Ex-N.Y. brokerage executive pleads guilty to pension bribe scheme

By Brendan Pierson

NEW YORK (Reuters) - A former managing director at broker-dealer Sterne Agee pleaded guilty on Tuesday to bribing a former portfolio manager at New York state's retirement fund in exchange for tens of millions of dollars' worth of business, federal prosecutors said.

Deborah Kelley, 58, admitted that between 2014 and 2016, she paid bribes including entertainment, travel and lavish meals to Navnoor Kang, former director of fixed income and head of portfolio strategy at the New York State Common Retirement Fund, prosecutors said in a statement.

Kang reciprocated by steering state pension business to Kelley's firm, prosecutors said - doing about $156 million in trades with the firm in the fiscal year ending March 1, 2015, and about $179 million in the fiscal year ending March 1, 2016.

Kelley received 35 to 40 percent of the hundreds of thousands of dollars in commissions the firm earned on those trades, prosecutors said.

Kang pleaded not guilty to corruption charges in January.

Kelley pleaded guilty to one count of conspiracy to commit securities fraud and honest services wire fraud before U.S. District Judge Paul Oetken in Manhattan, according to the office of Acting U.S. Attorney Joon Kim. Kelley has agreed not to appeal any sentence of five years or less, according to a written plea agreement.

Kelley's lawyer could not immediately be reached for comment.

Kelley left Sterne Agee in 2015, not long after Stifel Financial Corp acquired the company, according to Financial Industry Regulatory Authority records.

The charges against Kelley and Kang mark the latest pay-to-play case related to the third-largest U.S. pension fund, following a scandal a decade ago that sent the state comptroller to prison.

The $184.5 billion Common Retirement Fund is the investment arm of the New York State and Local Employees' Retirement System and the New York State and Local Police and Fire Retirement System.

According to prosecutors, Kang worked at the fund from January 2014 to February 2016 and was responsible for investing $53 billion in fixed income assets.

The charges were unveiled last December. Gregg Schonhorn, a vice president at FTN Financial Securities Corp who was also accused of bribing Kang, has pleaded guilty and is cooperating with the government, prosecutors said at the time.

(Reporting by Brendan Pierson in New York; editing by Grant McCool)

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