Former NYPD Officer Pleads Guilty in Disability Fraud Scheme

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A retired member of the New York City Police Department pleaded guilty to charges that he led a ring that directed hundreds of applicants for disability benefits to lie about their psychiatric conditions.

Joseph Esposito, 70, of Valley Stream, New York, is one of four people accused of directing the ring, which netted about $21.5 million in fraudulent benefits, according to Manhattan District Attorney Cyrus Vance Jr.’s office. Esposito was accused of recruiting three-quarters of the applicants indicted in the scheme, coaching them on how to participate and collecting kickbacks, according to Vance’s office.

Esposito pleaded guilty Wednesday to first-degree grand larceny in New York State Supreme Court in Manhattan. If he fulfills his obligations under a cooperation agreement with the district attorney, he will be allowed to plead to a lower charge of second-degree grand larceny and prosecutors will recommend a 1 1/2 to 4 1/2-year sentence. He also agreed to pay about $734,000, the amount of government benefit losses he was responsible for.

Vance’s office in January announced the indictments of more than 100 retirees, most of whom worked for New York City’s police and fire departments, for participating in the scheme. While more than 80 of 128 indicted defendants have pleaded guilty so far, Esposito is the first of the alleged ringleaders to admit to a crime as part of the scheme.

“Although neither the architect nor the mastermind, Mr. Esposito acknowledged that in his role, his actions crossed both an ethical and a legal line,” his attorney, Brian Griffin, told reporters after Wednesday’s plea.

Another Defendant

Prosecutors said Esposito and another defendant in the case, John Minerva, 62, of Malverne, New York, a disability consultant for the union that represents NYPD detectives, brought applicants into the scheme and referred them to Raymond Lavallee, 84, of Massapequa, New York, a lawyer who previously worked in the Nassau County District Attorney’s Office, and another defendant, Thomas Hale, 90, of Bellmore, New York, to submit the applications.

While many of the applicants had limited disabilities that entitled them to state pensions, they weren’t eligible for Social Security Disability Insurance, which requires a complete inability to work, according to Vance’s office.

The applicants, under the coaching of the alleged ringleaders, then created fake psychiatric conditions, such as depression, anxiety and post-traumatic stress disorder, according to Vance’s office.

Esposito and the other alleged ringleaders told the applicants to describe symptoms of depression and anxiety to doctors that they had recruited in order to build a one-year record of psychiatric treatment, according to Vance’s office.

Memory Tests

The applicants were instructed on how to fail memory tests, how to dress and statements to make, according to Vance’s office. Almost every applicant included identical descriptions of their lives, according to prosecutors. Many applicants made up claims of mental illness as a result of the 9/11 attacks, according to Vance’s office.

Esposito and Minerva allegedly took cash payments of $20,000 to $50,000 once the applicants received their benefits and distributed the money to Hale and Lavallee, according to Vance’s office.

The applicants claimed they were mostly confined to their homes, didn’t travel, and had limited social interaction, while driving, flying and playing recreational sports, according to Vance’s office.

One defendant piloted a helicopter, another played blackjack in Las Vegas, and another worked at a cannoli stand in the annual San Gennaro Festival in Manhattan’s Little Italy, according to Vance’s office.

The ringleaders are accused of operating the scheme from January 1988 to December 2013, obtaining as much as $500,000 in fraudulent proceeds from one applicant, according to Vance’s office.

People v. Esposito, 00201/2014, 00739/2014, 00845/2014, New York State Supreme Court, New York County (Manhattan).