Correction Union Boss, Hedge Fund Founder Face Fraud ChargesTHE ASSOCIATED PRESS (JAKE PEARSON and TOM HAYS)
New York (AP) -- The longtime head of the nation's largest municipal jail guard union was paid tens of thousands of dollars in cash, delivered in a Ferragamo handbag, in exchange for steering $20 million in union money to a hedge fund, according to a criminal complaint.
Norman Seabrook, the brash and defiant president of the 9,000-member New York City Correction Officers' Benevolent Association, and Murray Huberfeld, the hedge fund's founder, were arrested by FBI agents on conspiracy and fraud charges Wednesday.
Seabrook was released on $250,000 bond after a bail hearing at which his lawyer called the charges weak. Huberfeld was released on $1 million bond.
As a smiling Seabrook left the courthouse, he said: "I feel like a million dollars."
The arrests are the latest development in a series of overlapping public corruption investigations coordinated by U.S. Attorney Preet Bharara, with other targets including high-ranking New York Police Department officials and political fundraising activities of people with ties to New York's mayor.
Seabrook "made decisions about how to invest the nest egg for thousands of hardworking civil servants based not on what was good for them but on what was good for Norman Seabrook," Bharara said.
Prosecutor say the scheme by Huberfeld to hand hundreds of thousands of dollars in kickbacks to Seabrook in exchange for the investments in his fund, Platinum Partners LP, was facilitated by someone who has pleaded guilty and is cooperating with federal investigators.
The court papers don't name the cooperator. But two people with direct knowledge of the case identified him as Jona Rechnitz, a businessman who has contributed to Democratic Mayor Bill de Blasio's campaigns, was friendly with top police officials and has been captured on FBI wiretaps in a related gifts-for-favors probe.
The people weren't authorized to discuss the ongoing case and spoke to The Associated Press on the condition of anonymity. A lawyer for Rechnitz didn't return a request for comment Wednesday.
A lawyer for Huberfeld did not immediately return a message seeking comment, and an email to Platinum was not immediately returned.
Shortly after Rechnitz introduced Seabrook and Huberfeld in December 2013, union lawyers sent a letter to Huberfeld expressing interest in investing $10 million in union annuity funds in a Platinum fund, the complaint says. In subsequent months, Seabrook invested two other $5 million payments, leaving "COBA with just over $3 million cash on hand for the union," it says.
Though Seabrook was promised more for his investments, he ultimately was paid $60,000 by Rechnitz, the complaint says.
The middleman stashed the cash in an $820 bag he bought at "one of Seabrook's favorite stores, Salvatore Ferragamo on Fifth Avenue," before handing it to the union leader at a meeting in Manhattan in December 2014, it says. Investigators searching Seabrook's home recovered the luxury bag and 10 pairs of Ferragamo shoes, prosecutors said.
Huberfeld reimbursed Rechnitz for the kickback by having him create a fake invoice for eight games from his season tickets to the New York Knicks. Platinum then paid the bill by check, it adds.
Seabrook has fiercely defended his union members amid repeated allegations of brutality and misconduct at the Rikers Island jail complex and elsewhere in the 10,000-inmate jail system. In his more than 20 years in power, he has become a political powerbroker, contributing heavily to state and local elections and influencing almost every administrative decision affecting the city's jails.
But according to the complaint, he was desperate to gain personally from his work investing union funds, complaining drunkenly in a hotel room during a trip with Rechnitz that he "worked hard to invest COBA's money and did not get anything personally from it," adding "it was time that 'Norman Seabrook got paid.'"
De Blasio, who sought to distance himself from Seabrook on Wednesday, said if the allegations against Seabrook are true they are "very sad." He also lamented crossing paths with Rechnitz.
"If we had any inkling this is the kind of human being he was," de Blasio said, "I never would've gone near him."
AP reporters Kiley Armstrong and Ezra Kaplan contributed to this report.
This story has been corrected to show the allegations are contained in a criminal complaint, not an indictment.