March 4, 2011
External Affairs Branch
Patricia K. Macht, Director
Contact: Brad Pacheco, Chief, Office of Public Affairs
CalPERS Assists in Medco Investigation
SACRAMENTO, CA – The California Public Employees' Retirement System (CalPERS) announced today that it has been cooperating and collaborating as appropriate with the California Attorney General's Office and U.S. Securities and Exchange Commission (SEC) regarding allegations that Medco Health Solutions (Medco) paid former CalPERS Board Member Al Villalobos more than $4 million as a consultant on the CalPERS business that may have included improper conduct by former CalPERS Chief Executive Officer Fred Buenrostro and some former CalPERS Board Members.
As part of its special review related to placement agent activities, CalPERS has proactively pursued the allegations, providing investigative authorities with information it has learned and documents that it has gathered on this topic. CalPERS has contacted the independent directors on Medco's Board and urged them that this situation requires the company to conduct an independent investigation and the pension fund expects a prompt report of the outcome.
"CalPERS continues to be committed to rooting out fraud and abuse of the public trust," said Rob Feckner, President of the CalPERS Board. "Allegations of this kind regarding former CalPERS officials are offensive to our Board and the more than 2,300 hard-working CalPERS employees who dedicate themselves to serving our members, employers and stakeholders."
Anne Stausboll, Chief Executive Officer of CalPERS said: "These allegations are appalling and leave a deep scar. We have and will continue to evaluate and pursue every remedy that we can to ensure that this never happens again."
CalPERS current Board and staff have taken significant steps over last 18 months to ensure high standards of ethics in decision making. These include:
- Advancing strong laws to regulate placement agents
- Initiating a special review of placement agent activities
- Prohibiting gifts to staff
- Requiring contractors to disclose business connections and placement agents
- New authority to discipline sitting Board Members who violate ethics policies
- Establishing a 24-7 Ethics Helpline to identify fraud and abuse
- Reinvigorating CalPERS Core Values and culture that drive the Pension Fund's mission
Medco provides mail-order benefits for approximately 300,000 CalPERS members who are enrolled in the Pension Fund's PPO health plans. The company was awarded a three-year, $26-million contract for pharmacy benefit services in 2006. The contract was extended twice, and currently totals $48 million. No disruption of service to members under the current contract is anticipated.
Medco is also the finalist for a three-year contract beginning in 2012 and negotiations have been underway.
The CalPERS Board of Administration will review the Medco situation as part of its receipt of a special review report to be discussed at its Board meeting on March 15.
CalPERS is the largest public pension fund in the U.S. with assets of approximately $230 billion. The retirement system administers retirement benefits for more than 1.6 million active and retired California public employees and their families, and health benefits for 1.3 million enrollees. More information about CalPERS is available online at www.calpers.ca.gov.