March 24, 2012 / 12:35 AM / 8 years ago

Medco settles Calpers probe with $2.75 mln payment

SAN FRANCISCO, March 23 (Reuters) - Medco Health Solutions Inc will pay $2.75 million to resolve an investigation over a consultant it used to secure business at California’s pension fund for public employees, state Attorney General Kamala Harris’ office said on Friday.

At issue was the pharmacy benefits manager’s hiring of Alfred Villalobos, a former board member of the California Public Employees’ Retirement System who has worked as a placement agent for companies seeking work from the pension fund.

The fund, best known as Calpers, last March released a report of its review of placement agent activity in which Villalobos was sharply criticized.

Calpers also criticized Fred Buenrostro, a former chief executive officer of the fund, over his close ties to Villalobos.

Calpers’ report said Medco paid Villalobos $4 million to help the company land a pharmacy benefits contract at the fund. Harris’ office had also been looking into Medco’s ties to Villalobos and his ties to Buenrostro, who was replaced by the fund’s board in 2008.

Under the terms of the settlement, Medco denied any liability or wrongdoing arising from the investigation into whether fees paid to Villalobos were used to fund improper gifts, payments or campaign contributions to Calpers board members or staff.

A spokeswoman for Medco, which has agreed to be bought by rival Express Scripts Inc, said in a statement that independent members of the company’s board of directors concluded a review and determined that “no employee violated any laws or regulations; no employee violated the Medco Code of Conduct and all employees acted ethically, with integrity, transparency and in good faith.”

“Medco is pleased that after an exhaustive 18-month investigation Medco’s view of the facts has been affirmed - in short, there has been no finding that anybody at Medco did anything wrong at any time,” the spokeswoman said. “We cannot overstate the importance of resolving this matter in clearing Medco’s good name and validating the integrity of our people and business practices.”

Express Scripts declined to comment. Villalobos’ lawyer was not immediately available for comment.

Medco’s payment will reimburse California for its investigation costs and attorney fees, and Harris’ office will close its probe.

“Medco agrees, under the settlement, to a court order requiring the company to not unlawfully interfere or tamper with the competitive bidding process of any California governmental or quasi-governmental agency, and agrees to a requirement that Medco’s independent directors comprehensively review the investigative materials in order to take internal measures to ensure that problems do not occur again,” Harris’ office said in a statement.

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