Financial Fraud

Financial Fraud: NAVNOOR KANG Pled Guilty For Participating In a Massive Pay-For-Play Bribery Scheme Involving The NYSCRF

<h2>Former Director Of Fixed Income And Head Of Portfolio Strategy At The New York State Common Retirement Fund Pleads Guilty In &OpenCurlyDoubleQuote;Pay-For-Play” Bribery Scheme<&sol;h2>&NewLine;<p>Joon H&period; Kim&comma; the Acting United States Attorney for the Southern District of New York&comma; announced today that NAVNOOR KANG&comma; the former Director of Fixed Income and Head of Portfolio Strategy at the New York State Common Retirement Fund &lpar;&OpenCurlyDoubleQuote;NYSCRF”&rpar;&comma; pled guilty today before U&period;S&period; District Judge J&period; Paul Oetken for participating in a massive &OpenCurlyDoubleQuote;pay-for-play” bribery scheme involving the NYSCRF&comma; the nation’s third largest public pension fund&period;<&sol;p>&NewLine;<p>Acting Manhattan U&period;S&period; Attorney Joon H&period; Kim said&colon; &OpenCurlyDoubleQuote;As an investment professional with New York State Common Retirement Fund&comma; Navnoor Kang owed a duty to the public employees whose pension money he oversaw&period; But in this case of public corruption meets securities fraud&comma; Kang sold himself and his duty to safeguard public retirement money for luxury vacations&comma; jewelry&comma; cash and even drugs&period; He has now admitted to his crimes and is a convicted felon&period; ”<&sol;p>&NewLine;<p>According to allegations contained in the Indictment charging KANG and statements made during his plea proceeding&colon;<&sol;p>&NewLine;<p><strong>The NYSCRF<&sol;strong><&sol;p>&NewLine;<p>The NYSCRF is a pension fund administered for the benefit of public employees of the State of New York&period; From January 2014 through February 2016&comma; KANG served as Director of Fixed Income and Head of Portfolio Strategy for the NYSCRF&period; In that capacity&comma; KANG was responsible for investing more than &dollar;53 billion in fixed-income securities and was entrusted with discretion to manage those investments on behalf of the NYSCRF&period; KANG owed a fiduciary duty to the NYSCRF and its members and beneficiaries&comma; and was required to make investment decisions in their best interests and free of any conflict of interest&period; New York State law and NYSCRF policies prohibited KANG and other NYSCRF employees from receiving any bribes&comma; gifts&comma; benefits&comma; or consideration of any kind&period;<&sol;p>&NewLine;<p><strong>The Scheme to Steer NYSCRF Fixed-Income Business in Exchange for Secret Bribes<&sol;strong><&sol;p>&NewLine;<p>From 2014 through 2016&comma; KANG and others participated in a scheme to defraud the NYSCRF and its members and beneficiaries&comma; and to deprive the NYSCRF of its intangible right to KANG’s honest services&period; The scheme involved&comma; among other things&comma; an agreement among KANG&comma; Deborah Kelley&comma; a managing director of institutional fixed income sales at New York-based broker-dealer &lpar;&OpenCurlyDoubleQuote;Broker-Dealer-1”&rpar;&comma; Gregg Shonhorn&comma; a vice president of fixed income sales at a New York-based broker-dealer &lpar;&OpenCurlyDoubleQuote;Broker-Dealer-2”&rpar;&comma; and others to pay KANG bribes – in the form of entertainment&comma; travel&comma; lavish meals&comma; prostitutes&comma; nightclub bottle service&comma; narcotics&comma; tickets to sports games and other events&comma; luxury gifts&comma; and cash payments for strippers and KANG’s personal expenses – in exchange for fixed-income business from the NYSCRF&period; Such bribes – which totaled more than &dollar;100&comma;000 – were strictly forbidden by the NYSCRF&comma; and were paid secretly and without any disclosure to the NYSCRF and its members and beneficiaries concerning the conflicts of interest inherent therein&period;<&sol;p>&NewLine;<p>In exchange for the bribes paid by Kelley&comma; Schonhorn&comma; and others&comma; KANG used his position as Director of Fixed Income and Head of Portfolio Strategy at the NYSCRF to promote the interests of Kelley&comma; Schonhorn&comma; and their respective brokerage firms&period; KANG&comma; in exchange for the bribes he received&comma; agreed to steer fixed-income business to Broker-Dealer-1 and Broker-Dealer-2&period; In fact&comma; KANG steered more than &dollar;3 billion in fixed-income business to Broker-Dealer-1 and Broker-Dealer-2&comma; from which