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 nor 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 30-year business, Bellmore-based TJH Consulting, helps Social Security claimants fill out forms in order to apply for benefits. "That's his business," Conway said. "But he certainly denies any wrongdoing."
Court documents said Esposito was "known in law enforcement" 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 who screened applications.
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 only that 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 - including post-traumatic stress, anxiety and depression - 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 - as much as $100,000 - 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.