Seabrook, Huberfeld arrested, charged by Feds in bribery scheme involving union investments

By LOUIS FLORES

Norman Seabrook, the president of the Correction Officers’ Benevolent Association, or COBA, and Murray Huberfeld, the reported founder of the hedge fund management company, Platinum Partners, L.P., were arrested on Wednesday morning.

The arrests were carried out in response to a sealed criminal complaint signed on Tuesday by U.S. District Court Magistrate Judge Andrew Peck. Assistant U.S. Attorneys Martin Bell, Russell Capone, and Kan Nawaday are in charge of the prosecution of the case.

The two counts of Federal corruption charges included allegations of each of honest services fraud and the conspiracy to commit honest services wire fraud, according to the sealed complaint, which the press office of the U.S. Attorney’s Office for New York’s southern district publicly released to Progress Queens.

Mr. Seabrook was described in the allegations narrated in the sealed complaint as having complained about not personally profiting from the investment management of the retirement assets of COBA’s annuity fund.

“As alleged in the complaint, Seabrook believed he was entitled to more. As he put it to a witness, at the start of the charged bribery scheme in 2013, ‘It was time that Norman Seabrook got paid,’” recounted U.S. Attorney Preet Bharara, during a Wednesday press conference announcing the arrest and charges of each of Mr. Seabrook and Mr. Huberfeld.

After an intermediary relayed Mr. Seabrook’s complaining to Mr. Huberfeld, Mr. Huberfeld allegedly offered to pay and later arranged to pay $60,000 in kickbacks to Mr. Seabrook through the intermediary in exchange for what later amounted to the investment of $20 million of COBA annuity fund plan assets and union assets into a hedge fund managed by Platinum Partners, L.P, according to the sealed complaint.

Mr. Seabrook, who has served as president of COBA for over 20 years, was described as not having the requisite powers and authorities to make unilateral decisions about the investment of annuity fund plan assets and union assets. Nonetheless, he made those decisions through the use of intimidation, according to allegations in the sealed complaint.

In the sealed complaint, the intermediary through whom the kickback was paid was described as a coöperating witness, and the coöperating witness has pleaded guilty to “conspiring to commit honest services fraud in connection with, among other things, this matter, and is providing information to the Government in the hope of obtaining leniency when he is sentenced.”

During the press conference, U.S. Attorney Bharara refused to identify the coöperating witness. However, numerous news reports have identified Jona Rechnitz, a fundraiser for Mayor Bill de Blasio (D-New York City), as having paid for trips involving NYPD officers, including a 2014 trip to Las Vegas that featured a sex worker dressed up as a flight attendant, according to sources cited in a report published by The New York Post. Mr. Rechnitz was also linked to an NYPD sensitivity training program at the Museum of Tolerance New York, which received discretionary funding sponsored, in part, by New York City Councilmember Daniel Dromm. The nonprofit sponsor of the Museum of Tolerance New York is the Simon Wiesenthal Center Inc., where Mr. Huberfeld is a director.

In the sealed complaint, Platinum Partners was described as having two motivations in seeking the investment of the annuity fund plan assets and union assets. First, Platinum Partners was seeking to broaden its investor mix beyond high net worth individuals, and obtaining investments from institutional investors, such as retirement funds, would have marked that transition. COBA is the nation’s largest municipal jail union, according to the sealed complaint. Second, investors in hedge funds managed by Platinum Partners were making large amounts of withdrawals, also known as redemptions, and Platinum Partners needed new investors to make up for redemptions.

During the press conference, U.S. Attorney Bharara, said, in part, “This was an unusual investment, as COBA had never before invested in high-risk vehicles, like hedge funds. So, not only was this the first time that COBA had invested in a hedge fund, it was also the first time that Platinum had received an investment from a retirement fund. We allege this was not a coincidence, it was corruption. Notably also COBA’s investments in Platinum Partners came at a time when the fund desperately needed additional money, at a time when redemptions were rapidly outstripping new investments. In fact, COBA’s $20 million investment allegedly made it the largest investor in one of the Platinum funds in 2014, amounting to more than half of the incoming dollars that year. So, the bribed investment was something of a lifeline for that fund. In other words, just as high net worth investors were getting out of the fund, Seabrook was getting in with union retirement money.”

Role of an unidentified NYPD officer

The alleged $60,000 kickback paid to Mr. Seabrook was initially paid by the coöperating witness, who was later reimbursed through the payment of a fake invoice involving the purchase of nonexisting tickets to New York Knicks basketball games by Platinum Partners, according to the sealed complaint.

Payment of the alleged kickback was made by the coöperating witness, who stuffed cash into a bag purchased from the luxury goods boutique, Salvatore Ferragamo, and the drop was allegedly made. Once discovering how much cash was in the bag, Mr. Seabrook allegedly became angry, because he was expecting a higher payment, according to the sealed complaint. During the press conference, U.S. Attorney Bharara confirmed that a bag matching the description of the Ferragamo bag was found in Mr. Seabrook’s home by agents from the Federal Bureau of Investigation.

After the cash was delivered, each of Mr. Seabrook ; the coöperating witness ; an unnamed, unindicted co-conspirator ; and an unidentified New York Police Department officer had dinner together, according to the sealed complaint.

