By Francisco Alvarado, FloridaBulldog.org
As Russell Galbut seeks permission to build a colossal condo tower near Miami Beach’s main entrance, an ex-ally-turned-whistleblower is attempting to derail his plan with a letter-writing campaign to Mayor Dan Gelber, alleging the developer’s role in the failure and closure of South Shore Hospital, site of the proposed project.
William Zubkoff — who was South Shore’s CEO in 2004 when Galbut’s firm, Crescent Heights, bought the hospital’s land and buildings — fired off his first letter on April 14. “The City of Miami Beach doesn’t seem to do anything to protect the most vulnerable in our community,” Zubkoff wrote. “All that matters is trendy real estate development by greedy businessmen. Ultimately you can bet that Russell Galbut’s plans for the old South Shore Hospital campus is another conflicted insider real estate deal.”
A month later, Zubkoff again emailed Gelber following a city commission committee hearing in which Galbut presented three options for his project: a 36-story tower, a 42-story tower and a 50-story tower. Crescent Heights currently has approval to build a mixed-use residential building ranging from five to seven stories, the maximum allowed under the hospital site’s current zoning. In exchange for rezoning the property near the MacArthur Causeway, Galbut is offering to set aside up to three acres for green space open to the public.
“Russell Galbut’s recent public comments about his commitment to the Miami Beach community are pure ‘garbage’ and a ‘smoke screen’ to cover up his greed and illegal exploitation of at least two not-for-profit organizations on Miami Beach serving the needs of senior citizens,” Zubkoff wrote Gelber.
A healthcare administrator who has served as chairman of Miami-Dade’s Community Action Agency for more than a decade, Zubkoff has motivation for attacking Galbut’s latest condo venture in Miami Beach. Two years ago, Zubkoff sued Galbut, Plaza Health Network and its current chairman Ron Lowy for wrongful termination, alleging he was fired as the nursing home agency’s CEO for reporting illegal activities to the Internal Revenue Service and other federal authorities.
‘Galbut’s tumultuous history’
In a recent interview, Zubkoff told Florida Bulldog that he believes city officials should be aware of Galbut’s tumultuous history with South Shore, as well as with Plaza Health Network, an Aventura-based chain of nursing homes where the prominent builder served as board chairman from the mid-1990s until 2014.
“Russell’s business decisions with the non-profit hospital and the non-profit nursing homes had a devastating impact on Miami Beach’s seniors,” Zubkoff said. “Knowing that history could have an effect on what the city commission approves and doing what is in the best interests of the city.”
In an email, Galbut dismissed Zubkoff’s allegations. “There is nothing here either true or worthy of comment,” Galbut said. Lowy, an attorney who has represented Galbut on real estate matters for more than 20 years, added, “Zubkoff’s letters are full of lies and distortions, and not worthy of discussion.”
For his part, Gelber said he read Zubkoff’s letters, but that he doubts it will sway the city’s ongoing negotiations with Galbut regarding the height of the building. “I am not really going to relitigate the history of this parcel,” Gelber said. “I am just trying to negotiate the best deal for the residents.”
Gelber said that city staff is working with Galbut on a proposal allowing him to build a slender tower with a minimal number of units on the 600 and 700 blocks of Alton Road with the parcel on 5th Street to be used for the public park, which would also have features to help minimize flooding in the area. The sticking point is how many feet the city is willing to give the developer, Gelber added.
Gelber seeks benefit to community
In addition, Crescent Heights is already approved for a mixed-use project that would include hundreds of apartment units spread across a five-story building that runs from 5th Street to 7th Street, the mayor said. “Going with a skinny tower is better than apartments across the whole development,” he said. “What we can do is make sure [the South Shore site] is developed into something that benefits the community.”
Zubkoff’s history with Galbut goes back to the early 2000s when he was CEO of South Shore Hospital. At the time, the hospital was bleeding roughly $4 million a year and was nearly $30 million in debt. Galbut, who was chairman of the hospital’s board of trustees, and Crescent Heights stepped in to save the hospital then by agreeing to purchase its land and its buildings for $35 million, according to South Florida Business Journal clips. The hospital campus on Alton Road between 5th and 7th Streets is near the on-ramp to the MacArthur Causeway.
After purchasing South Shore in February 2004, Crescent Heights planned to convert the hospital from a non-profit to a for-profit facility. Galbut’s brother David was briefly named South Shore’s medical director and Zubkoff remained as CEO. However, David Galbut backed off the arrangement, and hospital operations were sold to Dr. Ira S. Barton in March 2005. It was renamed South Beach Community Hospital. Zubkoff told Florida Bulldog that Galbut, by then chairman of Plaza, had appointed him CEO of the nursing home chain.
