Two LIRR retirees found guilty of disability fraud

Former train maintenance crew foreman Frederick Catalano, 53, Former train maintenance crew foreman Frederick Catalano, 53, of Nesconset, and former conductor and transportation manager Michael Costanza, 60, of Merrick, were convicted of conspiracy and fraud. Photo Credit: Charles Eckert, 2013

advertisement | advertise on newsday

A Long Island Rail Road worker who claimed a disability only to pursue a jiujitsu black belt and another who went on to serve as a volunteer firefighter were convicted of conspiracy and fraud Thursday in federal court in Manhattan.

The verdict gave prosecutors a perfect record of 33 convictions for 33 defendants charged in an alleged decadelong conspiracy by hundreds of LIRR workers to claim phony disabilities that could have cost the federal Railroad Retirement Board $1 billion.

Manhattan U.S. Attorney Preet Bharara has not disclosed if any more cases are in the pipeline, and his office declined to comment on the verdict or whether the investigation is continuing.

The blue-collar workers convicted Thursday -- former maintenance crew foreman Fred Catalano, 52, of Nesconset, and former conductor and manager Michael Costanza, 60, of Merrick -- were stoic as the verdict was read but reacted emotionally afterward.

Costanza, whose nearly 10-year tenure as a North Merrick Fire District volunteer after claiming he was too disabled to work in 2004 was a central issue, cried with his family and was "distraught and disappointed," said his lawyer, Peter Tomao of Garden City.

Catalano, his wife and son, who all testified during the trial, sobbed together and expressed astonishment at the verdict, lamenting the outsized role a video of him demonstrating jiujitsu played during the trial.

advertisement | advertise on newsday

"I don't understand it," said Catalano, who claimed disabling back, neck and shoulder pain when he retired in 2011. "I saw doctors. They filled out the form. How could that not be reasonable doubt? If I wasn't qualified, why did they approve me?"

"He's being convicted because of his talents," said his son Jesse, 23, who testified that he and his dad had done jiujitsu together for 20 years.

"I can't believe it," added Catalano's wife, Alison. "They're wrong."

The prosecutions stemmed from revelations in 2008 that more than 90 percent of workers taking advantage of an early retirement plan at the LIRR were claiming disabilities to supplement their pensions, a rate far higher than Metro-North Railroad.

Beginning in 2011, Bharara's office brought a series of cases alleging a "culture of corruption" at the LIRR aided by three doctors running "disability mills" and a network of corrupt consultants. Most retirees pleaded guilty, and many became government witnesses.

Official probes blamed the LIRR and the retirement board for a lax system, but judges in the criminal cases said that wasn't a defense to fraud. In the only other trial, Dr. Peter Lesniewski and consultants Marie Baran and Joseph Rutigliano were convicted in August.

The verdict in the two-week trial of Costanza and Catalano came on the third day of deliberations. Jurors declined to comment, but a whiteboard visible in the jury room listed "jiujitsu" at the top of a list of evidence.

Catalano's lawyer, George Dazzo of Patchogue, had hoped testimony from his client's family and a treating chiropractor would sway the jury with its sincerity. But after meeting with jurors, he said Catalano's failure to disclose the jiujitsu to the retirement board, and hundreds of hours of overtime he worked just before retiring were critical factors.

advertisement | advertise on newsday

Dazzo and Tomao both said an appeal was likely. Tomao, who contended at trial that Costanza was mostly a supervisor at the fire district, said he believed that was the reason his client was singled out for prosecution from among hundreds of retirees.

"The government overstated what his role was and turned a voluntary service into evidence of criminality," Tomao said. "It's really a tragedy."

The LIRR hailed the verdict in a statement, calling the fraud scheme "a sad chapter of abuse of a federal program that is meant to protect rail workers who are truly disabled."

Catalano faces up to 75 years in prison; Costanza 55 years. Their sentencing was set for Feb. 26.

With Alfonso Castillo

You also may be interested in: