Doctors, Former Union Prez Arrested in $1 Billion Disability Scheme

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 (L.I.R.R.) workers made false disability pension claims that could have cost a federal pension agency about $1 billion, according to court papers and the New York Times.

Seven former railroad employees, the former union president, a former federal railroad pension agency employee, and one of the doctors (all accused of being co-conspirators) were arrested Thursday morning by F.B.I. agents and New York state investigators

There is another doctor involved who is reportedly expected to surrender soon.

They have been charged with mail fraud and conspiracy to commit health care fraud, according to a criminal complaint filed in the case.

The federal investigation was the result of sharp-eyed reports published by The New York Times in 2008 that “revealed systematic abuses of Railroad Retirement Board pensions by Long Island Rail Road workers.”

Allegedly, almost every career employee of the railroad was applying for and receiving disability payments, giving the L.I.R.R. a disability rate of three to four times that of the average railroad, reports the Times.

It was also discovered by the Times that retired railroad employees who had successfully claimed disability were regularly playing golf at a state-owned course without charge—a perquisite of their disability.

But that's nothing. Apparently, they weren't even trying to hide the fact that they all led healthy, disability-free lifestyles.

For instance, one former rail worker claimed he was unable to do any physical labor because of "severe and disabling pain in [the] back, shoulder & legs," but completed a 400-mile bike tour in northern New York in 2009, writes the Wall Street Journal.

But that’s not all.

The New York Times reports:

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 [emphases added].

And the Journal reports that one of the conspirators, Mr. Rutigliano, the former union president, worked more than 500 hours overtime in the year before he retired and took no sick leave, yet applied for disability benefits.

But why would the doctors go in on the scheme?

Allegedly, the doctors would charge around $800 to $1,200 in fees from each patient in return for prescribing unnecessary medical tests and physical therapy. The investigators then claim that the doctors would fabricate or grossly exaggerate medical assessments and built illness narratives to show the employees were unable to work.

By doing this, the doctors were able to collect millions of dollars in corrupt payments from patients and insurance companies, according to the 74-page complaint in the case.

"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 [emphasis added]," the complaint said.

Read the full report here.