Former CalPERS Officials Sued for $95 Million

California Attorney General Edmund G. Brown Jr. announced his office has filed a civil suit against former CalPERS Board Member Alfred Villalobos, his company ARVCO Capital, and former CalPERS CEO Fred Buenrostro, charging them with fraud. Explained Brown,

Working as a placement agent for ARVCO, Villalobos spent tens of thousands of dollars to lavishly entertain key senior executives at CalPERS, who then influenced the Board to authorize investments that generated over $40 million in commissions to Villalobos. None of these actions were disclosed as required by law, as state pension holders and taxpayers have every right to expect.

According to the complaint, Villalobos influenced these CalPERS officials by, among other things, taking two of them on an around-the-world trip, taking another on a private jet trip to New York, and giving Buenrostro a $300,000 job and a condo when he left the pension fund.

Brown also obtained a court order to freeze Villalobos’ assets and place them in receivership to recover the more than $40 million in commissions that Villalobos earned during the period alleged in the complaint. Brown explained that the freeze order, granted yesterday, was necessary because Villalobos has transferred real estate suspiciously, has lost tens millions of dollars in high-stakes gambling, and maintains over 20 bank accounts. Among the assets placed under receivership are two Bentleys, two BMWs, a Hummer H2, art work worth more than $2.7 million, $6 million in yet-to-be-paid placement-agent commissions, and 14 pieces of real property in California, Nevada and Hawaii.

Specific charges allege that:

  • Villalobos and ARVCO falsely represented that they had the required securities licenses and complied with all laws;
  • Defendants gave, accepted, and failed to disclose gifts;
  • Villalobos and ARVCO submitted bogus disclosure forms.

In addition to a permanent order preventing the defendants from violating state securities and unfair competition laws, and the imposition of civil penalties, Brown seeks to recover the more than $40 million in placement agent commissions that Villalobos and ARVCO collected. The receiver appointed by the court will be charged with recovering the money. Brown’s Office acknowledges the full support and assistance of CalPERS and its special review headed by Philip Khinda, Esq., of the Steptoe and Johnson law firm.

See also, State sues 2 former CalPERS officials, LATimes, 5/6/10.

I want to thank the Attorney General and his office for taking the steps they have to protect our members and the pension system.  We are all working hard to address these issues.  Manipulation of this 78-year old institution cannot, and will not, be tolerated.  We will continue to work side-by-side with authorities in the pursuit of justice,

said CalPERS Board President Rob Feckner. Anne Stausboll, CalPERS Chief Executive Officer, said

we are deeply troubled by the apparant fraud committed against CalPERS.  My number one priority has been, and will continue to be, ensuring that the system and our members are protected against fraud and abuse. CalPERS has placed the internal investment officer mentioned in the Attorney General’s complaint on administrative leave.  We are heartened to have the Attorney General’s Office working with us and our special review team to right the wrongs that may have occurred. These matters underscore the importance of passing placement agent reform this year.  We urge the Legislature and the Governor to pass our bill so that no one will ever be able to profit inappropriately in the way the Attorney General set forth in his court papers.

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