A federal appeals court Monday affirmed the convictions of three leaders of a massive disability fraud scheme at the Long Island Rail Road, ruling that the failure of regulators to crack down on the scheme didn't mean it wasn't a crime.

The Second U.S. Circuit Court of Appeals upheld the convictions despite agreeing with the defense that it was "remarkable" that an "epidemic" of fraudulent claims did not raise "red flags" at the federal Railroad Retirement Board.

"However, this is no defense to the defendants' fraud," the judges wrote. "If the RRB members were stupefied, then they were defrauded; if they were complicit (or co-conspirators), that would have been a ground for prosecution, not a defense."

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The appeal was filed by Dr. Peter Lesniewski, 64, a Rockville Centre orthopedist convicted of signing off on many phony claims, and two consultants -- Joseph Rutigliano, 68, of Holtsville, a former LIRR union official, and Marie Baran, 67, of East Meadow, a former retirement board supervisor.

They were found guilty in federal court in Manhattan in 2013 of being key players in a decade-long scam to submit bogus disability claims to supplement early retirement pensions for hundreds of ex-workers, a scheme that prosecutors said cost the retirement system hundreds of millions of dollars.

All three are serving federal prison sentences. Lesniewski and Rutigliano are due to be released in 2021, and Baran's sentence is scheduled to end in 2018. Altogether 33 doctors, consultants and retirees were convicted of being part of the scam, and dozens more gave up their pensions voluntarily in return for immunity.

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Lesniewski, Rutigliano and Baran were three of only five defendants who went to trial. U.S. District Judge Victor Marrero prohibited evidence that the LIRR and the RRB knew what was going on and turned a blind eye, or applied a loose definition of "occupational disability" that encouraged false claims.

While upholding the trial judge's ruling, the three-judge appeals panel made it clear that it was not impressed by the performance of regulators.

"Fraud at the LIRR was epidemic; the evidence showed that a whopping 79 percent of LIRR employees retired on disability; this number contrasts with 21 percent for employees of Metro-North," the panel noted. "It is therefore remarkable, as the defendants argued, that these percentages raised no red flags for the members of the RRB."

The appeals court also rejected various other claims from the defendants, including arguments that the case should have been prosecuted in the federal judicial district covering Long Island instead of Manhattan, that the criminal scheme fell outside the statute of limitations, and that testimony about purportedly disabled retirees golfing unfairly prejudiced some defendants.