Bloomberg News

Eleven Charged in $1 Billion Railway Workers Disability Scam

November 01, 2011

(Updates with descriptions of faked illnesses in the sixth, seventh paragraphs.)

Oct. 27 (Bloomberg) -- Eleven people, including two doctors and a former union president, were charged by the U.S. with participating in a $1 billion scheme to falsely claim disability benefits for retired New York commuter railway workers.

The doctors fraudulently recommended that hundreds of Long Island Rail Road retirees get payments from the U.S. Railroad Retirement Board, also known as RRB, according to a complaint unsealed today in Manhattan federal court.

As a result of the scheme, which ran between 1998 to the present, at least $300 million has already been paid out in unnecessary benefits, Manhattan U.S. Attorney Preet Bharara said today at a news conference announcing the charges.

“Benefit programs like the RRB’s disability pension program were designed to be a safety net for the truly disabled, not a feeding trough for the truly dishonest,” said Bharara, whose office is prosecuting the case.

Former railroad employees who claimed to be unable to work because they couldn’t stand, bend or grip objects without pain, among other symptoms, were seen playing golf, shoveling snow and taking a 400-mile bike ride, according to the complaint. The two doctors charged allegedly helped hundreds of people collect bogus disability benefits. One doctor made $2.5 million in compensation during the four-year scheme.

Severe Pain

The complaints described one retiree who collected $105,000 in annual pension and disabilities and claimed to have suffered severe pain while gripping simple hand tools. Authorities found after his retirement that the man played tennis several times a week and in a nine-month period in 2008 he signed in to play golf on 140 days.

A LIRR human resources manager who receives more than $90,000 in pension and disability payments retired after she claimed to suffer from “disabling pain” from walking, standing and using the stairs.

Law enforcement authorities recorded her “continuously exercising” at the gym for more than two hours and only stopped documenting her workout after the surveillance tape ran out, Bharara said.

The probe was a joint effort by the FBI, Metropolitan Transit Authority and the office of the Inspector General of the Railroad Retirement Board authorities said today.

‘Zero Tolerance’

“During my tenure as attorney general, we investigated and, exactly three years ago today, held hearings that revealed systemic abuse of the federal railroad pension system involving LIRR workers in a practice we termed ‘disability by appointment,’” New York Governor Andrew Cuomo said in an e-mailed statement. “We have zero tolerance for waste and fraud when it comes to pension systems.”

Ten of the accused have been taken into custody, prosecutors said. The remaining suspect is expected to surrender tomorrow, said Ellen Davis, a spokeswoman for Bharara.

The two doctors charged, Peter Ajemian and Peter Lesniewski, and a third unnamed doctor who died recently used their practices as “disability mills,” which were responsible for 86 percent of all LIRR disability applications filed before 2008, according to prosecutors.

Ajemian, 62, recommended at least 839 LIRR employees for disability between 1998 and 2008, according to the government. Lesniewski, 60, recommended at least 222. Both men are board- certified orthopedists. Also charged today was Maria Rusin, 55, Ajemian’s office manager.

Payments to Doctors

Prosecutors said the doctors received payments of $800 to $1,200 for performing phony medical assessments, plus millions of dollars from health insurers in payment for unneeded treatments.

Bharara said a unique aspect of the LIRR contract allows employees to retire early at the age of 50, provided they’ve been employed for at least 20 years. Such retirees are also entitled to receive a pension, a portion of the full retirement payment they’re entitled to at age 65.

If an LIRR employee retires and claims disability, prosecutors said, they can also receive payments that can equal roughly the base salary they earned during their career.

Retirees’ pensions are also tied to their income in the five years before retirement, the U.S. said. Railroad workers who’d later claim disabilities also managed to work hundreds of hours in overtime, right until the day their doctors declared they were “utterly unable” to continue.

Boosted Pensions

Because of the overtime already worked by these railroad employees, they were able to boost their pensions, he said.

“This gives new meaning to the concept of retirement planning,” Bharara said.

Prosecutors charged Marie Baran, 64, and Joseph Rutigliano, 64, who worked as “facilitators,” helping LIRR employees apply for disability benefits. Rutigliano, a former LIRR conductor and union president, retired with a claimed disability in 1999. Prosecutors said he took no sick days and worked more than 500 hours of overtime in the year before falsely claiming he was disabled by pain from a 1988 spinal fracture.

Six other former LIRR workers, Gregory Noone, 62, Regina Walsh, 63, Sharon Falloon, 56, Gary Satin, 62, Steven Gagliano, 55, and Richard Ehrlinger, 64, were charged with lying to the Railroad Retirement Board about their health to get disability payments.

Investigation

“In August 2008 when the LIRR became aware of the high rate of LIRR retiree applications, the LIRR asked the Railroad Retirement Board IG and the MTA IG to investigate,” LIRR President Helena Williams said in an e-mailed statement. “This important benefit should be reserved only for those disabled members of the railroad community who truly deserve it.”

Authorities said today that those named in the complaint would continue receiving their pension payments and it was unclear that if convicted, they would still be eligible for payments. Bharara said the investigation was continuing and he was also reviewing whether his office would pursue civil charges against the defendants.

The case is U.S. v. Ajemian, 11-Mag-2748, U.S. District Court, Southern District of New York (Manhattan).

--With assistance from Esme Deprez in New York. Editors: Andrew Dunn, Glenn Holdcraft

To contact the reporter on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net; Bob Van Voris in Manhattan federal court at rvanvoris@bloomberg.net. To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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