April 24th, 2012
Econintersect: Retired CEO of the California Public Employees’ Retirement System (CalPERS), Federico R. Buenrostro, has been charged with fraud by the SEC (Securities and Exchange Commission). Buenrostro is alleged to have aided his friend Alfred J.R. Villalobos in a shakedown of New York-based private equity firm Apollo Global Management. The CalPERS CEO signed documents certifying falsely that fees totaling more than $20 million dollars should be paid by Apollo to ARVCO Capital Research, Villaobos’ firm. The documents were fabricated with a false CalPERS logo by Villalobos and then signed by Buenrostro, the SEC alleges. Apollo reportedly paid the fees which were actually not legally due.
Follow up:The assertion is that the actions were triggered by new procedures implemented by Apollo in 2007 which required disclosure by CalPERS of so-called “placement agent fees.” When ARVCO’s request for the disclosure letter was not approved by CalPERS legal counsel the scheme was hatched to circumvent the approval channel, according to the SEC complaint.
These charges have not come out of the blue; The Los Angeles Times mentioned this over a year ago when reporting on other inappropriate activities:
In a scathing report, a former chief executive of the California public employee pension fund was accused of pressuring subordinates to invest billions of dollars of pension money with politically connected firms.
A 17-month investigation also found that Federico Buenrostro Jr. -- along with former pension fund board members Charles Valdes and Kurato Shimada –- strong-armed a benefits firm to pay more than $4 million in fees to consultant Alfred J.R. Villalobos, who later hired Buenrostro.
- SEC Charges Former CalPers Chief With Fraud (Tom Steinart-Threlkeld, Securities Technology Monitor, 23 April 2012)
- Scathing report faults CalPERS, fiormer chief executive on Villobos payments (Los Angeles Times, 14 March 2011)