US prosecutors brought charges Wednesday against a former New York state retirement fund official who allegedly steered $2.4 billion in business to brokers who gave him cocaine, a Rolex watch and other bribes. Navnoor Kang, who served as director of fixed income and head of portfolio strategy for the massive New York public retirement fund, received myriad illicit payments from Deborah Kelley and Gregg Schonhorn, who worked for unnamed broker-dealer firms and were also charged.
"Today, we allege a classic, quid pro quo bribery scheme," said Preet Bharara, US Attorney in the Southern District of New York. "The hard-earned pension savings of New Yorkers should never serve as a vehicle for corrupt, personal enrichment." The New York State Common Retirement Fund, with $184 billion, is the third largest pension fund in the US. Kang was responsible for investing more than $53 billion in fixed-income securities.
From 2014 through 2016, Kelley and Schonhorn showered Kang with bribes that included travel, lavish meals, payments for prostitutes, tickets to sports games, a $4,200 Hermes bracelet for Kang's girlfriend and $6,000 on four seats at a Paul McCartney concert in New Orleans, officials said. In exchange, Schonhorn's firm's business with the New York fund skyrocketed from zero in 2013 to nearly $2.4 billion in March 2016. Kelley, Schonhorn and their firms earned millions in dollars in commissions from the New York fund, Bharara said. Kang and Kelley also aligned their story ahead of hearings and testified falsely under oath, prosecutors said.
"We allege that rather than compete fairly for business from the New York State Common Retirement Fund's $50 billion fixed income portfolio, Schonhorn and Kelley bribed their way in, lining their pockets with millions in commissions along the way," said LeeAnn Ghazil Gaunt, an enforcement chief at the Securities and Exchange Commission, which brought a parallel case against the three parties. Schonhorn pleaded guilty to charges on December 15 in federal court in New York.