Source: http://100percentbronx.blogspot.com/2016/12/former-portfolio-manager-at-new-york.html
Timestamp: 2017-12-14 04:21:39
Document Index: 143221207

Matched Legal Cases: ['§ 371', '§ 78', '§ 240', '§ 2', '§ 1349', '§ 1343', '§ 1512', '§ 1512']

100PercentBronx: Former Portfolio Manager At The New York State Common Retirement Fund Charged In “Pay-For-Play” Bribery Scheme
Former Portfolio Manager At The New York State Common Retirement Fund Charged In “Pay-For-Play” Bribery Scheme
Preet Bharara, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an Indictment charging NAVNOOR KANG, the former Director of Fixed Income and Head of Portfolio Strategy at the New York State Common Retirement Fund (“NYSCRF”), and DEBORAH KELLEY, a managing director of institutional fixed income sales at a New York-based broker-dealer (“Broker-Dealer-1”), with participating in a “pay-for-play” bribery scheme involving the NYSCRF. KANG was arrested today in Portland, Oregon, and will be presented later today before a U.S. Magistrate Judge in Portland. KELLEY is expected to surrender today to authorities in San Francisco, California. The case is assigned to U.S. District Judge J. Paul Oetken.
Mr. Bharara also announced today the unsealing of charges against GREGG SCHONHORN, a vice president of fixed income sales at a New York-based broker-dealer (“Broker-Dealer-2”), who pled guilty and admitted to his participation in the scheme.
U.S. Attorney Preet Bharara said: “Today, we allege a classic, quid-pro-quo bribery scheme at the New York State Common Retirement Fund, the third largest pension fund in the country. 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. The hard-earned pension savings of New Yorkers should never serve as a vehicle for corrupt, personal enrichment. The intersection of public corruption and securities fraud appears to be a busy one, but it's one that we are committed to policing.”
The NYSCRF was a pension fund administered for the benefit of public employees of the State of New York. The third largest pension fund in the United States, the NYSCRF held approximately $184 billion in assets in trust for a total of more than one million retirees and other beneficiaries.
From January 2014 through February 2016, KANG served as Director of Fixed Income and Head of Portfolio Strategy for the NYSCRF. In that capacity, KANG was responsible for investing more than $53 billion in fixed-income securities and was entrusted with discretion to manage those investments on behalf of the NYSCRF. KANG owed a fiduciary duty to the NYSCRF and its members and beneficiaries, and was required to make investment decisions in their best interests and free of any conflict of interest. New York State law and NYSCRF policies prohibited KANG and other NYSCRF employees from receiving any bribes, gifts, benefits, or consideration of any kind.
In exchange for the bribes paid by KELLEY, SCHONHORN, and others, KANG used his position as Director of Fixed Income and Head of Portfolio Strategy at the NYSCRF to promote the interests of KELLEY, SCHONHORN, and their respective brokerage firms. KANG, in exchange for the bribes he received, agreed to steer fixed-income business to Broker-Dealer-1 and Broker-Dealer-2. In fact, KANG steered more than $2 billion in fixed-income business to Broker-Dealer-1 and Broker-Dealer-2, from which KELLEY, SCHONHORN, and their respective employers earned millions of dollars in commissions from the NYSCRF. In so doing, KANG, with the knowledge and approval of KELLEY and SCHONHORN, breached his fiduciary duty to make investment decisions in the best interest of the NYSCRF and its members and beneficiaries, and free of conflict, and deprived the NYSCRF of its intangible right to KANG’s honest services.
As the bribes paid by SCHONHORN to KANG increased, so too did Broker-Dealer-2’s fixed-income business with the NYSCRF. The value of the NYSCRF’s domestic bond transactions with Broker-Dealer-2 skyrocketed from zero in the fiscal year ending March 31, 2013, to approximately $1.5 million in the fiscal year ending March 31, 2014, to approximately $858 million in the fiscal year ending March 31, 2015, and to approximately $2.378 billion in the fiscal year ending March 31, 2016. Broker-Dealer-2 became the third largest broker-dealer with which the NYSRCF executed domestic bonds transactions for the fiscal year ending March 31, 2016, having not even been on the approved list in the fiscal year ending March 31, 2013. As the NYSCRF’s third largest broker-dealer in this asset class, Broker-Dealer-2 brokered approximately eight percent of the total value of the NYSCRF’s domestic bond transactions – a figure greater than that of all but two of the major international banks and brokerage houses on the list. Similarly, the value of NYSCRF’s domestic bond transactions with Broker-Dealer-1 increased from zero in the fiscal year ending March 1, 2014 to approximately $156 million in the fiscal year ending March 1, 2015, and to approximately $179 million in the fiscal year ending March 1, 2016.
On December 15, 2016, SCHONHORN, 45, of Short Hills, New Jersey, pled guilty in Manhattan federal court before Judge Paul G. Gardephe to six counts: conspiracy to commit securities fraud; securities fraud; conspiracy to commit honest services wire fraud; honest services wire fraud; bank fraud; and conspiracy to obstruct justice in the SEC investigation. Count One carries a maximum sentence of five years in prison. Counts Two, Three, Four, and Six each carry a maximum sentence of 20 years in prison. Count Five carries a maximum sentence of 30 years in prison. The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.
Mr. Bharara praised the investigative work of the FBI and noted that the investigation is continuing. He also thanked the SEC, which filed civil charges against KANG, KELLEY, and SCHONHORN in a separate civil action today, and the Office of Inspector General for the Office of the New York State Comptroller.
1 Conspiracy to Commit Securities Fraud (18 U.S.C. § 371) NAVNOOR KANG DEBORAH KELLEY 5 years in prison and a $250,000 fine or twice the gross gain or loss from the offense
2 Securities Fraud (15 U.S.C. §§ 78j(b) & 78ff; 17 C.F.R. § 240.10b-5; 18 U.S.C. § 2) NAVNOOR KANG DEBORAH KELLEY 20 years in prison and a $5,000,000 fine or twice the gross gain or loss from the offense
3 Conspiracy to Commit Honest Services Wire Fraud (18 U.S.C. § 1349) NAVNOOR KANG DEBORAH KELELY 20 years in prison and a $250,000 fine or twice the gross gain or loss from the offense
4 Honest Services Wire Fraud (18 U.S.C. §§ 1343 and 1346) NAVNOOR KANG DEBORAH KELLEY 20 years in prison and a $250,000 fine or twice the gross gain or loss from the offense
5 Conspiracy to Obstruct Justice in the SEC Investigation (18 U.S.C. § 1512(k) NAVNOOR KANG DEBORAH KELLY 20 years in prison and a $250,000 fine or twice the gross gain or loss from the offense
6 Obstruction of Justice in the Grand Jury Investigation (18 U.S.C. § 1512(c)(2)) NAVNOOR KANG 20 years in prison and a $250,000 fine or twice the gross gain or loss from the offense
Labels: Former Portfolio Manager At The New York State Common Retirement Fund Charged In “Pay-For-Play” Bribery Scheme