Reuters: Regulatory News: UPDATE 1-SEC brings fraud charges from Calpers probe

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UPDATE 1-SEC brings fraud charges from Calpers probe Apr 23rd 2012, 21:22 Mon Apr 23, 2012 5:22pm EDT * SEC: Ex-CEO, ex-board member fabricated documents * Pair a focus of long-running SEC, California AG probes SAN FRANCISCO, April 23 (Reuters) - The U.S. Securities and Exchange Commission charged a former chief executive of the biggest U.S. public pension fund and one of its former board members on Monday with scheming to defraud Apollo Global Management of more than $20 million in placement fees. The SEC alleged that Federico Buenrostro, a former chief executive of the California Public Employees' Retirement System, and Alfred Villalobos, a friend and former board member of the fund who became a placement agent, fabricated documents as part of the fraud. Investment firms hire placement agents to help them land business at pension funds. The SEC alleges that Buenrostro and Villalobos gave the private equity firm the impression the $235 billion pension fund had reviewed and signed placement-agent fee disclosure letters in accordance with its procedures. "In fact, Buenrostro and Villalobos intentionally bypassed those procedures to induce Apollo to pay placement agent fees to Villalobos's firms," the statement said. "The false letters bearing a fake Calpers logo and Buenrostro's signature were provided to Apollo, which then went ahead with the payments." Villalobos generated more than $70 million in placement agent fees over an approximately 10-year period, at least $58 million of which was related to Calpers' investments, according to the SEC's complaint. Buenrostro served as Calpers' CEO from 2002 to 2008. Buenrostro and Villalobos have been the focus of long-running probes by the SEC and the California attorney general's office regarding placement agent activity at Calpers, which has been cooperating in the investigations. Calpers at the same time has been implementing changes to better police placement agents. "We condemn in the strongest way possible the alleged misconduct of these individuals, and pledge to continue working with all law enforcement authorities investigating these issues," Calpers Board President Rob Feckner said in a statement. Calpers Chief Executive Anne Stausboll said the fund continues to assist authorities with its probes of placement agents. Apollo will also assist authorities, a spokesman for the private equity firm said. "The allegations described in the complaint filed today by the SEC, if true, are troubling," said Charles Zehren. "We have cooperated fully with the regulatory agencies investigating this matter, and will continue to do so." "Apollo believes it follows best practices in handling its placement agent relationships, and only learned of the alleged misconduct while cooperating with the regulatory agencies investigating this matter," Zehren added. The SEC said it seeks an order requiring Buenrostro, Villalobos, and Villalobos' firm to disgorge any ill-gotten gains, pay financial penalties and be permanently enjoined from violating the antifraud provisions of federal securities law. Representatives of Villalobos and Buenrostro could not be reached for comment. The two men have denied any wrongdoing. The office of California Attorney General Kamala Harris had no comment on the SEC's action, but said a case management hearing regarding the state's fraud lawsuit against Villalobos and Buenrostro is scheduled for early May in state court in Los Angeles County. Link this Share this Digg this Email Reprints

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