Photo: flickr: craigbaker
The SEC is alleging that the former CalPERS (California Public Employees’ Retirement System) CEO Federico R. Buenrostro and his friend Alfred J.R. Villalobos hustled private equity firm Apollo Global management out of $20 million.Apollo is run by industry heavyweights Marc Rowan, Leon Black, and Joshua Harris. Awkward.
This story is also awkward because, according to the SEC release, the scheme doesn’t sound that complicated.
Here’s what Buenrostro and Villalobos allegedly did…
According to the SEC’s complaint, CalPERS CEO Buenrostro falsified placement agent fee documents that said Villalobos’ firm, ARVCO Capital Research LLC (which later became ARVCO Financial Ventures LLC), was going to help Apollo raise private financing for CalPERS.
The fake documents basically consisted of a fake CalPERS logo and Buenrostro’s signature.
When Apollo got the documents, they paid ARVCO thinking the deal was legit. All told, the SEC says ARVCO collected $20 million in fees from forged documents.
From the release:
“Buenrostro and Villalobos not only tricked Apollo into paying more than $20 million in placement agent fees it would not otherwise have paid, but also undermined procedures designed to ensure that investors like CalPERS have full disclosure of such fees,” said John M. McCoy III, Associate Regional Director of the SEC’s Los Angeles Regional Office.
About the “full disclosure” thing — Apollo requires clients like CalPERS to sign an investor disclosure letter before paying out fees to placement agents like ARVCO. Apollo thought they had one from CalPERS back in 2008, but the SEC is alleging that Villalobos sent a fake letter from the start, and that CalPERS CEO Buentrostro signed off on it — Apollo then paid ARVCO $3.5 million.
When contacted about the letter, ARVCO said they never sent one because CalPERS had advised them not to send one.
According the the SECs complaint, Villalobos and Buenrostro repeated this trick for at least 4 more Apollo funds.