U.S. Securities and Exchange Commission between 2010 and 2012.
Buenrostro said in the agreement that he rehearsed his false answers with Villalobos.
Julia Cheever, Bay City News