FEDS BUST PARTY-BOY BOND BIG
A crooked New York pension official — hired by state Comptroller Thomas DiNapoli despite a shady past — steered billions of dollars worth of fixed-incomesecurities trades to two brokers in exchange for bribes of sex, drugs and rock ’n’ roll, the feds charged Wednesday.
Navnoor Kang allegedly was treated to hookers, piles of cocaine and VIP tickets to a Paul McCartney concert as part of a pay-for-play scheme involving the retirement accounts of government workers, including cops and firefighters.
Other payoffs cited by the feds include visits to strip clubs, $25,000 worth of bottle service at lounges, luxury vacations in New Orleans and Park City, Utah, a $17,400 Panerai watch and a $4,200 Hermès bracelet for his girlfriend.
Kang, 37, was put in charge of a $50 billion fixed-income investment portfolio in January 2014, despite having been fired from his previous job for nearly identical ethical breaches, court papers say.
The failed tennis player-turned-financial exec allegedly accepted at least 55 improper gifts — including an $8,000 Rolex watch and $1,200 worth of Rolling Stones concert tickets — while employed as a vice president at the prestigious Guggenheim Partners investment firm.
Court papers say Kang, during his job interview with the New York State Common Retirement Fund, “lied about the reason he was terminated” from his previous position.
DiNapoli’s office wouldn’t say what — if anything — it did to verify Kang’s claims at the time. “We are currently doing a thorough review of his hiring process. A criminal-background check was undertaken, including fingerprinting, before he was hired,” a DiNapoli spokesman said.
Kang, who was fired by the state in February, was busted Wednesday in his new hometown of Portland, Ore., on charges that include conspiracy, securities fraud and obstruction of justice.
At his arraignment, Kang was ordered held after the feds revealed he was heard on a wiretap talking about fleeing the country, The Oregonian newspaper reported.
The five-count indictment filed against him in Manhattan federal court also targeted stockbroker Deborah Kelley, 58, who surrendered to the feds in San Francisco.
Another broker, Gregg Schonhorn, 45, of Short Hills, NJ, secretly pleaded guilty last Thursday as part of a cooperation deal in which he pulled off a sting against Kang involving the Panerai watch, said Manhattan US Attorney Preet Bharara.
Kang knew both Schonhorn and Kelley before the state hired him. He accepted the Rolex from Schonhorn and the Rolling Stones tickets from a Schonhorn colleague who introduced them in Las Vegas in 2010, court papers say.
Kelley, meanwhile, provided a reference for Kang that helped him land his $166,464-a-year job with the state pension system, where he supervised seven investment officers.
Once hired, Kang quickly began scheming to further line his pockets, accepting at least $160,000 in payoffs from Schonhorn — including the hookers, coke and top-shelf booze — and another $20,000 from Kelley in the form of the vacations and the McCartney concert tickets, court papers say.
In exchange, he allegedly got both their employers added to the list of brokers used by the pension system, “under the guise of facilitating additional liquidity and obtaining best execution.”
As of March 31, Schonhorn’s firm — FTN Financial — had “executed approximately $2.38 billion in fixed-incomesecurities trades,” the papers state.
Schonhorn pocketed “sizable commissions — often hundreds of thousands of dollars per month,” the papers say.
Kelley’s firm — Sterne Agee & Leach, which was bought out last year by Stifel, Nicolaus & Co. — executed nearly $1 billion in trades before firing her last year for falsifying expense reports to pay for Kang’s bribes, according to the feds.
If not for the allegations, Kang might be viewed as a hero by the state, as the pension system’s fixed-income portfolio significantly outperformed the Vanguard Total Market Bond Index Fund during his tenure.
Defense lawyers for Kang and Kelley didn’t return calls, while Schonhorn’s lawyer and reps for FTN Financial and Stifel declined to comment.