NYC Corrections Union Boss, Hedge Fund Manager Busted for Fraud

It wasn’t as if Norman Seabrook needed the money. But in accepting it, he jeopardized the retirement of union members. Last Wednesday, June 8, Seabrook, president of New York City’s Correction Officers Benevolent Association (COBA), was arrested by FBI agents and charged with honest services fraud for receiving $60,000 in cash from an executive of a troubled Manhattan hedge fund, Platinum Partners, in exchange for steering $20 million in union pension money to the fund. Platinum Partners CEO Murray Huberfeld was similarly charged. Seabrook is out on $250,000 bond, but given his ouster by the COBA board, he doesn’t have much to do.  U.S. Attorney Preet Bharara (in photo) termed this “a straightforward and explicit bribery scheme.” The actions are part of a wider probe into NYPD corruption.

The Correction Officers Benevolent Association, with more than 9,000 members, is the largest union of its type in the country. And most of its members have an unusually stressful job: keeping order at the sprawling Rikers Island jail complex in New York City. Located on the East River between Queens and the Bronx, the Rikers facility spans more than 400 acres. On any given day, its 10 jails house around 10,000 inmates either awaiting trial, awaiting transfer to another facility or serving a sentence of one year or less. Many inmates are violent and proud of it. Rikers Island guards know from experience that to project weakness to such people dramatically raises their own likelihood of becoming crime statistics. Violent crime at Rikers is a daily reality. During Fiscal Year 2014, there were 88 stabbings and slashings, and 752 assaults, by inmates against uniformed staff members there. And it’s gotten worse. The respective numbers four years earlier were 34 and 500.

This atmosphere of violence, and fear of it, explains why Rikers Island guards often behave in ways that blur the line between discipline and thuggery. Investigative reports in recent years by the New York Times, the Village Voice, Mother Jones and CBS-TV’s “60 Minutes” each provided extensive evidence of brutality by corrections officers against inmates. In September 2014, the U.S. Attorney’s Office for the Southern District of New York, headed by the above-mentioned Preet Bharara, issued a report condemning “a pattern and practice of conduct at Rikers that violates the constitutional rights of adolescent inmates” and “rampant use of unnecessary force by DOC (Department of Corrections) staff.” In some cases, guards smuggled weapons and drugs to prisoners.  Surveillance video caught a sizable number of these acts, yet in more than 30 percent of all instances, the evidence managed to “disappear.”

Norman Seabrook knows this part of the world.  And for more than two decades he ran it with autocratic zeal. A native of the Bronx, Seabrook, now 56, first was elected president of the Correction Officers Benevolent Association in June 1995 after serving as a Rikers Island guard for a decade. Within several years he became one of the most powerful labor leaders in the city, frequently clashing with elected officials and the City Department of Corrections. Seabrook routinely has chastised the department for referring allegations of guard assaults to the Bronx District Attorney for prosecution. Time and again, he has shielded rank and file guards from the consequences. On more than one occasion, he made an impromptu appearance at Rikers to disrupt DOC investigations of inmate mistreatment. In November 2013, he grounded 33 buses set to transport Rikers Island inmates to court hearings because one of the detainees, Dapree Peterson, was set to testify against two corrections officers who allegedly had severely beaten him and then covered up the incident. Seabrook’s order caused nearly 750 inmates to miss their court dates. He claimed the buses were too dangerous to drive, yet only days earlier they seemed to be in good working order. Mayor Michael Bloomberg termed Seabrook’s action “outrageous.” The City of New York filed a complaint. Edna Wells Handy, Citywide Administrative Services Commissioner and chief investigator, wrote in her report: “At Mr. Seabrook’s urging, all the listed officers refused to attend.” She ruled that 63 officers had violated state labor laws and ordered them docked two days of pay. The move proved ineffectual. Seabrook used union funds to reimburse the officers. And though Dapree Peterson eventually did testify in his case, the two accused officers were exonerated.

