Federal prosecutors responsible for Long Island in 2008 decided against filing charges after investigating the same alleged scheme by LIRR retirees to make phony disability claims that is now the subject of a sprawling criminal indictment in Manhattan.
A new court filing by prosecutors in the Southern District of New York acknowledges that the Eastern District of New York started the probe "at least as of" September 2008, presented evidence to a grand jury and used many of the same investigators from the FBI, the MTA and the federal Railroad Retirement Board behind the case ultimately brought in Manhattan.
The filing states that the Manhattan U.S. attorney took the case up after the other prosecutors rejected it, but argues that the reason why it was originally rejected is "work product" that defense lawyers aren't entitled to learn.
The Southern District office "did not request, and generally has not received . . . opinions of the (Eastern District) prosecutors as contained in memorandums and emails," wrote Southern District prosecutor Justin Weddle. He added that opinions about the Eastern District's decision to not prosecute "need not be disclosed."
A spokesman for Eastern District U.S. Attorney Loretta Lynch, whose office covers Nassau, Suffolk, Queens, Kings and Richmond counties, would not comment on why the case wasn't pursued. Benton Campbell, the U.S. attorney in 2008 who is now in private practice, declined to comment.
Manhattan federal prosecutors in October 2011 charged 11 Long Island Rail Road retirees, doctors and others with a scheme to file phony disability claims with the Railroad Retirement Board. They have subsequently charged 21 others and obtained four guilty pleas.
Southern District U.S. attorney Preet Bharara claims the scheme may have involved as many as 1,500 LIRR retirees who applied for phony disabilities, at a cost to the government of as much as $1 billion. His office has offered immunity from prosecution to anyone who admits wrongdoing and agrees to give up their disability payments. Forty-four people have signed up for the program, which expires Friday.
Defense lawyers argue the Eastern District's decision would reveal weaknesses in the prosecution case and exculpatory facts about their clients.
A legal expert said the different course followed by the two offices doesn't necessarily mean that the Southern District is pursuing an unsound case, or that the Eastern District conducted a faulty investigation.
U.S. attorneys have limited resources and may decide to prioritize different types of cases, said James Cohen, a criminal-law professor at Fordham University Law School, while law-enforcement agencies turned down by one prosecutor may turn to another to pursue a case.
"The Eastern District might have . . . decided they were going to spend their resources going after the Mafia, drug dealers and political corruption," Cohen said. "It reflects a difference in judgment in how each prosecutor wants to use their resources, and possibly also a difference of opinion on the strength of the case or the importance of the case," Cohen said.
"It's unusual," he said, "but not unheard of."
LIRR president Helena Williams declined to comment on the Eastern District's 2008 investigation.
The state attorney general's office also launched an investigation into LIRR disability applications in 2008. That investigation led to the arrest of one person -- former LIRR budget analyst Frederick Kreuder, who was accused of accepting cash from fellow employees in exchange for helping them file disability claims.
In December, 2009, a Nassau County Court judge dismissed most of the charges against Kreuder, stating that his actions may have been unethical, but were not illegal. State prosecutors subsequently dropped all chargesagainst Kreuder, who agreed in exchange to resign from the LIRR, file amended tax returns, pay a $1,500 penalty, and never work in the public sector again.
With Alfonso Castillo