Eleven people, including two doctors and a former union president, were charged on Thursday in a “massive fraud scheme” in which hundreds of Long Island Rail Road workers made false disability pension claims that could have cost a federal pension agency about $1 billion, according to court papers.
A total of 10 of the defendants — seven former railroad workers charged with making false pension claims, the former union president, a former federal railroad pension agency employee who helped the workers file the claims, and one of the doctors — were taken into custody in the early morning hours at their homes by F.B.I. agents and state investigators, officials said. The other doctor is expected to surrender in the coming days.
All were charged with mail fraud and conspiracy to commit health care fraud, according to a criminal complaint filed in the case. The defendants in custody were expected to be arraigned later on Thursday in Federal District Court in Manhattan.
The federal investigation developed out of reporting by The New York Times for a series of articles published in 2008 that revealed systematic abuses of Railroad Retirement Board pensions by Long Island Rail Road workers. 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 have led many government agencies to slash services and lay off teachers, police officers and other 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 Thursday afternoon at a news conference along with two inspectors general: Barry L. Kluger of the Metropolitan Transportation Authority, which is the parent agency of the railroad, and Martin J. Dickman from the retirement board. The federal prosecutors and the F.B.I. were assisted in the investigation by the inspectors general at the two agencies.
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 Railroad, another M.T.A. subsidiary that serves commuters to New York City and has a work force of similar size and composition.
The articles revealed that a network of doctors and facilitators were helping the workers file papers claiming they were disabled.
The 74-page complaint in the case, which was sworn to by Adam M. Suits, a special agent with the Railroad Retirement Board inspector general’s office, lays out the scheme in detail and says that, as a result, the doctors received millions of dollars in corrupt payments from patients and insurance companies.
“And based my analysis of the data, including but not limited to the percentage of L.I.R.R. applicants handled by the three doctors discussed in this complaint and actual disability payouts to date, I further estimate that the fraudulent scheme could cause the R.R.B. to pay unwarranted occupational disability benefits exceeding $1 billion dollars if disbursed in full,” the complaint said.
The two doctors charged in the case, Peter J. Ajemian and Peter Lesniewski, and a third one who recently died but whose conduct was detailed in the complaint, were responsible for 86 percent of the 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 the retirees to file with the retirement board, the complaint contends.
Between 1998 and 2008, Dr. Ajemian recommended more than 839 Long Island Railroad employees for disability while Dr. Lesniewski recommended at least 222, according to the complaint. Both were board-certified orthopedists. Dr. Ajemian was assisted by his office manager, Maria Rusin, who was also charged in the case, the complaint said.
The doctors were paid — often in cash — between $800 to $1,200 for each phony 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.
The disability claims made by the seven people who are accused of obtaining their pensions fraudulently were in stark contrast to their lifestyles, according to the complaint. One of the defendants, Gregory Noone, who receives $105,000 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 complaint said.
Another defendant, Regina Walsh, an office worker for the railroad, who collects $108,000 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 complaint said.
And a third defendant, Steven Gagliano, 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.
Also charged in the case were the former railroad union president, Joseph Rutigliano, and Marie Baran, who served as the Railroad Retirement Board’s district office manager in Westbury, N.Y., until she retired in 2006, according to the complaint. Her husband retired from the L.I.R.R. with a disability pension based on an assessment performed by Dr. Lesniewski, the complaint said.
Mr. Rutigliano, a former L.I.R.R. conductor, retired in 1999, after a year in which he worked over 500 hours of overtime and took no sick leave, according to the complaint.
He then applied for and received disability benefits upon his retirement.
Others who were charged with falsely claiming they were unable to work and receiving disability benefits were Sharon Falloon, Gary Satin and Richard Ehrlinger, according to the complaint.
The defendants all face a maximum of 20 years in prison if convicted.