June 13, 2016
We know that New York pols are afraid of the city’s unions, but we didn’t know how afraid.
Last week, the feds charged correction-union chief Norman Seabrook with corruption, and highlighted a disturbing practice: The city invites corruption by sending taxpayer money to union slush funds with no real oversight.
Seabrook was supposed to stick up for his 9,000 officers, who do one of the hardest jobs in the city: police people at Rikers and other jails. Instead, he defrauded them, according to Manhattan US Attorney Preet Bharara.
Seabrook allegedly took $15 million from an $81 million union-retirement fund starting in 2013, plus another $5 million in dues money, and put it in a hedge fund.
He allegedly did this because he expected to get up to $150,000 in bribes each year from hedge-fund manager Murray Huberfeld (and received $60,000 before his arrest).
In doing so, Seabrook didn’t just allegedly take bribes. He exposed his jail guards and other middle-class employees to enormous loss.
This particular hedge fund, called Platinum, invests in some of the riskiest assets around: mining companies and Asian businesses. The fund was so risky that it requires most investors to sign a statement acknowledging that they are rich enough to withstand losing all their money in the fund without much pain.
And a hedge fund so desperate for cash that it’s willing to bribe government officials probably isn’t your best investment bet.
Indeed, Bharara’s investigators pointed out that many Platinum investors were taking their money out when Seabrook was putting his workers’ money in.
That’s not a surprise. The mining industry and Chinese economy have been tanking.
So Seabrook should’ve wondered whether he was putting nearly 20 percent of his guards’ investment-fund money and 40 percent of their union dues into a Bernie Madoff-type scheme.
This is sad, but criminals (and dumb investors) exist. The real outrage is that the city let this happen.
Almost all of the $81 million in the workers’ retirement fund came from city taxpayers. Since at least the 1970s, the city has contributed to special union funds — funds entirely controlled by union leaders.
There’s absolutely no reason to do this.
City workers get perfectly good — and entirely separate — middle-class pensions from the city, which manages $153.9 billion in pension investments for its workforce.
And the city has a reasonable system to prevent flagrant fraud and abuse: the mayor, the city comptroller, the public advocate and union officials all oversee investments.
By contrast, Seabrook alone was in charge of this private retirement fund for his workers.
As prosecutors note, other members of the union’s board “rarely question[ed] Seabrook,” because if they caused trouble, he could send them back to work at a jail.
In sending part of workers’ retirement money directly to Seabrook, the city harmed its own workers.
Seabrook told his union members of this special fund for which “you pay nothing whatsoever.”
But the city’s payments to this retirement fund cost $1,411 per year, per veteran correction officer — money that they otherwise would have gotten in salary increases, or higher benefits from the city’s far safer pension fund.
Make no mistake: City workers have been losing out — because city officials have been cynical when it came to protecting their welfare.
To make changes to the benefits it pays through its official pension funds, Gotham depends on Albany.
But the city could end these “special” union retirement payments without looking to Albany: They’re done through normal contract negotiations.
Yet no mayor — whether Giuliani or Bloomberg or de Blasio — has wanted to touch these murky pools of temptation.
It’s no coincidence, either, that Mayor de Blasio has had trouble trying to reform Rikers Island — and that last week, eight correction officers were convicted of badly beating an inmate.
Seabrook amassed so much control over guards that he was pretty much in charge — like in 2013, when he refused to let workers transport prisoners to court in protest, delaying one inmate from testifying about abuse.
But how did Seabrook get that power? The city gave it to him — in part by giving him control over tens of millions in cash, picking union leaders over city workers and taxpayers.
