By MARCY GORDON, Associated Press
WASHINGTON (AP) — Federal regulators say the former CEO of the nation's largest public pension fund conspired with a friend of his to trick a prominent investment firm into paying $20 million in fees to the friend's firms.
The Securities and Exchange Commission on Monday filed civil fraud charges against Federico Buenrostro, the former CEO of the California Public Employees' Retirement System, known as CalPERS, and his friend Alfred J.R. Villalobos.
Buenrostro denied the SEC's allegations through his attorney.
The SEC said the pair fabricated documents to trick investment firm Apollo Global Management into paying fees to Villalobos's firms for helping sell securities.
The documents had a fake CalPERS logo and gave Apollo the false impression that the pension system, before investing, had properly reviewed and signed fee disclosure letters, the SEC said.
The fabrication allegedly occurred in January 2008 when Buenrostro was chief executive of CalPERS, which runs a $235 billion fund for more than 1.6 million California employees, non-teaching school employees, local government workers and their dependents. Villalobos was a member of the CalPERS board.
"Mr. Buenrostro strongly denies any suggestion that he was involved in any type of fraudulent or illegal conduct," said his attorney, Bill Kimball.
Villalobos, who the SEC said is not represented by a lawyer, couldn't be reached for comment.
Apollo paid Villalobos's firms $20 million in "placement agent" fees that it wouldn't have paid without the disclosure letters, the SEC said.
The agency is seeking unspecified fines and restitution from Buenrostro and Villalobos.
Buenrostro was CalPERS' CEO from late 2002 through June 2008. The day after retiring from the pension fund, he began working at Villalobos's firms, according to the SEC.
Buenrostro and Villalobos also have been charged in a lawsuit filed by the California attorney general's office alleging fraud and kickbacks.
The current CalPERS CEO, Anne Stausboll, told reporters on a conference call Monday that a third, related criminal investigation by the U.S. Justice Department also continues.
Stausboll, and CalPERS President Rob Feckner said in a statement that they "condemned the alleged misconduct" outlined by the SEC and praised the federal agency "for recognizing the severity of the wrongdoing."
CalPERS has put into effect major reforms in the past two years to prevent abuses and "strengthen accountability, transparency and ethics," the statement said.
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