What Does A Fraudulent Pension Fund Smell Like? Just Ask California
Issue No. 12 | May 2026
CalPERS Would Not Audit Itself. The Retirees Did. Wait Until You Read What They Found.
If you live in California and you teach school, drive a fire truck, sweep a courthouse floor, or push paper in a county office, your retirement is parked inside the largest public pension fund in the United States. It is called the California Public Employees’ Retirement System. Everyone knows it as CalPERS. It holds $630 billion. It serves 2.4 million people. And on May 22, 2026, a 255-page forensic investigation landed on the desks of every California legislator and showed that the fund has been quietly hemorrhaging money, hiding fees, and protecting Wall Street insiders for years.
The investigation was led by Edward Siedle, a former Securities and Exchange Commission attorney, and Chris Tobe, a respected pension analyst. It was paid for by the people with the most to lose, the Retired Public Employees’ Association of California, who passed the hat among their members and raised over $245,000 from 350 donations to hire an investigator their state government should have hired decades ago. The retirees did the work California’s Democratic legislature refused to do.
What Siedle found should end careers. What California’s political class did next should make every voter in the country pay attention. The same party who lectures the country about democracy and protecting working families is the one running interference for a $630 billion pile of public money that nobody is allowed to look inside.
This is what corruption looks like when it wears a blue jersey.
The Numbers Nobody Wants You to See
Let’s start with performance, because that is the only thing a pension fund exists to deliver.
CalPERS ranks in the bottom 15 percent of all 230 large public pension funds in the United States. Bottom 15 percent over five years. Bottom 15 percent over ten years. This is not a one-bad-year story. This is a fund that has been losing ground to its peers for a decade and counting, while paying its CEO and three other executives more than $1 million each per year to deliver those results.
CEO Marcie Frost responded to the Siedle report by calling it “an opinion piece full of baseless assertions and breathless language designed to make our members needlessly fear for the stability of their pensions.” She insisted CalPERS ranks in the top 5 percent of large pension funds. The forensic report, working from public filings and peer comparisons, says the opposite. Members are entitled to know which one is right. The CEO will not let them find out.
Roughly 9 percent of CalPERS’ assets sit in what the industry calls zombie funds. These are aging private equity partnerships that have stopped producing real returns but keep charging management fees every year. CalPERS keeps paying. CalPERS will not say how it values these holdings, because CalPERS will not let anyone audit the books.
When Siedle asked for the documents, CalPERS first sent him a broken link. Then, on April 29, 2026, the fund mailed him a DVD. A DVD. In 2026.
The Apollo Pipeline
Here is the conflict at the center of everything.
CalPERS pays an outside firm called Wilshire Associates to advise it on where to put the money. Wilshire is owned by two private equity firms, CC Capital and Motive Partners. Apollo Global Management, one of the largest private equity firms in the world, holds a 24.9 percent stake in Motive Partners. CalPERS, according to its own latest annual report, has $772 million invested in nine Apollo funds.
Read that again. The consultant who tells CalPERS where to invest is partially owned by Apollo. CalPERS pours money into Apollo. Apollo earns fees on the CalPERS money. Wilshire earns fees from CalPERS for advising. The circle closes. The retirees keep waiting for returns that never quite arrive.
Apollo has been collecting fees from CalPERS for more than 20 years. Some were routed through middlemen called placement agents. One of those middlemen was a man named Alfred Villalobos.
The Bodies in the Basement
Villalobos was a CalPERS board member from 1993 to 1995. After he left the board he set up a firm called ARVCO and went into business as a placement agent helping private equity firms win CalPERS contracts. Between 2005 and 2009 he collected approximately $50 million in fees. Apollo paid him $14 million alone to help land a $3 billion CalPERS investment. Federal prosecutors said Villalobos delivered some of that money to a former CalPERS CEO named Federico Buenrostro in paper bags and shoeboxes at a Sacramento hotel.
