Fraud charges for jail officers’ Union Chief with a taste for luxury.
As federal agents tell it, the kickback scheme that led to the arrest of Norman Seabrook, the powerful leader of the New York City Correction Officers’ Union, was hatched one night in late 2013 in a hotel room in the Dominican Republic. According to the agents, the union president had been drinking and was delivering an earful to a well-connected New York real estate developer.
For too long, Seabrook complained, he had been working hard, investing the union’s money, and receiving nothing in return. It was time, he said, that “Norman Seabrook got paid.” Within months, Seabrook made an investment deal that made even the union lawyers uneasy, depositing $20 million of union funds into a high-risk hedge fund. In exchange, he is accused of receiving $60,000, delivered in a Salvatore Ferragamo bag — one of his favorite luxury brands.
Over the course of two decades as union president, Seabrook progressed from being a jail guard, patrolling the cellblocks of Rikers Island, to an influential power broker, forming alliances right across the political spectrum. These allies included Governor Andrew M. Cuomo, a Democrat, former Mayor Michael R. Bloomberg, an Independent, and former Governor George E. Pataki, a Republican.
Seabrook is a man who enjoys the finer things in life, is driven around town in luxury SUVs, dines at upscale restaurants, smokes fine cigars and wears expensive tailored suits. Indeed, after Seabrook was arrested, agents from the Federal Bureau of Investigation recovered a Ferragamo bag that matched the description of the one that had been stuffed with cash, along with 10 pairs of Ferragamo shoes. According to investigators, at least some of Seabrook’s luxuries were paid for by people seeking favors from him and the union.
Plane trips to Las Vegas, California, Israel and at least two to the Dominican Republic were underwritten by Jona Rechnitz, the developer who had chatted to Seabrook at the hotel in 2013. After their meeting, Rechnitz had introduced Seabrook to a hedge fund financier called Murray Huberfeld and had helped to arrange the kickback. Rechnitz pleaded guilty and is cooperating in the Seabrook case. In addition to his involvement in this case, he is also a central target in an investigation into the campaign fund-raising of Democrat Mayor Bill de Blasio. Rechnitz is not named in the complaint but is instead referred to as ‘Cooperating Witness 1’ or ‘CW-1’.
Both Seabrook and Huberfeld, an associate at the hedge fund, Platinum Partners, have been charged with one count of honest services fraud and one count of conspiracy to commit honest services wire fraud. Seabrook was released on a $250,000 bond and Huberfeld on a $1 million bond. Both have been ordered to remain in the New York City region. According to prosecutors, after the hotel meeting with Seabrook, Rechnitz went to Platinum and promised to arrange a deal whereby the union would become a major investor. The catch, he said, was that Seabrook would require compensation.
Huberfeld agreed to the arrangement and was willing to pay Seabrook 10% of all profits that the hedge fund made on the union’s investment. Seabrook, whose salary is $300,000 a year with his union stipend, only had one major concern, according to the complaint: he wanted to know how big his cut would be. Huberfeld told Seabrook that his return could be as much as $150,000 a year. To earn his return, Seabrook would direct money that was intended to cover correction officers’ pensions into a high-risk fund.
Up to this point, the union had maintained a traditional investment portfolio of conventional stocks and bond funds, government obligations and a real estate trust fund. The union’s lawyers reviewed the proposal and pointed out that the union had never invested in a hedge fund before. They also highlighted that they were not aware of any other New York City retirement fund that had been involved in such a risky venture. Even so, they did not stand in the way of the deal. The lawyers wrote to Platinum in February 2014, stating, “the annuity fund, however, is not averse to being a trendsetter”.
There were further red flags, specific to Platinum. Huberfeld had been convicted of fraud in 1993 for arranging for someone else to take a brokerage licensing exam on his behalf. He had been fined $5,000 and sentenced to two years of probation. In a separate case, in 1998, he and a partner had paid $4.6 million to settle a civil action brought by the Securities and Exchange Commission that alleged bank fraud. The US Attorney for the Southern District of New York Preet Bharara said of Seabrook that he made his investment decisions “based not on what was good for his union members but based on what was good for Norman Seabrook.” “For a Ferragamo bag filled with cash, Seabrook allegedly sold himself and his duty to safeguard the retirement funds of his fellow correction officers,” he said.
In the end, it was Seabrook who made the final decision on where union money went. Over the years, he had consolidated absolute control over the operations of the union, often bypassing his executive board on even the most significant financial decisions. According to the authorities, he ultimately invested $15 million of the union’s annuity fund, which is financed almost completely through annual contributions from the city, as well as another $5 million from the $12 million in assets held by the union at the time.
By the end of 2014, according to the complaint, Seabrook began demanding a payout for his services. The hedge fund, however, was performing worse than expected, and Huberfeld could not immediately get his hands on the money. Instead, Rechnitz fronted his own money to pay off Seabrook, with a promise from Platinum that he would be reimbursed. For accounting purposes, Rechnitz disguised the kickback as a $60,000 payment for a block of New York Knicks tickets. In December 2014, Rechnitz bought the bag from a Ferragamo store in Manhattan for $820. The handoff was made a few blocks away in Seabrook’s Chevrolet Suburban, which is registered to the union.
When Rechnitz told Seabrook how much money was in the bag, Seabrook is said to have been angry that it was not as much as he was initially promised. As the months went on, Platinum representatives kept pressing Seabrook to invest more union funds. According to investigators, the hedge fund was experiencing cash flow problems and needed $44 million to cover investors who wanted to withdraw their funds.
In January 2015, Huberfeld spoke on a phone that had been wiretapped by federal agents. Agents heard Huberfeld instruct an associate to press Seabrook for more money during a lunch meeting. “I’m under some pressure,” he was heard to say. In May 2015, the Marketing Director of Platinum sent an email to other executives noting that the meeting with Seabrook went very well, and that he “said he will send us more money shortly.” Before Seabrook could transfer any more funds, federal agents served subpoenas on the union and on Platinum.
The complaint does not make clear what happened to the $20 million the union invested. According to a lawsuit filed by a former union official over alleged financial improprieties, the investment was boasted to have returned $475,000 over a three-month period. A union financial statement listed a return of just $47,529 for the same time period.
Seabrook was suspended as a correction officer and relieved of his shield and gun. He sat in a packed courtroom looking relaxed. He was dressed, more modestly than usual, in jeans, a collared shirt and sandals. When asked by a reporter at the courthouse how he felt, Seabrook replied, “I feel like a million dollars.”