July 11 (Bloomberg) — Federico Buenrostro, the former chief executive officer of California Public Employees' Retirement System, pleaded guilty to conspiracy to commit bribery.

Buenrostro, who headed the the country's largest pension fund from 2002 to 2008, was accused of conspiring to trick Calpers into paying $14 million in fees to former board member Alfred Villalobos for arranging a $3 billion investment in funds managed by Apollo Global Management LLC. He appeared today in federal court in San Francisco to change his plea to charges filed last year.

He faces as long as five years in prison when he's sentenced Jan. 7.

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Fees for middlemen were at the center of a corruption probe in which Villalobos, a Calpers board member from 1993 to 1995, was sued by state prosecutors while the pension system's head of private equity resigned.

Buenrostro's attorney, William Portanova, said on June 30 that his client would admit he lied about backdating documents so Villalobos could get paid. He said Buenrostro is cooperating with the Justice Department and plans to testify against Villalobos, who was also charged last year and pleaded not guilty.

Calpers Rules

In the wake of the scandal, Calpers adopted rules compelling any company seeking a contract worth more than $10,000 to report hiring a placement agent to win its business. The rule also requires disclosure of how much was paid and for what services.

Villalobos, founder and managing director of Arvco Capital Research LLC, allegedly acted as a placement agent in helping Apollo to secure investments by Calpers in 2007 and 2008, prosecutors said last year.

Apollo required Arvco to obtain an investor disclosure letter from Calpers before paying any fees for securing the investments, they said. One purpose of the letter was to memorialize that investors were aware of the relationship between the placement agent and Apollo, according to the indictment.

After Calpers' legal and investment offices declined to sign a letter, Villalobos and Buenrostro allegedly conspired to create a series of fraudulent letters that were transmitted to Apollo in 2008 and 2009, according to the indictment.

The case is U.S. v. Villalobos, 13-cr-00169, U.S. District Court, Northern District of California (San Francisco).

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