Former New York State Pension Fund Manager, Two Brokers Involved In Bribery Scheme
A ex-portfolio manager of New York state's pension fund allegedly steered more than $2 billion in business to two brokerage firms in exchange for bribes including prostitutes, cocaine, concert tickets and a $17,400 Panerai watch. The details of the indictment were published in an article by The Wall Street Journal.
Navnoor Kang, a former portfolio manager at the New York State Common Retirement Fund was among the three people charged of a bribery scheme. He was arrested Wednesday in Portland. He was dismissed from the company in February.
Deborrah Kelley, a broker and former managing director at Sterne Agee surrendered to the San Francisco authorities, while Gregg Schonhorn, a broker and former vice president at FTN Financial pleaded guilty.
"This was an age-old and classic tale of quid-pro-quo corruption," said U.S. Attorney Preet Bharara at a news conference in Manhattan where the indictment was announced.
There has long been concerns about improper influence peddling in the pension world where outside investment firms compete to manage hundreds of billions of money in exchange for lucrative fees.
While those who oversee assets of public employees are supposed to ensure that the selection of firm is based on performance instead of political connections, recent accusations in New York represent the third high-profile case in the past decade where access to pension money was allegedly sold to favored firms that provided kickbacks.
"The New York State Common Retirement Fund has absolutely no tolerance for self-dealing, and we are outraged by Mr. Kang's shocking betrayal of his responsibilities," said State Comptroller Thomas DiNapoli.
Mr. Kang was director of fixed income and head of portfolio strategy for the New York fund from January 2014 through February 2016. According to the indictment, he was in charge of investing more than $53 billion in bonds.
With the New York fund being the third largest in the U.S. with $184.5 billion in assets, Ms. Kelley and Mr. Schonhorn sought the fund's business although their firms were not yet on the pension fund's approved list.
The prosecutors said that the bribes began in early 2014 when Mr. Schonhorn took Mr. Kang on weekend trips to Montreal. Mr. Schonhorn was said to pay for the flights, hotels and cocaine.
Mr Kang was taken by Ms. Kelley to New Orleans in October 2014. According to the charges, she paid for VIP tickets to a Paul McCartney concert.
Such perks provided to Mr. Kang was followed by other transactions that continued until the following year.
The defendants allegedly tried to cover their tracks, with Mr. Kang and Ms. Kelley agreeing to testify falsely and making a matching story after receiving Securities and Exchange Commission subpoenas.
Mr. Kang and Ms. Kelley face charges of securities fraud, wire fraud and obstruction of justice, among other charges. Mr. Schonhorn pleaded guilty to securities fraud, wire fraud, conspiracy to obstruct justice and other crimes.