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Former Sterne Agee Broker Pleads Guilty to Securities Fraud Involving NY Pension Fund

Deborah Kelley, an ex-Sterne Agee managing director and broker, has pleaded guilty to honest-services wire fraud and securities fraud. Kelley, admitted that she gave perks to former NY state pension fund manager Navnoor Kang in return for him directing trading business toward her firm. She could be sentenced to up to five years in prison. A second broker, Gregg Schonhorn, has already pleaded guilty to related criminal charges against him.

Kang, who was the portfolio manager of the New York State Common Retirement Fund, is accused of awarding the two brokers’ firms over $2B of business in return for drugs, strippers, vacations, and lavish jewelry.

As a result, contend prosecutors, the retirement fund’s domestic bond transactions to her firm went from $0 at the end of March 2014 to $179M in 2016. FTN Financial, which is where Schonhorn worked, ended up garnering $2.3B of business from working with the NY pension fund. The two brokers were paid 35-40% of the millions of dollars of commissions made by their brokerage firms.

Kelley was let go by her firm after she turned in expenses for perks given to Kang. Stifel Financial Corp (SF), which acquired Sterne Agee in 2015, said that the securities firm reported Kelley to the SEC. Meantime, reported the Wall Street Journal, the New York State Common Retirement Fund stopped all trading with the firm as well as with FTN Financial because of Kang’s arrangement with Schonhorn.

Kang has pleaded not guilty to the criminal and civil charges against him. It was Kang who got Sterne Agee and FTN Financial on the list of brokerage firms approved to do business with the state’s pension fund.

Securities Fraud
If you suspect that your investment losses are due to pension fund fraud, contact The SSEK Partners Group. We handle institutional investor fraud cases as well as securities fraud cases for individual investors.

Ex-Broker Pleads Guilty in New York Pension Case, WSJ, May 30, 2017

Ex-NY Pension Fund Portfolio Manager and Broker are Criminally Charged in Alleged $2B Pay-to-Play Scam, Institutional Investor Securities Blog, December 26, 2016

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