More than a hundred people were indicted today for fraudulently obtaining Social Security disability benefits, constituting one of the biggest such fraud busts of all time.
At a news conference in Manhattan Tuesday afternoon, federal and local officials described a 26-year-old scheme through which 102 people — including 72 New York City Police retirees and eight retired New York firefighters — allegedly collected Social Security Disability Insurance (SSDI) fraudulently. A number of the 102 indicted have already been arrested.
Manhattan district attorney Cyrus R. Vance Jr. said at the news conference that about half of the participants fraudulently claimed they had suffered a mental disability as a result of September 11.
The Social Security Administration paid out about $21.5 million in benefits to the defendants indicted today, according to the indictment filed Tuesday. On average, the defendants collected $210,000 in SSDI payments, according to the indictment. Eventually up to 1,000 indictments, the NYPD says, could be coming.
SSDI is supposed to be given only to those whose physical or mental ailments are so severe that they are incapable of performing any work whatsoever. Yet according to the indictment, some of those accused of fraud held jobs even as they collected Social Security disability payments; for example, one allegedly worked as a mixed-martial-arts instructor, and another piloted helicopters.
Photos and other evidence presented by the District Attorney’s office appeared to show defendants engaging in rigorous activities, including riding a motorcycle, training for a marathon, golfing, riding a jetski, and hauling in an enormous catch while deep-sea fishing.
The bust centers around four principal defendants: Raymond Lavallee, a disability attorney who once served as a Nassau County prosecutor and head of the county’s rackets bureau; Thomas Hale, a disability consultant who allegedly oversaw the scheme; John Minerva, a former cop and detectives’-union disability consultant; and Joseph Esposito, a retired New York City police officer.
The defendants seeking to fraudulently obtain disability benefits would first contact Esposito, “who is known within the law enforcement community as someone able to assist individuals in obtaining SSDI benefits in addition to their NYPD, FDNY or other retirement benefits,” the indictment says.
Esposito often advised those seeking disability that they would need to cite a psychiatric justification, “which they were instructed, could be created based on the events that occurred while they had worked, most often upon the September 11, 2001, terrorist attacks,” according to the indictment.
Esposito or Minerva would allegedly introduce those seeking disability to Hale, who, along with Lavallee, would file the SSDI application on their behalf.
Before filing that application, Hale and Esposito would arrange for the claimants to meet with designated psychiatrists or psychologists “to build a record of treatment for a psychiatric condition which would warrant an award of SSDI benefits,” according to the indictment, which noted that many of the applications followed distinctive patterns and “almost always listed the same diagnostic conclusions.” Many of the applications include identical phrasing and the same handwriting, which investigators say they have identified as Hale’s.
Before disability claimants met with SSA reps, Esposito would allegedly coach applicants on how to fake symptoms, appear properly disheveled, and fail concentration tests.
The court documents excerpted a phone conversation from January 2013 between Esposito and one applicant in which he told her how to answer the SSA’s examiners. Esposito said that if they asked her to “spell the word ‘world,’ so you go ‘W-R-L-D.’ Then they’re gonna say ‘Spell it backwards.’ You think about it, and you can’t spell it backwards.” He further instructed her to “put your head down now and then, don’t answer right away. You know, pause for a second. You’re just trying to show that, you know, you’re depressed. . . . And if [you] can, you pretend you have panic attacks?”
Once a claimant was awarded disability, the SSA would pay Lavallee $6,000 for legal representation. Those who had succeeded in receiving disability were allegedly expected to give a cash kickback to Lavallee, Hale, Esposito, and Minerva.
Esposito even allegedly instructed them on how to withdraw cash without triggering alerts for suspicious activity. The district attorney’s office has estimated that the four men running the scheme together received between $20,000 and $50,000 in cash payments for each person they helped fraudulently receive disability.
Once defendants aged into Social Security retirement benefits and were no longer eligible for disability payments, they would quit getting psychiatric care, “suggesting the medical claims had been bogus,” the indictment says.
New York City police commissioner William Bratton said at the news conference that the investigation is not yet complete, and “it is likely that more arrests will come in the coming months.”
— Jillian Kay Melchior is a Thomas L. Rhodes Fellow for the Franklin Center for Government and Public Integrity.