Business & Real Estate

Former CalPERS chief to pay $250,000 in bribery settlement

Former CalPERS CEO Fred Buenrostro, at a 2005 legislative hearing.
Former CalPERS CEO Fred Buenrostro, at a 2005 legislative hearing. Sacramento Bee file

He took the bribes in bundles of cash, stuffed in paper bags and a shoebox delivered at a hotel near the Capitol. He’ll surrender the money by writing a series of cashier’s checks, paid to the California Department of Justice and mailed to an office three blocks from the hotel.

The former chief executive of CalPERS, already facing prison time in the pension fund’s bribery scandal, has agreed to pay the state $250,000 to settle a civil lawsuit stemming from the case.

Fred Buenrostro, who ran the nation’s largest public pension fund from 2002 to 2008, agreed to the fine to settle a lawsuit filed nearly six years ago by then-Attorney General Jerry Brown. The settlement, filed Feb. 19 in Los Angeles Superior Court, represents one of the last chapters in the bribery case that rocked the California Public Employees’ Retirement System.

“We commend the attorney general’s leadership in this matter and are pleased to see justice served,” said CalPERS general counsel Matthew Jacobs in a statement emailed to The Sacramento Bee.

By agreeing to pay $250,000, Buenrostro is surrendering the “ill-gotten gains from his fraud,” according to the settlement papers. Buenrostro admitted in court papers once again that he accepted bribes from the late Alfred Villalobos, a former CalPERS board member who was representing private equity firms seeking the pension fund’s investments.

Villalobos consistently denied any wrongdoing in the case. The financier shot himself to death at a public gun range in Reno in January 2015, several months after Buenrostro pleaded guilty to criminal charges and agreed to testify against his old friend.

According to the settlement in the civil suit, Villalobos gave Buenrostro “money, gifts, air travel, meals, entertainment and other benefits” in an effort to steer CalPERS money to his clients. Villalobos and his firm, Arvco Capital Research of Stateline, Nev., were paid more than $40 million in commissions from investments CalPERS placed with their clients.

Buenrostro pleaded guilty in July 2014 to criminal charges that he accepted more than $250,000 in bribes from Villalobos. The bulk of the bribes came in $200,000 in cash handed over in three installments by Villalobos in three installments at the Hyatt Regency across from the Capitol in 2007. According to Buenrostro’s plea agreement, Villalobos delivered the cash in paper bags and a shoebox, instructing the CalPERS executive to shuffle the bills to scramble the serial numbers.

Three years later, after Buenrostro left CalPERS and went to work for Arvco Capital in Nevada, Villalobos gave Buenrostro a $50,000 forgivable loan to buy his silence as federal and state investigators pursued the two men.

Villalobos also gave Buenrostro casino chips, hosted his wedding and took him and a former CalPERS board member, the late Charles Valdes, on an around-the-world junket, according to court papers. Valdes was never charged with any wrongdoing.

Under the terms of the guilty plea in the criminal case, Buenrostro is expected to receive a five-year prison term when he is sentenced May 18 in U.S. District Court in San Francisco.

As for the civil settlement, Buenrostro is being allowed to pay up in five annual installments of $50,000 each starting in August 2021. That’s about the time he’s expected to be done with his prison term. The payments are to be mailed to the attorney general’s Sacramento office, three blocks north of the Hyatt.

The state agreed to the total sum of $250,000 because of Buenrostro’s “representations regarding his personal financial assets and liabilities,” according to the settlement. If it turns out Buenrostro lied about his finances, he would agree to pay $1.8 million, “due immediately.”

The attorney general’s office sued Buenrostro, Villalobos and Arvco in May 2010, demanding they pay the state $41 million – the estimated amount of commissions Villalobos earned from CalPERS deals with Buenrostro’s help.

Villalobos and Arvco filed for bankruptcy a month later, an action that normally would have put the state’s lawsuit on ice. A federal judge, however, said the state was exempted from the bankruptcy and was free to pursue the case.

A trial is scheduled to begin next Monday in Los Angeles against the lone remaining defendant, Arvco Capital, although it isn’t clear how much money the state could collect if it wins the lawsuit.

Arvco has gone out of business. Bankruptcy Court records suggest the firm controls several millions of dollars, but that money could be claimed by other creditors.

Dale Kasler: 916-321-1066, @dakasler

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