Former CalPERS Officials Sued over Investment Scheme

The Los Angeles Times reports that the civil suit alleges Buenrostro — chief executive of the powerful California Public Employees’ Retirement System from 2002 to 2008 — took tens of thousands of dollars’ worth of gifts from placement agent Villalobos, whose company, Arvco Capital Research, obtained more than $47 million in “undisclosed and unlawful commissions for selling approximately $4.8 billion worth of securities to CalPERS” from 2005 to 2009.  

The suit claims that Villalobos compromised Buenrostro and other CalPERS officials with gifts, which ultimately “compromised the integrity of CalPERS’ investment process” and violated the state corporations code, according to the news report. The gifts included round-the-world trips as well as private jet flights for fund executives to attend a New York fundraiser honoring Leon Black, founder of investment firm Apollo Global Management, Villalobos’ biggest client at CalPERS.  

The complaint seeks civil penalties, disgorgement of profits, and restitution to state pension fund investors of $95 million from Villalobos and Buenrostro. The state won a court order this week freezing Villalobos’ bank accounts and other assets.  

Neither Buenrostro nor Villalobos could immediately be reached for comment, and executives at CalPERS declined to comment to the newspaper.  

The attorney general’s office began investigating placement-agent activity last fall after CalPERS reported that Villalobos’ firm received the highest fees of any placement agent for the fund (see CalPERS Releases Placement Agent Disclosures).