This Big Investor Is Headed To Prison

June 2, 2016, 7:56 PM UTC
2005 Global Green USA's Annual Millennium Awards
Fred Buenrostro, CEO Calpers during 2005 Global Green USA's Annual Millennium Awards at Beverly Hills Hotel in Los Angeles, California, United States. (Photo by Todd Williamson/FilmMagic)
Todd Williamson — FilmMagic/Getty Images

Fred Buenrostro once was CEO of the California Public Employees’ Retirement System, the nation’s largest public pension and one of its most influential institutional investors. Now he’s heading to prison for his role in a pay-to-play scheme that funneled pensioner monies into certain private equity funds for the benefit of a friend.

Buenrostro is not one of the financial titans who enabled the financial crisis, but he’s no small fish.

“I’m humiliated, embarrassed and deeply ashamed of my actions,” the former pension executive reportedly told a federal judge, shortly before sentencing. But the judge didn’t go lightly, giving Buenrostro 4 1/2 years in the pen, which was six months longer than the prosecutor had requested.

For those who haven’t followed the saga, here’s the nutshell version: Buenrostro was friends with Alfred Villalobos, a onetime CalPERS board member who had gone on to become a “placement agent,” helping private equity firms like Apollo Global Management (APO) secure investments for their funds. Villalobos got commissions on such placements, and bribed Buenrostro to provide him with confidential CalPERS information and help steer CalPERS to invest in Villalobos clients. And some of this was pretty explicit, as Villalobos ― who killed himself before going to trial on related charges ― stuffed around $200,000 into shoe boxes and paper bags over a series of three meetings with Buenrostro. Villalobos also paid for Buenrostro’s 2004 wedding and provided all sorts of other financial inducements.

To be clear, there is no evidence that CalPERS suffered financially for the decisions, as many of the Villalobos client funds have generated decent returns. But the breach of trust and fiduciary duty was extreme, and should have been noticed much earlier by other CalPERS staff.

None of the Villalobos clients were ever charged with crimes, apparently employing a successful “see no evil, hear no evil” defense.

“This saga has now come to an end,” said current CalPERS executive Rob Feckner, in a prepared statement. “We are stewards of a sacred trust, and it must never be compromised for personal gain.”

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