Doctor and Two Consultants Found Guilty in Manhattan Federal Court in LIRR Disability Fraud Scheme
| U.S. Attorney’s Office August 06, 2013 |
Preet Bharara, the United States Attorney for the Southern District of New York, announced that PETER LESNIEWSKI, MARIE BARAN, and JOSEPH RUTIGLIANO were convicted today in Manhattan federal court for their participation in a massive fraud scheme in which Long Island Rail Road (LIRR) employees claimed to be disabled upon early retirement so that they could receive federal disability benefits to which they were not entitled. The three defendants were convicted on all counts charged following a three-week trial before U.S. District Judge Victor Marrero. Twenty-eight defendants have now been convicted in this case.
Manhattan U.S. Attorney Preet Bharara said: “Today, Peter Lesniewski, Marie Baran, and Joseph Rutigliano stand convicted of participating in the massive LIRR disability fraud that turned a safety net for the truly disabled into a gravy train for the corrupt. Dr. Lesniewski enabled hundreds of LIRR employees to dupe the government through medical paper trails filled with bogus diagnoses, while Baran and Rutigliano, in exchange for payments of thousands of dollars, helped lard the employees’ disability benefit applications with lies. Lesniewski, Baran, and Rutigliano served as engines of this fraud that led to a staggering 79 percent of LIRR retirees from 1998 to 2011 receiving federal disability benefits, costing the government hundreds of millions of dollars. Like the 25 people who previously pled guilty, these defendants now have been brought to justice and will pay for their central roles in this brazen scheme.”
According to the charging documents in this case and evidence presented at trial:
The LIRR Disability Fraud Scheme
The U.S. Railroad Retirement Board (RRB) is an independent U.S. agency that administers benefit programs, including disability benefits, for the nation’s railroad workers and their families. A unique LIRR contract allowed employees to retire at the relatively young age of 50—the age of eligibility has since changed to 55—if they had been employed by the LIRR for at least 20 years. Eligible employees are entitled to receive an LIRR pension, which is a portion of the full retirement payment for which they are eligible at 65. In addition, at full retirement age (between age 60 and age 65 depending on years of service), they are eligible to receive an RRB retirement pension. For LIRR workers who retired at 50 with only an LIRR pension, they would receive less than their prior salary and substantially lower pension payments than those to which they would be entitled at full retirement age. However, LIRR employees who retired and claimed disability could receive a disability payment from the RRB on top of their LIRR pension, regardless of age. A retiree’s LIRR pension, in combination with RRB disability payments, can be roughly equivalent to the base salary earned during his or her career.
Hundreds of LIRR employees exploited the overlap between the LIRR pension and the RRB disability program by pre-planning the date on which they would falsely declare themselves disabled so that it would coincide with their projected retirement date. These false statements, made under penalty of prosecution in disability applications, allowed LIRR employees to retire as early as age 50 with an LIRR pension, supplemented by the fraudulently obtained RRB disability annuity. From 1998 through 2011, approximately 79 percent of LIRR retirees obtained federal disability when they retired. By contrast, during this same period, only approximately 21 percent of retiring Metro-North employees stopped working and began receiving RRB disability benefits.
During the period 2004 through 2008, just three doctors—including LESNIEWSKI—were responsible for approximately 86 percent of all the disability claims submitted by LIRR retirees. Another of these doctors, Dr. Peter J. Ajemian, pled guilty for his participation in the fraud and was sentenced in May 2013 to eight years in prison.
The Disability Doctor
LESNIEWSKI, a board-certified orthopedist, recommended more than 130 LIRR workers for disability benefits. He used his medical practice as a disability mill, preparing fraudulent medical narratives for LIRR retirees well before the employees’ planned retirement dates so that the narratives could be submitted to the RRB upon retirement. These medical narratives were fabricated or grossly exaggerated in order to substantiate the LIRR employees’ bogus claims of disability. Many of the purportedly “objective” findings from the medical tests LESNIEWSKI conducted showed nothing more than normal—and non-disabling—degenerative changes one would expect to see in patients within the relevant age bracket. And in many cases, LESNIEWSKI failed to provide any meaningful treatment for the LIRR employees’ purported ailments. He received approximately $850 to $1,000, often in cash, for these fraudulent assessments and narratives, as well as hundreds of thousands of dollars in health insurance payments for unnecessary medical tests and fees for preparing fraudulent medical support for the claimed disabilities.
In one instance, a LIRR employee expressed concern to LESNIEWSKI about losing his disability benefits, and told him in writing, “Once I get shoulder fixed, Railroad Retirement may withdraw disability benefits.” In response, LESNIEWSKI performed tests on the employee’s back and knees, and within weeks, had created a paper trail falsely documenting supposedly disabling conditions in the employee’s back, hands, and knee.
The Disability Consultants
LIRR employees also utilized the services of so-called “disability consultants,” including BARAN and RUTIGLIANO, to further increase their chances of fraudulently obtaining disability benefits from the RRB. For approximately $1,000, typically paid in cash, BARAN and RUTIGLIANO falsely filled out disability applications on behalf of their LIRR clients to maximize the likelihood that they would receive disability benefits. Among other things, the defendants filled their clients’ disability applications with false, cookie-cutter descriptions of their physical condition and ability to work. The defendants also hid the income they were receiving from their respective disability consulting businesses.