Norman Seabrook, it seemed, was invincible. The following summer, he got the City Corrections Department to fire its chief investigator, Florence Finkle, a dogged and determined gumshoe, and to replace her with former Deputy Police Chief Michael Blake, an old childhood friend of Seabrook. Longtime readers of Union Corruption Update may remember the name Michael Blake. On March 31, 2010, Blake, then a COBA board member, along with another member, Chandra LaSonde, had been dismissed by Seabrook after being charged in Manhattan federal court with falsifying documents allowing Blake to collect a $10,000 life insurance claim on behalf of his ailing estranged wife, Pearline Blake, who would die soon after. He was convicted of mail fraud that June and sentenced to three years of probation. Ms. LaSonde was acquitted. Whatever bad blood existed between Norman Seabrook and Michael Blake, an unusually aggressive ladies’ man, was now gone.

Seabrook also was adept at putting the squeeze on politicians. During 1999-2000 he persuaded New York Republican Governor George Pataki, whose 1998 re-election he supported, to sign legislation creating a supplemental pension bonus of up to $12,000 per COBA employee despite strong opposition from Mayor Rudy Giuliani and several public employee unions. The union also got its checkbook out when election season rolled around. According to tax returns, COBA donated about $500,000 to various political campaigns during the 2012 election cycle. Financial and vocal support over the many years managed to buy Seabrook a lot of good will and influence beyond his union. Back in December 2002, President George W. Bush tapped him for membership on the Presidential Commission on the U.S. Postal Service. And in 2006, Governor Pataki appointed Seabrook to serve on the board of the Metropolitan Transportation Authority.

COBA rank and file, overwhelmingly black, have been fiercely supportive of Seabrook, also black, repeatedly re-electing him by a wide margin. To union members, he is “one of them,” a man who knows how to stand up to City Hall and the DOC, delivering quality contracts. But even the most powerful union leaders aren’t immune to the laws of gravity. That’s why Norman Seabrook now has lost his job and stands to lose his freedom as well. Put simply, Seabrook, whose recent annual combined Corrections Department and union compensation came to around $300,000, got greedy. And that greed is what led to his arrest at his Bronx home during the early hours of June 8.

According to federal prosecutors, this was a pay-for-play scheme all too commonly found in union benefit plan management. The Justice Department for several years had conducted several, often overlapping public corruption probes of local police. By the latter half of 2015, U.S. Attorney Bharara and his staff were focusing much of their attention on Murray Huberfeld, now 55, co-founder and CEO of a modest-sized Manhattan hedge fund called Platinum Partners. Things were not going well at Platinum, which sponsors two funds. Investors were redeeming funds at a rapid rate. Huberfeld, no stranger to legal problems, needed a quick infusion of cash. In Norman Seabrook, he saw real potential. Seabrook, head of the union retirement fund as well as his union, had more than $70 million in assets under management.

The shindig had its roots in the late weeks of 2013. Seabrook was on vacation in the Dominican Republic, accompanied by a person named by the Justice Department as a “cooperating witness” (“CW-1”), and NYPD Chief of Department Philip Banks, who since has resigned. At one point, Seabrook told CW-1 that his union’s pension investments were underperforming. The experience apparently affected him personally; Seabrook allegedly said, “It’s time Norman Seabrook got paid.” The cooperating witness had some dealings in the past with Huberfeld. And now he had an idea. He told Seabrook that Platinum Partners was looking for institutional rather than high net-worth individuals as investors. In return for Seabrook investing COBA retirement money with Platinum, Huberfeld promised generous kickbacks. CW-1 later ran the idea by Huberfeld, who agreed to the arrangement. Huberfeld worked out a formula through which Seabrook would receive a portion of the profits amounting to $100,000 to $150,000 per year. The two now were business partners.

What remained was getting Platinum Partners to deliver a sales pitch to the COBA Annuity Board and persuade the board’s financial advisers to conduct due diligence. Advisers included attorneys concerned that this was a high-risk venture of the sort that COBA and other public-sector unions typically avoid. The arrangement would proceed anyway. In March 2014, the COBA annuity fund, which is to say Norman Seabrook, invested $10 million in Platinum Partners. That June, the fund put in another $5 million. Two months later, in August, the union fund provided yet another $5 million. In the last two transactions, Seabrook allegedly did not ask the annuity board for approval. The union pension plan had become Platinum’s lifeline, accounting for over half of all incoming assets in 2014.

