ɃA££$¥ ฿RIɃ€$: The Norman Seabrook Edition
By the C|C Whistleblower Lawyer Team
In late 2013, after a few drinks and while relaxing in a hotel room in the Dominican Republic, Norman Seabrook declared that it was about time “Norman Seabrook got paid.” According to a complaint filed by the U.S. Attorney’s Office for the Southern District of New York, Mr. Seabrook felt he had done his time for over two decades, managing the investments of New York City’s largest correction officers union, and was tired of not personally benefitting from his work. (Nevermind the $300,000 a year salary and union stipend.)
What kind of man makes such a statement? The kind who gets a $60,000 cash bribe inside an $800 Ferragamo bag and then complains that it wasn’t as much as he was expecting. Which, according to the federal complaint, is exactly what Mr. Seabrook did.
Of course, after allegedly handing over $20 million in pension funds, a payoff of $60,000 and a nice bag may not seem like such a good deal.
In an extensive complaint, the U.S. Attorney’s Office alleges that Mr. Seabrook spent part of his Dominican Republic trip bemoaning his ungreased palm to his friend Jona Rechnitz, a New York businessman with deep political connections (which are now causing Mayor Bill de Blasio a few migraines). Rechnitz then put Seabrook in contact with hedge fund financier and founder of Platinum Partners, Murray Huberfeld. At the time, Platinum catered almost exclusively to high net worth individuals but was interested in attracting municipal institutional investors — like pension funds for government employees.
Seabrook, Rechnitz, and Huberfeld concocted a scheme. Seabrook was the President of New York City’s largest correction officers union, the Correction Officers’ Benevolent Association (“COBA”). COBA’s “annuity fund” — an employee retirement benefits fund, funded primarily by the City of New York — had about $81 million in assets, then invested primarily in common stocks, corporate bonds and notes, U.S. government obligations, mutual funds, and a real estate trust fund. Seabrook wielded significant power over COBA’s finances and, despite the existence of a COBA Executive Board, often made significant decisions unilaterally. In exchange for directing pension money into Platinum’s funds, Seabrook would get a share of Platinum’s trading profits.
Within about 6 months, COBA had invested $20 million with Platinum Partners. And Seabrook’s palms started to get itchy. In December 2014, Huberfeld and Rechnitz arranged for Rechnitz to pay Seabrook with $60,000 of his own money and seek reimbursement from Platinum by invoicing the firm for $60,000 worth of Knicks tickets. (FBI Special Agent Blaire Toleman’s affidavit notes that Rechnitz invoiced Platinum for eight tickets at $7,500 each but the Knick’s record at the time was 4 – 20. Let this be a lesson to those committing accounting fraud — value your kickbacks appropriately!) Rechnitz picked out a bag from Ferragamo, Seabrook’s “favorite luxury goods store,” stuffed it with cash, and delivered it to Seabrook.
On Wednesday June 7th, Seabrook and Huberfeld were arrested. Rechnitz has already pled guilty to related charges and is cooperating with authorities in exchange for leniency. Seabrook and Huberfeld, thanks to $250,000 and $1 million bond agreements, respectively, are free men, for now. But S.D.N.Y.’s Chief Prosecutor, Preet Bhahara, is unlikely to be happy with that state of affairs for much longer. Announcing the charges on Wednesday, Mr. Bhahara declared the arrangement a “straightforward and explicit bribery scheme” and noted his disappointment with a defendant who “sold himself and his duty to safeguard the retirement funds of his fellow correction officers.”
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