Manhattan U.S. Attorney Announces Charges Against Additional LIRR Retiree for Participating in Massive Disability Fraud Scheme

NEW YORK, July 6 -- The U.S. Attorney for the Southern District of New York issued the following news release:

Preet Bharara, the United States Attorney for the Southern District of New York, Martin J. Dickman, Inspector General of the Railroad Retirement Board ("RRB-OIG"), Janice K. Fedarcyk, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation ("FBI"), and Barry L. Kluger, Inspector General of the New York State Metropolitan Transportation Authority ("MTA-OIG"), announced charges today against DONALD ALEVAS, the former LIRR director of shop equipment, engineering, and environmental compliance, in connection with his participation in a massive fraud scheme in which Long Island Railroad ("LIRR") workers allegedly claimed to be disabled upon early retirement so that they could receive disability benefits to which they were not entitled. ALEVAS was arrested this morning, and will be presented in Manhattan federal court before U.S. Magistrate Judge Debra Freeman this afternoon. He is the 22nd person to be charged in connection with this scheme. Other defendants include two doctors and an office manager for one of the doctors who were allegedly involved in falsely diagnosing retiring LIRR workers as disabled, two "facilitators" who allegedly served as liaisons between retiring workers and the participating doctors, and 18 LIRR retirees, one of whom was also charged as a facilitator.

Manhattan U.S. Attorney Preet Bharara said: "As today's arrest makes abundantly clear, our investigation of the massive fraud that was allegedly perpetrated on the LIRR and that cost it hundreds of millions of dollars in potentially fraudulent benefits is very much ongoing. It should also make clear that we will prosecute those against whom we believe we have the evidence to prove that they received benefits to which they were not entitled - Donald Alevas makes that number 22, and he will not be the last. We strongly encourage any LIRR retiree who lied to get disability benefits to come forward and participate in the Voluntary Disclosure program while they still have the chance."

RRB-OIG Inspector General Martin J. Dickman said: "My office, in partnership with the U.S. Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation, remain committed to the investigation and prosecution of individuals who have submitted false information to the U.S. Railroad Retirement Board. The recent arrest is a testament to the tireless commitment of the dedicated professionals assigned to this ongoing investigation. I applaud their outstanding efforts and thank them for their unwavering resolve."

FBI Assistant Director-in-Charge Janice K. Fedarcyk said: "Mr. Alevas is the latest LIRR retiree to be charged with engineering a generous but fraudulent disability pension. He joins nearly two dozen others previously charged with serious crimes in connection with the ongoing investigation. We know he will not be the last. We encourage others to take advantage of the voluntary disclosure program rather than end up in handcuffs facing prison time."

MTA-OIG Inspector General Barry L. Kluger said: "Once again I wish to thank U.S. Attorney Bharara, his staff, and our other partners in this ongoing investigation and prosecution, for their dedication to combating pension fraud. The Voluntary Disclosure Program previously announced by the U.S. Attorney, the Long Island Railroad, and the federal Railroad Retirement Board, and extended today, remains a fair but still limited opportunity, in the public interest, for individuals who fraudulently obtained federal disability pensions to come forward, admit their wrongdoing, and thereby avoid the harsh reality of arrest and criminal prosecution. We again strongly advise all such individuals to do so now before their time runs out."

The LIRR Disability Fraud Scheme

The following allegations are based on public filings in the LIRR cases, including the Complaint against ALEVAS unsealed today, as well as statements made in open court:

The 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 allows employees to retire at the relatively young age of 50 if they have been employed by the LIRR for at least 20 years. It is the only commuter railroad in the United States that offers a retirement pension at that age. Eligible employees are entitled to receive a LIRR pension, which is a portion of the full retirement payment for which they are eligible at 65. At 65, they also receive an RRB pension. If an LIRR worker retires at 50, he or she will receive less than his or her prior salary and substantially lower pension payments than those to which they will be entitled at 65. However, an LIRR employee who retires and claims disability may 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 have 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 oath 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 2004 through 2008, 61% of LIRR employees who claimed an RRB benefit were between the ages of 50 and 55, and each received a disability award. In contrast, only 7% of employees at Metro-North who stopped working and received disability benefits during the same time period were between the ages of 50 and 55.

Three New York-area doctors accounted for 86% of the LIRR disability applications filed prior to 2008: Peter J. Ajemian, Peter Lesniewski, and a third unnamed doctor ("Disability Doctor-3"), who is recently deceased. Ajemian, with the assistance of his office manager, Maria Rusin, and Lesniewski, used their respective medical practices as "disability mills," 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 recommend a set of restrictions that, if legitimate, would render it impossible for the LIRR employees to continue in their occupations. Many of the purportedly "objective" findings from the tests they conducted showed nothing more than normal degenerative changes one would expect to see in patients within the relevant age bracket.