In 2014, Villalobos was indicted on federal bribery and fraud charges. Weeks before trial, in January 2015, he killed himself in Reno. Buenrostro pleaded guilty and in May 2016 a federal judge sentenced him to 54 months in federal prison. He had accepted more than $200,000 in cash bribes, a Lake Tahoe condo, and a $300,000 a year consulting job from Villalobos in exchange for steering CalPERS investments and forging documents that allowed Apollo to collect its commission on the $3 billion deal.
In 2020, CalPERS suffered yet another scandal when its Chief Investment Officer, Yu Ben Meng, resigned over allegations that he had personally approved a $1 billion investment in a firm in which he held shares. He left. The fund moved on. No independent investigator was appointed.
After Villalobos and Buenrostro, California passed some rules requiring placement agents to register as lobbyists. The state did not create an inspector general. It did not mandate a forensic audit. It did not appoint an outside watchdog with subpoena power. It treated the worst pension corruption scandal in American history as a one-off and went back to sleep.
Leon Black, Jeffrey Epstein, and the Money Trail
Apollo was founded by a man named Leon Black. In 2021, Black admitted he had paid Jeffrey Epstein more than $170 million for what he called tax advice. The founder of the firm collecting billions in fees from California’s teachers and firefighters paid the most notorious sex trafficker in modern American history $170 million for tax advice.
In February 2026, the American Federation of Teachers and the American Association of University Professors filed a formal complaint with the Securities and Exchange Commission, arguing that Apollo had not properly disclosed those Epstein payments to its investors. Two unions whose members include pension fund beneficiaries had to ask the federal government to investigate the firm their own pension fund was pouring money into. CalPERS did not file the complaint. CalPERS leadership did not even acknowledge it.
The Audit That Was Never Allowed
Here is where the Democratic-Party angle becomes inescapable.
California’s legislature is controlled by Democrats. The governor is a Democrat. The state treasurer and state controller, both of whom sit on the CalPERS board, are Democrats. The board itself is composed of public employee union leaders, appointees of state Democratic leaders, and those two statewide Democratic officials. There is no Republican veto pen to blame here. This is one party, in one state, with total control of every lever of pension oversight.
And here is what that party has done with that control.
The retiree group who paid for the Siedle investigation has previously introduced legislation to create an inspector general’s office for CalPERS. The legislation failed to pass. State Senator Dave Cortese of San Jose, a Democrat, introduced a bill this session that would have required private equity firms doing business with California’s public pensions to disclose basic information about their holdings. The Senate Appropriations Committee killed it. CalPERS staff opposed it, claiming with a straight face that letting beneficiaries see where their money goes would force the fund to raise its employer contribution rates by more than $6.1 billion per year. The legislators heard that argument and folded.
Compare California to New York. In 2009, the New York State Common Retirement Fund was rocked by a placement agent pay-to-play scandal nearly identical to the CalPERS one. By 2010, New York had established independent oversight, mandatory disclosure, and an inspector general with subpoena power. New York fixed it. California, run by the same party who runs New York, has spent 17 years refusing to.
This is not an accident. This is a design choice. The Democratic donor class in California overlaps significantly with the Wall Street firms collecting the fees. The public employee unions who endorse Democratic candidates also place leaders on the CalPERS board. The political incentives all point one way, which is toward keeping the books closed and the questions unanswered.
What the Retirees Are Owed
The 2.4 million Californians who paid into CalPERS did not sign up to fund Apollo’s fees. They did not agree to underwrite zombie partnerships. They did not consent to a consultant secretly owned by the firm collecting the largest checks. They were promised a pension. In exchange they accepted lower pay than their private sector counterparts and gave their working years to public service.
They are owed the truth. They are owed an audit. They are owed an inspector general. They are owed a CEO who answers questions instead of issuing press releases. They are owed a board who asks questions instead of rubber-stamping staff memos. They are owed a legislature who works for them instead of for the lobbyists who write the campaign checks.
