SEC Charges Former NYS Pension Fund Official in Pay-to-Play Scheme

Chris Gaetano
Published Date:
Dec 21, 2016

The Securities and Exchange Commission announced fraud charges today against Navnoor Kang, the former director of fixed income for the New York State Common Retirement Fund who, for the two years he worked there, directed $2.5 billion dollars worth of pension trades to two broker-dealers, Gregg Schonhorn and Deborah Kelley, in exchange for more than $180,000 worth of luxury gifts. Kang, who was hired to manage the state's roughly $50 billion in assets, is said by the SEC to have received a wide variety of gifts including: 


  • * More than $50,000 spent on hotel rooms in New York City, Montreal, Atlantic City, and Cleveland.
  • * Approximately $50,000 spent at restaurants, bars, lounges, and on bottle service.
  • * $17,400 on a luxury watch for Kang.
  • * $4,200 on a Hermes bracelet for Kang’s girlfriend, at Kang’s request.
  • * $6,000 on four VIP tickets to a Paul McCartney concert in New Orleans. 
  • * An extravagant ski vacation in Park City, Utah, including a $1,000 per night guest suite.

The SEC said that Kang also received tens of thousands of dollars to use on cocaine and prostitutes. For their part, the two broker-dealers in on this deal made hundreds of thousands of dollars in commissions from the pension fund's business. 

“Kang owed a duty not only to the New York State Common Retirement Fund but to the more than one million public servants and beneficiaries that are served by the fund, including police and fire personnel who count on their pensions to take care of them and their families,” said Andrew J. Ceresney, Director of the SEC Enforcement Division.  “This action demonstrates that the SEC will not tolerate public officials who abuse public pension funds to satisfy their own greedy and wanton desires.”

Beyond taking part in the scheme, the two broker-dealers are also charged with trying to keep the deal a secret: the SEC said they repeatedly lied to investigators and even coordinated with Kang to make sure their stories lined up, using pre-paid cell phones to do so.

“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, Chief of the SEC Enforcement Division’s Public Finance Abuse Unit.  “Moreover, they allegedly assisted Kang in covering up his misdeeds, with Kelley going so far as to help Kang obstruct the SEC’s investigation.”

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