apphotoannouncement.jpg

U.S. Attorney Preet Bharara of the Southern District of New York on Wednesday announced federal charges against Navnoor Kang, a former portfolio manager at the New York State Common Retirement Fund and two broker-dealers. Kang, 37, was arrested at his home in Southwest Portland. (AP Photo)

Navnoor S. Kang, a former manager of New York's public employee pension fund, was arrested in Portland on a federal indictment that accuses him of steering $2.5 billion in business to two brokerage firms while accepting more than $180,000 worth of bribes, including a $17,400 Panerai watch, drugs, prostitutes and lavish trips.

Navnoor Kang

FBI agents arrested Kang, 37, about 6 a.m. at his home in Southwest Portland. He made his first court appearance Wednesday afternoon in the Mark O. Hatfield Courthouse in Portland.

He will be in custody overnight, then fitted with a GPS monitoring anklet before his release Thursday to make a scheduled flight to Albany, N.Y.

Kang is expected to report to U.S. District Court in the Southern District of New York on his own on Jan. 4. He surrendered his passport to the FBI.

Assistant U.S. Attorney Peter Sax said the government was "quite concerned' about Kang not reporting as required, after listening to a recorded phone call Kang made in August to a cooperating witness in which he talked about fleeing to a country that doesn't have an extradition agreement with the United States.

Government lawyers in New York had sought a bond amount be set to assure Kang's appearance in court in January. But as federal judges in Oregon don't commonly set bonds, the electronic monitoring was added as a safeguard instead.

From January 2014 through February, Kang worked as director of fixed income for the New York State Common Retirement Fund, the third-largest public pension fund in the United States. He was given investment responsibilities for $50 billion of the fund's assets.

In a "pay-to-play'' scheme, Kang steered more than $2 billion of business to two brokerage firms who bribed him with at least $180,000 worth of luxury vacations, high-priced watches, tickets to concerts and sporting events, drugs, cash, cocaine, strippers and prostitutes, according to the indictment and a criminal complaint.

In late 2015, the Securities and Exchange Commissioner opened an investigation and subpoenaed Kang and Deborah Kelly, a former managing director at a New York-based brokerage firm.

"In advance of their testimony, Kang and Kelley agreed to align their stories and testify falsely before the SEC in order to conceal their scheme,'' the complaint said. Kang also is accused of instructing another brokerage director, Gregg Schonhorn, a former vice president, to testify falsely before a grand jury investigating the case.

Kang is charged with conspiracy to commit securities fraud, securities fraud, conspiracy to commit honest services wire fraud, honest services wire fraud, conspiracy to obstruct justice and obstruction of justice.

Thomas Price, Oregon assistant federal public defender, represented Kang in court Wednesday. Price said he didn't think Kang is a risk to the community but he'll agree to wear the electronic monitoring in order to travel to New York on his own.

Kang's LinkedIn profile says he's been working as a strategy officer for Fair Observer, a nonprofit media organization, for the past seven months.

Kelley, 58, a broker and former managing director at Sterne Agee, surrendered to authorities in San Francisco. Schonhorn, 45, a former vice president at FTN Financial, pleaded guilty and is cooperating with federal prosecutors, authorities said.

"The hard-earned pension savings of New Yorkers should never serve as a vehicle for corrupt, personal enrichment,'' said U.S. Attorney Preet Bharara, for the Southern District of New York, in a prepared statement.

Kang was booked by the U.S. Marshals Service into Multnomah County Detention Center on Wednesday after his court appearance.

-- Maxine Bernstein

mbernstein@oregonian.com

503-221-8212

@maxoregonian