A federal grand jury in San Francisco has indicted former payment agent Alfred J Villalobos of Reno, Nevada and former California Public Employee System (CalPERS) CEO Federico R Buenrostro Jr of Sacramento, California on charges of conspiracy to defraud the US, engaging in a false scheme against the US, and conspiracy to commit mail fraud and wire fraud.
Buenrostro was also charged in the same indictment with making a false statement to the US and obstruction of justice.
According to the indictment, Villalobos, 69, and Buenrostro, 64, conspired to create and transmit fraudulent documents in connection with a USD3bn investment by CalPERS into funds managed by Apollo Global Management, a private equity firm based in New York City.
ARVCO Capital Research, a financial services firm founded and managed by Villalobos, allegedly acted as a placement agent in helping Apollo to secure these investments by CalPERS. In each instance, Apollo required ARVCO to obtain an investor disclosure letter from CalPERS prior to paying ARVCO any fees for its efforts in securing CalPERS’ investments into Apollo-managed funds, citing, among other reasons, Apollo’s obligations under the securities laws.
After CalPERS’ legal and investment offices declined to sign a certain investor disclosure letter documenting ARVCO’s legal relationship with Apollo, Villalobos and Buenrostro allegedly conspired to create a series of fraudulent investor disclosure letters that were transmitted to Apollo. Apollo paid ARVCO a total of approximately USD14m in fees after receiving the fraudulent letters.
ARVCO transmitted the last fraudulent investor disclosure letter in June 2008, a few weeks before Buenrostro retired from CalPERS. On 1 July, 2008, Villalobos hired Buenrostro to work for ARVCO. When civil and later criminal investigations were opened into the operations of ARVCO and its role as a placement agent in connection with CalPERS’ investments in Apollo-managed funds, both defendants made false statements to and concealed information from the SEC, the USPIS, and the FBI about the authenticity of the investor disclosure letters in order to defeat and obstruct the lawful functions of those agencies.
Villalobos and Buenrostro made their initial appearance in federal court in San Francisco on 18 March 2013 and are currently out on bond. Buenrostro’s next scheduled appearance is 25 March 2013 at 9:30 a.m. for identification of counsel and review of the terms of his bond. Villalobos’ next scheduled appearance is 9 April 2013 at 9:30 a.m. for review of the terms of his bond. Both defendants are scheduled to appear before in district court on 8 May before Judge Breyer.
The maximum statutory penalty for conspiracy to commit mail fraud and wire fraud is 20 years in prison; USD250,000 fine or twice the amount of gain or loss, whichever is greater; three years of supervised release; and a USD100 special assessment. The maximum penalty for each count of conspiracy to defraud the US, false scheme against the US, false statement to the US, and obstruction of justice is five years in prison; USD250,000 fine or twice the amount of gain or loss, whichever is greater; three years of supervised release; and a USD100 special assessment. Restitution may also be ordered as to each of the five counts. However, any sentence following conviction would be imposed by the court after consideration of the US Sentencing Guidelines and the federal statute governing the imposition of a sentence.
