Norman Seabrook, president of Correction Officers’ Benevolent Association (COBA), which provides various retirement benefits for New York City correction officers, has been arrested for demanding and accepting bribes in exchange for investing union money in a New York-based hedge fund, according to the U.S. Attorney’s Office for the Southern District of New York.
According to the complaint, Seabrook’s control of the fund includes administration of its “Annuity Fund,” a retirement benefits program funded by the City of New York that invests more than $70 million for correction officers’ retirements. Manhattan U.S. Attorney Preet Bharara said: “As alleged, Norman Seabrook and Murray Huberfeld engaged in a straightforward and explicit bribery scheme. 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.”
Huberfeld is a founder and part owner of Platinum Partners, a Manhattan-based hedge fund that principally ran two funds. He was also arrested.
According to the complaint, 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, Seabrook told the witness 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.” The witness was friendly with and had done business with Huberfeld and was aware that Platinum was looking to attract public and institutional investors. The witness 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 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.NEXT: The investments did not perform as well as expected
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%, 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.
Toward the end of 2014, Seabrook wanted the first of his kickback payments, and demanded it from the government witness. But, Huberfeld said the fund had not performed as well as expected, and that he could pay Seabrook only $60,000.
The witness paid Seabrook the first $60,000 kickback on December 11, 2014. Before meeting Seabrook that evening, he went to Salvatore Ferragamo on Fifth Avenue in Manhattan and bought an expensive bag for Seabrook, in which he put the money. Huberfeld continued to lobby Seabrook for more money in 2015. However, after a lawsuit filed by a former COBA board member referred to the Platinum investments, and the U.S. Attorney’s Office grand jury investigation resulted in subpoenas to Platinum and COBA in May 2015, no further investments were made.
Seabrook and Huberfeld face up to 40 years in prison.A statement on COBA’s Facebook page from Elias Husamudeen, president of COBA, said, "We are saddened and concerned by these allegations, but would point out that Mr. Seabrook is innocent of these charges until proven otherwise.”