Bribery Figure In CalPERS Investment Scandal Commits Suicide

(January 21) Alfred Villalobos, the figure at the center of the California Public Employees Retirement System bribery scandal that ensnared the pension fund’s former chief executive, apparently committed suicide last week.
Villalobos, a Nevada businessman who was set to go to trial next month on charges that he bribed California Public Employees Retirement Fund Chief Executive Officer Fred Buenrostro, is believed to have fatally shot himself in the head January 13 at an indoor shooting range in Reno, according to Reno police.
The scandal which involved Villalobos and Buenorostro first broke in 2009, and has continued to unwind. Buenrostro has admitted receiving over $250,000 in bribes and hush money from Villalobos and is scheduled to be sentenced in May.
Though Buenrostro referred to each other as “friends,” Buenrostro was to be called upon to testify against Villalobos when his matter came to trial, elucidating details of how Villalobos made payments to him while he was brokering investments on behalf of the California Public Employees Retirement System. Those bribes to Buenrostro were intended to gain favor for the clients of Villarobos’ investment firm.
Villalobos had been a board member for the California Public Employees Retirement Board in the early 1990s, which led to his association with Buenrostro. Subsequent to his departure from the retirement system’s board, Villalobos worked Sacramento assiduously as a representative of Apollo Global Management and other hedge funds and private equity firms. In this capacity Villalobos sought investment dollars from the big pension fund. He found both Buenrostro and another board member, Charles Valdes, receptive to his approach In one eight month period, between August 2007 and April 2008, the California Public Employees Retirement System invested approximately $3 billion in several Apollo funds. As a broker on those transactions, Villalobos and his firm ARVCO Capital Research received $14 million in placement fees.
According to assistant U.S. attorney Timothy Lucey, who was prosecuting Villalobos, Villalobos gave Buenrostro more than $250,000 in bribes, including $200,000 in cash delivered in three installments at the Hyatt hotel across the street from the State Capitol in 2007. Furthermore, according to the U.S. Attorney’s Office, Villalobos fed Buenrostro’s gambling addiction, covering an unspecified amount of his losses believed to be in the hundreds of thousands of dollars at Lake Tahoe and Reno casinos for nearly a decade. Villalobos paid for Buenrostro’s wedding and treated Buenrostro and Valdes to an all-expenses-paid vacation to Europe and Asia in 2006. Later, according to Lucey, when investigators were zeroing in on Villalobos’ activity, he wrote Buenrostro a $50,000 check in an effort to dissuade him from being candid with those investigators.
Villalobos’s corruption of Buenrostro was of some moment, in that in recent years California has been beset by a public employee pension fund crisis in which taxpayers have been called upon to bail out the California Public Employees Retirement System by making ever larger payments into the system to cover staggeringly high pensions for its members.
California Public Employee Retirement System officials have attempted to downplay the impact of the Buenrostro/Villalobos scandal, maintaining that Buenrostro’s management of the pension fund showed a consistent profit.
The California Public Employee Retirement System commissioned a report by Washington securities lawyer Philip Khinda. Khinda concluded that Villalobos’ bribes had not steered any pension fund dollars to his clients, but noted his work probably interfered with the system’s negotiators’ autonomy and enabled the investment firms to get more favorable rates. This probably cost CalPERS millions of dollars in additional management fees paid to those firms, according to the Khinda report.
Villalobos’ death was not instantly disclosed. In fact, it caught prosecutors completely by surprise. When they appeared in court for a hearing related to a request by the defense to delay Villalobos’ trial, Villalobos’ lawyer, Bruce Funk, told the judge Villalobos had died. Lucey, unprepared for that announcement, according to courtroom observers, “rushed” from the courtroom without any further input.

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