A federal grand jury in San Francisco indicted Alfred J. Villalobos,
of Reno, Nevada, and Federico R. Buenrostro, Jr., aka Fred Buenrostro,
of Sacramento, California, on charges of conspiracy to defraud the
United States, engaging in a false scheme against the United States, and
conspiracy to commit mail fraud and wire fraud, U.S. Attorney Melinda
Haag announced. Mr. Buenrostro was also charged in the same indictment
with making a false statement to the United States and obstruction of
justice.
According to the indictment, Mr. Villalobos, 69 and Mr. Buenrostro,
64, conspired to create and transmit fraudulent documents in connection
with a $3 billion investment by the California Public Employee
Retirement System (CalPERS) into funds managed by Apollo Global
Management, a private equity firm based in New York City.
ARVCO Capital Research LLC, a financial services firm founded and
managed by Mr. Villalobos, allegedly acted as a placement agent in
helping Apollo to secure these investments by CalPERS. In each instance,
Apollo required ARVCO to obtain an investor disclosure letter from
CalPERS prior to paying ARVCO any fees for its efforts in securing
CalPERS’ investments into Apollo-managed funds, citing, among other
reasons, Apollo’s obligations under the securities laws.
After CalPERS’ legal and investment offices declined to sign a
certain investor disclosure letter documenting ARVCO’s legal
relationship with Apollo, Mr. Villalobos and Mr. Buenrostro allegedly
conspired to create a series of fraudulent investor disclosure letters
that were transmitted to Apollo. Apollo paid ARVCO a total of
approximately $14 million dollars in fees after receiving the fraudulent
letters.
ARVCO transmitted the last fraudulent investor disclosure letter in
June 2008, a few weeks before Mr. Buenrostro retired from CalPERS. On
July 1, 2008, Mr. Villalobos hired Mr. Buenrostro to work for ARVCO.
When civil and later criminal investigations were opened into the
operations of ARVCO and its role as a placement agent in connection with
CalPERS’ investments in Apollo-managed funds, both defendants made
false statements to and concealed information from the SEC, the USPIS,
and the FBI about the authenticity of the investor disclosure letters in
order to defeat and obstruct the lawful functions of those agencies.
Mr. Villalobos and Mr. Buenrostro made their initial appearance in
federal court in San Francisco on March 18, 2013, and are currently out
on bond. Mr. Buenrostro’s next scheduled appearance is Monday, March 25,
2013, at 9:30 a.m. for identification of counsel and review of the
terms of his bond. Mr. Villalobos’ next scheduled appearance is April 9,
2013, at 9:30 a.m. for review of the terms of his bond. Both defendants
are scheduled to appear before in district court on May 8, 2013, at
2:00 p.m. before Judge Breyer.
The maximum statutory penalty for conspiracy to commit mail fraud and
wire fraud is 20 years in prison; $250,000 fine or twice the amount of
gain or loss, whichever is greater; three years of supervised release;
and a $100 special assessment. The maximum penalty for each count of
conspiracy to defraud the United States, false scheme against the United
States, false statement to the United States, and obstruction of
justice is five years in prison; $250,000 fine or twice the amount of
gain or loss, whichever is greater; three years of supervised release;
and a $100 special assessment. Restitution may also be ordered as to
each of the five counts. However, any sentence following conviction
would be imposed by the court after consideration of the U.S. Sentencing
Guidelines a the federal statute governing the imposition of a
sentence.
Timothy J. Lucey is the Assistant U.S. Attorney who is prosecuting
the case with the assistance of Laurie Worthen and Maryam Beros. The
prosecution is the result of a two-and-a half-year investigation by the
U.S. Postal Inspection Service and FBI, with substantial assistance from
the Los Angeles Regional Office of the Securities and Exchange
Commission as well as the U.S. Secret Service.
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