Ex-N.Y. pension fund manager accused in graft scheme involving drugs, sex

NEW YORK, Dec. 21 (UPI) -- A former New York state pension fund manager was accused in a sweeping federal indictment Wednesday that alleges rampant corruption and extravagant bribes -- which included cash, drugs and prostitutes -- in exchange for granting brokerage firms millions of dollars in government business.

The former New York Common Retirement Fund manager, Navnoor Kang, is charged along with broker Deborah Kelley -- in a case involving multiple counts of conspiracy, fraud and obstruction of justice for the scheme, which prosecutors say lasted for at least two years.

According to the charging documents, Kang, 37, who served as the office's director of fixed income and head of portfolio security, repeatedly accepted bribes from Kelley and other brokers in exchange for millions of dollars worth of fixed-income business to their brokerage firms from the pension fund -- which, with $184 billion in assets, is the United States' third largest.

Kelley, 58, was a managing director of fixed income sales at a New York-based brokerage firm. The indictment also claims a second broker, Gregg Schonhorn, 44, also had some involvement.

Some of the bribes were given in the form of cash, cocaine, prostitutes, strippers and other personal expenses, the charges claim, and were orchestrated through the mobile phone application WhatsApp so the transactions couldn't be monitored by law enforcement.

Other forms of bribery provided to Kang, prosecutors allege, include a Paul McCartney concert, a ski trip to Utah and a $17,000 Paneral wristwatch. None of the gifts were reported to the pension fund office, the charges say.

"Today, we allege a classic, quid-pro-quo bribery scheme at the New York State Common Retirement Fund," U.S. Attorney Preet Bharara said in a statement Wednesday. "Navnoor Kang, a former portfolio manager at the fund, allegedly steered billions of dollars of business to broker-dealers who bribed him with luxury vacations, high-priced watches, drugs, cash, and more."

Prosecutors say Kang and Kelley also obstructed justice once the U.S. Securities and Exchange Commission started investigating their dealings last year. The indictment claims the pair conspired to lie under oath in federal court and attempted to cover up the bribery transactions.

Investigators said the bribery scheme ran between 2014 and February. Kang was fired in February when the allegations were uncovered.

New York's common pension fund is managed in behalf of more than a million state employees.

"The hard-earned pension savings of New Yorkers should never serve as a vehicle for corrupt, personal enrichment," Bharara said. "The intersection of public corruption and securities fraud appears to be a busy one, but it's one that we are committed to policing."

Kang and Kelley were also named in a separate lawsuit filed by the SEC Wednesday, Bloomberg reported, which claims Kang "demanded and received at least $180,000 in undisclosed and improper benefits, entertainment and travel" from the brokers in exchange for steering business to them.

Neither defendant immediately responded to the indictment Wednesday, but New York Comptroller Thomas DiNapoli did.

"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," he said in a statement. "He secretly circumvented our rigorous ethical standards and policies. When his misconduct was uncovered by federal authorities, our inspector general worked with law enforcement officials to uncover the extent of his scheme.

"The Common Retirement Fund strictly forbids this conduct, and we will continue to assist federal authorities."