FBI Makes Corruption Arrests in LIRR Pension Scandal
Investigators probe how and why a disability pension was awarded to nearly every LIRR employee who asked for one
By Jonathan Dienst, Shimon Prokupecz and Joe Valiquette
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Federal and state investigators made corruption-related arrests across Long Island Thursday in a pension scandal at the Long Island Rail Road that may have cost taxpayers hundreds of millions of dollars.

About a dozen doctors, consultants, LIRR retirees and pension administrators were expected to face federal criminal charges Thursday.

For nearly three years, the FBI, the New York Attorney General’s office and the MTA's Inspector General have been looking into how and why a disability pension was awarded to nearly every LIRR employee who requested one.

Investigators had been looking into whether the alleged corruption included a network of doctors and consultants who took part in the scheme.

Federal search warrants had been executed beginning in 2008 at the Westbury offices of the Railroad Retirement Board.

Officials have expressed concern that healthy workers were awarded disability pensions at a staggering rate.

Studies show that for years, more than 90 percent of LIRR employees seeking disability pensions were awarded them.

Employees were allowed to choose their own doctor when seeking a disability pension and it appears many workers sought out a specific few doctors for medical exams.

Some LIRR workers jokingly dubbed the system "disability by appointment."

Disability status adds about $36,000 on average to retirees' pensions each year, according to the LIRR, which amounts to millions of additional costs to taxpayers annually.

A study by the by the General Accounting Office last year showed that LIRR workers received disability pensions at a rate 12 times higher than workers at any other railroad.

In October 2008, the New York Times first reported hundreds of millions of tax dollars could have been misappropriated. Investigators said the scandal could soon top a billion-dollar rip-off it reforms are not made.

LIRR President Helena Williams has said a federal agency acted as a rubber stamp without consulting the railroad.

To curb abuse, the LIRR has said it would establish a Disability Watchdog, mandate worker ethics training and set up a fraud hotline.

The railroad also has said it wants federal legislation to mandate independent medical reviews of all disability applications.

Federal prosecutors, FBI and state investigators are expected to announce the results of the corruption investigation later Thursday.

Long Island Rail Road
Updated: Oct. 27, 2011

In September 2008, The New York Times ran an investigation on former employees of the Long Island Rail Road. Drawing on government records and dozens of interviews, reporters found that nearly all retirees from this commuter rail service – the busiest in the nation, according to its Web site – were applying for and receiving federal disability payments.

The articles revealed that a web of doctors and facilitators were helping the workers file papers claiming they were disabled. The authorities estimate that the cost to the Railroad Retirement Board of disability claims by Long Island Rail Road retirees was $1 billion.

Ten people, including a doctor and a former union president, were arrested on Oct. 27, 2011, and charged in the fraud scheme. Another doctor charged in the case was being sought.

Most of the people — those charged in the case include seven former railroad workers accused of making false pension claims, the two doctors and a former federal railroad pension agency employee who helped the workers file the claims — were taken into custody in the early morning hours at their homes by F.B.I. agents and state investigators. They were arrested on mail fraud and conspiracy to commit health care fraud charges.

The investigation, which developed out of the Times’s reporting, was conducted by the F.B.I. and federal prosecutors in Manhattan, along with the inspectors general of the federal Railroad Retirement Board and the Metropolitan Transportation Authority, the Long Island Rail Road’s parent agency.

The two doctors charged in the case, and a third one who died, were responsible for more than three-quarters of the disability applications filed before 2008, running what amounted to “disability mills.” They prepared false medical assessments for the retirees to file with the Railroad Retirement Board.

The disability claims made by the seven people who allegedly obtained their pensions fraudulently were in stark contrast to their conduct as detailed in the charges. One of the defendants, who receives more than $100,000 in pension and disability payments each year, plays tennis several times a week and played golf more than 100 times in less than a year despite supposedly suffering severe pain when gripping objects with his hands, bending or crouching.

The Times 2008 investigation also found that while still on the job, senior engineers and conductors had been taking advantage of old work rules to pad their paychecks, boosting their pensions in turn. These findings came at a time when L.I.R.R. passengers were facing possible fare increases in the near future, and the railroad’s parent – the Metropolitan Transportation Authority – was dealing with a growing budget shortfall.

The L.I.R.R. operates over 700 daily trains that transport an average of 288,000 passengers per day, with service stretching from Penn Station in Manhattan out to the eastern edge of Long Island (roughly 120 miles away).

It was chartered as a private company in 1834 and is the oldest railroad in the country still operating under its original title. After several mergers and bankruptcies, the State of New York finally acquired it in 1966 and placed it under the transportation authority.

The New York Disability Law Blog
Posted at 11:03 AM on October 10, 2008 by Troy Rosasco
Long Island Rail Road Disability Claim Scandal Widens
LINK

According to an article in Newsday today regarding the LIRR disability retirement scandal, Attorney General Andrew Cuomo has now issued subpoenas to four long term disability insurance companies and five Long Island doctors who predominately examined LIRR workers. This is in the wake of recent reports indicating that a whopping 98% of Long Island Railroad workers retire with disability pensions. The fact that white collar LIRR employees were getting occupational disability pensions tells you how broken this system really is.

