Fred Buenrostro, Corruption Conspiracy, California 2015

A shocking case of corruption has rocked the halls of California's Public Employee Retirement System (CalPERS) as former CEO Fred Buenrostro pleaded guilty to conspiracy to commit corruption and fraud charges. The charges stem from a conspiracy to trade official acts for cash and benefits, announced U.S. Attorney Melinda Haag, U.S. Postal Inspection Service, Inspector in Charge Rafael E. Nunez, FBI Special Agent in Charge David J. Johnson, and U.S. Secret Service Special Agent in Charge Andrew Adelmann.

Buenrostro, the former Chief Executive Officer (CEO) of CalPERS, admitted to conspiring with Alfred J. Villalobos, founder and operator of ARVCO Capital Research LLC (ARVCO). In pleading guilty, Buenrostro acknowledged that Villalobos operated ARVCO as a placement agent that solicited investments by public pension funds into private equity funds.

As part of the conspiracy, Buenrostro admitted that he began receiving secret benefits from Villalobos no later than 2005 for the purpose of influencing him in the exercise of his powers and duties as CalPERS CEO. Buenrostro admitted Villalobos provided him approximately $250,000, as well as gifts, domestic and international travel, meals, entertainment, payment for Buenrostro’s wedding, and his subsequent employment at ARVCO after he left CalPERS in May of 2008.

In exchange, Buenrostro admitted that he attempted to influence the CalPERS investment staff and Board to the benefit of Villalobos and his current and prospective clients, and provided Villalobos with access to CalPERS’ confidential information relating to investments, internal deliberations, and other proprietary matters.

As part of the conspiracy, Buenrostro admitted that he and Villalobos created fraudulent documents in order to secure fees for ARVCO from Apollo Global Management (Apollo), a private equity firm based in New York City. Villalobos, through ARVCO, was the placement agent through which Apollo secured $3 billion in investments by CalPERS. In 2007, Apollo informed ARVCO that it required signed Investor Disclosure letters from CalPERS prior to paying ARVCO any fees for its efforts in securing CalPERS' investments into Apollo-managed funds, citing, among other reasons, Apollo’s obligations under the securities laws.

Buenrostro is scheduled for sentencing on Jan. 7, 2015, at 10:00 a.m. He was charged by superseding information with a single count of conspiracy, in violation of Title 18, United States Code, Section 371, and pleaded guilty before the Honorable Charles Breyer, United States District Court Judge, to that charge in an agreement with the government that included his promise to cooperate in future investigations.

Buenrostro is currently released on bond and is facing a single count of conspiracy. The exact sentence or outcome is not yet known, but this case is a stark reminder of the dangers of corruption and the importance of transparency in government and public institutions.

Source: https://www.justice.gov/usao-ndca/pr/former-calpers-ceo-pleads-guilty-corruption-conspiracy