Eleven people were charged on Thursday in an enormous fraud scheme in which hundreds of
Long Island Rail Road workers falsely claimed to have disabling injuries, with some of them collecting tens of thousands of dollars in annual pensions while spending time playing golf, law enforcement officials said.
A complaint filed in the case said Steven Gagliano, who claimed disabling back pain, went on a 400-mile bike tour.
The fraudulent payouts in the scheme, officials estimate, could end up costing a federal pension agency more than $1 billion if fully disbursed.
Ten of the defendants were taken into custody early Thursday at their homes by agents from the Federal Bureau of Investigation and state investigators, officials said. They included seven former railroad workers, including a former union president; a former federal railroad pension agency employee who helped the workers file claims; a doctor; and a doctor's office manager. A second doctor is expected to surrender on Friday.
The United States attorney in Manhattan, Preet Bharara, said, "Employees, in many cases, after claiming to be too disabled to stand, sit, walk or climb steps, retired to lives of regular golf, tennis, biking and aerobics."
The charges involving the railroad come at a time when public workers' unions across the country have faced heavy criticism for negotiating pension obligations that led many government agencies to slash services and lay off teachers, police officers and other workers.
A sampling of hundreds of cases approved by two doctors showed that $121 million had been paid to workers whose disabilities were either fabricated or exaggerated, according to court papers, though the total was quite likely more. It was unclear if officials would try to stop the payouts, or could even legally do so, before the disbursements hit $1 billion.
The federal investigation followed reporting by The New York Times for a series of articles published in 2008 that revealed systematic abuses of federal Railroad Retirement Board pensions by
Long Island Rail Road workers.
The claims of disability made by the seven people charged with obtaining their pensions fraudulently contrasted sharply with their lifestyles, according to court papers. One of the defendants, Gregory Noone, 62, of East Islip, N.Y., who receives $105,000 in pension and disability payments each year, plays tennis several times a week and played golf 140 days over the course of one nine-month period, despite his reports that he had severe pain when gripping objects, bending or crouching, the complaint filed in the case said.
Another defendant, Regina Walsh, 63, a railroad office worker who lives in New Hyde Park, N.Y., collects $108,000 a year in pension and disability payments; she had complained of significant neck, shoulder and hand pain caused by sitting at a desk and using a computer, and leg pain caused by standing for more than five minutes. But surveillance showed her shoveling snow for over an hour and walking with a baby stroller for 40 minutes, the complaint said.
And a third defendant, Steven Gagliano, 55, of North Babylon, N.Y., who receives more than $75,000 in payments annually and claimed to be suffering from severe and disabling back pain, went on a 400-mile bike tour around New York State, the complaint said.
The complaint, 74 pages long, said that "the fraudulent scheme could cause the R.R.B. to pay unwarranted occupational disability benefits exceeding $1 billion dollars if disbursed in full."
Federal prosecutors and the F.B.I. were helped in the investigation by inspectors general from the Railroad Retirement Board and the Metropolitan Transportation Authority, the parent agency of the Long Island Rail Road.
Nine defendants appeared on Thursday before United States Magistrate Judge Theodore H. Katz in Manhattan; eight were released on personal recognizance bonds. A ninth defendant was taken to a hospital after becoming ill. The 10th defendant is to appear on Friday. Each defendant faces a maximum of 20 years in prison if convicted.
The Times articles reported that virtually every career employee of the railroad was applying for and receiving disability payments, giving the Long Island Rail Road a disability rate three to four times that of the average railroad.
The Long Island Rail Road, unlike any other commuter railroad in the country, allows workers to collect an early pension, in some cases at age 50, which they can supplement with disability pensions from the federal railroad agency. The Times found that retired railroad employees who had successfully claimed disability were regularly playing golf at a state-owned course without charge - another perquisite of their disability.
Indeed, the railroad's retirement rate was particularly striking when compared with the number of disability pensions at Metro-North Railroad, another subsidiary of the transit authority that serves commuters to New York City with a work force of similar size and composition.
Investigators involved in the case said they brought charges only in cases with the strongest proof and the most egregious instances of fraud. But in a news conference on Thursday, officials gave a warning to railroad retirees with knowledge about any continuing disability fraud.
11 Charged in L.I.R.R. Disability Fraud Plot
"If you have this kind of firsthand information, we would like to hear from you," said Diego Rodriguez, the special agent in charge of the criminal division of the F.B.I.'s New York office. "For those who choose not to contact us, there is a good chance we will be contacting you."
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Helena E. Williams, president of the Long Island Rail Road, said, "We have to be very vigilant making any improvements we can make with the mission of changing the culture at the railroad."
Two doctors were charged in the case, Peter J. Ajemian, 62, of Syosset, and Peter Lesniewski, 60, of Rockville Centre, N.Y. A third doctor whose conduct was detailed in the complaint recently died. Together, they were responsible for 86 percent of the railroad's disability applications filed before 2008, running what amounted to "disability mills," the complaint said. They prepared false medical assessments and so-called illness narratives for hundreds of retirees to file with the retirement board, the complaint says.
Dr. Ajemian was taken into custody on Thursday; Dr. Lesniewski is expected to surrender on Friday. Dr. Ajemian was assisted by his office manager, Maria Rusin, 55, of Farmingdale, N.Y., who was also charged in the case, the complaint said.
The doctors were paid - often in cash - $800 to $1,200 for each fake assessment and narrative, in addition to the millions of dollars in health insurance payments they received for unnecessary medical treatments and fees for preparing false medical records to support the disability claims, the complaint said.
Also charged in the case were the former railroad union president, Joseph Rutigliano, 64, of Holtsville, N.Y., and Marie Baran, 64, of East Meadow, N.Y., who served as the Railroad Retirement Board's district office manager in Westbury, N.Y., until she retired in 2006, according to the complaint.
Mr. Rutigliano, a former conductor with the Long Island Rail Road, retired in 1999, after a year in which he worked more than 500 hours of overtime and took no sick leave, according to the complaint. He then applied for and received disability benefits after his retirement.
Others who were charged with falsely claiming they were unable to work and receiving disability benefits were Sharon Falloon, 56, of Merrick, N.Y.; Gary Satin, 62, of Mooresville, N.C.; and Richard Ehrlinger, 64, of Bay Shore, N.Y., according to the complaint.
Ms. Falloon, who collected $90,349 annually in disability and pension payments, said she had a hard time climbing stairs, the complaint said. But surveillance video showed her taking a 45-minute step aerobics class at a gym. The video ran out after two hours, the complaint, but Ms. Falloon was still working out.