WASHINGTON, DC-The Securities and Exchange Commission is pursuing civil charges against the former CEO of the California Public Employees’ Retirement System, Fred R. Buenrostro, and a former board member of the pension fund, Alfred J.R. Villalobos. The agency filed a complaint in the US District Court in Reno, NV, alleging that Buenrostro and Villalobos violated several federal securities laws relating to the $20 million in placement fees with private equity firm Apollo Management.
William H. Kimball, Buenrostro’s attorney tells GlobeSt.com that his client “strongly denies any allegation that he engaged in fraudulent or illegal conduct." Attempts by GlobeSt.com to locate Villalobos to request a comment for this article were unsuccessful. The SEC did not respond to GlobeSt.com’s request for comment in time for publication.
In its court filing, the SEC claims that Villalobos, a placement agent, generated more than $70 million in placement agent fees over a 10-year period, at least $58 million of which was related to CalPERS’ investments. In 2007, Apollo Global Management began requiring signed Investor Disclosure letters from investors, such as CalPERS, from whom it raised money with the assistance of a placement agent. When CalPERS refused to sign the disclosure letter, Villablobos allegedly generated a letter using the CalPERS logo. Buenrostro then signed this letter.
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In a prepared statement, Current CalPERS CEO Anne Stausboll and CalPERS Board President Rob Feckner lauded the SEC action. A CalPERS spokesman tells GlobeSt.com that the episode prompted CalPERS to push for a California law requiring placement agents to register as lobbyists and prohibiting them from being paid fees based on whether CalPERS invests with their clients.
CalPERS also put several internal measures in place as well, the spokesman adds. These included recommendations made by law firm Steptoe & Johnson, such as periodic audits by CalPERS Office of Audit Services to ensure that none of the fund's money is used to pay placement agent fees and the ongoing review of management and other fees by the Investment Office of external money managers.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
