Heads of Sin-Focused Hedge Fund, Prison Pension Arrested

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.

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“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.

Cambridge Associates has hired Vicky Williams from BP’s pension as it seeks to grow its private equity expertise.

Williams joins as a senior investment director, and was previously head of private equity at BP Investment Management, responsible for nearly £2 billion ($2.9 billion) of assets. She has held similar roles at the British Airways and Shell UK pensions, and has worked on the limited partner advisory board of the British Venture Capital Association.

Alex Koriath, head of Cambridge Associates’ European pensions practice, said in a statement that Williams “really knows what it takes to successfully put together a private investment allocation.”

“We are seeing pension funds that have traditionally steered clear of private investments now consider not just private equity but the whole gamut of private investments—including private debt and niche strategies,” Koriath added. Cambridge is receiving an increasing number of private equity-related requests from pension funds in the UK and Europe, he said.

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“In an environment of prolonged low interest rates and expected returns, the illiquidity premium and alpha that private investments offer will play an increasingly important role in pension schemes’ strategies,” Williams said.

Booming demand for private equity will lead to industry assets exceeding $4 trillion in the next two years, according to a Deloitte analysis published last month.

The industry will further grow to $4.66 trillion by 2020, the consultant estimated. As of 2015, assets under management, including dry powder and the unrealized value of portfolio companies, totaled $3.65 trillion.

Cambridge Associates’ President and Head of Global Investments David Druley is set to succeed current CEO Sandra Urie on July 1.