US - The California attorney general has accused former CalPERS board member Alfred Villalobos, now a third party marketer, with bribing former chief executive Fred Buenrostro in order to gain business for private equity firms including Apollo Global Management.
In a civil suit, Brown alleged Villalobos and Buenrostro helped funnel US$4.8bn of the California Public Employees' Retirement System's assets into funds run by Apollo and Aurora Capital Group. As a result, Villalobos pocketed $47m in undisclosed commissions. Brown is charging both Villalobos and Buenrostro with fraud. The two private equity firms are not accused of wrongdoing.
"Working as a placement agent for (Villalobos' firm) ARVCO, Villalobos spent tens of thousands of dollars to lavishly entertain key senior executives at CalPERS, who then influenced the Board to authorize investments that generated over $40m in commissions to Villalobos," said Brown. "None of these actions were disclosed as required by law, as state pension holders and taxpayers have every right to expect."
"CalPERS was shocked to learn the magnitude of these fees when they came to light," the suit says.
According to the complaint, Villalobos "cultivated improper relationships" with Buenrostro, former board member and head of the investment committee for 13 years Charles "Chuck" Valdes; current senior investment officer Leon Shahinian and other members of the board who were not named. None, other than Buenrostro, are named as defendants in the civil suit.
The suit details a slew of gifts and perks received by Buenrostro and others, but not fully reported to the board including an around the world trip and limo rides.
The suit says Buenrostro had an open job offer from Villalobos to join his firm while he was still at CalPERS and mere day after he left the pension fund in 2008, received a $300,000 job and a free condominium the next year.
Villalobos also allegedly paid for Valdes' expenses when he attended the Academy Awards ceremony in 2006, while on a separate occasion Shahinan was taken to New York on a private jet and put up at the Mandarin Oriental Hotel for a cost topping $9,000.
In a statement, CalPERS current CEO Anne Stausboll said Shahinian has been placed on administrative leave.
Officials at the pension fund applauded Brown and board president Rob Feckner said: "We are all working hard to address these issues. Manipulation of this 78-year old institution cannot, and will not, be tolerated."
The suit focuses on Villalobos' quest to gain CalPERS' business for Apollo.
CalPERS has had a relationship with Apollo for some 15 years and took a 10% stake in the company in 2007.
Last month, CalPERS struck a deal with Apollo Global Management that saw the private equity fund manager reducing its existing fees by $125m over the next five years and forgoing the use of placement agents in the future. (Global Pensions, April 20, 2010)
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