FBI probes whistleblower claim of $130 million scam; Plaza Health Network under scrutiny

By Francisco Alvarado, 

Plaza Health Network's headquarters at 1800 NE 168th St., North Miami Beach. Witnesses saw FBI agents carting off computers and boxes of patient records there for several days last year.

Plaza Health Network’s headquarters at 1800 NE 168th St., North Miami Beach. Witnesses saw FBI agents carting off computers and boxes of patient records there for several days last year.

Since being founded 64 years ago as a convalescent home for elderly Jewish people and war veterans, Plaza Health Network has nurtured a reputation for providing top-notch services to senior citizens of all denominations who can no longer take care of themselves.

But a little-noticed whistleblower’s lawsuit filed in Miami federal court by an ex-Plaza executive alleges the non-profit company scammed the federal government for $130 million.

The FBI, the Miami U.S. Attorney’s Office and attorneys with the civil division the Department of Justice are investigating as a result of accusations made by Steven Beaujon, Plaza Health’s chief financial officer from September 2002 to February 2012. Beaujon stands to collect a substantial reward if his allegations prove true.

According to Beaujon’s 2012 lawsuit, Plaza Health chief executive William Zubkoff, and its board of directors, led by past chairman and Miami Beach real estate developer Russell Galbut, concocted a scheme to dole out secret kickbacks to dozens of south Florida physicians who referred hundreds of Medicaid and Medicare patients to Plaza Health’s eight nursing and rehabilitation centers.

Russell Galbut, left, and William Zubkoff

Russell Galbut, left, and William Zubkoff

Plaza Health allegedly used the patients to submit false claims to Medicaid and Medicare for therapy services that were never provided or charged at inflated cost. A convicted stock swindler ran the company’s therapy program, Beaujon said.

Likewise, the complaint accuses Zubkoff and the board of fraudulently inflating the value of Plaza’s real estate assets to obtain low-interest rate loans from the U.S. Department of Housing and Urban Development.

Galbut and Zubkoff declined comment. Plaza’s current board chairman Ron Lowy, a criminal defense and civil attorney who represents real estate companies owned by Galbut, said Beaujon’s complaint is without merit and the ongoing federal investigation has not found any criminal wrongdoing on the part of Plaza’s management team.

“The government has not taken any type of formal action against Plaza Health Network,” Lowy said. “The lawsuit was filed by a disgruntled employee who asserted all types of outrageous claims.”

Nicole Navas, a Justice Department spokeswoman, said she cannot comment on pending investigations.


A 62-year-old attorney and builder, Galbut has deep ties to Miami Beach’s political power structure where his family has been developing real estate since the 1970s. They began by converting apartment buildings into condos. Today, their company, Crescent Heights, is one of the largest development firms in the country.

In Miami Beach, Galbut and his family own several iconic properties including the site of the shuttered South Shore Hospital, the Alexander Hotel, the Castle Beach Club, 100 Lincoln Road, and the Shelbourne Hotel, which recently reopened after undergoing a $90 million renovation.

In the 1980s Galbut’s law firm was associated with Alex Daoud, a city commissioner elected mayor in 1985 only to see his career end in 1991 with a felony bribery conviction and an 18-month prison sentence.

Galbut, who is building himself an ostentatious 17,000-square-foot penthouse on top of a South Beach parking garage his company is developing, is a big political contributor. In 2013, he and his companies gave $6,000 to a political action committee supporting two city commissioners. Election records show that Galbut and his companies donated $113,750 to various Republican congressional candidates in 2008, 2010, 2012, and the recent midterm election.

Galbut and Zubkoff joined the board of directors for Hebrew Homes for the Aged, Plaza Health’s predecessor company, in 1995 as vice-president and secretary, respectively. A year later, Galbut was elected chairman. Zubkoff was hired as president and CEO in 2007.

Plaza’s seven-member board also includes four people with close ties to Galbut: his brother Abraham Galbut, his cousin Joan Brent, Ben Rozsansky, who works full-time at Galbut’s company Crescent Heights, and chairman Ron Lowy. 

Steven Beaujon, former Plaza Health chief financial officer-turned- whistleblower

Steven Beaujon, former Plaza Health chief financial officer-turned- whistleblower

Under the Galbut and Zubkoff administration, Hebrew Homes changed its name to Plaza Health Network and added six locations with 933 total beds in Allapattah, Aventura, Little Havana, South Beach, North Miami, and North Miami Beach.

