A former portfolio manager for the $206.9 billion New York State Common Retirement Fund was sentenced to 21 months in prison for participating in a massive “pay-to-play” bribery scheme.
Navnoor Kang, who had been director of fixed income and head of portfolio strategy for the fund from 2014 to 2016, pled guilty to conspiracy to commit securities fraud and conspiracy to commit honest services wire fraud. He was also sentenced to three years of supervised release, ordered to forfeit nearly $79,000, and had to pay almost $243,000 in restitution to the fund.
“Combining public corruption with securities fraud, Navnoor Kang betrayed his duty to safeguard public retirement money, bought off with jewelry, cash, drugs, strippers, and prostitutes,” US Attorney Geoffrey S. Berman said in a release. “His crimes have bought him a prison sentence.”
According to the indictment handed down from the US Southern District of New York, Kang accepted bribes worth more than $100,000 in the form of prostitutes, narcotics, travel, lavish meals, tickets to sporting events, luxury gifts, and cash payments in exchange for fixed-income business from the fund.
The bribes came from Deborah Kelley, who had been a managing director of institutional fixed income sales at Sterne Agee, and Gregg Schonhorn, a vice president of fixed income sales at FTN Financial, according to The Wall Street Journal.
According to the indictment, Kang used his position overseeing more than $53 billion in fixed-income securities to steer more than $2 billion in fixed-income business to the broker-dealers, who earned millions of dollars in commissions from the fund. The Southern District said that in doing this, Kang breached his fiduciary duty to make investment decisions in the best interest of the fund, and its members and beneficiaries, and deprived the fund of its intangible right to Kang’s honest services.
The Southern District said that as the bribes increased, so did the broker-dealers’ fixed-income business with the pension fund. It said the value of the funds’ domestic bond transactions with Schonhorn’s firm “skyrocketed” from zero in the fiscal year ending March 31, 2013, to approximately $1.5 million a year later, then to $858 million the following year, and up to nearly $2.4 billion by the end of fiscal year 2016.Kelley and Schonhorn have each pled guilty for participating in the scheme. Kelley was sentenced to three years of probation. Schornhorn has yet to be sentenced.