CalPERS Confirms U.S. Probe

The giant California Public Employees’ Retirement System acknowledged that federal authorities, including the Securities and Exchange Commission and California-based federal prosecutors, have requested millions of documents as part of a probe into bribery allegations that have shaken the giant pension fund.

The disclosure was mentioned in materials released at CalPERS’s Feb. 14 board meeting and confirms the existence of federal investigations first revealed by unnamed sources in the Wall Street Journal last spring.

“The investigations are ongoing, and are expected to remain active for some time,” CalPERS said.

While details of the federal investigations are not yet public, a state-level case filed by Jerry Brown, California’s former attorney general and current governor, alleges that Alfred Villalobos, a placement agent who was previously a former Los Angeles deputy mayor and a member of CalPERS’s board, bribed the then-CalPERS chief, Federico Buenrostro, and two other CalPERS associates with lavish gifts.

Those gifts included expensive travel to Dubai and European cities as well as attendance at a high-profile New York event honoring Leon Black, the founder of Apollo Global Management. Black’s Apollo was a primary client of Villalobos’s firm, Arvco Capital Research.

The lawsuit alleged that Villalobos helped steer CalPERS investment funds totaling $4.8 billion to Apollo between 2002 and 2008, the period Buenrostro was chief executive of the pension fund. That money was responsible for $47 million in commissions that Villalobos’s firm earned as a placement agent between CalPERS and Apollo. The case says these gifts violated the pension fund’s own rules and compromised the investment process.

Brown called for $95 million in restitution from Villalobos in the complaint.

Both Villalobos and Buenrostro denied wrongdoing in the state lawsuit. Apollo and Black were not accused of any wrongdoing in the state suit.

In response to the state investigation, California lawmakers enacted a law requiring placement agents to register as lobbyists.