By Nate Raymond Reuters NEW YORK (Reuters) - U.S. prosecutors on Wednesday accused a former portfolio manager at New York state's retirement fund of steering $2 billion in trades in exchange for bribes from brokerage employees, in the latest pay-to-play case to rock the fund. Navnoor Kang, the ex-director of fixed income at the New York State Common Retirement Fund, was charged in an indictment filed in Manhattan federal court along with Deborah Kelley, a former Sterne Agee Group Inc managing director. Kang was arrested on Wednesday morning and Kelley was expected to surrender to authorities in San Francisco, a spokesman for U.S. Attorney Preet Bharara said. Gregg Schonhorn, another broker-dealer whom prosecutors said paid bribes, secretly pleaded guilty to related charges on Dec. 15, the spokesman said.