Broker Accused of Pay-to-Play With New York Fund Avoids Prison

Last December, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges against Navnoor Kang, Gregg Schonhorn, and Deborah Kelley, concurrent with the Securities and Exchange Commission’s (SEC)’s fraud charges against them.

Kang, who served as the director of fixed income for the New York State Common Retirement Fund from January 2014 to February 2016, allegedly used his position to direct up to $2.5 billion in state business to Schonhorn and Kelley, who were registered representatives at two different broker/dealers. In exchange for this business, which netted Schonhorn and Kelley millions of dollars in commissions, the SEC said, the brokers provided Kang with tens of thousands of dollars in benefits.

A sentencing memorandum for Kelley cites many letters from friends, family and former co-workers attesting to “a life otherwise characterized by a deep devotion to her family, friends and community, and the extent to which she has already paid and continues to pay for her errors.” According to the memo, “the letters describe a woman whose ‘history and characteristics’ are fundamentally at odds with the conduct for which she now stands before the court.”

The memo notes that Kelley repaid $187,991.19 in forfeiture representing the amount of her earnings based on business with New York State following her guilty plea in May. She pleaded guilty to one count of conspiracy to commit securities fraud.

Kelley was sentenced to probation for a term of three years with six months home confinement and 1,000 hours of community service.