Boca Rehab Clinics to Pay $7.7 Million in Fraud Case

Contact Form - Your First Step

The Palm Beach Post
WEDNESDAY, MAY 19, 1999

By Jenny Staletovich
Palm Beach Post Staff Writer

A Boca Raton-based drug rehabilitation clinic that sent patients to see The Fugitive and Thelma and Louise, then billed the federal government for group therapy or “adult living skills” agreed to pay $7.7 million to settle a lawsuit filed by the U.S. attorney’s office.

The Tuesday settlement was reached by a trustee for National Recovery Institutes

Group, which filed for bankruptcy in March1998 and shut its doors.

The case, triggered when a former therapist complained to supervisors about fraudulent billing, closes another chapter in the plummeting career of former health-care mogul Sheldon Russakoff, whose late-night television commercials and limousine service helped build an empire in South Florida. Russakoff, who could not be reached for comment Tuesday, remains under criminal investigation for fraudulent billing.

Because the company is in bankruptcy, Joelee Caplan, who is still a therapist, will receive only about $28,000 for blowing the whistle on Russakoff. The federal government will receive only slightly more.

“You could call it bittersweet, but remember, private citizens come forward … to expose fraud,” said her attorney, Ken Nolan. “She exposed the fraud, and it was investigated really well by the (Pentagon’s Defense Criminal Investigative Service). As a result, the defendant chose to file for bankruptcy and go out of business.”

National Recovery was one of about a dozen companies operated by Russakoff and helped finance his million-dollar waterfront Boca Raton villa, a North Miami Beach condo, a Ferrari, a Bentley and other luxuries.

Russakoff, 54, came to Florida after opening a lucrative rehab clinic in New York, which came under scrutiny when auditors discovered he charged up to 17 times what comparable nonprofit clinics charged. Ultimately auditors demanded he return nearly a half-million dollars.

Empire expands into S. Fla.

By 1990, he had expanded his empire to South Florida by advertising heavily on late-night TV to Northeasterners happy to come to sunny South Florida to cure their addictions to alcohol and other drugs.

Russakoff’s aggressive marketing — he paid for airfare and limousine service for potential patients — paid off. He had clinics in Boca Raton and Fort Lauderdale, an HMO in Sunrise and summered in St. Tropez. Clinic workers, however, said he operated his clinics like mills, and treatment suffered. One patient complained that after nine days, which included only one or two brief talks with a psychiatrist, he was billed nearly $13,000. He spent most of his time watching TV or going to the movies, he said.

In its investigation, the Pentagon found records that indicated the government was repeatedly double-billed or billed for therapy when patients went to the beach or bowling. “Randolph J. has weight training which (National Recovery billed) as adult living skills therapy for $165…Vickie M. attended water volleyball (billed)… as adult living skills therapy for $125,” according to records in the federal suit.

In 1996, less than a year after she was hired, Caplan refused to falsify records and complained to supervisors, Nolan said. In April 1996 she was fired and quickly filed her suit, which doubles as a wrongful termination case and a complaint of fraud on behalf of the government.

In its amended complaint, the government claimed Russakoff bilked $1.6 million from Medicaid and more than 700,000 from TRICARE, the military insurance plan.

Meanwhile, in bankruptcy court, creditors have lined up with claims against Russakoff’s companies worth $50 million, said Robert Furr, an attorney who represented him. The three clinics in Florida have all been sold, and the New York clinic is in the process of being sold, Furr said. The government is an unsecured creditor and must wait behind secured creditors such as banks.

The government stands to receive little — for this case, the trustee set aside only $142,288 minus Caplan’s 20 percent cut. But by working closely with First Union bank officials who were owed about $8 million, the government helped stop even more loss, said Assistant U.S. Attorney, Laurie Rucoba.

Even after filing bankruptcy, the clinics continued to operate and bill for services, she said. The month before the state took over Sunrise Health Plan, an HMO with 16,000 members operated by Russakoff, Russakoff paid himself nearly a half-million dollars. But together the government and bank worked to persuade the courts to appoint a trustee, who fired administrators and stopped the fraudulent billing, Rucoba said.

“That was our way of stopping the fraud and helping to stop the drain of assets,” she said. “This was the best result for the government under the circumstances.”