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Alleged fraud scheme follows other scandals linked to LIRR workers

The federal fraud charges brought forth Thursday against a group of MTA employees follow a long history of scandals involving Long Island Rail Road workers accused of gaming the system to significantly pad their earnings.

Although high overtime rates at the LIRR had long been a concern among financial watchdogs, the issue drew intense scrutiny following a payroll report published last year by the Empire Center for Public Policy, a think tank, which found that more than half of the top 100 earners at the MTA — and seven of the top 10 — all worked for the LIRR.

Several LIRR laborers doubled, or even tripled, their base salaries through extra earnings, including the MTA’s top earner for 2018, Thomas Caputo, a track inspector who retired in April 2019. He made $461,000 in 2018 — $117,00 in base salary and $344,000 in overtime, according to officials. Caputo was among those ensnared in the federal indictment Thursday.

In addition to the U.S. Attorney’s Office, since last year the MTA inspector general, the Queens district attorney and an independent consultant hired by the MTA all began probing potential overtime fraud at the agency.

The MTA, responding to recommendations made by Inspector General Carolyn Pokorny and by its hired consultant, adopted several new protocols aimed at curbing wage abuse, including closer management oversight and the use of biometric time clocks to verify employee time and attendance.

Anthony Simon, general chairman of the International Association of Sheet Metal, Air, Rail and Transportation Workers, the LIRR’s largest union, said the workers are presumed innocent.

"These accusations of overtime abuse and the pending investigations are approaching two years old," Simon said. "If a few workers have been pulled out of this investigation, they have every right to the process to defend those accusations. They have worked tirelessly throughout these difficult times."

In a follow-up report this year, the Empire Center found that overtime at the MTA fell by about $100 million in 2019. It’s gone down another $25 million this year, according to the MTA.

Tim Hoefer, president of the Empire Center, called the arrests "a reminder that New Yorkers deserve to know how government spends every dollar." He noted that the charges come as the MTA is threatening deep service cuts, layoffs and fare hikes if it does not get a $12 billion federal bailout to offset COVID-19 losses.

"These criminal charges are proof that the MTA, and New York State officials, need to do their fair share to cut costs before asking New Yorkers to pay more," Hoefer said.

As recently as October, Pokorny’s office found that many of the management shortfalls that contributed to excessive overtime among some workers "remain largely unchanged," including record-keeping that relies heavily on "the honor system."

In a statement Thursday, Pokorny said: "The situation underscores what our office has been saying again and again — the lack of management systems and controls at the MTA creates an environment where fraud could easily occur undetected — and it did, as alleged in these criminal complaints."

MTA Board member and finance committee chairman Lawrence Schwartz, who has led calls for overtime reform at the agency, agreed that the agency leaders are still not doing enough to weed out fraudulent overtime. He called for a freeze on all overtime claims coming from the LIRR’s engineering department — the source of some of the LIRR’s more questionable overtime claims — until they can be thoroughly reviewed, including by the MTA inspector general.

"The employees that have been arrested today — they’re going to pay a big price. And their families are going to pay a big price. I feel bad for their families on some level. But, my thing is, you shouldn’t let it happen in the first place, MTA management. If you were doing your job . . . you would be catching and flagging this on a daily, weekly, monthly basis," Schwartz said in an interview. "Stop making excuses. You don’t get to keep screwing up."

It’s also not the first time that a federal fraud case has targeted LIRR workers. In 2011, the U.S. Attorney’s Office for the Southern District brought charges against several railroad retirees charged with fraudulently collecting federal disability pensions. More than two dozen former LIRR workers were eventually convicted on fraud charges.

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