Former CEO Of Calpers Indicted On Financial Fraud Scheme Charges

Tyler Durden's picture

There was a time when pervasive financial crimes would if not shock and appall people, then at least make them think for a minute or two. Sadly, now that even the biggest bank by assets is found to have misled regulators, shareholders and the broad public and its CEO is proven to have perjured himself before Congress, and absolutely nothing happens, not even one of those token SEC wristslap settlements, we are way past the point of even pretending to care. Which is why there is little we can comment on the news that Federico Buenrostro Jr., 62, the former CEO of the nation's largest pension fund, California's Calpers, has been indicted by a federal grand jury in a scheme to defraud Apollo Management, one of the biggest private equity firms in the nation, of $20 million. How is one supposed to have any faith, or worse, any hope that there is something more than mere criminality pushing the US capital markets to "new highs", and why is anyone surprised the retail investor has given up on the Fed-backstopped US "wealth creation mechanism" long ago.

From Reuters:

A federal grand jury has indicted former California Public Employees' Retirement System Chief Executive Officer Federico Buenrostro on conspiracy charges in connection with a scheme to commit fraud, the U.S. Department of Justice said on Monday.


The grand jury also indicted Alfred Villalobos, a former member of the pension fund's board, in connection with the scheme involving fraudulent documents related to a $3 billion investment of the retirement system in funds managed by Apollo Global Management.

The full story, from a year ago, courtesy of the LA Times:

Federal securities regulators sued a former chief executive and a former director of the California Public Employees' Retirement System, accusing them of scheming to defraud an investment firm of $20 million.


The Securities and Exchange Commission alleged that former CEO Federico Buenrostro Jr., 62, and former director Alfred J.R. Villalobos, 68, fabricated documents requested by Apollo Global Management, a New York private equity firm.


Apollo had hired Villalobos, a close friend of Buenrostro, as a so-called placement agent to secure billions of dollars of investments from the country's largest public pension fund.


The documents were used by Villalobos and his companies — Arvco Capital Research and Arvco Financial Ventures of Zephyr Cove, Nev. — to bill Apollo for helping to win private equity investment management contracts.


In all, Apollo paid Villalobos more than $48 million from 2005 to 2009.


Villalobos received at least $12 million in additional placement fees from other investment funds that managed CalPERS money.


Both Buenrostro and Villalobos have denied any wrongdoing. Buenrostro was not involved "in any type of fraud or illegal conduct," said his attorney, Bill Kimball.


Villalobos does not have an attorney, the SEC said. The telephone at Villalobos' onetime office near his Lake Tahoe mansion was disconnected.


The alleged phony documents were patched together to make it look as if the fees had been approved by CalPERS investment staff, the suit alleged. Apollo's lawyers had wanted Villalobos to provide them with proof that CalPERS consented to the fees.


"Those documents gave Apollo the false impression that CalPERS had reviewed and signed placement agent fee disclosure letters in accordance with its established procedures," the SEC said in a statement.


"In fact, Buenrostro and Villalobos intentionally bypassed those procedures to induce Apollo to pay placement agent fees to Villalobos' firms," the SEC said.


The false documents bore a fake CalPERS logo and in at least one instance a copy of Buenrostro's signature taken from an otherwise blank paper, the SEC said.


The suit alleged that Villalobos, Buenrostro and an Arvco staffer created the bogus documents beginning in 2007 after CalPERS investment officers were advised by their lawyers not to sign such disclosure orders.


"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.


Buenrostro and Villalobos also are the target of a civil fraud suit brought by the California attorney general's office in Los Angeles County Superior Court.


And CalPERS, which has an investment portfolio valued at $235 billion, has confirmed that a federal criminal investigation is pending.


The SEC action is the latest by law enforcement in a probe that began in October 2009, when CalPERS released documents in a Public Records Act request that showed Villalobos was paid unusually high placement agent fees for helping Apollo and other investment firms close deals with the pension fund.


Philip Khinda, a Washington securities lawyer hired by CalPERS to conduct a special review of the placement agent scandal, applauded the SEC.


"It's another impressive action by law enforcement authorities, and I expect more from them to come," Khinda said.


Sure: more wristslaps of the kind that continue to make crime pay - because paying a $1 million "settlement", assuming one is caught, when the profits throughout the life of the crime are orders of magnitude higher, not only do not serve as a deterrence mechanism, they make more financial executives seek illegal, criminal shortcuts, in hopes they can rake up enough ill-gotten booty before the SEC comes knocking, and forces them to disgorge a grand total of some 3-5% of their gains.

Sadly, this is what passes for justice in America in this day and age.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
machineh's picture

former CEO Federico Buenrostro 

the literal translation from Spanish is 'pretty face'

You can't make this sh*t up.

disabledvet's picture

Yes you can...yes you can. Indeed "you have to." you can't ask for 50 million with a business that says your name is Pedro..."and that's it."

Atomizer's picture

3,2,1... Action!

The media needs to create a new distraction to offset interest.


buzzsaw99's picture

Now that's funny. Apollo tries to rip off Calpers using an inside agent who ripped them off instead. Suck it Apollo! HAHAHAHAHAHAHA!!

NotApplicable's picture

"Unusually high fees."


little buddy buys the dips's picture

LOL, how's the view from under the bus?...

donethat's picture

Belly button lint ?

goldenbuddha454's picture

This can only lead to one thing; a new and improved pork-laden financial regulatory bill designed to make the bad guys cower in fear and give tv face time to the politicians who create it.  Same shit, different day, next. 

ultraticum's picture

Poor Apollo . . . got fleas sleepin' with dogs.  Whimpering on back to the biggest flea-ridden dog of all . . . . goobermint.  The final monopoly on force.

Saul Sage's picture

fuck the Fed(erico)!

Downtoolong's picture

Too bad Freddy. You've got to be Too Big To Fail and Jail like me sucka. That's why I'm richer than you.



tony bonn's picture

another token shmuck is rolled under the bus for window dressing.....i guess the sec needs some income to pay for its unexpectedly large porn bill

Lordflin's picture

One down and 99,999 to go...

ebworthen's picture

Hang the fuckers already.

q99x2's picture

But somehow Holder is getting a cut of it too. Somebody catch that F'ker picking up the drop and post it to YouTube.

PoliticalRefugeefromCalif.'s picture

  Well as to be expected any news about Clownafornia and especially Calpers hits my dash with the usual suspicion that my pension might be a bit ... well, exposed to risk or something like that.

 Junk the hell out of me for being a retiree from the land of the magic unicorn if you get any satisfaction, I don't blame anyone- if I could I probably would do it myself.

  At this point I stay numbed up anyway- might as well work off some rage, I do it at least two minutes a day myself and it helps.

  It was a good ride for a boy from Oklahoma, getting to see the insides of a men's prison and all and learn about real life diversity.. but like all rides there is a time you get off.. way or the other.

  This bastard will probably end up the Treasury Sec. before this is done- besides there is always another one waiting in the batters box who learned from Freddy.

.."The ultimate result of shielding
     men from the effects of folly is
     to fill the world with fools"..
     -- Herbert Spencer


CaptainObvious's picture

This doesn't mean shit. Why don't they indict him for the larger crime of being the former CEO of CALPERS, which is one of the biggest financial scams in history and is going to take down Kalifornia's economy single-handedly.

torabora's picture

Actually the High Speed Train To Nowhere project is going to compete with Calpers to destroy the Commiefornia economy.

Black Markets's picture

What does Corzine make of this news?

optimator's picture

Ask Mary Shapiro's opinion.  She's doing much better now....has a better job to increase her knowledge of large corporations.

riphowardkatz's picture

meanwhile 22 songs equals 200k+

Rearranging Deckchairs's picture

I am still waiting for those Jackal's in the U.C. system to be perp walked for borrowing money in complicated transactions from wall st that they use to build profit making hospitals and apartment buildings while they keep their foot on the gas pedal and jack student tuition sky high while never restoring cuts.



newengland's picture

Jail 'em. Don't bail 'em. Californication fcks its followers. Pelosi et al are crooks.

The USA was founded as a Republic, not a democracy which only works until people figure out how to steal from others.

Calpers is a sub-prime exemplar.

dark pools of soros's picture

must of stole from more than just goyims

madcuban's picture

One must ask, why now? This may be the beginning of the move to justify the govt taking over pensions. To "protect us from fraud". Be very careful how much you cheer, this type of activity. There are ulterior motives afoot.

Its_the_economy_stupid's picture

$20 million?!! This attracts SEC attention? Puh-lease!

Somebody hurt somebodies pride here, that's all. But, they hurt the wrong person's pride.

newengland's picture

The economy...defrauded by gangster banksters and their DC puppets. Stop excusing them.

No loss to me. Loss to you. Pet.

torabora's picture

I'd say they didn't share the loot with the right people.

newengland's picture

Silly bint. Calpers is defrauded, and your sort make excuses for it. Silly ninny.

Radical Marijuana's picture

These issues should be considered in this context:

It is the Ouroboros of Incorporated Robbery!

Walter Burien, Clint Richardson & Jerry Day videos:

Ending Taxation - The Only Game in Town - 2011

The Corporation Nation Master (2010)

Corporation Nation 2

These were not well-made, entertaining videos, however, the concepts revealed are important:

Another, shorter, talking head video about the CAFR:

Introduction to the CAFR - Why You Can’t Get Ahead




orangegeek's picture

Who gives a shit?  Corruption galore that is being monitored by "the same pigs in the main house" said in Orwell speak.