The California Public Employees’ Retirement System (CalPERS) today applauded the indictments handed down against the pension fund’s former Chief Executive Officer (CEO) Fred Buenrostro and former member of the CalPERS Board Alfred Villalobos.
After years of coordination with authorities by CalPERS, the U.S. Department of Justice indicted Buenrostro on five counts including fraud, mail and wire fraud, making false statements to the U.S. government and obstruction of justice.
Villalobos was indicted on three counts including fraud, mail and wire fraud, and making false statements.
“We are extremely pleased that law enforcement authorities are moving to hold individuals accountable for activities which violate the public trust,” said Rob Feckner, President of the CalPERS Board. “This is a long-awaited indictment of two former officials is another step on the road toward justice for California’s taxpayers, public employees and for all of CalPERS staff and stakeholders.
"This type of behavior has no place in our organization. We have enacted numerous reforms and policies to enhance transparency, to guard against future activities of this nature and to demonstrate our commitment to the highest levels of ethics. The work we have done has made CalPERS a stronger organization,” he said.
CalPERS commissioned a special review in the fall of 2009 to review the fees paid by its external managers to placement agents and to ensure the Fund and its members were not harmed. The review considered more than 70 million pages of information collected from more than 400 custodians within CalPERS, and more than 140 interviews.
"We condemn in the strongest way possible the actions at the center of these indictments and we thank law enforcement authorities for their work on behalf of CalPERS and our members,” said Anne Stausboll, CalPERS Chief Executive Officer. “The trust of our members, employers and stakeholders, and CalPERS own core values, are the heart of our organization and we will not let the selfish and illegal actions of a few individuals define our organization, our members or our staff.”
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
- 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 reflects each Board Member’s commitment to be effective and capable fiduciaries, ethical leaders, and open and accountable to CalPERS stakeholders.
CalPERS is the largest public pension fund in the U.S. with approximately $255 billion in assets. The retirement system administers retirement benefits for more than 1.6 million current and retired California State, public school, and local public agency employees and their families on behalf of more than 3,000 public employers in the state, and health benefits for 1.3 million enrollees. For more information about CalPERS, visit www.calpers.ca.gov.