According to Beaujon’s whistleblower lawsuit, Galbut and his brother-in-law orchestrated Plaza Health’s alleged scheme to illegally siphon Medicaid and Medicare funds, while paying kickbacks to as many as 55 physicians. Federal law prohibits payments to doctors for referring Medicaid and Medicare patients.

To hide the true nature of the payments, Plaza Health entered into bogus contracts with the doctors to provide medical treatment at its eight facilities. Beaujon alleged, however, that the physicians were not required to show up for work and did not have to submit time sheets for the hours they supposedly worked.

Between 2008 and 2011, Plaza paid $2 million to 11 of the 55 doctors, according to a chart in Beaujon’s lawsuit.

The lawsuit says patients referred by doctors on Plaza Health’s payroll were placed in a physical therapy program run by Herman Epstein – an employee with no medical background and no physical therapy certifications, but a 1999 securities fraud conviction.


The criminal case stemmed from Epstein’s participation in a New Jersey boiler room operation that targeted elderly victims.

According to the lawsuit, Epstein’s job at Plaza Health was to fabricate and inflate the number of hours that Medicaid and Medicare patients supposedly received physical therapy. Between 2008 and 2011, the company billed the government programs for $130 million in bogus physical therapy services, the complaint alleges.

Beaujon asserted he was punished with a demotion and minimal pay raises because he kept warning Galbut about Plaza’s illegal activities.

In either February or March 2013, about a year after Beaujon sued, FBI agents raided Plaza Health’s Aventura corporate office and two of its nursing homes, according to three nursing assistants employed by the non-profit who asked for anonymity.

One nursing assistant who worked at the Aventura office said she saw four agents wearing FBI windbreaker jackets carting off computers and boxes of patient records for several days. Another nursing assistant said she also saw FBI agents coming in and out of the Sinai Plaza Rehabilitation and Nursing Center at 201 NE 112th St.

“They would come out with boxes and go back in for more,” she said. “It was something very serious because management had to get out and let the agents do what they had to do.”

Plaza chairman Lowy confirmed the raids took place.

In an October 16, 2013 motion, Assistant U.S. Attorney Franklin Monsour Jr. notified Judge Federico Moreno, who is presiding over Beaujon’s whistleblower case, that the Department of Justice was not intervening in the lawsuit because its investigation had not been completed.

“However, the government’s investigation will continue,” Monsour wrote.

Both employees who witnessed the feds taking records told that they began hearing rumors the board of directors was looking for an exit strategy after the federal raid.

Indeed, state records show that on Sept. 13, 2013, during the Hebrew holiday of Yom Kippur, Plaza Health informed the Florida Department of Health that it was closing its nursing home at 320 Collins Ave. and would lay off 159 employees. As recently as August of this year, the company contracted with business consulting firm Marcus & Millichap to produce a valuation report on all its nursing homes.

A Plaza Health administrator, who also requested anonymity, said Galbut and the other board members want to find a national for-profit nursing home operator to sell the business to.

“It’s the destruction of the highest quality senior care not-for-profit network in our community,” the administrator said.

Lowy insisted that Plaza Health is no longer in trouble with the feds and that the nursing homes are not for sale. He also added that the company has complied with every subpoena and request for documents by the federal government.

Lowy blamed the union representing Plaza Health’s nurses and nursing assistants, SEIU, for spreading misinformation.

“We are sad that there are entities trying to foster fear that people will lose their jobs,” Lowy said. “We are doing everything possible to make Plaza the best nursing home system in the country.”

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Latest comments

  • El dia real de asalto del FBI a las oficinas de Plaza healtj Ntework fue
    el 15 de Agosto de 2013, en que unos cinco agentes asaltaron las
    unidades de la Network y unos cincuenta a las oficinas centrales en
    1800 NE 167 Street en North Miami Beach.

    En setiembre 30 de 2013 se hizo publico que Beajoun trabajaba
    para el FBI.

    Unos 500 trabajadores han sido despedidos desde entonces mientras
    ellos seguían cobrando salarios de seis cifras bien abultadas.

  • As in cases like this, one wonders where the truth lies. It would be a shame to lose facilities like these, however also a shame if there is a case for fraud against the government. Appreciate this article with all of its details.

  • While Mr. Lowy claims that Galbut is not compensated for his services, one should investigate the owners of the entities which own the nursing homes leased to and operated by Hebrew Home Health Network and who runs and benefits form Hebrew Homes Captive Services among other entities which are paid by hebrew Home Health Network or it’s various vendors.

    It is also the case that generally graft is funneled indirectly in a manner that is downstream from immediate ownership or employment and therefore difficult to identify. A claim of non-direct compensation therefore is hardly a conclusive defense.

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