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Navnoor Kang, former director of fixed income and head of
portfolio strategy at the New York State Common Retirement Fund,
entered his plea in Manhattan federal court to charges that
included securities fraud and wire fraud.
Deborah Kelley, a former managing director at broker-dealer
Sterne Agee who is one of two brokerage executives to face
charges over the scheme, also pleaded not guilty to fraud
charges contained in an indictment made public Dec. 21.
The arraignment came in the latest pay-to-play case to
center on the third-largest U.S. pension fund following a
scandal a decade ago that sent the state comptroller to prison
and sent shock waves through the pension fund world.
The Common Retirement Fund is the investment arm of the New
York State and Local Employees’ Retirement System and the New
York State and Local Police and Fire Retirement System.
According to prosecutors, Kang, 38, worked at the $184.5
billion fund from January 2014 to February 2016 and was
responsible for investing $53 billion in fixed income assets.
Prosecutors said that from 2014 to 2016, Gregg Schonhorn, a
vice president at FTN Financial Securities Corp, Kelley and
others spent more than $100,000 on bribes for Kang that included
travel, meals, prostitutes, sports tickets and cash.
In exchange, Kang steered more than $2 billion in trades to
Sterne Agee and FTI Financial, resulting in millions of dollars
in commissions to Schonhorn and Kelley, the indictment said.
The bribes that Kelley, 58, paid Kang included a ticket to a
Paul McCartney concert during a New Orleans trip during which
she paid various expenses, the indictment said.
It added that Schonhorn spent thousands of dollars on Kang
for strip clubs, expensive dinners and cocaine while also
providing him with cash for prostitutes.
Schonhorn has plead guilty and is cooperating with
prosecutors. Kelley left Sterne Agee in 2015, not long after
Stifel Financial Corp acquired the company, according to
Financial Industry Regulatory Authority records.
The case is U.S. U.S. v. Kang et al, U.S. District Court,
Southern District of New York, No. 16-cr-837.
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