Near the end of that year, Norman Seabrook was getting restless. He wanted the first of his kickbacks from the unnamed cooperating witness, CW-1. Like the man said, it was time to get paid. Huberfeld told CW-1 that the fund wasn’t doing as well as expected, and that for now, he could pay Seabrook only $60,000. CW-1 agreed to lay out the money, with Huberfeld agreeing to reimburse him out of Platinum Partners funds. CW-1 paid Seabrook the first $60,000 on December 11, 2014, putting the money inside an $820 luxury bag he’d bought at the Salvatore Ferragamo store on Fifth Avenue. The transfer was made a few blocks away, after which the pair and two other persons went out to dinner. To make the payoff seem legit, CW-1, at Huberfeld’s prior suggestion, sent a $60,000 invoice to Platinum to cover the cost of CW-1’s tickets for New York Knicks basketball games. A few days later Platinum sent a reimbursement check to CW-1.

During the first few months of 2015, Huberfeld, through a second co-conspirator not identified in the criminal complaint, continued to ask Seabrook for more contributions. This time, the effort hit a wall. Then-COBA corresponding secretary, William Valentin, who has called Seabrook a “tyrant,” filed a pair of federal lawsuits demanding a full accounting of the money flowing into Platinum Partners. The U.S. Attorney’s Office convened a grand jury that resulted in subpoenas for Platinum Partners and COBA in May 2015. Then, a little over a year later, Seabrook and Huberfeld each were charged with one count of honest services wire fraud and one count of conspiracy to commit honest services wire fraud. They will have a hard time convincing a jury of their innocence, especially given that CW-1, the mystery mule, is no longer a mystery. He is Jona Rechnitz, a Brooklyn real estate investor with a taste for local politics. Rechnitz had been a fundraiser for New York City Mayor Bill de Blasio’s successful 2013 election campaign. After the election, Rechnitz raised funds for the new mayor’s (now-defunct) Campaign for One New York. He provided funds of his own for these ventures, respectively, $9,900 and $50,000. He also made a $102,300 donation in October 2014 to the New York Democratic Senate Campaign Committee. Rechnitz already has pleaded guilty. Mayor de Blasio regrets his association. “If I had any inkling that this was the kind of human being he (Rechnitz) was, never would I have gone near him.”

The U.S. Attorney’s work may not be done. The case against Norman Seabrook and his Platinum Partners friends grew out of a two-year joint investigation by the FBI and the New York Police Department’s Internal Affairs Bureau into suspicions that ranking NYPD officers had illegal dealings with de Blasio campaign donors. The probe has implications not only for the future of the de Blasio administration, but also for national security. Former NYPD detective and police chief aide Nick Casale explains: “In a post-9/11 world, you have to see internal corruption in any police organization as the soft underbelly vulnerable to a terrorism conspiracy.  Anything that erodes internal security or public integrity is a way in for the bad guys.”

As for Norman Seabrook, his union career appears over. Not only was he removed from his COBA post one day after his arrest, but he also faces a prison sentence of up to 40 years on the two charges against him. He believes he’ll pull through. “There are all kinds of allegations,” he said. “I’ve been fighting the city, fighting government, fighting for the rights of corrections officers, and I’m gonna keep doing it. God is good. I’ll be fine.” His lawyer, Paul Schectman, added that the charges against his client are “not strong” and amount to a “one-witness case.” Seabrook’s successor, former COBA Vice President Elias Husamudeen, will try to carry on.

Whatever the outcome of Seabrook’s case, Rikers Island security officers have more confidence in their retirement plan to deliver promised benefits, even though the current status of the $20 million in steered investments is less than clear. At the June 8 announcement of the arrests, U.S. Attorney Preet Bharara stated: “For a Ferragamo bag stuffed with $60,000 in cash, Seabrook allegedly sold himself and his duty to safeguard the retirement funds of his fellow correction officers. Norman Seabrook, as COBA’s president for over two decades, allegedly made decisions about how to invest the nest egg for thousands of hard-working public servants, based not on what was good for them, but on what was good for Norman Seabrook.” That sounds like an accurate summation.