Kelley&comma; Schonhorn&comma; and their respective employers earned millions of dollars in commissions from the NYSCRF&period; In so doing&comma; KANG&comma; with the knowledge and approval of Kelley and Schonhorn&comma; breached his fiduciary duty to make investment decisions in the best interest of the NYSCRF and its members and beneficiaries&comma; and free of conflict&comma; and deprived the NYSCRF of its intangible right to KANG’s honest services&period;<&sol;p>&NewLine;<p>As the bribes paid by Schonhorn to KANG increased&comma; so too did Broker-Dealer-2’s fixed-income business with the NYSCRF&period; The value of the NYSCRF’s domestic bond transactions with Broker-Dealer-2 skyrocketed from zero in the fiscal year ending March 31&comma; 2013&comma; to approximately &dollar;1&period;5 million in the fiscal year ending March 31&comma; 2014&comma; to approximately &dollar;858 million in the fiscal year ending March 31&comma; 2015&comma; and to approximately &dollar;2&period;378 billion in the fiscal year ending March 31&comma; 2016&period; Broker-Dealer-2 became the third largest broker-dealer with which the NYSRCF executed domestic bond transactions for the fiscal year ending March 31&comma; 2016&comma; having not even been on the approved list in the fiscal year ending March 31&comma; 2013&period; As the NYSCRF’s third largest broker-dealer in this asset class&comma; 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&period; Similarly&comma; the value of NYSCRF’s domestic bond transactions with Broker-Dealer-1 increased from zero in the fiscal year ending March 1&comma; 2014&comma; to approximately &dollar;156 million in the fiscal year ending March 1&comma; 2015&comma; and to approximately &dollar;179 million in the fiscal year ending March 1&comma; 2016&period;<&sol;p>&NewLine;<p>KANG’s trades resulted in the payment of millions of dollars in commissions to Broker-Dealer-1 and Broker-Dealer-2&comma; of which Kelley and Schonhorn personally earned approximately 35 to 40 percent&period;<&sol;p>&NewLine;<p><strong>The Obstruction of Justice<&sol;strong><&sol;p>&NewLine;<p>In late 2015&comma; the Securities and Exchange Commission &lpar;&OpenCurlyDoubleQuote;SEC”&rpar; opened an investigation into the entertainment and benefits that Kelley had provided KANG&comma; and the SEC subpoenaed both KANG and Kelley for their testimony&period; In advance of their testimony&comma; KANG and Kelley agreed to align their stories and testify falsely before the SEC in order to conceal their scheme&period; In late 2015 and early 2016&comma; KANG and Kelley each falsely testified under oath before the SEC about expenses Kelley had paid for KANG&period; Moreover&comma; after a federal grand jury investigation was opened&comma; KANG instructed Schonhorn to testify falsely before the grand jury&comma; and KANG admitted that he had hidden relevant evidence&period;<&sol;p>&NewLine;<hr &sol;>&NewLine;<p>KANG&comma; 37&comma; of Glendale&comma; California&comma; pled guilty to one count of conspiracy to commit securities fraud&comma; which carries a maximum sentence of five years in prison&comma; and one count of conspiracy to commit honest services wire fraud&comma; which carries a maximum sentence of 20 years in prison&period; KANG is scheduled to be sentenced on February 23&comma; 2018&comma; by Judge Oetken&period;<&sol;p>&NewLine;<p>Kelley and Schonhorn have each pled guilty for participating in the scheme&period; Kelley was sentenced by Judge Oetken to three years of probation&period;<&sol;p>&NewLine;<p>Mr&period; Kim praised the investigative work of the Federal Bureau of Investigation and noted that the investigation is continuing&period; He also thanked the SEC&comma; which filed civil charges against Kang&comma; Kelley&comma; and Schonhorn in a separate civil action&comma; and the Office of Inspector General for the Office of the New York State Comptroller&period;<&sol;p>&NewLine;<p>This case is being handled by the Office’s Securities and Commodities Fraud Task Force&period; Assistant U&period;S&period; Attorneys Edward A&period; Imperatore and Joshua A&period; Naftalis are in charge of the prosecution&period;<&sol;p>&NewLine;<p><a href&equals;"https&colon;&sol;&sol;www&period;justice&period;gov&sol;usao-sdny&sol;pr&sol;former-director-fixed-income-and-head-portfolio-strategy-new-york-state-common">Original PressReleases&&num;8230&semi;<&sol;a><&sol;p>&NewLine;

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