Medco Health Solutions has agreed to pay $2.75 million and change its internal procedures to settle claims that it paid millions in bribes to win a contract to provide prescription drugs to members of the California Public Employees' Retirement System.
The settlement was the latest development in a case that began in 2004 and involved allegations of dealings between the then-head of CalPERS, Federico Buenrostro Jr., and a paid Medco consultant and former CalPERS board member, Alfred J.R. Villalobos, who helped secure the $26-million contract in 2006.
At the time, Buenrostro and other CalPERS executives allegedly lobbied Medco to pay a $4-million consulting fee to Villalobos before the pension fund approved the deal with Medco, according to a report last year from a CalPERS-funded investigation.
CalPERS is the nation's largest public pension fund, with $225 billion in assets, providing benefits to about 1.6 million state and local government employees, retirees, spouses, children and other beneficiaries.
Under the settlement, Medco would have to pay the $2.75 million to the state and change its business practices so that it would not "unlawfully interfere or tamper with the competitive bidding process" of state agencies.
"Medco failed to exercise sufficient controls to ensure that Mr. Villalobos' compensation for expenses was not used to fund improper gifts, payments or campaign contributions to CalPERS board members or staff," said a statement from Atty. Gen. Kamala D. Harris' office.
Medco did not admit to wrongdoing as part of the settlement, noting through spokeswoman Jennifer Leone Luddy that "there has been no finding that anybody at Medco did anything wrong at any time."
In a separate civil suit from 2010, the state alleged that Buenrostro, the top CalPERS executive from 2002 to 2008, took tens of thousands of dollars in gifts from Villalobos, including a Lake Tahoe condominium in December 2009. A day after retiring from CalPERS, Buenrostro joined Villalobos' company.
Villalobos and a lawyer for Buenrostro could not be reached for comment. In the past, Villalobos and Buenrostro have both denied any wrongdoing.