Attorney General Cuomo Ends Pension Fund Abuse By Four Wny Physicians And Targets More Than 100 Others As Investigation Expands

BUFFALO, N.Y. (December 18, 2008) – Attorney General Andrew M. Cuomo announced today that he has ended the abuse of the public pension system by four Western New York physicians and that he has sent letters to employers of more than 100 other physicians seeking information to determine whether they improperly received taxpayer-funded benefits ordinarily reserved for public employees.

Four physicians from Lancaster Depew Pediatrics have agreed to pay the state a total of $50,000 and forfeit state pension credits and benefits for being improperly listed as employees of the Lancaster Central School District. All four provided services to the district as outside contractors and thus were ineligible for pension credits reserved for public employees.

Cuomo’s office also sent letters to school districts and other public employers across the state seeking information on and justification for the listing of 102 other physicians as payroll employees earning credits in the taxpayer-funded public pension system.

The settlement and letters announced today represent a new phase of Cuomo’s ongoing investigation into waste and abuse of the public pension systems. The four Lancaster physicians are the first non-attorneys to settle pension abuse cases against them.

“New Yorkers are fed up with the systemic corruption constantly hitting them in their wallets,” said Attorney General Cuomo. “This is yet another example of taxpayer dollars too easily slipping through the cracks and into the hands of those not entitled to them.”

At various times between 1985 and 2006, Michael D. Terranova, M.D., Mark D. Bezbatchenko, M.D., Elizabeth Davis, M.D., and Michael Rabice, M.D. – all physicians at Lancaster Depew Pediatrics – were listed as “employees” of the Lancaster Central School District and received employee benefits, such as health insurance and pension credits, that are ordinarily reserved for legitimate public employees. Under the settlement announced today, the four physicians will collectively pay the State of New York $50,000 and forfeit any pension system credits accrued as well as any employee contributions made into the pension system.

Attorney General Cuomo’s investigation into the Lancaster physicians determined that Terranova began providing services to the Lancaster Central School district in 1985. Through 2006, Terranova was listed as an employee of the district, receiving an annual salary, health insurance benefits and pension credits. At Terranova’s request, the Lancaster Central School District added Bezbatchenko to the payroll as an employee in 1991, Davis in 1995 and Rabice in 1998. During that entire time the “salary” from the district, which grew from $14,000 to $30,000, was split evenly between the physicians but all received health insurance and credits in the state pension system. In 2006, the school district increased compensation for the doctors to $42,000 and removed all of them from the payroll, ceased providing health insurance and ended the reporting to the retirement system of the doctors as “employees.”

At all times, the four Lancaster physicians were working as independent contractors and not employees and therefore should not have received credits in the taxpayer-funded public pension system. The school district did not supervise, control or direct the manner in which any of the physicians performed their duties, and did not provide any sort of office or staffing for the doctors.

Cuomo, meanwhile, is also expanding the investigation into specific physician-employee arrangements in other school districts and public employers in Western New York, Long Island, Central New York, the Southern Tier, Capital Region, the North County, Catskills and Hudson Valley. The Attorney General’s office sent document request letters to public employers in those regions seeking information regarding the placement of 102 physicians on their employee payrolls, which allowed the physicians to accumulate credits in the public pension system. Among other things, the letters seek documents including personnel files on each physician, time and attendance records, records regarding their “employment” or financial arrangements with the district and any materials forwarded to the state Comptroller regarding pension system eligibility.

Attorney General Cuomo’s ongoing statewide investigation of pension abuse includes more than 4,000 local governments and special districts across New York State, all school districts and the 37 Boards of Cooperative Educational Services (“BOCES”).  The investigation has already revealed that many lawyers had improperly remained on public payrolls for such extended periods of time, or were included on the payrolls of so many public sector employers simultaneously, that they accumulated substantial credits in the New York State pension system. To date, Attorney General Cuomo’s investigation into fraud and abuse in the public pension systems has resulted in settlements of more than $1.5 million being returned to taxpayers based on actions involving the conduct of more than 70 attorneys and other professionals.

The Attorney General’s Office urges individuals with knowledge of any questionable arrangements between any BOCES, local governments, or school districts and their outside professionals to contact the Public Integrity Bureau by telephone at 212-416-8090 or by e-mail at public.integrity@ag.ny.gov.

The settlement announced today was handled by Assistant Attorney General Darcy M. Goddard and Assistant Attorney General Lauren Popper Ellis.

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