Ex-CalPERS CEO To Admit Bilking Apollo

Jul 2 2014 | 5:15am ET

The former head of the U.S.’s largest public pension fund is poised to plead guilty to defrauding Apollo Global Management as part of a “pay-to-play” scam.

Federico Buenrostro, who led the California Public Employees’ Retirement System from 2002 until 2008, is near a plea agreement with federal prosecutors, they said this week. The deal, which requires Buenrostro to cooperate with authorities in the case against  former CalPERS board member and Los Angeles deputy mayor Alfred Villalobos, could be finalized as soon as next week.

Buenrostro and Villalobos are accused of creating phony disclosure letters from CalPERS after the pension refused, and providing those fake documents to Apollo to win $14 million from the firm for Villalobos’ placement agency, Arvco Research Capital. The two allegedly did not do a great job, with CalPERS’ name misspelled on one letter and another dated after Buenrostro’s resignation to go to work for Arvco.

Buenrostro is expected to plead guilty to conspiracy and faces up to five years in prison. When he does, he’ll become the highest-profile former public official to do so since former New York State Comptroller Alan Hevesi pleaded guilty to pay-to-play charges in 2010.

CalPERS said it “looks forward to the closure of these cases at the appropriate time in the due course of the justice system.”

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