Firm linked to CalPERS ethics probe secured $3bn for Apollo

It has emerged that Apollo Global Management secured more than $3 billion from the California Public Employees’ Retirement System via ARVCO Capital Research, a placement firm chaired by Alfred Villalobos, a former CalPERS board member and past deputy mayor of Los Angeles.

ARVCO is now making headlines as a California political ethics commission investigates Charles Valdes, a CalPERS board member to whom associates of Villalobos contributed $38,600 for a 2005 re-election campaign. The Fair Political Practices Commission is reviewing Valdes’ 2005 campaign account, as first reported by the Sacramento Bee newspaper.

Following the 2005 campaign contributions, ARVCO secured more than $4 billion in commitments from CalPERS for its private equity clients, more than $3 billion of which went to Apollo.

Apollo, which declined comment, has not been accused of any wrongdoing in the California investigation, nor has ARVCO. Roman Porter, executive director of the FPPC, declined to discuss the focus of the commission’s investigation, though in general, the commission is looking to see if Valdes is in violation of any state laws or FPPC regulations.

The commission oversees the Political Reform Act in California, Porter said, and the relevant rules would fall under the act. Porter declined to specify the rules that relate to the investigation. The Political Reform Act includes provisions governing campaign disclosure, lobbyists, conflicts of interest and limitations on contributions.

With ARVCO’s help, Apollo secured a $1 billion commitment to Apollo Investment Fund VII in 2008; $650 million to Apollo Investment Fund VI in 2006; $800 million to Apollo Special Opportunities Managed Account in 2007.

Apollo also received $10 million from CalPERS for AP Alternative Assets and a $588 million commitment to Apollo Global Management with ARVCO as placement agent.

CalPERS did not disclose how much Apollo paid ARVCO for the placement agent work. The pension revised its policy recently to force private investment firms to disclose the amount of fees they pay third parties for placement work, a pension spokesman said.

Apollo also used ARVCO to secure a $350 million commitment from the New York State Common Retirement Fund in 2007, according to documents from that pension. The New York documents report that Apollo paid ARVCO a fee for its work, but did not disclose the amount of the fee.

Villalobos' name has popped up previously in relation to the ongoing “pay-to-play” scandal emanating from the New York State Common Retirement Fund, although he and his firm have not been charged with any wrongdoing, nor been a focus of the related investigations by the New York Attorney General and the Securities and Exchange Commission.

ARVCO's chairman is no stranger to controversy. He resigned as deputy mayor of economic development for Los Angeles after media reported he had suffered huge gambling losses and filed for bankruptcy in the 1980s. Villalobos served on CalPERS board in the 1990s, after which he began to steer private investment firms to the pension for fundraising.