NEW YORK, Jan 4 (Reuters) - A former portfolio manager at New York state's retirement fund pleaded not guilty on Wednesday to charges that he steered $2 billion in trades to two brokerages in exchange for bribes that included vacations, cocaine and prostitutes.
Navnoor Kang, former director of fixed income and head of portfolio strategy at the New York State Common Retirement Fund, entered his plea in Manhattan federal court to charges that included securities fraud and wire fraud.
Deborah Kelley, a former managing director at broker-dealer Sterne Agee who is one of two brokerage executives to face charges over the scheme, also pleaded not guilty to fraud charges contained in an indictment made public Dec. 21.
The arraignment came in the latest pay-to-play case to center on the third-largest U.S. pension fund following a scandal a decade ago that sent the state comptroller to prison and sent shock waves through the pension fund world.
The 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, 38, worked at the $184.5 billion fund from January 2014 to February 2016 and was responsible for investing $53 billion in fixed income assets.
Prosecutors said that from 2014 to 2016, Gregg Schonhorn, a vice president at FTN Financial Securities Corp, Kelley and others spent more than $100,000 on bribes for Kang that included travel, meals, prostitutes, sports tickets and cash.
In exchange, Kang steered more than $2 billion in trades to Sterne Agee and FTI Financial, resulting in millions of dollars in commissions to Schonhorn and Kelley, the indictment said.
The bribes that Kelley, 58, paid Kang included a ticket to a Paul McCartney concert during a New Orleans trip during which she paid various expenses, the indictment said.
It added that Schonhorn spent thousands of dollars on Kang for strip clubs, expensive dinners and cocaine while also providing him with cash for prostitutes.
Schonhorn has plead guilty and is cooperating with prosecutors. Kelley left Sterne Agee in 2015, not long after Stifel Financial Corp acquired the company, according to Financial Industry Regulatory Authority records.
The case is U.S. U.S. v. Kang et al, U.S. District Court, Southern District of New York, No. 16-cr-837. (Reporting by Nate Raymond in New York; Editing by Tom Brown)