New Yorkers in Exile

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10 Arrested in $1 Billion L.I.R.R. Disability Scheme
By WILLIAM K. RASHBAUM

Ten people, including a doctor and a former union president, were arrested early Thursday and charged in a major fraud scheme in which hundreds of Long Island Rail Road workers made false disability pension claims costing a federal agency an estimated $1 billion, according to people briefed on the matter. Another doctor charged in the case was being sought, the people said.

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, the people said.

They were arrested on mail fraud and conspiracy to commit health care fraud charges, the people said, and were expected to be arraigned later in the day in United States District Court in Manhattan.

The federal investigation developed out of reporting by The New York Times for a series of articles published 2008 that revealed systematic abuses of Railroad Retirement Board pensions by Long Island Rail Road workers.

The United States attorney in Manhattan, Preet Bharara, and the head of the New York F.B.I. office, Janice K. Fedarcyk, were expected to announce the charges at a news conference with two inspectors general, Barry L. Kluger of the Metropolitan Transportation Authority, and Martin J. Dickman from the Retirement Board. The investigation 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 people said.

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 of three to four times that of the average railroad. 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, another transportation authority subsidiary that serves commuters north of New York City and has a work force of similar size and composition.

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, the people said.

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

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 people said. 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 over 100 times in less than a year despite supposedly suffering severe pain when gripping objects with his hands, bending or crouching, the person said.

Another defendant, an L.I.R.R. office worker, who also collects more than $100,000 a year in pension and disability payments and complained of significant neck, shoulder, hand and leg pain when standing for more than five minutes, was seen under surveillance shoveling heavy snow and walking with a stroller for a long period of time, the person said.
And a third person, 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 people said.

The defendants face a maximum of 20 years if convicted, the people said.