By Francisco Alvarado, FloridaBulldog.org
Two years ago, Plaza Health Network agreed to pay the U.S. Department of Justice $17 million to settle a civil investigation that revealed the Aventura-based nursing home chain operated an illegal kickback scheme involving Medicare and Medicaid patient referrals. Now, Plaza Health is looking to recoup the money by suing its former general counsel and the prominent law firm he was a partner in for malpractice.
Although Plaza Health sued attorney William Eck and Greenberg Traurig on May 27, the Miami-Dade Circuit Court lawsuit has not been reported until now. Plaza Health accuses Eck and Greenberg of providing bad legal advice and failing to stop alleged illegal activities by its former CEO William Zubkoff that led to the Justice Department’s investigation.
“The bottom line is that Mr. Eck did not provide his fiduciary duty,” said Ronald Lowy, chairman of Plaza Health’s board of directors. “He knew about the problem and allowed it to go on for a long time.”
Eck, who left Greenberg last year to join the Washington, D.C. firm Seyfarth Shaw LLP, declined comment. A Greenberg spokeswoman who did not want to be identified provided Florida Bulldog with this statement: “We were not the lawyers for the aspect of [Plaza Health’s] business at issue, and deny that we knew of any wrongdoing or, if it occurred, that we assisted it.”
Attorneys for Plaza Health did not return phone messages and emails requesting comment.
From 2006 through 2013, Plaza Health hired dozens of doctors as “medical directors” who were supposed to treat elderly and disabled residents at Plaza Health’s seven facilities across Miami-Dade, according to the 2015 settlement agreement with the Justice Department. Federal prosecutors alleged that the medical directors were actually ghost employees who performed few, if any, of their contracted duties. Instead, they were being paid for simply funneling Medicare and Medicaid patients to Plaza Health, a violation of federal law. The investigation arose from a 2012 whistleblower lawsuit filed by Plaza Health’s ex-chief financial officer Steven Beaujon.
According to a June 16, 2015 Justice Department press release, CEO Zubkoff agreed to resign from Plaza Health. He was succeeded as CEO by former State Rep. Elaine Bloom.
In March 2016, however, Zubkoff sued Plaza Health for wrongful termination. He contends he was fired on March 23, 2015, three months before the settlement was reached, because he threatened to expose misconduct by Plaza Health’s prior chairman, Miami Beach developer Russell Galbut. Zubkoff claims that Galbut controlled Plaza Health’s board of directors in order to enrich himself and his companies through various real estate deals involving the nursing home’s facilities.
In its lawsuit against Eck and Greenberg, Plaza Health alleges its former general counsel, Eck, and his then-law firm became aware of the illegal arrangements with the doctors as early as 2009 when Shutts & Bowen, another law firm retained by the nursing home chain, warned that Zubkoff’s practice of retaining medical directors violated federal law.
“Eck and GT did nothing,” the complaint states. “Instead, these lawyers egregiously breached their duties to [Plaza Health] and permitted this illegal scheme run by Zubkoff to continue unabated for years, until such time as the United States began an investigation into [Plaza Health.]
Furthermore, Eck, who was also a board member, admitted that he did not advise Plaza Health’s board of directors of Zubkoff’s misconduct because he did not want to upset his relationship with the nursing home executive, the lawsuit alleges. Lowy told Florida Bulldog that when Eck resigned from the board last year, he confronted him about Zubkoff. “He said he didn’t want to upset the apple cart,” Lowy recalled. “He said he didn’t want to antagonize Mr. Zubkoff.”
Zubkoff refuted Lowy’s accusations and the allegations against him described in the Eck/Greenberg lawsuit. He said the blame falls on Galbut, who served on Plaza Health’s board of directors from 1995 to 2014, when he stepped down as chairman. He was replaced by Lowy, an attorney who has represented some of Galbut’s real estate companies. Greenberg has also represented some of Galbut’s real estate interests.
“It is absurd for Plaza Health to blame anyone else but Russell Galbut for the medical director issues and to sue his own law firm,” Zubkoff said. “Russell Galbut instructed everyone that all medical director issues were his responsibility with his ‘special committee’ of his board.”
Zubkoff claims Galbut did so to completely control the process, and to protect his two physician brothers who were paid as medical directors for years. “Russell Galbut sued his own lawyers to intimidate them not to testify and tell the truth about what he did,” he said.
In an email response to questions, Galbut denied wrongdoing. “As for Dr. Zubkoff’s claims, I would draw your attention to his signed settlement agreement with the U.S. Government which provides that he could no longer work for [Plaza Health],” Galbut said. “All employees answered only to Zubkoff. The settlement confirms that I was only a ‘volunteer board member.’ ”