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600 Long Island Rail Road Retirees to Lose Disability Pay in U.S. Inquiry

About 600 Long Island Rail Road retirees will lose their disability benefits after a federal agency voted last week to halt the payments, amid a sweeping investigation into what prosecutors have called a major disability fraud scheme, according to agency documents and officials.

The agency, the United States Railroad Retirement Board, which over more than a decade granted disability benefits to hundreds of railroad retirees based on fraudulent medical evidence with little scrutiny, took the action on Thursday during a five-minute meeting at its headquarters in Chicago. The vote approved procedures under which the board will cut off the benefits, which, officials said, are costing the agency $2 million a month.

Most of the retirees will continue to receive their railroad pensions, which are separate from the federal disability benefits.

A spokesman for the Retirement Board said in an e-mail message that he was unaware of any past actions by the 78-year-old federal agency to terminate disability benefits on anything approaching a similar scale. He said disability benefits had been cut off in individual cases, but he could not say how many.

The vote came four months after the Railroad Retirement Board cut off disability payments to 229 of the same retirees, but then quickly reinstated the payments to all those who asked for reconsideration, a total of 214, according to agency documents and e-mail messages from the spokesman, Michael P. Freeman.

The first terminations came several weeks after the doctor who submitted what prosecutors have said was the bogus medical evidence underlying the applications of the roughly 600 retired railroad workers pleaded guilty in federal court in Manhattan to fraud and conspiracy. The doctor, Peter J. Ajemian, told the judge in January that the retirees were not in fact disabled.

But under the new order, the payments to the 214 retirees who sought reconsideration will again be stopped. They, like other Long Island Rail Road retirees covered by the board’s order, can reapply and submit new medical evidence, the order said. But their benefits will not be reinstated while the board considers the applications.

Dr. Ajemian, who was sentenced to eight years in prison, is among 24 people — including retirees, another doctor and two facilitators — who since 2011 have pleaded guilty to federal charges resulting from of the investigation. Charges against eight other people indicted in the case are pending, and the investigation by the F.B.I. and federal prosecutors in Manhattan, officials have said, is continuing.

The federal investigation followed a series of articles in The New York Times published in 2008 that revealed systematic abuses of federal Railroad Retirement Board pensions by Long Island Rail Road workers.

Under the order voted by the board last week, it will halt disability payments roughly three months after the board notifies the retiree of the pending termination.

Joseph W. Ryan Jr., a criminal defense lawyer who represents one of the defendants in the case who is going to trial in the coming weeks, said he had been consulted by a number of people who were notified that their benefits were being terminated.

“It’s unfair and it’s contrary to the existing regulations,” Mr. Ryan said. “This board action seeks to vacate the retirees’ rights to reconsideration and that places a new burden on the retirees to reapply for what was awarded more than a decade ago.”

It was not immediately clear why the board chose to act last week after failing to do so for months. The board members refused to answer a reporter’s questions at the meeting and the agency’s spokesman, Michael P. Freeman, would respond to questions only via e-mail.

But five months ago, in a strongly worded memo, the Railroad Retirement Board’s inspector general, Martin J. Dickman, urged the board to stop the disability payments right away, citing their cost.

“It is imperative that the RRB take immediate action to terminate these benefits because failure to act will cost the RRB approximately $2 million dollars (sic) per month in improper payments,” Mr. Dickman wrote in the Feb. 1 memo.

A month later, Mr. Dickman followed up in a second memo to the agency’s general counsel, Karl T. Blank, to reiterate his position. In April, he wrote to the board a third time. Noting that he had heard about the requests for reconsideration by many of the retirees, he stressed that if Dr. Ajemian’s name “appears in any RRB disability application or on any supporting documentation,” the entire application “is tainted by Ajemian’s admitted fraud and nullified in its entirety.”

“It is my view,” he wrote, “that the benefits must be terminated without exception.” The last five words of the sentence were underlined in red pen.

In a statement, the Railroad Retirement Board said it was committed to ensuring that workers “who receive benefits under the Railroad Retirement Act are entitled to such benefits” and supported the prosecution of workers who obtain — or help others obtain — benefits through fraudulent means.

Beside the loss of their disability benefits and the continuing criminal investigation, the retired workers face an additional challenge. Federal prosecutors in Manhattan are still conducting a civil investigation into the disability benefits already paid out to the retirees, according to Mr. Dickman’s Feb. 1 memo, which could result in an effort to recover some or all of that money.

The L.I.R.R., which has cooperated with the authorities since the investigation began, said in a statement that federal disability benefits “should be reserved for those who are truly disabled.”

The railroad, it said, has “moved aggressively against those retirees who have pleaded guilty by seeking reductions in their L.I.R.R. pension benefits,” adding that six retirees from the railroad had agreed to 15 percent reductions in those pensions. The railroad is also negotiating with a number of others. “By pursuing reductions in L.I.R.R. pensions, the M.T.A. estimates it will save taxpayers $1.12 million over the retirees’ lifetime,” the statement said, referring to the railroad’s parent agency, the Metropolitan Transportation Authority.

Idalmy Carrera contributed reporting.

A version of this article appears in print on  , Section A, Page 18 of the New York edition with the headline: 600 Long Island Rail Road Retirees Lose Disability Pay in U.S. Inquiry. Order Reprints | Today’s Paper | Subscribe

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