By Joseph Ax
NEW YORK (Reuters) - The powerful head of New York City's prison guard union and a hedge fund financier were arrested early on Wednesday morning, the latest fallout from a wide-ranging corruption probe that stretches from the police department to City Hall.
Norman Seabrook, the longtime president of the Correction Officers’ Benevolent Association, and businessman Murray Huberfeld were charged with fraud and conspiracy, according to a criminal complaint unsealed on Wednesday.
The charges stem from an investment of $20 million of union money that Seabrook made in 2014 in New York-based Platinum Partners in exchange for bribe payments from Huberfeld, who had worked at the firm.
In April, Reuters reported Seabrook had invested union funds in Platinum, a mid-sized firm with a history of buying into controversial businesses, including two energy companies that are facing criminal charges.
Representatives for Platinum Partners were not immediately available. Lawyers for Seabrook and Huberfeld could not immediately be identified.
A person familiar with the matter has told Reuters that Seabrook was referred to Platinum by Jona Rechnitz, a businessman at the heart of an ongoing corruption probe that is examining Mayor Bill de Blasio's fundraising activities, among other things.
The criminal complaint refers to a "cooperating witness" who has pleaded guilty and is helping the government in the hopes of a reduced sentence. The description of the witness, who is accused of acting as a go-between for Seabrook and Huberfeld in the bribe scheme, matches that of Rechnitz.
Rechnitz's lawyer, Alan Levine, declined to comment on Wednesday.
The corruption investigation has centered on Rechnitz and another businessman, Jeremy Reichberg, and whether they gave police officers gifts and trips in exchange for official favors. Several high-ranking officers have been reassigned or disciplined as a result of the probe.
Rechnitz and Reichberg had ties to de Blasio when he ran successfully for mayor in 2013. Several state and federal agencies are pursuing overlapping investigations into de Blasio’s fundraising, including his efforts on behalf of state Senate Democrats in 2014.
De Blasio has repeatedly said he and his administration acted legally at all times. Reichberg's lawyer was not immediately available for comment on Wednesday.
The cooperating witness, whose description matches that of Rechnitz but whom the criminal complaint refers to only as "CW-1," first met Seabrook through a police officer in 2013. He also knew Huberfeld, who had an office at Platinum, the complaint said.
According to CW-1, Huberfeld was secretly running Platinum, but his role was not publicly acknowledged because of "a prior lawsuit or investigation relating to a fund Huberfeld previously ran," the complaint said. Platinum founder Mark Nordlicht could not be reached for comment on Wednesday.
Huberfeld was ordered to disgorge profits and fined for violating securities laws at his Broad Capital fund. He later provided Platinum with start-up money and ran Nordlicht's credit-focused hedge funds until Platinum took them over in 2011.
In 2013, CW-1, Seabrook, a police officer and others took two trips to the Dominican Republic. There, Seabrook complained that he worked hard to invest the union's money but made none for himself, according to the criminal complaint.
It was time "Norman Seabrook got paid," he told CW-1, according to the complaint.
Authorities said CW-1 helped orchestrate a fraud scheme in which Huberfeld promised to return half of Platinum's 20 percent commission to Seabrook as a kickback.
CW-1 agreed to use his own money to bribe Seabrook and at Huberfeld's suggestion created a fake invoice for New York Knicks tickets he supposedly sold to Platinum in order to get reimbursed, the complaint said.
He then brought $60,000 in cash to Seabrook on Dec. 11, 2014, in a new $820 Salvatore Ferragamo bag he had purchased just for the handoff, according to court documents.
Preet Bharara, the U.S. Attorney in Manhattan, was expected to announce the charges at a press conference later on Wednesday.
(Additional reporting by Jonathan Stempel; Editing by Lisa Von Ahn)