Federico R. Buenrostro, who retired in 2008 as chief of the California Public Employees' Retirement System, now faces charges from the Securities and Exchange Commission, in a case involving placement fees that has been brewing since 2009.

The SEC alleges that Buenrostro and his friend Alfred J.R. Villalobos fabricated documents given to New York-based private equity firm Apollo Global Management.

The falsified documents gave Apollo the impression, the SEC said, that CalPERS had reviewed and signed disclosure letters about fees being paid to placement agents, when it had not.

Buenrostro and Villalobos “intentionally bypassed those procedures to induce Apollo to pay placement agent fees” totaling $20 million to Villalobos's firms, the regulator said Monday. The false letters bore a fake CalPERS logo and Buenrostro's signature. Apollo then went ahead with the payments.

Buenrostro strongly denies the allegations of fraudulent conduct contained in the SEC's complaint, lawyer William H. Kimball said.

Villalobos was not immediately available for comment.

"Buenrostro and Villalobos not only tricked Apollo into paying more than $20 million in placement agent fees it would not otherwise have paid, but also undermined procedures designed to ensure that investors like CalPERS have full disclosure of such fees," said John M. McCoy III, Associate Regional Director of the SEC's Los Angeles Regional Office, in a statement.

In April 2008, Buenrostro said he was leaving Calpers, which manages roughly $240 billion, to pursue private sector opportunities.

"I want to publicly state what I have told the board: I have reached a decision to retire from public service. Media speculation about reasons for my departure are unwarranted and incorrect," he was quoted by Reuters as saying, at the time.

In October 2009, CalPERS announced a special review to be led by the Washington law firm of Steptoe & Johnson LLP into “whether the interestsof the institution’s participants and beneficiaries had been harmed by the use of placemen agents or related activities.’’

The 17-month investigation, among other results, found that Buenrostro Jr. put pressure on one benefits firm to pay more than $4 million in fees to consultant Villalobos, who later hired Buenrostro.

According to the SEC's complaint, Apollo began requiring signed investor disclosure letters in 2007 from investors such as CalPERS before it would pay fees to a placement agent that assisted in raising funds.

Villalobos's firm, ARVCO Capital Research, agreed to this contractual provision in a placement agent agreement with Apollo related to CalPERS's investment in Apollo Fund VII.

However, when ARVCO requested an investor disclosure letter from CalPERS's Investment Office to provide Apollo, CalPERS's Legal Office apparently had advised the fund not to sign a disclosure letter. ARVCO never again contacted CalPERS's Investment Office for an investor disclosure letter.

The SEC alleges that in January 2008, Villalobos instead fabricated a letter using a phony CalPERS logo. At Villalobos's request, Buenrostro then signed what appeared to be a CalPERS disclosure letter. Upon receipt of the fake disclosure letter for Apollo Fund VII, Apollo paid ARVCO about $3.5 million in placement agent fees.

The SEC's complaint further alleges that less than two weeks later, Villalobos and Buenrostro created false CalPERS disclosure letters for at least four more Apollo funds “under similarly suspicious circumstances,’’ the SEC said.

The SEC is trying to force Buenrostro, Villalobos, and ARVCO to disgorge gains, pay penalties, and be permanently enjoined from violating the antifraud provisions securities laws.