Feds charge 5 — including LIRR's top-paid employee for 2018 — in alleged overtime fraud scheme

Five MTA employees, including four current and former Long Island Rail Road employees, have been charged in an alleged overtime fraud scheme federal prosecutors said netted them more than $1 million in pay for time when they were not at work.

Instead, officials said, the defendants were often actually at home, running long-distance races, bowling, vacationing at resorts in Williamsburg, Virginia or enjoying concerts in Atlantic City.

Their overtime pay resulted in "significant increases" in their salaries and earned the defendants the distinction of being among the highest-paid employees of the Metropolitan Transportation Authority, prosecutors said.

They were identified as Thomas Caputo, 56, of Holbrook; Joseph Ruzzo, 56, of Levittown; John Nugent, 50, of Rocky Point; and Joseph Balestra, 51, of Blue Point. A fifth defendant, Michael Gundersen, 42, of Manalapan, N.J., a long-time MTA employee, was also charged with fraud for falsely claiming to have worked overtime, as well as some regular working hours, prosecutors said.

"These defendants, senior and LIRR and New York City Transit employees, allegedly made themselves some of the highest-paid employees at the entire MTA by claiming extraordinary, almost physically impossible amounts of overtime," said Acting Manhattan U.S. Attorney Audrey Strauss, in a statement announcing the arrests. "As alleged, those almost impossible claims were fueled by brazen, repeated fraud."

The defendants were charged with federal program fraud because the MTA receives money from the federal government. Both the railroad and the transit system are part of the MTA. Conviction carries a maximum penalty of 10 years in prison.

"This type of double-dealing directly contributes to rising MTA fares for the average, hardworking commuter," said FBI New York head William Sweeney. "Today these individuals learned the end of the line is the federal courthouse in lower Manhattan."

Caputo, a track inspector who retired in April 2019, was actually the highest paid employee of the MTA for the year 2018, making more money than the organization’s chairman, officials said. He made $461,000 in 2018 — $117,00 in base salary and $344,000 in overtime, according to officials.

Federal prosecutors said that to "honestly earn" that amount of money, Caputo would have had to work every single day in 2018, including weekends and holidays, plus 10 hours of overtime each day, in addition to his regular 40-hour week, officials said.

The defendants "frequently volunteered" for overtime, which was granted on a seniority basis to employees such as them because of their lengthy service, officials said.

The other three Long Island Rail Road employees and the transit authority employee were among the 12 highest paid employees of the MTA for 2018, officials said.

Ruzzo, Nugent and Balestra were track foremen involved in track maintenance; Gundersen a maintenance supervisor.

According to court papers, Ruzzo, Nugent, Balestra and Gundersen each made over $240,000 in overtime, which would have required eight to 10 hours of overtime for each calendar day, in addition to a regular 40-hour shift.

To calculate the false overtime claims, the staff of the MTA’s office inspector general matched the defendants' self-reported work time records with their actual whereabouts, based on location information from records from the defendants cellphones' and bank accounts, ATM charges, MTA building access cards, work and personal emails, license plate readers locating their vehicles, and other records, officials said.

In the case of Caputo, for example, the MTA investigators matched his work time records with that of the bowling league in which he played, officials said.

In one example in the complaint, Caputo put in for a 15-hour overtime shift on a construction project at the West Side Yard near 34th Street and the Hudson River in Manhattan in October of 2018. Caputo’s cellphone records, however, indicated that he had made several calls from near his house in Suffolk County during that time, and records of a bowling alley near his house showed that he had participated in a bowling league game also during that time.

In Gundersen’s case, officials said, he put in for a back-to-back 20 hour shift over two days in September of 2018. However, at the time of the shifts, he had sent himself an email with photos showing that they had been taken at a farm in Manalapan, N.J. His phone records also indicated Gundersen had made calls from the Manalapan area during the tine of the supposed overtime shift.

"The alleged conduct by these MTA employees is an egregious betrayal of public trust," MTA spokesman Tim Minton said in a prepared statement, adding the agency had already implemented a number of overtime controls that increased oversight and accountability.

Multiple investigations into overtime at the MTA grew out of a payroll report published last year by the Empire Center for Public Policy, a think tank group, that revealed alarming overtime rates among the agency’s top earners — particularly at the LIRR.

At a bail hearing in federal court in Manhattan, Caputo, Ruzzo, and Balestra were released on $200,000 bond, and Nugent was released on $100,000 bond.

Balestra’s attorney, John LoTurco, said his client denies the accusations. "Joseph Balestra has been a model Long Island Rail Road employee for thirty years. He has been a solid citizen and an active member in his community."

Ruzzo’s attorney, Ken Womble, declined to comment; as did Nugent’s attorney William Wexler, and Gunderson’s attorney, Daniel Bibb.