Frederick Kreuder did not break the law by running a side business to help fellow Long Island Rail Road employees apply for federal disability benefits, but he should have paid taxes on the money he made in that venture, a Nassau County judge ruled Friday as he dismissed dozens of charges against the Bellmore man.
Kreuder, 50, is the only person to be criminally charged in state Attorney General Andrew Cuomo's ongoing investigation into unusually high disability application rates by employees of the nation's largest commuter railroad.
Kreuder's attorney, William Petrillo of Rockville Centre, said Judge John Kase's decision to dismiss 48 of the 53 charges in Kreuder's indictment was "a tremendous victory."
"This decision validates the fact that this prosecution is misguided, selective and a huge waste of taxpayer money," Petrillo said. "We look forward to a jury hearing what's left of this absurd case."
A spokesman for Cuomo's office said prosecutors are "reviewing the decision and considering our options."
Kreuder, a 20-year-plus veteran of the LIRR, has been suspended without pay from his job as a budget analyst since Cuomo's office arrested him in November 2008 on charges of official misconduct and receiving reward for official misconduct - both felonies. He faces a maximum of 1 1/3 to four years in prison on each count.
Cuomo's office and other law enforcement bodies have been investigating the U.S. Railroad Retirement Board since records surfaced last year showing that the board approves nearly all applications for occupational disability benefits. Federal records show that LIRR employees have filed for the benefits at a rate nearly 12 times higher than those of other railroads.
Prosecutors argued Kreuder violated his duties as a civil servant when he received $500 to $1,000 from each LIRR colleague he helped navigate the federal pension system. Kreuder steered LIRR employees to certain doctors, advised them on the best date to retire to maximize their benefits, and helped with paperwork, prosecutors said.
But Kase, in his ruling, wrote that while Kreuder's side business may have run "afoul of ethical considerations and duties imposed by ethical codes," it was not criminal.
The remaining charges of petty larceny and offering a false instrument for filing stem from prosecutors' allegations that Kreuder failed to pay less than $1,000 in taxes on the income he made from his side business. Prosecutors have said Kreuder made about $16,000 over four years in the venture.
In a statement Friday, the LIRR did not specifically address Kreuder's case, but said that it continues "to do everything in its power to make sure disability pensions are reserved for those who truly deserve them."