Feds: Pension exec moved $2B for coke, prostitutes, other bribes
NEW YORK — A former New York pension official faces federal charges for allegedly steering $2.5 billion in securities trades to two brokers, who bribed him with more than $100,000 worth of high-priced gifts, lavish trips, VIP tickets to a Paul McCartney concert, cocaine and prostitutes.
The Securities and Exchange Commission on Wednesday filed fraud charges against Navnoor Kang, 38, who served as director of fixed income for the New York State Common Retirement Fund, the nation’s third largest public pension program, from January 2014 to February 2016.
The two brokers, Gregg Schonhorn, 45, and Deborah Kelley, 58, who the agency said benefited from millions in commissions to handle the investment money, also were charged. All three also were hit with federal criminal charges. Schonhorn has pleaded guilty to the federal indictment, according to the U.S. attorney’s office for New York’s southern district.
The range of bribes certainly was colorful -- and expensive. Kang benefited from $50,000 spent on hotel rooms, $50,000 on restaurants and bars, $17,400 on a luxury watch, $4,200 on hermes bracelet for his girlfriend, a skit vacation to Park /city, Utah, and $6,000 for the Paul McCartney tickets, according to offcial releases. It is not known how much was allegedly spent on the cocaine or prostitutes.
“The hard-earned pension savings of New Yorkers should never serve as a vehicle for corrupt, personal enrichment,” Manhattan U.S. Attorney Preet Bharara said in a statement, calling the alleged pay-for-play arrangement a “classic, quid-pro-quo bribery scheme.”
The $184 billion state fund provides retirement benefits to more than 1 million retirees in state and local government, including firefighters and police officers. Kang oversaw $53 billion of it, and his attorney, Brian McEvoy, would only say that he had been arrested Wednesday in Portland, Oregon, where he lives. Lawyers for Schonhorn and Kelley did not return requests for comment.
Another attorney for Kang, Lauren DeSantis-Then, told the Associated Press her client denies all the charges.
“Mr. Kang is not guilty and we look forward to our day in court,” she said.
Kang was fired from his job in February, the state comptroller’s office said. Comptroller Thomas DiNapoli said in a statement that the fund has “no tolerance for self-dealing and we are outraged by Mr. Kang’s shocking betrayal of his responsibilities.”
Broker Schonhorn was dismissed from his job Wednesday at FTN Financial Securities in New York, a spokeswoman for the firm confirmed. The other broker, Kelley, worked at Sterne Agee & Leach during the period the scheme was occuring. After Stifel Nicolaus acquired Sterne Agee, it discharged her for violating company policy against providing gifts and entertainment to a public official and lying about her expenses, according to records at the Financial Industry Regulatory Authority.
This is the latest pay-to-pay scandal to roil the New York pension fund. In 2007, state comptroller Alan Hevesi was enmeshed in a bribery scheme to direct pension money into certain investments. Hevesi pleaded guilty and served a year in prison, and the office imposed safeguards it said would stop such schemes in the future.
