NEW YORK CITY — The hedge fund manager arrested for allegedly bribing union boss Norman Seabrook once tried to bilk his own sister in an investment scheme targeting dying people in hospices, federal officials said.
Murray Huberfeld, who has a history of shady financial dealings, was arrested Wednesday morning and accused of bribing Correction Officers' Benevolent Association President Norman Seabrook in exchange for investing $20 million of the union's pension fund in his hedge fund, according to U.S. Attorney Preet Bharara.
The bribery scheme, which dated back to 2013, was meant to use union dollars to offset other client withdrawals from Huberfeld's Manhattan-based fund, Platinum Partners, according to an affidavit from FBI agent Blaire Toleman.
Platinum has made a profit every year since Mark Nordlicht founded it in 2003 with initial investments from "penny-stock dealmakers" Huberfeld and David Bodner, according to Bloomberg.
"Platinum’s specialty is investing in companies that others avoid, such as payday lenders or high-flying Singaporean penny stocks," Bloomberg reported.
Platinum officials did not immediately reply to a request for comment.
Huberfeld's shady history began in 1992 when he and Bodner pleaded guilty to misdemeanors for paying other people to take their brokerage-licensing tests, Bloomberg reported.
The pair then had to pay $4.6 million to the Securities Exchange Commission in 1998 for selling restricted stock, according to an SEC news digest.
By 2007, Huberfeld was working for Platinum as the hedge fund's chief investment officer, according to SEC judge Brenda Murray.
Then, that fall, a Morgan Stanley investor named Michael Horowitz approached Huberfeld with a scheme to make money off the terminally ill involving a financial tool called a variable annuity, according to the SEC.
People buy variable annuities from insurance companies that then invest the money and make occasional payments back to the purchaser, according to the SEC's website. To make this tool more attractive, some insurance companies offer a "death benefit," which gives a bonus to the annuity's owner if they die before getting the regular payments.
Horowitz saw a gray area that allowed him to buy these annuities in someone else's name, federal officials said.
He told Huberfeld that he could rake in these "death benefits" if they start buying annuities for people in hospices or otherwise near death, officials said.
They began targeting "close friends and relatives" partly because they "were trusted to return the money paid out by insurance companies," according to the SEC.
At one point, Huberfeld's sister, Bina Levy, told federal officials that he had asked her to sign some documents she didn't understand about variable annuities while a colleague asked her husband to do the same, officials said.
Horowitz also charmed hospice patients by giving them a box of candy in exchange for personal information, federal documents show.
Horowitz made about $1 million in sales commissions in this scheme and was sanctioned for his part in the scheme, according to reports and the SEC.
In May 2008, Huberfeld was part of the American delegation who visited Israel with then-President George W. Bush as part of the country's 60th anniversary, according to The New York Sun.
During this time period, Huberfeld, Bodner and Nordlicht invested some money funneled to them by Florida lawyer Scott Rothstein, who was later arrested for running a $1 billion Ponzi scheme, according to The Business Journal.
An attorney for Rothstein's victims sued the trio in 2011 accusing them of continuing to participate in his scheme even as they grew suspicious of the money, The Business Journal reported.
Huberfeld and his colleagues hadn't invested through Platinum, but that fund continued to get embroiled in shaky investments like a Texas energy company that was fined $100,000 for overbilling its customers, according to Reuters.
Reuters reported the firm invested heavily in Black Elk Energy Offshore Operations when an explosion on one of its rigs killed three workers and sent the company into bankruptcy. Still, Platinum managed to make a profit by divvying up the company and selling it to Platinum subsidiaries, Reuters reported.
Huberfeld left his post at Platinum by 2014, Reuters reported. But he continued to do business with the firm, federal investigators said Wednesday.
He was arraigned Wednesday afternoon in the union corruption scandal and released on $1 million bail, using his home as collateral.
Huberfeld did not speak to reports after leaving court and got into a waiting black SUV with a license plate that read "SNOW FUN."