In a story that is not wanting for irony, Norman Seabrook, the NYC correction officer union leader will be meeting with a few of those he represents on their home turf following his arrest today on federal fraud charges. The charges against Seabrook and Murray Huberfeld, a hedge-fund financier, Platinum Partners, are the result of a number of corruption probes against New York City Mayor Bill de Blasio.
New York City Mayor and fund-raising investigation
One of the targets of the fund raising investigation, Jona S. Rechnitz, is presently cooperating with investigators in this case and is “providing information to the government in the hopes of obtaining leniency when he is sentenced.” Mr. Rechnits recently pleaded guilty to fraud conspiracy charges and it’s likely information that he provided to investigators that saw today’s arrests.
Seabrook, the longstanding head of the 9,000-member Correction Officers’ Benevolent Association was arrested in his Bronx home early this morning by agents from the Federal Bureau of Investigation.
Mr. Huberfeld, the founder of Centurion Credit Management, and subsumed by Platinum Partners was arrested around 6 a.m like Mr. Seabrook in his own home.
The charges came from prosecutors in the office of Preet Bharara, the United States attorney for the Southern District of New York and accuse Seabrook of getting a kickback from Huberfield following a $20 million investment from the union’s pension fund in Platinum Partners.
While ValueWalk has learned some interesting things about Platinum Partners and has profiled the fund returns, there are questions as Zeke Faux of Bloomberg News has recently reported on some of the issues.
The assistant FBI director and head of the bureau’s New York Office, Diego Rodriguez, are holding a press conference with Mr. Bharara now.
“Norman Seabrook has spent his life fighting for correction officers. One should not expect him to stop fighting now,” said Seabrook’s lawyer, Paul L. Shechtman.
While there are no less than six investigations ongoing into Mayor Bill de Blasio and his aids, there is not mention of them in this particular criminal complaint though de Blasio referred to Seabrook as a friend” and a “great leader” in 2014.
Rechnitz appears to have been the bagman in the alleged kickback which saw him deliver $60,000 to Seabrook from Huberfeld and that “ultimately Murray Huberfeld agreed to pay Seabrook bribes that were expected to total hundreds of thousands of dollars.”
While Rechnitz was not named in the complaint, it’s likely that he is the identified “cooperating witness #1” in the complaint.
Murray Huberfeld – DOJ further alleges:
Toward the end of 2013, on a trip to the Dominican Republic with, among others, an individual who is now a cooperating witness for the Government (“CW-1”), SEABROOK told CW-1 that he worked hard to invest COBA’s money and was not getting anything out of it, and it was time that “Norman Seabrook got paid.” CW-1 was friendly with and had done business with MURRAY HUBERFELD, a founder and part owner of Platinum Partners (“Platinum”), a Manhattan-based hedge fund that principally ran two funds. CW-1 was aware that Platinum was looking to attract public and institutional investors – as opposed to its more typical investor set of high net-worth individuals – and told HUBERFELD that SEABROOK would likely invest COBA money in Platinum if HUBERFELD were willing to pay SEABROOK money. HUBERFELD agreed to the proposition, and HUBERFELD worked out a formula in which SEABROOK would be paid a kickback of a portion of the profits from COBA’s investment that HUBERFELD estimated could be between $100,000 and $150,000 per year.
SEABROOK then began investing COBA’s money, at first going through the motions of having Platinum make a pitch to COBA’s Annuity Fund board and having advisers conduct diligence. Those advisers included attorneys who expressed concern that public pensions like COBA do not typically invest in higher-risk vehicles like hedge funds. In March 2014, COBA’s Annuity Fund made a $10 million investment in one of Platinum’s funds. In June 2014 – this time without running the investment by the COBA Board or seeking any approval – SEABROOK invested $5 million, or 40 percent, of COBA’s own assets in the same fund. In August 2014, the Annuity Fund invested another $5 million in Platinum. By that point, COBA was the largest investor in that Platinum fund for all of 2014, and amounted to more than half of all incoming investments for the fund. At the same time, the fund was experiencing significant redemptions by other investors.