Back in 2016, an investment director at the New York State Common Retirement Fund was indicted on charges of steering pension money towards certain brokers in exchange for monetary bribes and drugs, among other things.
But how did Navnoor Kang, 37, hide his funneling of millions of dollars in business to two brokers?
A report, released by the New York Comptroller’s Office, reveals how he kept his scheme under wraps.
From the Wall Street Journal:
A move from paper tickets to electronic trade confirmations allowed Mr. Kang to avoid listing the broker who executed the trades, according to the report. Under Mr. Kang’s watch, the pension fund also stopped producing weekly trade reports that identified the brokers involved.
Unlike his predecessor or his counterpart who managed the pension fund’s stock investments, Mr. Kang traded himself rather than direct his staff to do so, according to the report. This meant that no one approved his transactions.
Mr. Kang would instruct his brokers to send the electronic confirmations to his subordinates—creating “the false impression that most of these transactions were conducted by the investment staff and then approved by him,” the report said.
“Kang’s manipulation of the electronic trade process had ripple effects that he capitalized on to further conceal his alleged criminal activity,” the comptroller’s office wrote in the report.
Additionally, the report points the finger at top headhunting firm Korn Ferry for finding Kang in the first place. Ferry and pension fund officials both ignored several red flags from his previous employer.
Kang had been previously fired from Guggenheim for unclear reasons; but when Korn Ferry followed his references, they didn’t uncover anything too fishy.
From the Journal:
In December, a pension employee wrote to colleagues noting Korn Ferry officials said they reviewed Mr. Kang’s references and contacted his former employer. One of Mr. Kang’s references, according to the report, was Deborah Kelley, a saleswoman eventually indicted by federal prosecutors for bribing Mr. Kang. Ms. Kelley has pleaded not guilty and her lawyer didn’t respond to a request for comment.
In July 2015, Mr. Kang and the pension’s chief investment officer traveled to California and met with Guggenheim executives, among others, according to the report. The Guggenheim executives greeted Mr. Kang warmly, and a top executive with the firm told the CIO that his firm “may have been too harsh” to Mr. Kang, who had “made a mistake,” the report said.
But the executive wouldn’t expand on what Mr. Kang did wrong and, when confronted by the CIO, Mr. Kang said he had rebuffed the advances of another employee and had lost his job for failing to report a dinner, according to the report. Guggenheim used that infraction, he told the CIO, to “get rid of him.”
The Common Retirement Fund will be changing several policies in the wake of the scandal, including re-instating the weekly and monthly trade reports that list the brokers involved in each transaction. These reports are reviewed by higher-ups, and would have certainly prevented this scandal had Kang not circumvented them.
View the full report here.
Photo by Martin Raab via Flickr CC License