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Apollo moves past CalPERS woes

The private equity firm portrays itself as a victim in the public pension fund scandal.

March 26, 2011|By Stuart Pfeifer and Nathaniel Popper, Los Angeles Times

The firm is led by Leon Black, a former protégé of Michael Milken at high-risk securities operation Drexel Burnham Lambert Group Inc. When Drexel went under in 1990, Black and a few colleagues founded Apollo.

Black, the son of a rabbi-turned-food-industry tycoon, is an avid art collector and sits on the boards of the Metropolitan Museum of Art and the Museum of Modern Art. His net worth was recently estimated at $3.5 billion by Forbes magazine.

“They stick up for the investors,” said Paul Schaye, the founder of Chestnut Hill Partners, a private equity advisory firm. “They want to get transactions done, and sometimes that involves sharp elbows.”

The financial crisis hit the firm hard, causing it to delay earlier efforts at a public offering of stock. But last year Apollo’s portfolio grew 26% and generated a profit of $94.6 million.

The upcoming public offering could raise as much as $417 million, which the firm wants to use to expand its operations. The deal is structured to keep decision making power firmly in the hands of Black and his partners.

Apollo does not appear to have been particularly fazed by the CalPERS investigation. In its regulatory filings, the company said it expects that the probe “will not have a material adverse effect on its financial statements.”

“Apollo believes that it has handled its use of placement agents in an appropriate manner,” the filing said.

The CalPERS report, the culmination of a 17-month investigation by a Washington law firm, focused blame on Villalobos, former CalPERS Chief Executive Federico Buenrostro Jr. and others at the pension fund.

Last week’s report said Villalobos had turned Buenrostro into “a puppet,” promising him a lucrative job, lavishing him with gifts and securing a valuable advocate for Apollo and other Villalobos clients inside CalPERS.

Apollo portrayed itself as a victim in a court filing in Nevada, where Villalobos has filed for bankruptcy. The company submitted a claim against Villalobos, saying he violated state and federal law by lavishing CalPERS staff with gifts, causing Apollo “reputational harm.”

Apollo spokesman Charles Zehren declined to comment.