Manhattan District Attorney Cyrus R. Vance, Jr. announced that 106 people have been indicated for a massive fraud against the federal Social Security Disability Insurance Benefits (SSDI) program that resulted in the loss of hundreds of millions of dollars from federal taxpayers. The four principal defendants – Raymond Lavallee, age 83; Thomas Hale, age 89; Joseph Esposito, age 64; and John Minerva, age 61 – are accused of directing hundreds of SSDI applicants, including many retirees of the NYPD and FDNY, to lie about their psychiatric conditions in order to obtain benefits to which they were not entitled.
The four men are charged with grand larceny in the first and second degrees, and attempted grand larceny in the second degree. The remaining 102 defendants, all SSDI recipients, are charged with grand larceny in the second degree and attempted grand larceny in the second degree.
“For years, federal taxpayers have unwittingly financed the lifestyles of the defendants charged today,” said Vance. “The Social Security Disability safety net exists to help those who are unable to help themselves. Many participants cynically manufactured claims of mental illness as a result of September 11th, dishonoring the first responders who did serve their city at the expense of their own health and safety.”
The alleged scam further depleted the already limited resources available for battling the real and complex conditions of PTSD and depression suffered by first responders and rescuers following 9/11, Vance added. He said federal agents from the Social Security Inspector General’s office worked with assistant district attorneys and detective investigators in his office, as well as seasoned detectives from the NYPD’s Internal Affairs Bureau, to crack what he called a “decades-long scam.”
New York City Police Department Commissioner William J. Bratton did not mince words when discussing the case or the defendants: “The retired members of the NYPD indicted in this case have disgraced all first responders who perished during the search and rescue efforts on Sept. 11, 2001, and those who subsequently died from 9/11 related illness, by exploiting their involvements that tragic day for personal gain.”
Under the United States Social Security law, individuals are qualified as “disabled” and entitled to SSDI payments if they suffer from a disability that prevents them from assuming any job available to them in the national economy. The payment amount varies per recipient, but the average annual payment is approximately $30,000 to $50,000 for each recipient.
According to the indictment and documents filed in court, from approximately January 1988 to December 2013, the four principal defendants in this case operated together to direct and assist many hundreds of applicants to falsely claim disabilities in order to collect SSDI payments, in addition to their public pensions. The applicants claimed that they suffered a psychiatric condition that prevented them from working, such as post-traumatic stress disorder (PTSD), anxiety or depression. Many of the defendants used their association with the events of 9/11 as the cause of their psychiatric condition. Seventy-two of the defendants also are collecting pensions as retirees of the NYPD, eight from the New York City Fire Department, five from the New York Department of Correction and one from the Nassau County Police Department.
“The crimes alleged in this indictment outline a highly organized, far-reaching criminal enterprise that targeted the Social Security Disability Insurance (SSDI) program,” said Special Agent-in-Charge Edward J. Ryan of the U.S. Social Security Administration. “These individuals allegedly relied on lies, deceit and under-the-table payments while they bilked the Social Security Trust Funds of tens of millions of dollars and, in many instances, exploited the tragic events of Sept. 11, 2001 for their own gain. This exploitation, combined with the fact that many of those indicted formerly held positions of public trust, make these crimes all the more egregious.”
As detailed in court papers, applicants were typically brought into the charged scheme by Esposito, a retired member of the NYPD, or Minerva, a disability consultant for the Detectives’ Endowment Association, the union that represents NYPD detectives. They would then 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 from 1964 to 1970, and Hale, a key manager of the scheme under Lavallee, to submit the SSDI applications.
Although many of the NYPD and FDNY applicants had limited physical disabilities that legitimately entitled them to state disability pensions, these physical conditions did not entitle them to SSDI, which requires a complete inability to work. For that reason, according to the charges, to overcome the SSDI threshold, the applicants, with the help and direction of the four alleged ringleaders, created false psychiatric conditions (typically depression, anxiety or PTSD).
Hale and Esposito are accused of coaching applicants to falsely describe symptoms of depression and anxiety to doctors they had recruited, in order to build a record of psychiatric treatment over the course of approximately one year. Specifically, they instructed applicants on how to fail memory tests with plausibility, how to dress and on their demeanor. Almost every application included identical descriptions of the applicants’ activities of daily living, such as:
- “I nap on and off during the day.”
- “I have the TV on to keep me company.”
- “I was a healthy, active, productive person.”
- “I’m up and down all night long.”
- “My [family member] is always after me about my grooming.”
- “I’m unable to perform any type of work activity in or out of the house.”
Social Media Helped Bring Them Down
One claim made by most of the defendants was that they were unable to use a computer, yet many had Facebook pages, Twitter handles and YouTube channels. In fact, they posted recent photos of themselves playing basketball, deep sea fishing, golfing, jet skiing, attending sporting events and on vacation.
Before filing their SSDI applications, according to the charges, none of the defendants had a history of a psychiatric condition that would qualify them for SSDI benefits. While collecting their cash benefits, many of the applicants lived lifestyles that starkly contrasted with the claims made on their applications, judging by the photos on social media.
For example, defendants often claimed that they rarely left their homes, did not travel and had almost no social interactions with family and friends. But, according to court documents, applicants were in fact driving, traveling by air, engaging in recreational sports and lifting heavy objects. Several of the defendants also were gainfully employed, including at energy and investment companies, private security and private eye firms, construction and landscaping and even baking.
In some particularly striking examples, one defendant piloted a helicopter, another played blackjack in Las Vegas, another worked at a cannoli stand at the San Gennaro Festival in Manhattan, another rode a jet ski, one played basketball and one defendant taught and performed mixed martial arts.
“Many of the individuals … are alleged to have crafted an insidious scheme to profit off the tragedy of the worst terrorist attack in our nation’s history, one that affected all New Yorkers so very personally,” said James T. Hayes Jr., special agent-in-charge of Homeland Security Investigations New York. “I’m proud that through the work of my office’s El Dorado Task Force, one of the largest and most successful financial investigations task forces in the world, we will chase down every penny that these dishonorable thieves fraudulently pilfered so that the truly heroic firefighters, police officers, medics and civilians who actually risked their lives on Sept. 11, 2001, and are now suffering because of it, can get the care that they critically need.”
Applicants typically were awarded SSDI benefits approximately between three and 12 months after submitting their applications. Initial awards were paid to the applicants in the form of lump sum payments that included a retroactive award going back up to 12 months from the application filing date. The retroactive portions could be as high as $100,000. The recipients then continued to receive monthly payments.
According to the indictment, after the retroactive awards were deposited into the applicants’ accounts, Esposito and Minerva instructed the applicants to withdraw cash from the bank in in increments under $10,000, so that the withdrawals would not raise suspicion or require the filing of currency reports with the federal government. Applicants then made cash payments to Esposito or Minerva, who in turn transferred the money to Hale and Lavallee. These one-time cash payments were based on the applicants’ monthly awards, and ranged from approximately $20,000 to $50,000.
In addition to a portion of the secret kickbacks, Lavallee also received $6,000 directly from the government for attorney’s fees for each applicant. Applicants then continued to collect their monthly fraudulent disability payments, which ranged from approximately $2,000 to $5,000 per month, depending on the number of dependents within the beneficiary’s household.
Among the indicted applicants, SSDI awards have been paid since as far back as 1988, and in some instances, the total amount fraudulently obtained was close to $500,000 per applicant. The average SSDI payment to date for charged defendants, which included retroactive lump sum payments, was approximately $210,000.