Ex-Bond Broker Avoids Prison in N.Y. Pension Bribe Scheme

(Bloomberg) -- A former bond broker persuaded a federal judge to spare her from prison after pleading guilty to conspiring with a portfolio manager of New York's main pension fund to funnel state business to her firm in exchange for bribes including concert tickets and luxury vacations.

Deborah Kelley, 59, a former managing director at Sterne, Agee & Leach Inc., pleaded guilty in May to a single count of conspiracy for spending more than $19,000 to entertain the portfolio manager, Navnoor Kang, with a vacation in New Orleans that included VIP seats to a Paul McCartney concert and a ski trip in Park City, Utah.

U.S. District Judge Paul Oetken on Friday gave Kelley three years probation, with the first six months to be spent confined to her home in Piedmont, California. She was also ordered to perform 1,000 hours of community service and pay a $50,000 fine. Prosecutors had sought a five-year prison sentence.

A tearful Kelley begged Oetken to keep her out of prison, saying she was "beyond remorseful" for entertaining Kang, which she called the "worst decision" she has ever made.

"My actions have led to the darkest and saddest years of my life and they will haunt me forever," Kelley said before the judge handed down the sentence as her family looked on.

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Prosecutors had asked Oetken to impose a prison term, saying Kelley's misconduct "corrupted the investment process of the third-largest pension fund in the country and involved repeated obstruction of justice."

"This was not a fleeting aberration," Assistant U.S. Attorney Edward Imperatore told the judge. "This was not a mistake in judgment. This was a concerted campaign of misconduct."

Prosecutors have said Kang, a former director of fixed income and head of portfolio strategy at the New York State Common Retirement Fund, took at least $180,000 in bribes in exchange for sending business to certain brokerages from 2014 to 2016. Kang has pleaded not guilty.

Another broker, Gregg Schonhorn, who was accused of bribing Kang with cocaine, prostitutes, luxury travel and a $17,400 Panerai watch, pleaded guilty in December and agreed to cooperate with authorities.

In sentencing Kelley to probation, Oetken said Kelley was a "good person," noting that he has rarely received as many letters in support of a defendant, and drew a distinction between her and Schonhorn, noting that her gifts were "less substantial, less lavish and less obvious." But he also noted that that she got more than $180,000 in commissions as a result of the bribes and that she knew what she was doing was wrong.

"It was significant and Ms. Kelley knew it was against the rules," Oetken said.

The case is U.S. v. Kang, 16-cr-00837, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Chris Dolmetsch in New York State Supreme Court in Manhattan at cdolmetsch@bloomberg.net.

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Paul Cox, Joe Schneider