Attorney General Cuomo Announces First Arrest In Lirr Disability Benefits Scandal

NEW YORK, NY (November 17, 2008) - Attorney General Andrew M. Cuomo today announced the arrest of the LIRR's Manager of Budget Development and Analysis, Frederick S. Kreuder, for allegedly accepting payments from LIRR employees in exchange for assisting them in obtaining federal disability benefits, including referring them to private physicians and filling out federal disability paperwork.

Kreuder had been working out of LIRR's Hillside Support Facility located in Hollis, Queens until he was suspended in October based on information revealed by the Attorney General’s ongoing investigation of retirement and disability benefits at LIRR.

"Today's arrest is the first time that someone is being held accountable for the culture of entitlement and systemic abuse that plagued the LIRR and Railroad Retirement Board,” said Attorney General Andrew Cuomo. “Moving forward, this office will continue to pursue criminal charges against any individual who facilitated such unchecked abuse, and will continue working to correct the systemic abuse in the disability benefits program.”

According to the complaint, Kreuder accepted $100 from one employee in the form of a contribution to Kreuder's baseball team, and agreed to accept $900 more once that employee's application for Railroad Retirement Board occupational disability benefits was approved. In exchange for these payments, Kreuder allegedly agreed to assist the employee with his application for Railroad Retirement Board benefits, including referring him to a doctor who Kreuder knew would provide supporting documentation.

The complaint charges Kreuder with one count of Receiving Reward for Official Misconduct in the Second Degree, a Class E felony, and one count of Official Misconduct, a Class A misdemeanor. The investigation is ongoing.

Today's arrest took place in the context of Attorney General Cuomo's ongoing investigation into disability and retirement payments made to LIRR retirees. Attorney General Cuomo initiated the investigation upon request from Governor Paterson after news reports revealed that over ninety percent of LIRR retirees receive occupational disability payments from the Railroad Retirement Board, in addition to receiving private pensions through LIRR.

On October 27, 2008, Attorney General Cuomo held a public hearing on the LIRR investigation. The hearing, held at SUNY Old Westbury and attended by five members of Congress from Long Island, included testimony from a Long Island doctor who testified anonymously about the high number of LIRR employees who requested federal disability paperwork from him just before they became eligible for LIRR retirement benefits.

Other testifying witnesses included former LIRR Controller Kim Porcelain, LIRR President Helena Williams, and an investigator from the insurance company Aflac, who testified to unusually high payout rates on private short-term disability insurance policies held by LIRR employees. Attorney General Cuomo's investigation into disability benefits at LIRR is continuing.

The case against Frederick S. Kreuder is being prosecuted by Assistant Attorneys General Renee L. Jarusinsky and Jessica E. Silver of the Public Integrity Bureau, under the Supervision of Special Deputy Attorney General for Public Integrity Ellen Nachtigall Biben and Executive Deputy Attorney General for Criminal Justice Robin L. Baker. The investigation was handled by Investigators Kevin R. McCann and Michael S. Ward under the supervision of Deputy Chief Thomas Richardson, and Chief Investigator Joseph A. D'Amico.

The charges are merely accusations and the defendant is presumed innocent until and unless proven guilty.