WSJ, Editorial Board
Rampant abuse may soon require another taxpayer bailout.
New York tabloids are having a field day with the news that dozens of ex-cops have been charged with scamming as much as $400 million in Social Security disability benefits. The bigger outrage is that this grand taxpayer theft went undetected for two decades and is merely part of the national scandal that the disability program has become.
Manhattan District Attorney Cyrus Vance Jr. this week charged 102 retirees, including 80 former New York police officers and firefighters, with making phony disability claims since as far back as 1988 to obtain Social Security benefits and tax-free pensions equalling up to 75% of their pay. About half of the cheats attributed their “disabilities” to 9/11, even if they never even worked at Ground Zero.
Heading the alleged racket were 64-year-old retired cop Joseph Esposito and 61-year-old detectives’ union consultant John Minerva. They recruited and then directed disability applicants to Raymond Lavallee, an 83-year-old former Nassau County prosecutor, and 89-year-old Thomas Hale who assists disability applicants. They are alleged to have acted much like college counselors, except their jobs were to make their clients look inept.
Messrs. Hale and Esposito allegedly coached applicants to feign psychiatric impairments by failing memory tests, dressing shabbily, and describing symptoms with statements such as “My [family member] is always after me about my grooming.” Many said they couldn’t leave the house except for short walks.
They claimed all this even as they have active lives and second careers. One ex-cop who claimed to suffer from post-traumatic stress syndrome posted a YouTube video of himself teaching karate. Was he trying to make the cut for “America’s Dumbest Cops”? Online photographs showed others riding motorcycles and jet skis, which we doubt passes as physical therapy. The four ringleaders allegedly charged a flat fee that ranged from $20,000 to $50,000 per applicant. Mr. Lavallee also received $6,000 per applicant in attorney’s fees from Uncle Sam. He must really be enjoying his Golden Years.
Mr. Vance says the 102 indicted retirees collected on average $210,000 in benefits. Since most are still in their 40s or early 50s, each could have extracted hundreds of thousands more had the racket continued. One alleged fraudster is only 32. Mr. Vance says as many as 1,000 people may have been involved in the scheme, and the investigation is
What’s remarkable about all this is that it’s merely an extreme example of what has been happening across the country. Oklahoma Senator Tom Coburn’s Committee on Homeland Security and Governmental Affairs issued an amazing report last October describing how a Kentucky-based disability law firm colluded with a Social Security administrative law judge to abuse the program. The report says that disability attorney Eric Conn employed attractive women to recruit applicants and hired doctors with records of ethical problems to falsify medical opinions.
He then steered his clients’ applications to administrative law judge David Daugherty. Administrative law judges re-evaluate applications that have been rejected de novo. Some like Judge Daugherty have a reputation for being “intellectually lazy,” to quote his professional colleagues. Judge Daugherty approved benefits in more than 99% of cases compared to a program-wide average of 62%, which is dubious enough. Between 2005 and 2011, he awarded an estimated $2.5 billion in lifetime benefits—while rarely being in the office.
Two women who worked in the agency’s West Virginia office have filed a civil suit against Mr. Conn and Judge Daugherty. Mr. Conn responded in a statement that “it is noteworthy that the U.S. government studied the lawsuit for a year and a half and decided not to join it or get involved” and that “I have always tried to represent my clients in the best and most appropriate way possible, within all the laws and rules.” Neither man would answer questions at a Senate hearing in October.
The gist of the Senate report is that the Social Security disability program has vague criteria for qualifying and lacks even the barest oversight, which makes it ripe for abuse. Administrative law judges decide cases independently and are virtually immune to disciplinary action. Politicians enable the fraudsters by denouncing anyone who proposes a fix as an enemy of the disabled.
The truth is that opponents of reform are the ones hurting the truly disabled. The nearby chart show how disability claims have exploded—to 8.9 million last year from 5.9 million in 2003 and 2.7 million in 1985. Not coincidentally, that is the year Congress relaxed eligibility standards to make it easier for people reporting pain, discomfort and mental illness to qualify for benefits. Like the jet-skiers in New York.
The second chart shows that all of these claims are bleeding the Social Security disability trust fund, which paid out $137 billion in benefits in 2012 or nearly twice as much as a decade ago. Without reform, the fund is on track to go broke in 2016, triggering either a 20% cut in benefits for all recipients or one more taxpayer bailout.
You’d think that fixing this mess would be a Washington priority, but Mr. Coburn and a few others are voices in the wilderness. Instead the country is treated to a political game over extended jobless benefits that might even be affordable if the Obama Administration cared a whit about stopping disability fraud. The polls say public trust in government is falling to new lows, but judging by the open secret of disability insurance scams it isn’t nearly low enough.