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 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 likelihood of becoming crime statistics.  Assaults at Rikers are a daily reality.  During Fiscal Year 2014, there were 88 stabbing and slash attacks, and 752 assaults, by inmates against uniformed staff members at the facility.  The respective numbers four years earlier were 34 and 500. 

This elevated 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 captured a sizable number of such acts, but in more than 30 percent of all instances, video evidence “disappeared.”                  

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.  In short order he became one of the most powerful labor leaders in the city, frequently clashing with elected officials and the New York City Department of Corrections (DOC).  Seabrook frequently has chastised the department for referring allegations of guard assaults to the Bronx District Attorney for prosecution.  Time again, he 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 went so far as to order the grounding of 33 buses set to transport Rikers Island inmates to court because one of the detainees, Dapree Peterson, was set to testify against two corrections officers who had severely beaten him and then covered up the incident in their report.  Seabrook’s action caused nearly 750 inmates to miss their court date.  He claimed the buses were too dangerous to drive.  Yet only days earlier, they were 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 while Dapree Peterson eventually testified, the officers were exonerated.       

Norman Seabrook, it seemed, was invincible.  The following summer, he got City Corrections Department chief investigator Florence Finkle, a dogged and determined gumshoe, fired.  He replaced her with former Deputy Police Chief Michael Blake, an old childhood friend.  Longtime readers of Union Corruption Update may remember 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 policy claim on behalf of his ailing estranged wife, Pearline Blake, who would die not long 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 aggressive ladies’ man, was now gone.      

Seabrook also was adept at squeezing politicians.  During 1999-2000 he persuaded Governor George Pataki, whose re-election he supported, to sign legislation creating a supplemental pension plan bonus of up to $12,000 per COBA employee despite strong opposition from Mayor Rudy Giuliani and several public employee unions.  The union regularly 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 nominated 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 can stand up to City Hall and the DOC, while delivering quality contracts.  But even the most powerful union leaders aren’t immune to the laws of gravity.  That’s why Norman Seabrook has lost his job and stands to lose his freedom as well.  Put simply, Seabrook, whose recent annual combined Corrections Department and union compensation was around $300,000, got greedy.  And greed is what led to his arrest at his Bronx home during the early hours of June 8.   

It was pay-for-play corruption all too common in the world of union benefit plans.  The U.S. Justice Department for several years had conducted several, often overlapping public corruption probes of local police.  By the latter half of 2015, Preet Bharara and his prosecutors were focusing much of their attention on Murray Huberfeld, 55, founder, CEO and part-owner of a modest Manhattan-based hedge fund, Platinum Partners.  Things were not going well at Platinum, sponsor of two undercapitalized funds.  Investors increasingly were redeeming their accounts.  Huberfeld needed a quick infusion of cash.  In Norman Seabrook, he saw potential.  Seabrook, as head of the union retirement fund as well as his union, by then had more than $70 million in assets.       

The shindig had its roots in the late weeks of 2013.  Seabrook took a vacation in the Dominican Republic, accompanied by an individual, 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.  And he was frustrated in a personal way, allegedly saying, “It’s time Norman Seabrook got paid.”  The cooperating witness had dealings in the past with Huberfeld.  And now he had an idea.  He told Seabrook that Platinum Partners was looking for public and institutional investors rather than high net-worth individuals.  If Seabrook invested COBA retirement money with Platinum, Huberfeld would provide 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 that would amount to roughly $100,000 to $150,000 per year.  The two agreed to do business. 

What remained now was to get Platinum Partners to deliver a sales pitch to the COBA Annuity Board and persuade the board’s financial advisers to conduct necessary due diligence.  The advisers included attorneys who were concerned this was a high-risk venture of the sort that COBA typically avoids.  But the arrangement proceeded anyway.  In March 2014, the COBA annuity fund, which is to say Seabrook, invested $10 million in Platinum Partners.  That June, the fund put in another $5 million.  Two months later, in August, the union fund contributed yet another $5 million.  In the last two transactions, Seabrook 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.
Source: http://nlpc.org/stories/2016/06/15/corrections-union-boss-hedge-fund-manager-busted-fraud