Four Nassau County men were the masterminds of a scheme that defrauded taxpayers of an estimated $400 million by coaching faked mental problems to get Social Security payments for as many as 1,000 ineligible people during the past quarter-century, officials said Tuesday.
The four architects of the scheme, and 102 recipients of the benefits, were indicted on grand larceny charges, Manhattan District Attorney Cyrus R. Vance Jr. said Tuesday. He said those 102 accounted for $23 million in losses. More indictments are likely as the investigation continues.
"The brazenness is shocking," Vance said at a Manhattan news conference with Police Commissioner William Bratton and officials of the Social Security Administration.
Those indicted Tuesday on charges of obtaining fraudulent benefits included 72 retired NYPD officers, eight retired New York City firefighters, five retired city correction officers and one retired Nassau police officer, Vance said.
The retirees claimed they were suffering from mental problems so severe they could not work, and often claimed they could not bear to leave their homes or even operate their home computers, he said.
But Vance said records obtained by investigators showed one man piloted a helicopter, another performed mixed martial arts and another worked a cannoli stand at the San Gennaro Festival in Manhattan. Others worked at construction, landscaping and other jobs, he said, and one was a baker.
Far from being homebound, bank records show some of the recipients going on vacations and engaging in other activities, and numerous Facebook pages and Twitter accounts showed they used computers, he said.
Vance identified the four ringleaders as:
Attorney Raymond Lavallee, 83, of Massapequa, a former FBI agent and former Nassau County prosecutor;
Retired NYPD officer Thomas Hale, 89, of Bellmore;
Retired NYPD Det. John Minerva, 61, of Malverne, a consultant to the Detectives' Endowment Association, a union representing NYPD detectives; and
Retired NYPD Officer Joseph Esposito, 70, of Valley Stream.
Each is charged with first- and second-degree grand larceny and second-degree attempted grand larceny and faces up to 25 years in prison if convicted on the most serious charges.
Most of the defendants entered pleas of not guilty at their arraignments before Justice Daniel Fitzgerald in State Supreme Court in Manhattan. The four accused ringleaders posted bonds in amounts negotiated with prosecutors earlier.
Hale's lawyer, Joseph Conway of Mineola, said his client "denies the allegations . . . each and every charge." Conway said Hale's business, Bellmore-based TJH Inc., helps Social Security claimants fill out forms in order to apply for benefits. Attorneys for the three other men said their clients are not guilty.
Court documents said Esposito was "known in the law enforcement community" as someone who could help get disability benefits and that he and Minerva coached applicants on how to act and what to say when they were interviewed by doctors and the government workers.
The documents say applicants were instructed to tell the interviewer that they could not sleep at night, took naps during the day and could not concentrate. If asked to spell a word, they should get it wrong, and they should avoid eye contact, the documents said.
Records show Minerva and Esposito would refer applicants to Lavallee, an attorney who previously served as assistant district attorney and chief of the Rackets Bureau in the Nassau County district attorney's office, and Hale, a key manager of the scheme under Lavallee, to submit the disability applications.
The scheme began to unravel in 2008, when someone questioned how a retired police officer could be mentally fit to hold a pistol license and be mentally incapacitated enough to qualify for disability benefits, officials said.
Vance declined to say why no medical or mental health practitioners were charged, saying the investigation was continuing.
Prosecutors said those charged collected an average ranging from $30,000 to $50,000 a year, and some collected nearly $500,000 because their payments began back in 1988.
Many said their conditions resulted from the Sept. 11, 2001, terrorist attacks, according to court papers, but Vance said there was no documentation supporting those claims.
After the claimants received their retroactive Social Security disability payments they then paid "secret kickbacks" to Esposito or Minerva, prosecutors said.
Those one-time payments ranged from $20,000 to $50,000, Vance said, but they were done either in cash or in small bank withdrawals to escape notice.
With Gary Dymski, Anthony M. DeStefano, Joan Gralla
and Maria Alvarez
HOW IT WORKED
Four men are accused of helping hundreds of people get Social Security disability benefits by coaching them to fail memory tests, avoid eye contact, act disoriented and even fake a panic attack, according to court documents and officials.
One accused ringleader said in a conversation recorded by investigators that if the applicants were asked to spell the word "world," they should say "W-R-L-D."
"Then they're gonna say: 'spell it backwards,' " the ringleader advised. "You think about it, and can't spell it backwards," the court document said.
If the interviewer told them to remember three items -- a spoon, a fork and a dish -- and then asked about the items later, "You remember one of them."
-- William Murphy
THE ACCUSED RINGLEADERS
Raymond Lavallee, 83, of Massapequa, is accused of overseeing the operation to solicit and assist retired police officers and firefighters in falsely claiming disabilities. Prosecutors allege Lavallee pocketed $6,000 in government funds as attorney fees for every successful fraudulent claim, in addition to a share in the $20,000 to $50,000 one-time payments that the claimants paid the men. About $6,000 in cash was seized from Lavallee's home and another $2,000 from his safe-deposit box, prosecutors said.
Thomas Hale, 89, of Bellmore, also oversaw the operation, according to prosecutors, who allege he coached retirees on how to fool doctors into determining that they were suffering depression and anxiety. Hale also shared in the kickbacks, which prosecutors allege, were transferred to him from the other defendants. Hale operates from his home TJH Inc., a consulting company that helped the Social Security claimants fill out forms in order to apply for benefits. About $51,000 in cash and Social Security papers referring to the applicants was seized from his home-office, prosecutors said.
John Minerva, 61, of Malverne, is accused of obtaining psychiatrists and psychologists to diagnose conditions that would warrant social security benefits. Minerva, prosecutors said, obtained kickbacks directly from retirees and shared them with his co-defendants. Minerva is a disability consultant in the pension department for NYPD's detective's union. He also is the union's representative to the NYPD's Article Two Medical Board, which reviews applications for an NYPD disability pension. From 1973 to 1984, he was an NYPD officer. Investigators seized $60,000 from his home and another $325,000 from his safe-deposit box, prosecutors said.
Joseph Esposito, 70, of Valley Stream, helped coach the retirees on how to present psychiatric issues, prosecutors said, and took kickbacks. According to an intercepted phone call, Esposito suggested applicants "pretend" to have "panic attacks" when meeting with Social Security officials. Esposito, who worked at the NYPD from 1973 to 1990, filed a claim in September 1990, when he was 46, and received a three-quarter disability retirement from the NYPD based on injuries in two line-of-duty car accidents. He began receiving Social Security benefits in October 1991 based on "mood disorders." He has received $300,000 in Social Security benefits for himself, more than $13,000 for his wife and nearly $114,000 for his children. Prosecutors say $62,000 and a ledger with the applicants' names and purported conditions were seized from his residence. $650,000 was seized from a safe-deposit box that prosecutor say belongs to him.
-- Nicole Fuller
SOURCES: New York district attorney, defense attorneys