The United States Attorney for the Southern District, Preet Bharara, has had a busy few months, with successful large scale prosecutions against health insurance officials, New York State lawmakers, and inside trading investment bankers. On October 27, 2011, the latest bombshell was dropped: Several former L.I.R.R. workers, including a former railroad union president, and two physicians, have been charged in a massive fraud scheme which could end up costing the U.S. Railroad Retirement Board up to one billion dollars. The charges are premised on a scheme in which former L.I.R.R. employees, who were eligible to retire on a pension at age 50, would be seen by three physicians, Dr. Peter J. Ajemian, and Dr. Peter Lesniewski, (and a third unnamed doctor who recently died), who would prepare false medical assessments in support of the employees’ disability pensions, which would be paid in addition to the retirement pensions. Allegedly, these three doctors were involved in 86% of the false disability applications. The U.S. Government alleges that the doctors were paid between $800.00 and $1,200 in cash for each false assessment and narrative reports, along with millions of dollars to perform unnecessary medical treatments.
The former employees would be able to receive disability and general pension funds which equaled their pre-retirement income. The discovery of the purported fraud was developed from videotapes of many of the defendants playing golf, tennis, working out at the gym and going on 400 mile bike rides, while having claimed that they suffered from severe and disabling back, neck and other injuries. Allegedly, surveillance video obtained by the government depicts one defendant at the gym for over two hours after claiming she could no longer walk stairs, and another defendant shoveling snow for 40 minutes after alleging that she could no longer stand for more than five minutes and had terrible shoulder and hand pain. In the case of the former railroad union president, Joseph Rutigliano, he allegedly never took a sick day, worked 570 hours of overtime in the 12 months before his retirement, and then received disability payments after his retirement in 2006. Rutigliano is also charged as a “facilitator” in assisting other employees in preparing false applications for disability benefits.
Mr. Bharara noted that: ”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 74 page complaint filed in the United States District Court in Manhattan on Thursday, October 27th charges the defendants under Section 18 of the United States Code, section 1347, which states in pertinent part as follows:
“Whoever knowingly and willfully executes, or attempts to execute, a scheme or artifice—
(2) to obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any health care benefit program, in connection with the delivery of or payment for health care benefits, items, or services, shall be fined under this title or imprisoned not more than 10 years, or both. If the violation results in serious bodily injury (as defined in section 1365 of this title), such person shall be fined under this title or imprisoned not more than 20 years, or both;”
The defendants were also charged under section 1349, the conspiracy statute, which states:
“Any person who attempts or conspires to commit any offense under this chapter shall be subject to the same penalties as those prescribed for the offense, the commission of which was the object of the attempt or conspiracy.”
It appears that one of the reasons that the scheme was uncovered was reporting in the New York Times as early as 2008 in which it was noted that the federal Government Accountability Office found that LIRR employees applied for disability pensions 12 times as often as any other commuter railroad. MTA data showed that 79% of LIRR employees over the age of 50 received disability benefits from 2004 through 2008. Additionally, the defendants seemed to have not been at all concerned that the scheme would be uncovered. The federal complaint alleges that one of those charged was receiving $105,000 in pension and disability benefits while playing tennis several times a week and golf 140 times during a nine month time frame.
The defendants were arraigned on October 27th and October 28th, with most released on personal recognizance bonds, which would be forfeited if they failed to appear in Court. If convicted on all charges, the defendants could be facing up to 20 years in prison under federal sentencing guidelines.
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