Image: One of the suspects expected to be charged in connection with the LIRR pension scandal is taken into custody by the FBI
NBC New York
One of the suspects expected to be charged in connection with the LIRR pension scandal is taken into custody by the FBI.
By
NBC News and msnbc.com
updated 10/27/2011 5:07:52 PM ET 2011-10-27T21:07:52

Eleven people, including two orthopedists and a former union official, face federal corruption charges in a long-running probe into an alleged fraud of the Long Island Rail Road's pension system that may have cost taxpayers hundreds of millions of dollars, authorities said Thursday.

Federal and state investigators made the sweeping arrests across Long Island Thursday morning.

The 11 defendants include orthopedists, consultants, pension administrators and LIRR retirees.

Investigators said the scandal could soon top a billion-dollar rip-off if reforms are not made.

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

Read the original story on NBC New York

In a system that some LIRR employees jokingly dubbed "disability by appointment," 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.

Three-year investigation
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.

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

Among those charged Thursday is Peter Ajemian, an orthopedist from Rockville Centre. He is accused of helping more than 700 LIRR retirees get disability benefits from 1998 to 2008. His office manager, Maria Rusin, is also charged in connection with the investigation.

Peter Lesniewski, another orthopedist, is accused of helping more than 200 LIRR employees obtain benefits.

Messages left with the offices of Ajemian and Lesniewski were not immediately returned.

Also charged were former Union President Joseph Rutigliano and Marie Baran, who worked as consultants to help LIRR workers "game" the system, officials said. They were paid by LIRR workers for the service, prosecutors said.

LIRR workers Gregory Noone, Regina Walsh, Sharon Falloon, Gary Satin, Steven Gagliano and Richard Ehrlinger are accused of lying to get disability benefits.

A study 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.

Officials said 86 percent of all LIRR disability cases went through doctors Ajemian, Lesniewski and a third doctor, who has since passed away. The doctors are accused of conducting unnecessary tests and grossly exaggerating conditions.

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.

Doctor made $2 million?
Many of the workers were still doing their jobs when doctors determined they were too sick or disabled to work. The doctors were often paid $1,200 in addition to thousands billed to insurance companies for the diagnosis.

Prosecutors said Ajemian made more than $2 million. His patients have already collected $90 million in disability benefits and expect to get $210 million more.

Lesniewski made more than $750,000. Disability payments to his patients have already totaled more than $31 million and the patients stand to receive $64 million more.

Noone, one of the accused LIRR workers, collects an annual combined retirement and disability pension of $105,000 every year. In 2008, investigators said the disabled Noone signed in to play golf at an area club on 140 different days despite his disability claim.

The federal Railroad Retirement Board (RRB) administers the disability program in addition to a regular pension program that has an age-65 retirement.

The LIRR offers yet a third pension for workers who can start collecting benefits at age 50.

Some workers charged Thursday claimed disability so they could collect both the LIRR and a RRB disability pension starting at age 50, prosecutors said.

In October 2008, the New York Times first reported hundreds of millions of tax dollars could have been misappropriated.

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.

Early morning arrests
The Times reported Thursday that the defendants faced a prison sentence of up to 20 years if they are found guilty.

It added that the charges were expected to be announced at a news conference Thursday by Preet Bharara, the United States attorney in Manhattan, and Janice K. Fedarcyk, head of the New York FBI office.

The paper said that its previous 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 investigation also found that retired railroad workers played golf regularly at a state-owned course for free, another benefit of claiming disability.

NBC New York and msnbc.com staff contributed to this report.

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