Margaret Brown, the president of the Retired Public Employees’ Association who led the fundraising drive, told the Sacramento Bee that the CalPERS board “delegated almost all the decisions to the staff, and they don’t ask any questions.” She added, “That never would have happened if there was an independent inspector general inside CalPERS’ offices.”
She is right. The party in power knows she is right. And it has chosen, year after year, to let it continue.
The Wave
Once again, our parties have failed us.
Republicans in Washington have spent the last six months protecting a president’s family from tax investigators, steering Pentagon loans to the president’s son, and dropping bribery cases for billionaires who pledge investment dollars. The big national papers cover those stories around the clock.
But while the cable networks chase the federal sideshow, the largest public pension fund in the country has been quietly rotting under the watch of the other party. Democrats in Sacramento have killed inspector general bills, killed disclosure bills, and let four executives clear $1 million a year for bottom-15-percent results. They have protected Wall Street fee streams from the same retirees they claim to fight for.
Two-point-four million Californians, who built classrooms, put out fires, drove ambulances, and processed unemployment claims, are being told to trust a $630 billion black box run by people who will not open the books and overseen by politicians who answer to the donors collecting the fees.
This is not democracy. This is patronage with a pension fund attached.
The Centercratic Party’s fourth principle is One Law for All. That means one set of rules for the executive in the corner office and one set for the retiree on a fixed income. It means private equity firms who do business with public money have to answer the same questions as a contractor bidding on a public road.
The Centercratic Party’s eighth principle is Stewardship of Trust. Every public dollar carries a promise. Every pension contribution is a covenant between a worker and a state. When that covenant is broken, the trust does not just shrink. It disappears. And once it disappears, every other promise our government makes starts to look like a lie.
We must save our democracy before it is too late. That means fixing the institutions both parties have hollowed out while we were busy fighting each other on cable news. It means demanding California’s Democratic legislature pass an inspector general bill this session. It means demanding the CalPERS board produce, in plain English, every fee paid to every Apollo fund since 2000. It means demanding the resignation of any executive who responds to a 255-page forensic investigation with the phrase “opinion piece.”
The retirees of California raised $245,000 of their own money to find out what their government would not tell them. The rest of us owe it to them to read what they found, share it, and make sure that next election, the people who hid this answer for it.
That is the wave.
The CenterWave is published by CenterVoter, the home of the Centercratic Party. Visit centercratic.party | centervoter.com
Sources:
Gretchen Morgenson, NBC News, “Nation’s largest public pension fund plagued by secrecy and underperformance, probe finds,” May 22, 2026
William Melhado, Sacramento Bee, “External investigation of CalPERS recommends inspector general to oversee fund,” May 22, 2026
Edward Siedle and Chris Tobe, CalPERS: America’s Misled and Misleading Pension Leader, Retired Public Employees’ Association of California, May 2026
Los Angeles Times, “Ex-CalPERS official Villalobos commits suicide,” January 15, 2015
U.S. Department of Justice, “Former CalPERS CEO Sentenced to 54 Months’ Imprisonment for Role in Corruption Conspiracy,” May 31, 2016
CBS News San Francisco, “Former California Pension Fund CEO Given 4.5-Year Prison Sentence for Bribery,” May 31, 2016
Capitol Weekly, “CalPERS and Villalobos: The end of private equity’s ‘golden years,’” September 1, 2016
Institutional Investor, “Wilshire Associates Is Being Bought by Private Equity Firms,” October 2, 2020
Adam Ashton, Jefferson Public Radio, “With more money than ever, California’s biggest pension funds are a political battleground,” May 11, 2026
International Business Times, “Top Pension Fund Faces Fresh Scrutiny After Independent Probe Alleges Secrecy, Weak Returns,” May 2026
Straight Arrow News, “Forensic Investigation Finds Major Issues at Nation’s Largest Public Pension Fund,” May 2026