Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that NORMAN SEABROOK, the former president of the Correction Officers’ Benevolent Association (“COBA”) was sentenced to 58 months in prison for his role in a bribery scheme in which he accepted a $60,000 bribe payment, and the promise of future bribe payments, in exchange for SEABROOK’s investment of millions of dollars of COBA money in a hedge fund. SEABROOK was found guilty of honest services fraud offenses on August 18, 2018, after a 10-day trial in Manhattan federal court. Today’s sentence was imposed by U.S. District Judge Alvin K. Hellerstein.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Tens of thousands of hardworking correction officers once looked to Norman Seabrook as their leader and champion. Seabrook now stands convicted of betraying them for a bag full of cash and the promise of more. His conduct resulted not simply in the membership’s loss of faith in its leader, but the loss of millions of dollars in retirement benefits due to union members. My Office has worked tirelessly with our law enforcement partners to hold Seabrook and those who conspired with him to account. Today’s sentence sends an important message to any other person in a position of power that no one is above the law, and that violating a sacred trust in return for a cash payoff will land you on the wrong side of a prison door.”
According to the allegations in the Indictment, Superseding Indictment, and Complaint, other filed documents, and the evidence at trial:
COBA is New York City’s largest correction officers union and the largest municipal jail union in the United States. COBA represents over 20,000 active and retired correction officers in New York City, including at Rikers Island. NORMAN SEABROOK, the defendant, was the president of COBA for over 20 years. SEABROOK wielded enormous power over the affairs of COBA, and was rarely questioned by his executive board, as he had the ability to affect their assignments, pay, and hours. SEABROOK’s control extended to the union’s finances, including the 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.
Toward the end of 2013, on a trip to the Dominican Republic with, among others, Jona Rechnitz, a real estate businessman who is now a cooperating witness for the Government, SEABROOK told Rechnitz 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.” Rechnitz 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. Rechnitz 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 on the side. 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 would 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 wrote letters expressing concern that public pensions like COBA do not typically invest in higher-risk vehicles like hedge funds. SEABROOK concealed those letters from the other members of COBA’s Annuity Fund Board in order to secure their approval for the investment. 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, money that had been set aside for use in the event of a union emergency. 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, Platinum was experiencing significant redemptions by other investors.
Toward the end of 2014, SEABROOK wanted the first of his kickback payments, and demanded it from Rechnitz. Huberfeld told Rechnitz that the fund had not performed as well as expected, and that he could pay SEABROOK only $60,000. Rechnitz agreed to lay out the cash, and Huberfeld agreed to reimburse Rechnitz on Platinum’s behalf. Huberfeld suggested that to paper over the reimbursement, Rechnitz invoice Platinum for a number of Rechnitz’s courtside tickets to New York Knicks games, in the amount of $60,000, and Platinum would then cut a check to Rechnitz.
Rechnitz paid SEABROOK the first $60,000 kickback on December 11, 2014. Before meeting SEABROOK that evening, Rechnitz went to one of SEABROOK’s favorite stores, Salvatore Ferragamo on Fifth Avenue in Manhattan, and bought an expensive men’s handbag for SEABROOK. Rechnitz put the money in the bag, and met SEABROOK a few blocks away in SEABROOK’s COBA sport utility vehicle with tinted windows, where he handed SEABROOK the bag. Rechnitz and SEABROOK had dinner with two other persons nearby, then attended a Torah dedication ceremony nearby, after which SEABROOK left Manhattan. These events have been corroborated by, among other things, phone records, emails, license plate reader records, surveillance footage, and a receipt from Salvatore Ferragamo. On the same day, Rechnitz’s assistant prepared a $60,000 invoice to Platinum for Knicks tickets, which Rechnitz forwarded by email to Huberfeld. Three days later, Platinum paid Rechnitz by check.
Huberfeld, through another associate, Jeremy Reichberg, 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. As part of the lawsuit, SEABROOK filed a false affidavit in which he claimed that COBA’s board members had authorized his unilateral and unauthorized June 2014 transfer of $5 million of union funds to Platinum. He also claimed that he himself had paid for his March 2014 trip to Israel when it had, in fact, been paid for by Rechnitz. This lie under oath served to hide SEABROOK’s connection to the Platinum Partners investment and the bribe arrangement behind it.
On May 25, 2018, Huberfeld pled guilty to one count of conspiracy to commit wire fraud in connection with the use of the sham invoice as part of his role in the conspiracy. He is due to be sentenced by Judge Hellerstein on February 12, 2019, and faces a maximum sentence of five years in prison.
On January 2, 2019, Reichberg was found guilty of honest services fraud, conspiracy, and obstruction of justice in connection with a separate scheme in which he and Rechnitz provided gifts and benefits to a number of high-level officers of the New York City Police Department (“NYPD”) in exchange for official police action for themselves and their associates. He is due to be sentenced by U.S. District Judge Gregory H. Woods on April 4, 2019.
In addition to the prison term, SEABROOK, 58, of the Bronx, New York, was sentenced to three years of supervised release, and ordered to pay restitution in the amount of $19 million.
Mr. Berman praised the investigative work of the Federal Bureau of Investigation and the NYPD Internal Affairs Bureau.