The hospital’s financial woes lingered, and it filed for bankruptcy in 2006. The same year, South Beach Community was threatened with exclusion from participation in Medicare, Medicaid and all other federal care programs if it didn’t comply with a corporate integrity agreement, which was part of a settlement resulting from federal charges that the hospital overbilled Medicare using false reports under the previous owners. The hospital closed shortly thereafter, and Crescent Heights began demolishing the buildings in 2013. All that remains is the skeleton of South Shore’s main building.
Zubkoff now claims that Crescent Heights saddled the hospital with more debt and never delivered on promised upgrades to the medical facilities to better compete with Mount Sinai Medical Center, Miami Beach’s other hospital. The whistleblower added that Crescent Heights leased Barton a three-story medical building and not the entire hospital. “It was reduced to one-third of its size,” Zubkoff said. “Russell didn’t put a penny into it.”
In his May 19 email to Gelber, Zubkoff made similar allegations. “Conflicted insider Russell Galbut bought the hospital promising to keep it open when he really planned to close the hospital, lay-off all of the 500 employees, and develop the real estate,” he wrote. “Seniors, patients, nurses, and our community were hurt so that Russell Galbut could financially benefit from another insider conflicted real estate deal.”
Lowy blames Zubkoff
Lowy countered that South Shore collapsed due to mismanagement by Zubkoff, who turned to Crescent Heights to clean up his mess. “Rather than succeeding with the hospital under his sole control, Zubkoff and his team lost the license to South Shore Hospital after it was disqualified from participating in Medicare and Medicaid, defaulting on bonds and losing its accreditation,” Lowy said. “Despite Zubkoff’s claims, the closing had nothing to do with the property owner, only the tenant.”
Galbut and Zubkoff finally had their falling out amid a federal investigation into Plaza. In March 2015, about a year after Lowy replaced Galbut as Plaza’s chairman, Zubkoff was fired and replaced by former State Rep. Elaine Bloom. Lowy contends Zubkoff was fired for his role in a scheme to pay numerous physicians kickbacks for referring Medicaid and Medicare patients to Plaza Health’s nursing homes.
The physicians were listed as medical directors employed by Plaza Health, but in actuality those were ghost positions, according to a 2012 federal whistleblower complaint filed by the network’s ex-Chief Financial Officer Stephen Beaujon. He sued Plaza Health and Zubkoff. Galbut is not named as a defendant, but Beaujon’s lawsuit states the ex-CFO informed the developer and other board members about the kickbacks, yet they did nothing to stop the practice.
The allegations were confirmed by a Department of Justice investigation that resulted in no criminal charges, but Plaza Health was required to pay the U.S. government $17 million in June 2016 to settle the civil probe. “When Zubkoff was CEO of the Plaza Health Network, he again participated in illegal conduct,” Lowy said.
Zubkoff said he was only following Galbut’s orders when he was Plaza Health’s top executive and that he was really fired because he sent a whistleblower letter on March 9, 2015 to the IRS investigations division as well as to the Inspector General and General Counsel for the U.S. Department of Health and Human Services.
“The problem is that our board has always been dominated by one businessman and his tainted cronies with personal for-profit conflicts and motives,” Zubkoff’s letter states. “Russell Galbut, his private employees, and his relatives have exploited the real estate and the not-for-profit organization for their own personal benefit, and the situation is now going from bad to worse.”
In his lawsuit, Zubkoff is seeking damages for lost wages and emotional distress because of prohibited retaliation under Florida’s Private Sector Whistleblower’s Act. He told Florida Bulldog that he was fooled by Galbut into believing the developer really wanted to help senior citizens in Miami Beach.
“I now see it was all a real estate play for Russell,” he said. “He does it from the inside by financially raping the non-profit organizations that are supposed to serve seniors and then he makes out like a bandit on the real estate.”
In a phone interview, longtime Miami Beach activist Frank Del Vecchio said Gelber and city commissioners should heed Zubkoff’s warnings. Delvecchio said a coalition of neighborhood associations is trying to stop Galbut’s proposal and require that the city only allow Crescent Heights to build up to 28 stories.
“I am extremely concerned about the windfall profits Galbut would receive from an unconscionable upzoning of the [South Shore] property,” Del Vecchio said. “During his campaign, the mayor said that every major enterprise should be probed very carefully before the city makes a commitment. With Galbut and his companies, any government official should pay extremely close attention to any dealings involving them.”