The Financial Industry Regulatory Authority Inc. has barred one of the brokers charged in December for participating in a "pay-for-play" bribery scheme involving the $184 billion New York State Common Retirement Fund, one of the largest public pension funds in the country.
The broker, Deborah D. Kelley, was arrested in San Francisco on Dec. 21 and was then charged with securities fraud, conspiracy to commit securities fraud and conspiracy to obstruct justice in a Securities and Exchange Commission investigation, as well as wire fraud charges,
according to the U.S. attorney's office for the Southern District of New York.
That same day, the FBI arrested Navnoor Kang, the former director of fixed income and head of portfolio strategy at the New York State Common Retirement Fund in Portland, Ore.
From 2014 to 2016, Ms. Kelley and another broker, Gregg Schonhorn, paid Mr. Kang more than $100,000 in bribes,
including prostitutes, narcotics, nightclub bottle service, tickets to sports and other events, cash payment for strippers and other lavish items, in exchange for fixed income business from the pension fund, according to the U.S. attorney's office.
In exchange for the bribes, Mr. Kang used his position at the New York State Common Retirement Fund to promote the interests of the two brokers and their firms, the U.S. attorney's office alleged. Mr. Kang steered more than $2 billion in business to Ms. Kelley's broker-dealer, from which she and her employers earned millions of dollars in commissions from the pension fund.
In 2014, Ms. Kelley was registered with Sterne, Agee & Leach Inc. In June 2015, she was registered with Stifel, Nicolaus & Co. Inc. after
Stifel purchased Sterne Agee. In September 2015,
Stifel fired Ms. Kelley for violations of firm policies because she "provided gifts or entertainment to a portfolio manager of a public pension fund and misrepresented the nature of the expenses submitted for reimbursement,"
according to Tuesday's Finra settlement barring her from the industry.
At the time of her arrest in December, Ms. Kelley was working at Seaport Global Securities.
Ms. Kelley in February informed Finra staff she would not appear for on-the-record testimony related to allegations about the improper gifts and entertainment, according to the settlement.
Her attorney, G. Robert Gage, declined to comment.
Mr. Schonhorn pled guilty and admitted his participation in the scheme, according to the U.S. attorney's office.
