Apollo Placement Agent, Ex-CalPERS Exec. In Hot Water In Calif.

May 12 2010 | 3:05am ET

California has filed suit against a former board member of the state’s public pension fund, alleging that he sought to bribe its former CEO while working as a placement agent on behalf of private equity firm Apollo Global Management.

According to the suit, which also names former California Public Employees’ Retirement System CEO Fred Buenrostro, Alfred Villalobos “attempted to bribe” a senior investment officer at CalPERS, which was mulling whether to buy a stake in the New York-based firm. The pension eventually did buy a 9% stake in Apollo for $600 million.

Apollo itself is not accused of any wrongdoing. The p.e. firm and CalPERS last week struck a deal that will see the former cut the fees charged to the latter by $125 million over the next five years. Apollo has also agreed not to use placement agents in its dealings with CalPERS.

“We will continue to cooperate fully with all regulatory agencies investigating this matter,” Apollo said. “We believe we at all times have handled our placement agent relationships in an appropriate matter.”

According to the lawsuit, filed last week by the California attorney general’s office, Apollo employed Villalobos, a former CalPERS board member, and his company, Arvco Capital Research, to drum up business from the $200 billion pension fund. Villalobos “cultivated improper relationships” with CalPERS officials which “compromised the integrity” of the pension.

In one case, Villalobos paid for Leon Shahinian, CalPERS’ senior investment officer, to New York to attend a fundraiser in honor of Apollo founder Leon Black, as well as a trip to Florida the following day. The $63,000 in expenses were paid for by Apollo.

Shahinian has not been named in the suit, but he has been put on administrative leave from CalPERS.

The lawsuit is seeking $95 million from Villalobos and Buenrostro. A Los Angeles judge has already frozen Villalobos’ assets.


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