April 23, 2012
External Affairs Branch
Robert Udall Glazier, Deputy Executive Officer
Brad Pacheco, Chief, Office of Public Affairs
CalPERS Applauds SEC Fraud Charges Against Former Pension Fund CEO and a Former Board Member
SACRAMENTO, CA – Leaders of the California Public Employees’ Retirement System (CalPERS) applauded the U.S. Securities and Exchange Commission (SEC) for the charges the SEC filed today against the pension fund’s former Chief Executive Officer (CEO) Fred Buenrostro and a former member of the CalPERS Board Alfred Villalobos.
The SEC charged Buenrostro and Villalobos with several counts of fraud in violation of the federal securities laws for their alleged fabrication and misuse of several purported CalPERS disclosure letters sent to CalPERS money manager Apollo Global Management in order to secure millions of dollars in placement agent fees for Villalobos and his placement agent firm ARVCO. The SEC action follows the state court fraud charges against these same defendants brought by the California Attorney General based on the same documents and payments.
Current CalPERS CEO Anne Stausboll and CalPERS Board President Rob Feckner condemned the alleged misconduct outlined in the SEC complaint and they praised the SEC for recognizing the severity of the wrongdoing.
“We commend the SEC for its leadership and perseverance on behalf of CalPERS, our members and employers, our stakeholders and California taxpayers,” said Feckner. “We condemn in the strongest way possible the alleged misconduct of these individuals, and pledge to continue working with all law enforcement authorities investigating these issues. Today’s action by the SEC reaffirms the importance of the special review CalPERS commissioned on placement agent activity. As leaders and stewards of CalPERS, we stand ready to continue upholding the sacred trust of our members, employers and taxpayers and will do everything within our power to never allow the system to be compromised by personal gain.”
CalPERS has instituted numerous and sweeping reforms in the last two years to further safeguard the system and strengthen accountability, transparency and ethics.
“We have dedicated ourselves as an organization to pursue all of the appropriate policy changes and remedies available to prevent further misconduct,” said Stausboll. “The actions we have taken represent more than lessons learned. They are the foundation to preserve and protect the respect and confidence of those we serve.”
CalPERS actions, many of which were recommended in the special review report it commissioned, have included:
- Advancing a State law that requires placement agents to register as lobbyists and prohibits them from being paid fees based on whether CalPERS invests with their clients;
- Creating an Enterprise Risk Management Office and the position of Chief Risk Officer with overarching responsibility for risk management throughout CalPERS;
- Creating an ethics helpline to help identify fraud, waste and abuse;
- Posting conflict of interest forms and travel costs on the CalPERS website;
- Establishing new rules for communications between Board Members and staff about investment proposals and contracts;
- Granting new authority to discipline Board Members who violate policy;
Conducting periodic audits to ensure compliance with CalPERS policies and regulations that preclude use of the fund's money for payment of placement agent fees;
- Enhancing the process of responding to Public Records Act requests;
Obtaining commitments for approximately $215 million in fee concessions from leading external managers, along with the commitment that they will not use placement agents when seeking CalPERS business in the future;
- Adopting a policy that limits gifts to Board members from individuals and firms doing business with the pension fund or seeking to do business with the fund; and
- Adopting a set of Principles for Effective Board Governance that reflect each Board member’s commitment to be effective and capable fiduciaries, ethical leaders, and open and accountable to CalPERS stakeholders.
Read the full SEC complaint (PDF, 155 KB).
Read the CalPERS Special Review report on placement agents (PDF, 898 KB).
CalPERS, with assets of approximately $235 billion, is the largest public pension fund in the U.S. It administers retirement benefits for more than 1.6 million California state, local government, and public school employees, retirees, and their families on behalf of more than 3,000 public employers, and health benefits for more than 1.3 million enrollees. The average CalPERS pension benefit is $2,332 per month. The average benefit for those who retired in the most recent fiscal year that ended June 30, 2011, is $3,065 per month. More information about CalPERS is available at www.calpers.ca.gov.
Additional ResourcesCalPERS Strengthens Accountability, Transparency and Ethics (PDF, 315 KB)