Attorney General Kamala D. Harris Announces Settlement with Medco Over Alleged Wrongdoing in Solicitation of CalPERS Contract

SAN FRANCISCO -- Attorney General Kamala D. Harris today announced that Medco has agreed to pay $2.75 million and change internal procedures to settle claims regarding Medco Health Solution’s engagement of Alfred Villalobos to assist it in securing a CalPERS contract in 2005.

Medco paid Villalobos $4 million for what it claimed was “consulting-as-needed” on an audit of the company, but which may have been intended to influence the awarding of a pharmaceutical benefits contract from the pension fund.

According to the complaint filed with the settlement, 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, and failed to ensure that Mr. Villalobos, as its agent, refrained from meeting with CalPERS Board members and officials during the period of restricted communications during the competitive bid process.

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.

The $2.75 million dollars secured by the Attorney General’s Office will reimburse the state for attorney fees and investigative costs, some of which the Attorney General is authorized to share with cooperating state agencies such as CalPERS itself.

The CalPERS Board voted not to renew Medco’s contract based in part upon a review of some of the Attorney General’s findings. CalPERS also conducted an investigation of Villalobos’ use by other companies and its full report is available here: http://www.calpers.ca.gov/eip-docs/about/board-cal-agenda/agendas/full/2....

A copy of the settlement is attached to the online version of this release at www.oag.ca.gov.