Ex-CalPERS chief pleads guilty to bribery, steering investments

McClatchy Washington BureauJuly 11, 2014 

US NEWS ENV-BLUEWHALES 1 LA

The California coastline.

ALLEN J. SCHABEN — Los Angeles Times/MCT

— The former chief of the giant California Public Employee Retirement System pleaded guilty Friday to conspiring to trade his influence in channeling billions of dollars in CalPERS’ investments in exchange for $250,000 in bribes, travel in the United States and abroad, meals, gifts and payment for his wedding.

Fred Buenrostro also admitted that he obtained a job at ARVCO Capital Research LLC in 2008 in return for assisting ARVCO’s founder, Alfred Villalobos, in arranging for $3 billion of the retirement funds to be invested in Apollo Global Management, a New York-based private equity fund. ARVCO received $14 million in fees for the investment, federal prosecutors said.

The case tarnishes the reputation of one of the nation’s premier public retirement systems, with assets last year of nearly $258 billion and about 1.6 million members, including 574,000 retirees.

Buenrostro’s plea, entered in U.S. District Court in San Francisco, marked the first disclosure that he had taken cash from Villalobos, with whom he was indicted on much narrower charges in 2013.

According to the Sacramento Bee, Buenrostro’s lawyer said following the brief hearing: “There is no question that the chickens have come to roost for Mr. Buenrostro. He is starting a new chapter in his life. He is a 64-year-old man who is ready to tell all.”

Buenrostro declined comment as he left the courtroom.

In his plea agreement, he acknowledged that he began to receive secret benefits from Villalobos no later than 2005, and that he tried to steer CalPERS’ investment staff and its directors to make decisions benefitting Villalobos and ARVCO. He also gave Villalobos access to confidential CalPERS information relating to investments, internal deliberations and other matters, federal prosecutors said.

To help Villalobos secure fees, Buenrostro admitted, he and Villalobos dummied a series of phony Investor Disclosure Letters that Apollo required. CalPERS legal and investment offices had declined to sign the first investor letter documenting ARVCO’s relationship with Apollo.

Later, when civil and eventually criminal investigations into the operations of ARVCO and its role in placing CalPERS’ invesstments in Apollo-managed funds, Buenrostro and Villalobos agrees on a fake version of facts to conceal their dealings from the U.S. Securities and Exchange Commission, the U.S. Postal Inspection Service and the FBI, he admitted.

His admissions to a superseding, single-count conspiracy indictment detailed corruption that went well beyond the 2013 indictment against him and Villalobos. The two were originally charged with concocting the phony letters from CalPERS to make sure Villalobos got paid millions in fees for procuring pension fund investments for one of his Wall Street clients.

Buenrostro, whose sentencing was scheduled for Jan. 7th, faces up to five years in prison and a fine of up to double his gain from the corruption.

Villalobos, who is charged in the original indictment, has pleaded innocent to all charges, is in poor health

Villalobos, who has pleaded innocent, is in poor health and wasn’t in courtroom but listened by phone. His defense attorney, Bruce Funk, said that he will continue to fight the charges, the Bee reported.

“We don’t think there’s any truthful information (Buenrostro) could give that could affect Mr. Villalobos,” Funk said after the hearing.

Villalobos is due to appear before U.S. District Judge Charles Breyer on Aug. 8.

Email: ggordon@mcclatchydc.com; Twitter: @greggordon2.

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