The leaders of a New York hedge fund and state correction officers’ union were arrested Wednesday on bribery and fraud charges.
Union President Norman Seabrook initiated an “explicit bribery scheme” with a leader of Platinum Partners, the Manhattan US attorney’s office alleged.
Seabrook controlled an $81 million member retirement fund, according to the complaint. Despite board opposition, Seabrook allegedly signed over $20 million to Platinum in exchange for a 2% profit share—roughly $100,00 to $150,000 per year.
He is accused of receiving one payment in a luxury bag, along with extensive free travel.
“For a Ferragamo bag stuffed with $60,000 in cash, Seabrook allegedly sold himself and his duty to safeguard the retirement funds of his fellow correction officers,” said Manhattan US Attorney Preet Bharara at a press conference Wednesday.
As longtime union president, Seabrook “allegedly made decisions about how to invest the nest egg for thousands of hard-working public servants, based not on what was good for them, but on what was good for Norman Seabrook.”
Platinum reportedly specializes in assets others won’t touch: Payday loans, insurance products targeting the terminally ill, oil companies facing criminal charges, and—twice—Ponzi schemes.
The strategy has delivered substantial alpha for years, according to figures obtained by Reuters. One of Platinum’s two funds returned an average 17% annually since 2003, and the flagship 13.4% since 2005.
Outperformance has failed to trump headline risk for institutional allocators, with high-net-worth investors said to make up the majority of Platinum’s $1.3 billion under management. Firm co-founder Murray Huberfeld offered Seabrook additional payouts if he could lead fellow institutions into the fund, the complaint stated.
Federal agents arrested Huberfeld at his home Wednesday. Both men face up to 40 years in prison on fraud charges, the Department of Justice said.
Platinum Partners did not respond when asked for comment and information on its future plans.