The long term disability insurance companies have been identified by the New York Times in their ongoing railroad disability scandal series as First Unum Life Insurance Company, AFLAC, Transamerica Financial Life Insurance Company and CUNA Mutual. It is possible that these disability insurance companies may have been victims of the broken Railroad Retirement Board disability decisions if they were required to pay out on policies if the LIRR employee was granted a disability retirement pension. It is not often on this blog that you will see me refer to long term disability insurers as potential victims, but it seems they might have been in this case.

As a disability lawyer for almost 20 years on Long Island, I am proud to say that I have never represented any LIRR employee in a Railroad Retirement Board disability claim. It appears they didn't need me - all they had to do to get disability benefits was to raise their hand! Unfortunately, abuses like this tarnish those LIRR employees with legitimate disability claims, of which I am sure there are many.

I predict this story is only going to get bigger, and will eventually lead to major reform of the Long Island Rail Road workers disability system. One simple solution would be to simply abolish the Railroad Retirement Board, and to include LIRR employees in the Social Security Disability system, which generally requires the claimant to be "disabled from all work", not just their "regular occupation". This would also help LIRR workers since Social Security disability taxes withheld from their paycheck are far less than the railroad system taxes they now pay. Perhaps Senators Schumer and Clinton can propose this easy fix. However this broken system is reformed, the days of automatic disability pensions for LIRR workers are over. Now they will have to be truly disabled.

October 9, 2008
Subpoenas for Insurers of Workers at L.I.R.R.
By WALT BOGDANICH and NICHOLAS PHILLIPS, NY TIMES

One day after the Long Island Rail Road expressed concerns that its employees might be improperly collecting disability payments not only from the federal Railroad Retirement Board but also from private insurers, investigators for the state attorney general on Wednesday began serving subpoenas on four private insurers that sell disability policies and on five doctors who have performed disability examinations on Long Island, a person close to the investigation said.

Four government agencies are already investigating whether former Long Island Rail Road employees, including white-collar managers, legitimately received thousands of federal disability pensions from the retirement board. Those inquiries were opened after The New York Times found that in recent years, virtually all career L.I.R.R. employees who retired began receiving federal disability income.

The most recent subpoenas from the office of Attorney General Andrew M. Cuomo expand that investigation to include two types of private insurance policies that rail workers buy via payroll deductions. One is a short-term disability policy and the other guarantees payment of auto loans, credit card debts and personal loans should the policyholder lose the ability to work.

Federal rules do not prohibit former rail workers from receiving both federal and private disability payments, according to a retirement board official. But records provided by the Long Island Rail Road raise the possibility that hundreds of its employees are buying private policies knowing that the federal railroad board will declare them disabled.

A person close to the investigation said that Mr. Cuomo’s office was serving subpoenas seeking testimony and documents from Aflac, the First Unum Life Insurance Company, the Transamerica Financial Life Insurance Company and the CUNA Mutual Group.

Long Island Rail Road officials said this week that more than 1,600 employees had purchased private disability policies. They made that discovery while researching a Freedom of Information Act request from The Times, and passed the information to Mr. Cuomo and to Barry L. Kluger, inspector general for the Metropolitan Transportation Authority, the L.I.R.R.’s parent agency.

The five doctors have drawn the attention of state investigators because they are believed to conduct physical exams for both private and federal disability programs, according to an individual close to the investigation.

Helena Williams, the Long Island Rail Road president, said in a letter to state investigators on Tuesday that rail officials had expelled insurance brokers selling disability policies from L.I.R.R. property. She also said that another insurer had stopped selling those policies to L.I.R.R. workers.

Rail workers can pick their own doctors for federal disability application exams.

The doctors expected to get state subpoenas are Dr. Peter J. Ajemian, Dr. Samir Dutta, Dr. Ralph Parisi, Dr. Joseph Bonafede and Dr. Peter Lesniewski.

The doctors either did not respond to messages seeking comment, or could not be reached at their listed telephone numbers.

Dr. Ajemian moved from an office in Rockville Centre, in Nassau County, last week, a person answering the phone there said.

State records list Dr. Dutta as having a practice in Floral Park, also in Nassau, but a person answering the telephone said the doctor was not there.

A spokeswoman for Unum, Mary Clarke Guenther, said that her company planned to fully cooperate with the attorney general. A CUNA official said that no subpoena had been received. Laura Kane, a spokeswoman for Aflac, said, “We did receive the subpoena and we are looking forward to cooperating with the investigation.”

Cindy Nodorft, a spokeswoman for Transamerica Life, said in a statement that her company stopped selling disability insurance to Long Island Rail Road employees early this year. But she said she could not comment further because the matter was under investigation.

The Railroad Retirement Board, based in Chicago, is a relatively obscure agency. It serves the same purpose as Social Security, but only for rail workers.

Two days after The Times first reported on the disproportionate number of Long Island Rail Road retirees collecting disability payments — about a quarter of a billion dollars since 1980 — federal agents raided the Long Island office of the retirement board and removed files and computers.