Villalobos, Buenrostro targets of CalPERS fraud enforcement action

By Marc Lifsher

April 23, 2012 12 AM PT

SACRAMENTO — Federal securities regulators sued a former chief executive and a former director of the country’s largest public pension fund, accusing them of scheming to defraud an investment firm of more than $20 million in fees.

The Securities and Exchange Commission filed the lawsuit Monday against the former CEO, Federico Buenrostro Jr., and the former CalPERS board member, Alfred J.R. Villalobos, alleging that they fabricated documents provided to Apollo Global Management in New York.

The documents were the basis used by Villalobos and his companies, ARVCO Capital Research and ARVCO Financial Venturues of Zephyr Cove, Nev., to bill Apollo for placement fees.

Villalobos was paid the fees for helping Apollo win multibillion-dollar contracts to invest money on behalf of the California Public Employees’ Retirement System.

The alleged phony documents were patched together to comply with requests from Apollo lawyers that Villalobos provide them with proof that the fees had been approved by CalPERS investment staff.

“Buenrostro and Villalobos not only tricked Apollo into paying more than $20 million in placement agent fees it would not otherwise have paid, but also undermined procedures designed to ensure that investors like CalPERS have full disclosure of such fees,” said John M. McCoy III, associate regional director of the SEC’s Los Angeles office.

The complaint seeks restitution from Villalobos and Buenrostro as well as financial penalties.

The two defendants also are the target of a civil fraud suit brought by the California attorney general in Los Angeles Superior Court.

A federal criminal investigation also is pending.

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