Ex-California Public Employees’ Retirement System Chief Executive Officer Federico Buenrostro and a former placement agent were charged with conspiracy to create false documents in connection with a $3 billion investment into funds managed by Apollo Global Management LLC.

Buenrostro, 64, who led the state’s public pension fund from 2002 to 2008, was accused along with Alfred Villalobos, 69, of conspiracy to defraud the U.S., engaging in a false scheme against the U.S. and conspiracy to commit mail fraud and wire fraud in a grand jury indictment announced today by U.S. Attorney Melinda Haag in San Francisco.

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. Apollo required Arvco to obtain an investor disclosure letter from Calpers before paying any fees for securing the investments, Haag said in a statement.

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. Apollo paid Arvco a total of approximately $14 million dollars in fees after receiving the letters, Haag said.

Buenrostro didn’t immediately respond to a phone message seeking comment on the charges. Chris Nichols, an attorney for Villalobos, didn’t immediately respond to a voice-mail message. The two men appeared in federal court in San Francisco and are free on bond. A hearing in the matter is scheduled for May 8.}

Maximum Penalty

The maximum penalty for conspiracy to commit mail fraud, the most serious charge, is 20 years in prison and a $250,000 fine, or twice the loss or gain from the conduct, whichever is greater, according to Haag’s statement.

Buenrostro and Villalobos were sued on similar grounds last year by the U.S. Securities and Exchange Commission in federal court in Nevada.

The SEC alleged that the two men fabricated documents they provided Apollo so that the firm erroneously believed Calpers had reviewed and signed the placement agent fee-disclosure letter Apollo required. Buenrostro left Calpers in June 2008 to work for Villalobos, who is a former board member of the pension fund.

Buenrostro, who is defending himself without a lawyer in the SEC case, denied the agency’s allegations in a July 20 answer to the civil complaint.

‘Extremely Pleased’

“We are extremely pleased that law enforcement authorities are moving to hold individuals accountable for activities which violate the public trust,” Rob Feckner, president of the Calpers board, said in a statement. “This is a long-awaited indictment of two former officials, and is another step on the road toward justice for California’s taxpayers, public employees and for all of Calpers staff and stakeholders.”

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 the fund’s business. The rule also requires disclosure of how much was paid and for what services.

The fund passed limits on gifts to board members from individuals and firms doing business with the system or seeking to do business with the fund.

State lawmakers also passed a law prohibiting money managers from paying contingency fees to middlemen who help win state retirement-plan contracts and requires placement agents to register as lobbyists.

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