Eleven Charged, FBI says Hundreds of NY Rail Workers Committed $1B Fraud

The ride on the gravy train might soon be over for hundreds of Long Island Rail Road (LIRR) employees suspected of having cheated their way to big pensions in what FBI officials are calling a $1 billion fraud scandal. They are said to have gone as far as paying doctors to say they were unable to work, even though some of those supposedly disabled retirees were spotted regularly playing tennis and golf, shoveling heavy snow and working out for hours at a gym, according to an A.P. article in the Chicago Tribune.

So far eleven people, including two orthopedists and a former union official, have been charged with conspiracy in the decade-long fraud that authorities state “poisoned” the pension system that was used by employees of the nation’s largest commuter railroad.

Janice Fedarcyk, the head of New York’s FBI office, called it a “game where every retiree was a winner.” U.S. Attorney Preet Bharara said the disability pension program was not designed to be “a feeding trough for the truly dishonest,” but authorities say that’s what happened.

According to a criminal complaint filed in U.S. District Court in Manhattan, hundreds of LIRR employees falsely declared themselves disabled so that they could collect more pension money from the ages of 50 to 65, when they would otherwise qualify for full benefits,.

In one example, the complaint cites a retired engineering manager who complained of severe hand, knee, shoulder and back pain but often played tennis and golf while collecting about $105,000 yearly in combined pension and disability payments.

Another example is a former employee who said she suffered neck, shoulder and hand pain from computer work and couldn’t stand more than five minutes without leg pain. She was “surveilled shoveling heavy snow for approximately one and a half hours,” the complaint said. She gets about $108,000 a year in combined pension and disability payments.

The complaint said many of the workers who retired with disability benefits worked abnormally high amounts of overtime in the five years before retirement because the pensions are calculated based on earnings during that period. Those heavy workloads often continued “right up until the very day when they and their physicians claimed they were utterly unable to continue doing their railroad jobs,” the complaint said.

The complaint also seemed to place some of the blame for the scandal on the pension system itself, saying the “exceptionally high rate of occupational disability applications for the LIRR can be attributed to the fact that the LIRR, and the LIRR alone, offers a pension to employees as young as 50 years old.”

The complaint noted that dishonest employees would lie about their physical condition so they could retire at an earlier age and with a salary that was almost equal to what they got when they were working.

Before 2008, three doctors, one of whom has since died, were responsible for 86 percent of the railroad’s disability applications. The complaint stated that one of those doctors recommended at least 839 LIRR employees for disability from 1998 to 2008.

Authorities said the doctors collected $800 to $1,200 in fees from each patient as they built disability cases by prescribing unnecessary medical tests and physical therapy. They said the doctors then fabricated or grossly exaggerated medical assessments and built illness narratives to show the employees were unable to work.

The writer of the criminal complaint was former FBI Agent Adam M. Suits, who now works as a special agent with the Office of the Inspector General for the federal Railroad Retirement Board (RRB). He estimated that “the fraudulent scheme could cause the RRB to pay unwarranted occupational disability benefits exceeding $1 billion if disbursed in full.”

Helena Williams, the president of LIRR has said the Railroad Retirement Board acted as a rubber stamp without consulting the railroad.

She said, “The LIRR condemns any fraudulent activity associated with federal disability pension benefits.” Williams added that the LIRR has cooperated with authorities and supports “efforts to root out fraud.”

Williams told The Associated Press that workers who were hired since 1988 cannot retire until they are at least 55 years old and have 30 years on the job. She also noted that since 2008 the railroad has conducted ethics training of all employees.

An investigative arm of Congress found that in 2009, the system approved nearly 100% of the claims that were filed by retired LIRR workers — a higher rate than other commuter railroads.

The complaint noted that 61%, or 869 of the 1,423 LIRR employees who claimed a disability pension from 2004 to 2008 were ages 50 to 55, while only 7 percent of employees at the Metro-North commuter railroad who received disability benefits during the same period were 50 to 55. The Metro-North services New York’s northern suburbs, while the LIRR carries passengers between Manhattan and the 110-mile island that stretches east of the city and includes Brooklyn and Queens.

The LIRR carries around 265,000 riders a day.

“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,’” Gov. Andrew Cuomo said in a statement. “These arrests continue to show that we have zero tolerance for waste and fraud when it comes to pension systems.”

Some commuters at Long Island’s Hicksville station applauded the charges:

John Rodriquez said, “They are stealing. I hope they throw the book at them.”

Edward Plakstis stated, “It’s terrible, I am sick of it because I keep paying, paying, paying for someone to get rich.”