Derailed: Feds charge 11 in LIRR scam

Federal authorities arrested 11 people, 10 of them Long Islanders and one East Meadow resident, last week and charged them with fraud for allegedly participating in a multimillion-dollar Long Island Rail Road scam.

A criminal complaint unsealed in federal court in Manhattan on Oct. 27 accused orthopedist Peter Lesniewski, 60, of Rockville Centre, and another physician of running “disability mills” that approved hundreds of false disability claims worth about $1 billion to the federal Railroad Retirement Board, which administers workers’ benefits. A doctor’s office manager, two facilitators — one a former LIRR union president and the other a one-time RRB official — and six LIRR retirees were also charged.

The scam ensured that LIRR workers, who can retire at age 50, would collect the RRB’s supplementary pension upon their retirement. Railroad workers usually don’t collect until age 65. To increase their chances of receiving disability benefits, LIRR employees turned for help to facilitators Joseph Rutigliano, of Holtsville, a former LIRR conductor and union president, and East Meadow resident Marie Baran, 64, who served for a time as an RRB district office manager in Westbury. The pair coached applicants on how to make false claims and on which doctors to see. Baran’s husband, an LIRR retiree, receives RRB benefits based on a medical assessment done by Lesniewski.

“The complaint … summarizes a bold and deceptive scheme involving a massive fraud,” said Diego Rodriguez, the special agent in charge for the FBI Criminal Division of New York. “One that played out for more than 10 years, culminated in the payout of over $300 million in fraudulently obtained annuity payments and served as a game where everyone who played was a winner — until today.”

The arrests followed a three-year probe into the high approval rate of disability pensions for retiring LIRR employees. According to the complaint, LIRR workers collected disability benefits at a rate 12 times higher than Metro-North workers.

The complaint charged that Lesniewski recommended 222 LIRR employees for disability benefits over the course of a decade, while Syosset orthopedist Peter Ajemian, 62 — with the help of his office manager, Maria Rusin — recommended some 839 workers for the benefits. A third, unidentified doctor, recently deceased, also participated in the scheme, according to Manhattan U.S. Attorney Preet Bharara. In return for the physicians’ participation, LIRR workers paid them between $800 and $1,200, often in cash. Through cash payments and billings to private insurers, Lesniewski collected about $750,000 and Ajemian collected $2.5 million. Some 587 LIRR employees who received false paperwork from the two physicians have already collected $121 million in RRB disability benefit payments, and are slated to receive more than $274 million in total.

According to the complaint, the three doctors accounted for 86 percent of disability claims filed between 1998 and 2011.

“This became a culture of sorts among the LIRR workers, who took to gathering in doctors’ waiting rooms bragging to each [other] about their disabilities while simultaneously talking about their golf game,” Rodriguez said.

“Benefit programs like the RRB’s disability pension program were designed to be a safety net for the truly disabled, not a feeding trough for the truly dishonest,” Bharara said. “And in these tough economic times … it is especially disheartening to think that railroad employees would tell a train of lies to pad their early retirements, and that a handful of doctors would traffic on the credibility of their profession to promote a culture of fraud.”

Rutigliano, who retired in 1999, had himself abused the system, according to Bharara. Lesniewski prepared a narrative in which he said that Rutigliano, 64, fractured his spine in 1988 and that his back pain was worsening over the years. The orthopedist offered no explanation for why the injury did not interfere with Rutigliano’s collection of overtime — in 1998 he worked more than 500 hours of overtime and took no sick leave. Additionally, law enforcement surveillance performed in 2008 showed Rutigliano playing golf twice a month.

The six LIRR retirees who were charged in the complaint are among hundreds who defrauded the RRB, according to Rodriguez.

Merrick resident Sharon Falloon, 56, who was an LIRR human resources manager, collects more than $90,000 in pension and disability benefits annually based on her claims that walking and standing cause her “disabling pain” and that stairs are “very difficult” for her. In January, however, Falloon was observed “vigorously” exercising at a gym, including 45 minutes in a step aerobic class.

Steve Gagliano, 55, of North Babylon, collects $76,810 yearly for a purported disability that he claimed rendered him unable to do any of the physical labor required in his job as a signalman because of “severe and disabling pain in back, shoulder and legs,” according to Bharara. In his false narrative, Lesniewski said that Gagliano was occupationally disabled. But in 2009, Gagliano allegedly participated in a 400-mile bike tour in upstate New York.

Gregory Noone, 62, of East Islip, a retired LIRR engineer manager, collects $105,000 annually. In his disability application, Noone claimed that he suffered severe pain when gripping and using simple hand tools and pain in his knees, shoulder and back from bending or crouching. But in 2008, he was seen playing tennis and golfing regularly — signing up to play on one golf course 140 times in a nine-month period.

Retiree Regina Walsh, 63, of New Hyde Park, was seen shoveling heavy snow; Gary Satin, 62, of North Carolina, was observed participating in landscaping work; and Richard Ehrlinger, 64, of Bay Shore, was seen engaging in heavy lifting.

Each of the accused faces a maximum of 20 years in prison for conspiracy to commit health care fraud and mail fraud.

LIRR President Helena Williams issued a statement last week saying that the railroad “condemns any fraudulent activity” and that it has been cooperating with the authorities. “We support their efforts to root out fraud,” Williams said.

The FBI’s investigation is continuing, according to Rodriguez, who urged others involved in the scam to come forward. “Who has better information about this scheme … than those who perpetrated it?” he said. “If you have this kind of firsthand information, we look forward to hearing from you. … For those who choose not to contact us, there’s a good chance we’ll be contacting you.”

To reach the FBI, call (212) 384-1000.