SEC: Former CalPERS officials defrauded Apollo

Alfred Villalobos, a former CalPERS board member turned placement agent, and the pension system’s former CEO Fred Buenrostro, allegedly tricked Apollo into paying fees for fundraising work they claimed was approved by the pension, the SEC has charged.

In 2007, Apollo Global Management began to require that placement agents submit signed approval forms from limited partners before it would pay any fees to the fundraisers.

And that’s when the fun began, according to the US Securities and Exchange Commission.

That policy allegedly led to an embattled placement agent, Alfred Villalobos, and his friend Fred Buenrostro, the former chief executive officer of the California Public Employees’ Retirement System, defrauding Apollo for more than $20 million by allegedly submitting fake CalPERS disclosure forms that ensured the flow of fees from the Leon Black-led firm, according to a lawsuit filed by the US Securities and Exchange Commission Monday.

“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 McCoy, associate regional director of the SEC’s Los Angeles regional office, in a statement.

An attorney for Buenrostro did not return calls and emails for comment. An attorney for Villalobos could not be reached; a number for Villalobos’ firm, ARVCO Capital Research in Nevada, was disconnected. Villalobos filed for bankruptcy in 2010 and faces fraud charges from the state of California for alleged misconduct involving private equity fundraising activities.

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

John McCoy

CalPERS applauded the charges Monday: “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.”

Apollo said: “The allegations described in the complaint filed today by the SEC, if true, are troubling. We have cooperated fully with the regulatory agencies investigating this matter, and will continue to do so. Apollo believes it follows best practices in handling its placement agent relationships, and only learned of the alleged misconduct while cooperating with the regulatory agencies investigating this matter.”


After Apollo initiated its disclosure policy, Villalobos, who was working on helping raise the firm’s seventh fund, tried to get CalPERS to sign off on the form, but the pension system declined. The disclosure letter was the first of its kind that CalPERS had ever seen at the time, and the pension system determined signing the letter would not benefit the system.
“Signing such a form could not possibly benefit CalPERS, the pension fund, or its members; the only possible beneficiary was ARVCO – a firm that was not in contract with CalPERS and was acting solely in its own self-interest.  Using good judgment, the CalPERS staff did not sign that letter,” a spokesperson for CalPERS said in an email.

Once CalPERS declined to sign the form, Villalobos allegedly created a letter using the CalPERS logo from Buenrostro’s business card and Buenrostro, who was the system’s CEO at the time, allegedly signed the disclosure letter, according to the SEC complaint.

When this plan worked, the two men allegedly used the fake document system to collect more than $20 million in placement fees from Apollo for a series of funds, the complaint said.


CalPERS has implemented major reforms to its investment programme, including mandatory disclosure by its managers of the use of placement agents and the fees. The system initiated an internal review of its programme in 2009.

The system also reviewed its relationship with Apollo, which led to the firm cutting some fees for the pension system.

Two former CalPERS investment officials, Leon Shahinian, who headed the system’s Alternative Investment Management programme, and Joncarlo Mark, a senior portfolio manager, both said in depositions in 2010 they questioned Apollo's relationship with Villalobos.

“I didn’t understand why Apollo felt like they needed to hire a placement agent on something where CalPERS had explicitly indicated an interest in investing in,” Shahinian said, according to a transcript of a deposition seen by sister title Private Equity International in 2010.

“Apollo was an existing manager with CalPERS and [I] felt it was unnecessary to have … Villalobos involved in representing them when we had an existing very large scale relationship with Apollo,” Mark said during his 29 July, 2010 deposition.

Villalobos was a member of the CalPERS board from 1992 to 1995 and started ARVCO in 1997, which primarily solicited commitments from CalPERS and some other pension systems, according to the SEC. Using his connections to Buenrostro and other board members, Villalobos and ARVCO received about $58 million in placement fees, the complaint said. Buenrostro left his role as CEO in 2008.