Ethics on the Long Island Railroad

by Leigh on December 1, 2010 · 1 comment

in Management

The topic of ethical behavior of employees is often brought up in the “A Management Approach to Organizational Behavior” classes I teach at Zicklin.  Recently, I mentioned the Long Island RailRoad (L.I.R.R.) retirement scandal that was exposed by a journalist in 2008 as a good example of unethical behavior.

“A Disability Epidemic Among a Railroad’s Retirees” by Walt Bogdanich, (The New York Times, September 20, 2008) details in 5,000 words how retired L.I.R.R. employees as young as 50-years-old would retire, go to the same doctor colleagues used, then—as 97% did in some years—apply for and receive disability.  Since there was a low bar set for those who could receive disability, the retirees could spend their time playing golf on publicly funded links.

After begin coached by a L.I.R.R. employee on what to say to a specific doctor, the retirees would be eligible to “get a pension and tens of thousands of dollars in annual disability payments—a sum roughly equivalent to the base salary of their old jobs.”  Bogdanich also found that, “Since 2000, about a quarter of a billion dollars in federal disability money has gone to former L.I.R.R. employees.”

During a recent class when I presented this example, one of my students raised his hand and asked me a very good question:  “Did the employees have to pay the money back?”

Doing some research, I found “Disability-Claims Inquiry Concluding for L.I.R.R.” by David Halbfinger (The New York Times, March 22, 2010) and a post entitled, “Cuomo Closes LIRR Disability Investigation at the blog “Trainjottting” www.trainjotting.com

New York Attorney General Andrew Cuomo issued 108 subpoenas related to the case, yet only one person had been brought up on felony charges as of last March.  The doctors, insurance companies, those who retired in 2009, and executives at L.I.R.R., would probably not be charged in a case that suggested the L.I.R.R. was a very dangerous place to work—even though it won national awards for improving workplace safety.

The person brought up on charges was a former manager of L.I.R.R.’s pension office, Frederick S. Kreuder, who charged $100 to coach workers on how to get disability benefits.  The charges were dropped, however, since what he did was not criminal.

In the March Times article, Halbfinger writes about Kreuder, “A judge threw out most of the charges in December, saying his moonlighting may have been unethical but was not illegal. The attorney general’s office dropped the case last month in exchange for Mr. Kreuder’s resignation, payment of a $1,500 penalty and agreement not to work in the public sector.”

After the initial article by Bogdanich appeared in 2008, the L.I.R.R. set out to hire an independent examiner to review safeguards against abuse of the pension system.  Yet, in the words of Halbfinger, “Despite the railroad’s efforts, the Government Accountability Office reported that as of last April (2009), Long Island Rail Road workers applied for disability at a rate 12 times that of other railroads; that only three doctors handled most of the claims, a clue to potential abuse; and that 64 of 66 claims were approved.”

When I see my student again, I will be able to give him an answer to his question.  That is, “No, the employees are not paying back their disability pensions they received in an unethical manner.”

The bigger question, however, is still to be answered:  “What models do those involved in the L.I.R.R. disability scandal set for college students working to be ethical leaders?”

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Monex Investigation December 18, 2010 at 1:07 am

But it turns out that a staggeringly high number of LIRR employees are still getting approved for disability. Apparently LIRR president Helena Williams wanted to attend a meeting after learning about the LIRR employees alleged abuse of the system but The board with about 34 billion in assets had not met formally in nearly two years and no new meeting was scheduled. Last month the NY Times found that since 2000 virtually all LIRR employees –disability payments raising questions about the USRRB s approval process the board grants pensions .

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