- Created on Monday, 11 August 2014 22:36
- Written by IVN
San Francisco, California - A federal grand jury earlier today indicted Alfred J. Villalobos, of Reno, Nev., on charges of conspiracy to commit corruption offenses and to defraud the United States, engaging in a scheme to conceal material facts from the United States, and conspiracy to commit mail fraud and wire fraud, announced U.S. Attorney Melinda Haag, U.S. Postal Inspection Service, Inspector in Charge Rafael E. Nunez, FBI Special Agent in Charge David J. Johnson, and U.S. Secret Service Special Agent in Charge Andrew Adelmann.
This indictment adds corruption allegations to, and supersedes, an earlier indictment returned in March 2013.
According to the superseding indictment, Villalobos conspired with Fred Buenrostro, the former Chief Executive Officer (“CEO”) of the California Public Employee Retirement System (“CalPERS”) in connection with a $3 billion investment by CalPERS into funds managed by Apollo Global Management (“Apollo”), a private equity firm based in New York City. Villalobos, through his financial services firm, ARVCO Capital Research LLC (“ARVCO”), acted as the placement agent through which Apollo secured the investments by CalPERS.
The superseding indictment alleges that no later than 2005, Villalobos began giving Buenrostro secret benefits for the purpose of influencing and rewarding him in the exercise of his powers and duties as CEO concerning CalPERS’ financial transactions, investment operations, and internal deliberations, for the benefit of Villalobos. The benefits from Villalobos included payments of approximately $250,000, as well as gifts, domestic and international travel, meals, entertainment, payment for Buenrostro’s wedding, and his subsequent employment at ARVCO after he left CalPERS in May of 2008. In exchange, Buenrostro provided Villalobos with access to CalPERS’ confidential information relating to investments and other proprietary matters and attempted to influence the CalPERS investment staff and CalPERS Board, as directed by Villalobos.
In 2007, Apollo told ARVCO that it required signed Investor Disclosure letters from CalPERS prior to paying ARVCO any fees for its efforts in securing CalPERS’ investments into Apollo-managed funds. After CalPERS’ legal and investment offices declined to sign the first Investor Disclosure letter documenting ARVCO’s relationship with Apollo, Villalobos and Buenrostro conspired to create a series of fraudulent Investor Disclosure letters that were transmitted to Apollo. Apollo paid ARVCO a total of approximately $14 million dollars in fees after receiving the fraudulent letters.
The superseding indictment further alleges that 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, Villalobos and Buenrostro agreed on a false version of facts and subsequently made misrepresentations to, and concealed information from, the SEC, the USPIS, and the FBI, about their financial relationship and the authenticity of the Investor Disclosure letters.
On July 11, 2014, Buenrostro was charged by superseding information with a single count of conspiracy in violation of Title 18, United States Code, Section 371, and pleaded guilty before the Honorable Charles Breyer, United States District Court Judge, to that charge in an agreement with the government that included his promise to cooperate in future investigations. Both defendants are currently released on bond. The arraignment for Villalobos on the superseding indictment is not yet scheduled. However, a status hearing is scheduled before Judge Breyer for Aug. 8, 2014, at 9:00 a.m.
The maximum statutory penalty for conspiracy to defraud the United States, and for a scheme to conceal material facts from the United States, is five years of imprisonment, $250,000 fine or twice the amount of gain or loss, whichever is greater, three years of supervised release, and a $100 special assessment. The maximum statutory penalty for conspiracy to commit mail fraud and wire fraud is 20 years’ imprisonment, $250,000 fine or twice the amount of gain or loss, whichever is greater, three years of supervised release, and a $100 special assessment. Restitution may also be ordered as to each of the three counts. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Timothy J. Lucey and Philip A. Guentert are the Assistant United States Attorneys who are prosecuting the case with the assistance of Laurie Worthen and Beth Margen. The prosecution is the result of an investigation by the U.S. Postal Inspection Service and the FBI, with substantial assistance from the Los Angeles Regional Office of the SEC as well as the U.S. Secret Service.
Please note, an Indictment contains only allegations and, as with all defendants, Alfred J. Villalobos must be presumed innocent unless and until proven guilty.