Hedge Fund Manager Pleads Guilty to Wire Fraud Benefiting NYC Corrections Union Boss

Murray Huberfeld had something on his mind other than front row seats at New York Knicks home games. That’s why he’s headed for prison. On May 25, Huberfeld, founder and head of a now-defunct hedge fund, pleaded guilty in Manhattan federal court to wire fraud conspiracy in connection with his payment of a $60,000 bribe through an intermediary to Norman Seabrook, deposed longtime president of New York City’s Correction Officers Benevolent Association (COBA), which represents employees at the sprawling Rikers Island jail complex. In exchange for the bribe, Seabrook allegedly had steered $20 million in COBA pension funds to the hedge fund, known as Platinum Partners. Huberfeld is scheduled for sentencing on September 14. Seabrook is set to go on trial on July 30.

Union Corruption Update covered this story at length back in June 2016. Norman Seabrook, who ran the 9,000-member Correction Officers Benevolent Association for more than two decades, had been arrested days earlier by FBI agents and charged with honest services fraud for receiving $60,000 in cash from Murray Huberfeld, now 57, a Long Island resident and founder-principal of a Manhattan-based hedge fund, Platinum Partners. The day following his arrest, the union’s executive board ousted Seabrook. COBA represented guards at Rikers Island, where on any given day there are around 10,000 inmates – many of them vile, crazed sociopaths – awaiting trial, awaiting transfer or serving a sentence. Stabbings and slashings by inmates of uniformed guards at the complex number in the dozens each year.

Norman Seabrook, now 58, a former Rikers guard himself, became COBA president in 1995. He represented members with ferocious and dictatorial zeal, often thwarting official investigations of alleged guard violence against inmates. He also felt that his total annual compensation package of around $300,000 wasn’t quite enough. As the head of the COBA retirement fund as well as the union itself, he controlled some $70 million in assets which he believed were underperforming. For him, Murray Huberfeld was a ticket to better performance plus some extra money on the side. He had met Huberfeld through Jona Rechnitz, a Brooklyn-based real estate investor, while on vacation in the Dominican Republic. Rechnitz put Seabrook in touch with Murray Huberfeld, who presumably could improve pension earnings. Soon enough, Huberfeld and Seabrook reached a deal. Seabrook would transfer COBA pension funds to Platinum Partners and in return would receive $100,000 to $150,000 a year of money on the side. He proceeded to move $20 million to Huberfeld’s firm in three separate installments during December 2014.

Platinum Partners, unbeknownst to many, was in danger of collapse. And in closing the deal, Seabrook bypassed standard due diligence safeguards, effectively putting the well-being of retired and active union members at extreme risk. Predictably, Huberfeld was unable to deliver the promised lucrative side money. But as an act of good faith, Huberfeld had his fixer, Jona Rechnitz, personally provide Seabrook with $60,000 in cash stuffed inside a Ferragamo handbag. To disguise the nature of the transaction, Huberfeld and Rechnitz arranged for Platinum Partners to create a fake invoice for $60,000 indicating the purchase of eight pairs of courtside tickets to New York Knicks basketball games. In fact, no tickets changed hands. Huberfeld’s check to Rechnitz was a reimbursement for Rechnitz’ $60,000 cash payment to Seabrook.

Platinum Partners, however, would remain short on funds. A panicked Murray Huberfeld decided that another infusion of COBA pension money was the best way, if not the only way, to stave off a meltdown. During the first few months of 2015, Huberfeld, through an unnamed second co-conspirator, continued to ask Norman Seabrook for contributions. This time, the effort resulted in disaster. COBA’s increasingly suspicious corresponding secretary, William Valentin, filed a pair of federal civil lawsuits demanding a full accounting of pension funds flowing into Platinum Partners. This action led to a criminal investigation by then-U.S. Attorney Preet Bharara (in photo), who convened a grand jury. The probe yielded indictments in June 2016 against Seabrook and Huberfeld for honest services fraud, with Rechnitz listed as a cooperating witness.

The defendants, pleading not guilty, decided to take their chances in court. The first trial ended last November in a hung jury. But the prosecution remained adamant and filed superseding indictments. And several weeks ago, on May 25, Huberfeld, seeing no way out, pleaded guilty to wire fraud conspiracy, though not to bribery. “I knew the Knicks ticket invoice was fake,” he admitted to U.S. District Judge Alvin Hellerstein. While lawyers for both sides accept the federal guidelines calling for a 6-to-12-month prison sentence, Judge Hellerstein warned Huberfeld that he might impose something more severe given Huberfeld’s likely participation in a bribery scheme to acquire union pension funds and his unwillingness to turn government witness. Norman Seabrook is set to go on trial on July 30. He might not have to contend with Huberfeld, but he almost certainly will have to deal with testimony from Jona Rechnitz, a government witness not only in this case but in a number of others. Huberfeld’s attorney, Henry Mazurek, issued a statement following his client’s plea indicating he wanted to “put this chapter behind him” by pleading guilty to defrauding his now-defunct company. “He (Huberfeld) regrets ever letting Jona Rechnitz into his life,” said Mazurek.

Prosecutors have their own interpretation of events. “Murray Huberfeld caused his former hedge fund to pay tens of thousands of dollars to a criminal partner in order to enable another crime – paying off the head of the corrections officers’ union for the investment of millions of its members funds,” said Geoffrey Berman, U.S. Attorney for the Southern District of New York. “We will continue to work with our law enforcement partners to fight fraud and corruption.”