Long Island Rail Road Disability Fraud Leads to 11 People Charged

This week, at least 11 people were charged over a fraud scam that allowed hundreds of Long Island Rail Road workers to falsely claim that they had disabling injuries in order to collect annual pensions. The scam could cost a federal pension agency over $1 billion. Among the defendants are seven ex- railroad workers (including an ex-federal railroad pension agency employee and a former union president) two doctors, and an office manager.

According to prosecutors, employees that took part in the Long Island Rail Road disability fraud claimed they were disabled when in fact they were still able to play golf, ride a bike, or engage in aerobics. The doctors reportedly filed the false claims so they could receive an extra benefit from the Railroad Retirement Board. Per the criminal complaint, Dr. Peter Ajemian recommended that at least 734 employees of LIRR be approved for disability. Dr. Peter Lesniewski recommended that 222 LIRR workers receive disability benefits. A third doctor is believed to have also been involved in the scam but he recently passed away. The doctors allegedly created false illness narratives and medical assessments for hundreds of retirees, receiving $800 – $1200 for each one, in addition to fees for false medical records to support the claims of disability. They also were paid millions in health insurance payments for treatments that were not actually needed.

Approximately $121 million was paid out to LIRR workers, whose disabilities were exaggerated or made up. For example, according to the New York Times, 62-year-old defendant Gregory Noone gets $105,000 in disability and pension payments annually and supposedly is in a lot of pain when he crouches, bends, or grips objects. Yet he manages to play golf and tennis frequently. 55-year-old Steven Gagliano, whose yearly payments are $75,000, took part in a 400-mile bike tour even though he claims to experience back pain that is so severe it is disabling.

The federal government started investigating the scam after the New York Times published a number of articles about LIRR employees abusing federal Railroad Retirement Board pensions in 2008. Per the newspaper, almost all of the railroad company’s career employees were seeking and getting disability payments-that’s three to four times the disability rate of the average railroad company. Also, said the Times, the federal Railroad Retirement Board appears to have been poorly run, with inadequate tests to determine whether disability claims is legitimate. Some railroad officials had even complained that disability benefits were frequently awarded for medical conditions even if a worker’s ability to work hadn’t been impaired. Few claims were turned down.

11 Charged in L.I.R.R. Disability Fraud Plot, NY Times, October 27, 2011
Local Docs Charged in $1B LIRR Disability Scam, Rockville Center, October 27, 2011
US Railroad Retirement Board

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SEC’s Proxy Access Rule is Rejected by Appeals Court, Stockbroker Fraud Blog, August 5, 2011
No Need for New SRO Overseeing Investment Advisers, Says NASAA Official to Congress, Stockbroker Fraud Blog, April 10, 2011
Unfortunately, there are people out in the world determined to take financial advantage of others in order to make a profit. Our stockbroker fraud law firm represents victims of securities fraud.