Before working as a disability consultant, BARAN served as an RRB district office manager in Westbury, New York, until her retirement in December 2006. BARAN’s husband, an LIRR retiree, receives RRB disability benefits based on a medical assessment done by LESNIEWSKI. The disability application submitted by BARAN’s husband claimed that he was too disabled to work and that he had difficulty performing such basic daily activities as sitting, standing, walking, writing, and even tying his shoes. However, during his retirement, BARAN’S husband regularly played golf and traveled around the world with her. BARAN also referred her LIRR employee clients to LESNIEWSKI and the other disability doctors.
RUTIGLIANO is a former LIRR conductor and union president who applied for and received an RRB occupational disability after his retirement in 1999. In the year prior to retiring, he worked substantial hours of overtime, took no sick leave whatsoever, and then applied for a disability with a narrative LESNIEWSKI prepared. Moreover, while receiving disability benefits from the RRB, RUTIGLIANO regularly played golf year-round.
BARAN, 65, of East Meadow, New York, was convicted of two counts of conspiracy to commit mail fraud, wire fraud and health care fraud, two counts of conspiracy to defraud the RRB, two counts of health care fraud, two counts of mail fraud, and two counts of wire fraud.
RUTIGLIANO, 66, of Holtsville, New York, was convicted of two counts of conspiracy to commit mail fraud, wire fraud and health care fraud, two counts of conspiracy to defraud the RRB, three counts of mail fraud, three counts of wire fraud, and one count of making a false statement. The count of making false statements carries a maximum sentence of five years in prison.
LESNIEWSKI, BARAN and RUTIGLIANO will be sentenced by U.S. District Judge Victor Marrero on December 13, 2013 at 3 p.m..
Thirty-three people have been charged in connection with the LIRR disability fraud scheme, 25 of whom have pled guilty and three of whom have now been convicted after trial. The charges against the remaining defendants, Kevin Neville, Donald Alevas, Frederick Catalano, Jr, Thomas Coscetta, and Michael Costanza, are merely allegations, and they are all presumed innocent unless and until proven guilty.
Mr. Bharara praised the work of the RRB-OIG, the FBI, and the MTA-OIG for their outstanding work in the investigation, which he noted is continuing. He also acknowledged the previous investigation conducted by the New York State Attorney General’s Office into these pension fraud issues.
The case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Justin Weddle, Nicole Friedlander, and Daniel Tehrani are in charge of the prosecution.
Manhattan U.S. Attorney Preet Bharara said: “Today, Peter Lesniewski, Marie Baran, and Joseph Rutigliano stand convicted of participating in the massive LIRR disability fraud that turned a safety net for the truly disabled into a gravy train for the corrupt. Dr. Lesniewski enabled hundreds of LIRR employees to dupe the government through medical paper trails filled with bogus diagnoses, while Baran and Rutigliano, in exchange for payments of thousands of dollars, helped lard the employees’ disability benefit applications with lies. Lesniewski, Baran, and Rutigliano served as engines of this fraud that led to a staggering 79 percent of LIRR retirees from 1998 to 2011 receiving federal disability benefits, costing the government hundreds of millions of dollars. Like the 25 people who previously pled guilty, these defendants now have been brought to justice and will pay for their central roles in this brazen scheme.”
According to the charging documents in this case and evidence presented at trial:
The LIRR Disability Fraud Scheme
The U.S. Railroad Retirement Board (RRB) is an independent U.S. agency that administers benefit programs, including disability benefits, for the nation’s railroad workers and their families. A unique LIRR contract allowed employees to retire at the relatively young age of 50—the age of eligibility has since changed to 55—if they had been employed by the LIRR for at least 20 years. Eligible employees are entitled to receive an LIRR pension, which is a portion of the full retirement payment for which they are eligible at 65. In addition, at full retirement age (between age 60 and age 65 depending on years of service), they are eligible to receive an RRB retirement pension. For LIRR workers who retired at 50 with only an LIRR pension, they would receive less than their prior salary and substantially lower pension payments than those to which they would be entitled at full retirement age. However, LIRR employees who retired and claimed disability could receive a disability payment from the RRB on top of their LIRR pension, regardless of age. A retiree’s LIRR pension, in combination with RRB disability payments, can be roughly equivalent to the base salary earned during his or her career.
Hundreds of LIRR employees exploited the overlap between the LIRR pension and the RRB disability program by pre-planning the date on which they would falsely declare themselves disabled so that it would coincide with their projected retirement date. These false statements, made under penalty of prosecution in disability applications, allowed LIRR employees to retire as early as age 50 with an LIRR pension, supplemented by the fraudulently obtained RRB disability annuity. From 1998 through 2011, approximately 79 percent of LIRR retirees obtained federal disability when they retired. By contrast, during this same period, only approximately 21 percent of retiring Metro-North employees stopped working and began receiving RRB disability benefits.
