SAN FRANCISCO (AP) — The former head of the nation’s
largest pension fund admitted Friday that he took bribes, including
hundreds of thousands of dollars stuffed in paper bags and a shoe box,
and helped an associate collect millions in a fraudulent investment
scheme.
Fred Buenrostro Jr. pleaded guilty in San Francisco
federal court to fraud and bribery charges stemming from his time as
chief executive of the California Public Employees’ Retirement System
from 2002 to 2008.
In his plea agreement, Buenrostro said that in
exchange for his help Alfred Villalobos, a former CalPERS board member,
took him on a trip around the world, gave him casino chips and paid for
his wedding in Lake Tahoe, California.
Villalobos denied the allegations through his attorney Friday.
Buenrostro’s
guilty plea arises from a yearslong investigation into the role of
money-management firm middlemen, called placement agents, in helping
clients win investment business from a California pension system that
controls $300 billion.
CalPERS said the investigation has prompted
it to take "aggressive steps to implement policies and reforms that
strengthen accountability and ensure full transparency."
Buenrostro
said in his plea that he started taking bribes in 2005 to use his
influence with CalPERS to make investment decisions to help Villalobos’
clients. He also said he gave Villalobos, a CalPERS board member in the
mid-90s, access to confidential investment information.
The
64-year-old former executive said he forged letters allowing firms
connected with Villalobos to collect a $14 million commissions on $3
billion pension fund investments. He said he started writing bogus
investor disclosure letters after CalPERS legal and investment officials
declined to authorize them.
Further, Buenrostro said after he
left CalPERS and went to work for Villalobos that he accepted $50,000 to
lie to federal investigators in 2010 about their relationship.
Buenrostro
faces five years in prison and a $250,000 fine when he is sentenced in
January. In exchange for a lesser sentence, Buenrostro has agreed to
cooperate with the continuing investigation of Villalobos, said
Buenrostro lawyer William Portonova. "He got tired of lying," Portonova
said. "He’s ready to tell the truth."
Villalobos has pleaded not
guilty to fraud charges and other related counts. His attorney, Bruce
Funk, said his client denies the claims contained in Buenrostro’s plea
agreement. "If he’s truthful, there is nothing he can say that will hurt
Mr. Villalobos," Funk said.
Buenrostro and Villalobos, 70, also face two government lawsuits.
The
state attorney general sued in 2010, saying Buenrostro and Villalobos,
along with other former pension board and staff members, participated in
kickback scheme.
At that time, the attorney general obtained a
court order freezing assets of Villalobos and his company in an attempt
to recover more than $40 million in commissions. Villalobos filed for
bankruptcy later in 2010. His assets included 20 bank accounts, two
Bentleys, two BMWs, a Hummer, art worth more than $2.7 million and 14
properties in California, Nevada and Hawaii. None of Buenrostro’s assets
were seized.
State attorney general spokesman Nick Pacilio said a trial is scheduled for Sept. 8 in San Francisco
Superior Court.
The Securities and Exchange Commission has also filed a lawsuit in 2012, which is still pending.
In
a related sanction, the state’s campaign watchdog, the Fair Political
Practices Commission, fined other executives and investment managers in
2011 for failing to report gifts that included food, wine and baseball
and Rose Bowl tickets.