Besides the alleged kickback of $60,000, Mr. Seabrook also received valuable gifts, including airfare for alleged travel to the Dominican Republic, Las Vegas, and Burbank, California. The NYPD officer, who joined Mr. Seabrook and the coöperating witness for dinner the night when the alleged kickback was paid, also joined these trips, as did the unindicted, co-conspirator, according to the sealed complaint. Indeed, Mr. Seabrook was allegedly introduced to the coöperating witness in late 2013 by the NYPD officer, according to the sealed complaint. Despite the unknown identity of the unindicted, co-conspirator, a report published by The New York Daily News revealed that former NYPD Chief of Department Philip Banks III had joined Mr. Seabrook in a paid 2014 trip to the Caribbean. It is not known if former Chief Banks is the unindicted, co-conspirator.

News reports have been published that allege that NYPD officers have received gifts in exchange for providing police services to businessmen, some of whom have political ties to Mayor de Blasio. The reported expansion of the investigation of the NYPD into each of the campaign finance and official activities by the de Blasio administration has converged with a number of other reported City, State, and Federal corruption investigations ranging from the sale of a former AIDS nursing home in the Lower East Side to the campaign finance activities of Mayor de Blasio’s nonprofit lobbying arm, the Campaign for One New York, to the campaign finance activities surrounding Mayor de Blasio’s efforts to flip control of the New York State Senate into Democratic Party hands.

Possible secondary financial mismanagement

During the press conference, U.S. Attorney Bharara referred to the newly appointed chief of the Public Corruption Unit, Andrew Goldstein, who replaced Arlo Devlin-Brown, the latter who is expected to join the New York office of the law firm of Covington & Burling LLP as a partner. Convington, the law firm with long-time links to former Attorney General Eric Holder, is derided for reportedly compromising the independence of senior U.S. Department of Justice officials, according to government reform activists.

Speaking generally during Wednesday’s press conference about the ongoing efforts of his office to combat political, campaign, and corporate corruption, U.S. Attorney Bharara said his office would remain “as aggressive, as ever, in exposing corruption wherever we find it, and it is too bad that we seem to find it everywhere we look.”

FBI Assistant Director Diego Rodriguez, the agent in charge of the agency’s New York Field Office, said that Mr. Huberfeld allegedly managed the business affairs of Platinum Partners “off the books.”

During the press conference, U.S. Attorney Bharara addressed the issue of Mr. Huberfeld’s secret role as the alleged top manager of Platinum Partners, saying, in relevant part, “There’s an allegation in the complaint that Mr. Huberfeld was more responsible than was presented publicly because of some concerns about past legal troubles.”

In 1998, the U.S. Securities and Exchange Commission charged Broad Capital Associates, Inc., an investment company, and its owners, which included Mr. Huberfeld, with violating Federal securities laws applicable to securities registration and reporting. In 2014, BDL Group, a subsidiary of Platinum Partners, was determined to have illegally made money from proceeds of a form of life insurance purchased for patients in hospice care, according to a report published by the Reuters news service.

Despite Mr. Seabrook’s lack of authority to solely make investment decisions, despite questions about the true power and authority exerted by Mr. Huberfeld over Platinum Partners, and despite COBA’s inability to make a representation that it could bear the risk of losing its entire investment in Platinum Partners, the latter an issue raised in the sealed complaint, the $20 investment of annuity fund plan assets and union assets were still transacted with Platinum Partners. It is not known how Platinum Partners’ prime broker or custodian would have processed investment orders for pension plan assets without performing a due diligence review about the powers and authorities of COBA to invest in Platinum Partners.

Because of regulations that apply to the investment of pension plan assets, the annuity fund assets subject to investment restrictions could not be fully commingled with non-pension plan assets within the Platinum Partners hedge fund. It is also not known in what types of trading accounts Platinum Partners held the COBA assets. A question submitted by Progress Queens to the U.S. Attorney’s Office about the location of the COBA assets was not answered.

A request made by Progress Queens for an interview with an official at Platinum Partners was redirected to an executive assistant at the firm, who, in turn, declined to comment, choosing, instead, to redirect comment further still to an outside public relations firm.

The arrests and the related press conference overwhelmed the news cycle on Wednesday, overshadowing a joint announcement by Mayor de Blasio and New York City Council Speaker Melissa Mark-Viverito (D-Spanish Harlem) that budget negotiations for Fiscal Year 2017 had concluded weeks ahead of the 30 June deadline.

With escalating news about the reported wide-ranging, Federal corruption investigation into the de Blasio administration, the mayor has sought to portray himself in the media as undeterred by accusations in news reports about graft. To help control the media narrative, Mayor de Blasio has sought to restrict unauthorised communication by his staff with the media by demanding the execution by City Hall staff of redundant confidentiality agreements, a move described by former New York Civil Liberties Union executive director Norman Siegel as possibly constituting “obstruction.”

Near the conclusion of Wednesday’s press conference, U.S. Attorney Bharara was pushed to further comment about aspects of the reported, wide-ranging Federal corruption investigation being led by his office. In response to a reporter’s question, U.S. Attorney Bharara said, “I’m not going to comment on what other investigations are or are not pending. As those of you, who come here often, appreciate, it is seldom the case that the bringing of a particular charge on a particular date is the end of the matter. We’re still investigating lots of different things, and you should expect to see me again.”

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