During the period 2004 through 2008, just three doctors—including LESNIEWSKI—were responsible for approximately 86 percent of all the disability claims submitted by LIRR retirees. Another of these doctors, Dr. Peter J. Ajemian, pled guilty for his participation in the fraud and was sentenced in May 2013 to eight years in prison.
The Disability Doctor
LESNIEWSKI, a board-certified orthopedist, recommended more than 130 LIRR workers for disability benefits. He used his medical practice as a disability mill, preparing fraudulent medical narratives for LIRR retirees well before the employees’ planned retirement dates so that the narratives could be submitted to the RRB upon retirement. These medical narratives were fabricated or grossly exaggerated in order to substantiate the LIRR employees’ bogus claims of disability. Many of the purportedly “objective” findings from the medical tests LESNIEWSKI conducted showed nothing more than normal—and non-disabling—degenerative changes one would expect to see in patients within the relevant age bracket. And in many cases, LESNIEWSKI failed to provide any meaningful treatment for the LIRR employees’ purported ailments. He received approximately $850 to $1,000, often in cash, for these fraudulent assessments and narratives, as well as hundreds of thousands of dollars in health insurance payments for unnecessary medical tests and fees for preparing fraudulent medical support for the claimed disabilities.
In one instance, a LIRR employee expressed concern to LESNIEWSKI about losing his disability benefits, and told him in writing, “Once I get shoulder fixed, Railroad Retirement may withdraw disability benefits.” In response, LESNIEWSKI performed tests on the employee’s back and knees, and within weeks, had created a paper trail falsely documenting supposedly disabling conditions in the employee’s back, hands, and knee.
The Disability Consultants
LIRR employees also utilized the services of so-called “disability consultants,” including BARAN and RUTIGLIANO, to further increase their chances of fraudulently obtaining disability benefits from the RRB. For approximately $1,000, typically paid in cash, BARAN and RUTIGLIANO falsely filled out disability applications on behalf of their LIRR clients to maximize the likelihood that they would receive disability benefits. Among other things, the defendants filled their clients’ disability applications with false, cookie-cutter descriptions of their physical condition and ability to work. The defendants also hid the income they were receiving from their respective disability consulting businesses.
Before working as a disability consultant, BARAN served as an RRB district office manager in Westbury, New York, until her retirement in December 2006. BARAN’s husband, an LIRR retiree, receives RRB disability benefits based on a medical assessment done by LESNIEWSKI. The disability application submitted by BARAN’s husband claimed that he was too disabled to work and that he had difficulty performing such basic daily activities as sitting, standing, walking, writing, and even tying his shoes. However, during his retirement, BARAN’S husband regularly played golf and traveled around the world with her. BARAN also referred her LIRR employee clients to LESNIEWSKI and the other disability doctors.
RUTIGLIANO is a former LIRR conductor and union president who applied for and received an RRB occupational disability after his retirement in 1999. In the year prior to retiring, he worked substantial hours of overtime, took no sick leave whatsoever, and then applied for a disability with a narrative LESNIEWSKI prepared. Moreover, while receiving disability benefits from the RRB, RUTIGLIANO regularly played golf year-round.
* * *
LESNIEWSKI, 62, of Rockville Centre, New York, was convicted of one count of conspiracy to commit mail fraud, wire fraud and health care fraud, which carries a maximum sentence of 20 years in prison, one count of conspiracy to defraud the RRB, which carries a maximum sentence of five years in prison, two counts of health care fraud, two counts of mail fraud, and four counts of wire fraud. Each of the health care fraud counts carries a maximum sentence of 10 years in prison, and each count of mail fraud and wire fraud carries a maximum sentence of 20 years in prison.BARAN, 65, of East Meadow, New York, was convicted of two counts of conspiracy to commit mail fraud, wire fraud and health care fraud, two counts of conspiracy to defraud the RRB, two counts of health care fraud, two counts of mail fraud, and two counts of wire fraud.
RUTIGLIANO, 66, of Holtsville, New York, was convicted of two counts of conspiracy to commit mail fraud, wire fraud and health care fraud, two counts of conspiracy to defraud the RRB, three counts of mail fraud, three counts of wire fraud, and one count of making a false statement. The count of making false statements carries a maximum sentence of five years in prison.
LESNIEWSKI, BARAN and RUTIGLIANO will be sentenced by U.S. District Judge Victor Marrero on December 13, 2013 at 3 p.m..
Thirty-three people have been charged in connection with the LIRR disability fraud scheme, 25 of whom have pled guilty and three of whom have now been convicted after trial. The charges against the remaining defendants, Kevin Neville, Donald Alevas, Frederick Catalano, Jr, Thomas Coscetta, and Michael Costanza, are merely allegations, and they are all presumed innocent unless and until proven guilty.
Mr. Bharara praised the work of the RRB-OIG, the FBI, and the MTA-OIG for their outstanding work in the investigation, which he noted is continuing. He also acknowledged the previous investigation conducted by the New York State Attorney General’s Office into these pension fraud issues.
The case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Justin Weddle, Nicole Friedlander, and Daniel Tehrani are in charge of the prosecution.
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