United States v. Seabrook
| Citation | 968 F.3d 224 |
| Decision Date | 04 August 2020 |
| Docket Number | Docket No. 19-436 (L),August Term, 2019 |
| Parties | UNITED STATES of America, Appellee, v. Norman SEABROOK, Murray Huberfeld, Defendants-Appellants. |
| Court | United States Courts of Appeals. United States Court of Appeals (2nd Circuit) |
KANNON K. SHANMUGAM, Paul, Weiss, Rifkind, Wharton & Garrison LLP (Masha G. Hansford, Katherine S. Stewart, Amanda C. Weingarten, on the brief), Washington DC, for Defendant-Appellant Huberfeld.
RICHARD W. LEVITT, Levitt & Kaizer, New York, NY, for Defendant-Appellant Norman Seabrook
MARTIN S. BELL, Assistant United States Attorney (Russell Capone, Lara Pomerantz, Won S. Shin, Assistant United States Attorneys, on the brief), for Audrey Strauss, Acting United States Attorney for the Southern District of New York, New York, NY, for Appellee.
Before: POOLER, LYNCH, and MENASHI, Circuit Judges.
Appeal from United States District Court for the Southern District of New York (Alvin K. Hellerstein, J .), convicting Murray Huberfeld, after a guilty plea, of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 371. We hold that the district court erred at sentencing by applying the commercial bribery sentencing guideline based on an uncharged bribery scheme that the government dropped in exchange for Huberfeld pleading guilty to the wire fraud. Vacatur is warranted because we cannot be confident, despite the district court's statement to the contrary, that it would have imposed the same sentence had it instead used the correct guideline.
We also hold that the district court erred by ordering $19 million in restitution to be paid to the Corrections Officers Benevolent Association ("COBA"), an entity that was not a victim of the convicted conduct under the Mandatory Victims Restitution Act ("MVRA"), 18 U.S.C. § 3663A.
Accordingly, we vacate and remand for Huberfeld's resentencing and reverse the restitution order. We decide Norman Seabrook's appeal through summary order, which we issue simultaneously with this opinion.
In the early 2000s, Huberfeld co-founded the Manhattan-based hedge fund, Platinum Partners. By 2011, Huberfeld had stepped down from a management role at Platinum and assumed a legacy role as limited partner. His primary responsibility in that role was to solicit investors and refer potential clients to the then-current management team.
Defendant Norman Seabrook was the long-time president of COBA, New York City's largest union for corrections officers. He wielded immense influence over the union's operations. His control of COBA extended to its finances, including the administration of its Annuity Fund, a retirement benefits program for corrections officers with holdings of more than $70 million.
In late 2013, Platinum experienced significant levels of redemptions from its investors. Huberfeld understood that this meant Platinum needed to find new clients. Around this time, he told Jona Rechnitz, a real-estate businessman and mutual acquaintance of Seabrook and Huberfeld, that Platinum was looking to attract institutional investors such as unions. Rechnitz, who had spent time cultivating relationships in law enforcement leadership circles, suggested that he might be able to recruit COBA as a client by courting Seabrook.
Rechnitz invited Seabrook on a vacation to the Dominican Republic where Rechnitz proposed investing COBA's money into Platinum. Seabrook agreed, but he wanted to get paid for it. When Rechnitz relayed this to Huberfeld, he was amenable to the arrangement. Huberfeld devised a formula whereby Platinum would pay Seabrook a portion of the profits from COBA's investment, estimating an annual payment between $100,000 and $150,000.
Seabrook immediately took steps to ensure COBA would invest in Platinum. At first, he went through the motions of having Platinum make a pitch to COBA's Annuity Fund board. The board directed its financial advisors and attorneys to conduct due diligence, and authorized Seabrook to invest up to $10 million if the advisors concluded that the investment was prudent. When some of the attorneys expressed concern, however, Seabrook concealed those warnings from the board. In March 2014, COBA invested $10 million from its Annuity Fund in a Platinum fund. After the initial investment, COBA made two additional $5 million investments.
At the end of 2014, when it came time to make the first payment to Seabrook, Huberfeld told Rechnitz that the fund had underperformed, and Seabrook would only get $60,000. Rechnitz agreed to personally pay out the cash to Seabrook, and Huberfeld agreed that Platinum would reimburse him for it. Before meeting Seabrook, Rechnitz stopped at Salvatore Ferragamo on Fifth Avenue in Manhattan and bought an expensive handbag. He stuffed the $60,000 of cash inside and handed it to Seabrook, who was parked in his car a few blocks away. In order to paper over the reimbursement, Rechnitz, through his company, invoiced Platinum for courtside tickets to eight New York Knicks games. Rechnitz forwarded the invoice by email to Huberfeld. Three days later, Platinum sent a check to Rechnitz for $60,000, ostensibly to cover the cost of the Knicks tickets.
In 2015, Huberfeld, through another mutual associate, continued to lobby Seabrook for investments. But, after a former COBA board member filed a lawsuit against the union that mentioned the Platinum investments, and after the government's investigation of Seabrook became known, COBA made no additional investments.
In June 2016, the FBI arrested Rechnitz, Seabrook, and Huberfeld. Federal agents also executed a search warrant at Seabrook's home. They recovered, among other things, over $20,000 in cash and the Salvatore Ferragamo bag. Six months later and two years after COBA's initial investment, Platinum filed for bankruptcy and COBA lost $19 million of its $20 million investment.
On July 7, 2016, a federal grand jury sitting in the United States District Court for the Southern District of New York returned an indictment charging Seabrook and Huberfeld with honest services wire fraud and conspiracy to commit honest services wire fraud. The indictment alleged a commercial bribery scheme that "deprive[d] members of COBA of their intangible right to the honest services of SEABROOK, its President. ..." App'x at 18. In late October 2017, Seabrook and Huberfeld were tried jointly before the Hon. Andrew L. Carter, Jr.1 That trial ended in a hung jury. For administrative reasons, the matter was reassigned to the Hon. Alvin K. Hellerstein.
Following the mistrial, the government approached Huberfeld with a plea offer. Huberfeld agreed to plead guilty to a superseding information that charged him only with conspiracy to commit wire fraud for presenting the false $60,000 invoice to Platinum, instead of the overarching bribery scheme that was charged in the superseding indictment. The only reference to COBA in the information was the allegation that Huberfeld and Rechnitz knew that "the actual purpose of the payment [of $60,000] was to reimburse Rechnitz for having paid Norman Seabrook ... for Seabrook's efforts to get COBA to invest millions of dollars in Platinum." App'x at 42.
In the plea agreement, the parties stipulated that the applicable sentencing guideline was U.S.S.G § 2B1.1, the fraud guideline. After a two-level reduction for Huberfeld's acceptance of responsibility, the parties stipulated that, based on a $60,000 loss, the final offense level was 10, resulting in a Guidelines range of 6 to 12 months' imprisonment.
On May 25, 2018, the parties appeared before the district court for a plea hearing.
The government explained that the scheme involved Huberfeld "defrauding Platinum Partners out of this $60,000 that was used to pay Mr. Seabrook" and that the payment's purpose was "to cover the cost of compensating Mr. Seabrook for his efforts in securing the union's investment in the hedge fund." App'x at 68, 69. Initially, the district court expressed "reservations" about accepting the plea because the superseding information did not charge the overarching bribery scheme. App'x at 73. The district court discussed the false invoice as a "constituent part of a larger fraud," and stated that Huberfeld was "an agent in paying a bribe in order to procure an investment." App'x at 70. The government disagreed with this characterization, at least as it related to the contents of the charging instrument:
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