ALEVAS's Fraud

DONALD ALEVAS was the director of shop equipment, engineering, and environmental compliance at the LIRR. On or about November 1, 2008 - roughly one month after his 50th birthday - ALEVAS retired from the LIRR, claiming that he had an occupational disability and that he had become disabled as of August 30, 2008. In so doing, ALEVAS ensured that each year he would receive tens of thousands of dollars in additional benefits. For example, in 2010, ALEVAS received approximately $55,590 in LIRR pension payments and approximately $33,600 in RRB disability payments, for a total of $89,190. Those payments nearly matched the salary he received in his final year working for the LIRR.

ALEVAS long planned to retire in November 2008, and it was only as that retirement date drew closer that he began seeing doctors or indicating that he had any disability affecting his work. At least as early as January 2007, ALEVAS asked for pension estimates based on a "planned retirement date" of November 1, 2008. Thereafter, ALEVAS exchanged emails with a co-conspirator about his plan to become disabled as of August 30, 2008, and asked how he should handle telling LIRR that he was disabled. ALEVAS also began consulting with Dr. Peter Ajemian in December 2007, and paid him to falsely claim that he suffered from a variety of disabilities including hearing loss and neck and back pain. As further proof of ALEVAS's deliberate scheme, the medical notes upon which he ultimately relied to claim his total disability were written in connection with a medical examination by Dr. Ajemian that never even occurred. Specifically, records from Ajemian's medical practice include "notes" memorializing his examination of ALEVAS on October 28, 2008, at which time he described ALEVAS's need to take disability leave because of "neck and back pain." However Ajemian had stopped working at that medical practice in September 2008, so the notes were a fiction that were timed to justify his planned retirement.

At the same time ALEVAS was developing a record to support his disability claim so that he could receive RRB disability benefits, he was also building a record that would qualify him for private disability insurance. Specifically, in August 2007, he submitted an application to a private insurer in which he stated that he was not disabled. He also informed a different doctor - at the same time he was seeing Ajemian - that he had "started side jobs in his home" including "handy-man and small construction work." ALEVAS's plan was to collect disability benefits from both the RRB and his private insurance policy.

Extension of the Voluntary Disclosure and Disposition Program

On May 22, 2012, the U.S. Attorney's Office, in partnership with the RRB and the LIRR, announced a voluntary disclosure and disposition program. Under the program, the U.S. Attorney's Office would agree not to prosecute, or file a civil action against, any LIRR retiree who voluntarily comes forward and admits that he or she obtained RRB disability benefits by making false and/or misleading statements to the RRB, and agrees to give up his or her right to certain RRB disability benefits. In addition, the RRB would agree not to commence any administrative proceedings seeking the repayment of any disability benefits that are the subject of this program, and the LIRR would agree not to seek forfeiture of LIRR Company Pension Plan(s) benefits. Under the Early Version of the program, any participating LIRR retiree would have to give up his or her right to future disability benefits, while under the Standard Version of the program, any participating LIRR retiree would have to give up not only future disability benefits, but 50% of the RRB disability benefits he or she has already received.

At the time of the original announcement, the deadline for participation in the Early Program was July 6, 2012. In light of continuing inquiries received by the U.S. Attorney's Office, as well as the need to ensure that all eligible LIRR retirees have sufficient time to make an informed decision, the deadline for the Early Version of the program will now be September 14, 2012. The deadline for the Standard Version of the program will now be October 15, 2012.

ALEVAS, 53, of Patchogue, New York, faces one count of conspiracy to commit mail fraud and health care fraud, and one count of mail fraud. Each charge carries a maximum sentence of 20 years in prison.

Manhattan U.S. Attorney Bharara praised the RRB-OIG, the FBI, and the MTA-OIG for their outstanding work in the investigation, which he noted is ongoing. He also acknowledged the previous investigation conducted by the New York State Attorney General's Office into these pension fraud issues.

The Office's Complex Frauds Unit is handling the case. Assistant U.S. Attorneys Edward A. Imperatore and Tatiana Martins are in charge of the prosecution.

Peter J. Ajemian, Peter Lesniewski, Maria Rusin, Marie Baran, Joseph Rutigliano, Joseph Rutigliano, Gregory Noone, Regina Walsh, Sharon Falloon, Gary Satin, Steven Gagliano, Richard Ehrlinger, Brian Delgiorno, Philip Pulsonetti, Gregory Bianchini, Franklin Plaia, Michael Stavola, Michael Dasaro, Karl Brittell, Kevin Nugent, Gary Supper, and Thomas Delalla were previously charged in connection with the LIRR disability fraud scheme. The charges against them remain pending and the defendants are presumed innocent unless and until proven guilty.

TNS LE-120707-JF78-3942540 StaffFurigay