Ex-CalPERS head charged with fraud


The role of middlemen in the private equity placement game has sparked lots of controversy and fraud charges over the past few years, ensnaring some big-name financiers and local politicians.

Steven Rattner's reputation, for example, was certainly sullied in his battle with the New York AG's office. The latest news comes from the other coast.

The SEC has just accused Federico R. Buenrostro--the former head of CalPERS, among the largest and most influential public pensions in the country--with fraudulently steering payments to his close friend, Alfred J. R. Villalobos. The alleged victim was private equity firm Apollo, which apparently steered tens of millions to Villalobos. The charges piggyback charges already filed by the state of California.

The complaint, filed in Federal District Court in Nevada, claims that the two men "fabricated documents to give Apollo the false impression that Calpers had approved the payments to Mr. Villalobos," notes Deal Book. The SEC "detailed how Mr. Villalobos and Mr. Buenrostro had supposedly defrauded Apollo. Mr. Buenrostro was said to have signed blank sheets of fake Calpers letterhead, which Mr. Villalobos then used to generate phony letters demonstrating that Calpers had been aware of the payments to Mr. Villalobos. They did this for at least five different Apollo investments, regulators said."

A previous report commissioned by the pension found that Villalobos "turned Mr. Buenrostro into 'a puppet' by lavishing him with gifts and promises of a lucrative job once he left Calpers. The two men both live in Zephyr Cove, Nev., a small town on Lake Tahoe just across the California border…. Buenrostro took a job at Mr. Villalobos's company, Arvco Capital Research, less than two months after resigning from the Calpers board in 2008."

This is a stark reminder of the shocking pay-to-play scandal that engulfed the industry not too long ago. We can only hope that CalPERS and others have cracked down hard.

For more:
- here's the article

Related articles:
Roots of CalPERS woes are political as well as financial
CalPERS CIO goes after private equity