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Owner of Former Hmo Charged with Falsifying Records

2/22/2001

TALLAHASSEE -- The former owner and president of Sunrise Healthcare Plan, Inc., a 15,000-member Fort Lauderdale-based health maintenance organization that became insolvent in 1997 and left more than $15 million in unpaid claims, was arrested today for falsifying the company's financial records.

Florida Treasurer and Insurance Commissioner Tom Gallagher said Sheldon "Don" Russakoff, 57, of Miami Beach, initially indicated in the company's financial records that his $180,000 annual salary was being paid out of the account of another company he owned. But when it became apparent the company was on the verge of collapse, the company's board of directors approved payments totaling more than $600,000 from the company for back pay and the return of investment capital to Russakoff.

"Russakoff drained the company's funds despite knowing that hundreds of claims would go unpaid," Gallagher said. "But he made the mistake of committing his crime in writing."

Russakoff surrendered this morning at the Broward County Jail and is charged with one count of making false entries in the books of a corporation with intent to defraud, a third-degree felony. He could be sentenced up to five years in jail and up to a $5,000 fine if convicted. A judge would also have the discretion to order restitution. The Office of Statewide Prosecution is handling the prosecution, based on an investigation by the Division of Insurance Fraud.

Sunrise, with offices located at 500 W. Cypress Creek Rd., began operating in September 1995. It is at that time, investigators say, that Russakoff made a false entry in the company's 1995 Annual Statement by showing his salary of $180,000 would be paid on behalf of Sunrise by Cost Effective Health Services, a subsidiary corporation Russakoff also owned.

About a year and a half later, Sunrise was in financial trouble. The company's quarterly financial report for the period ending March 31, 1997, led department regulators to determine the company needed an infusion of more than $1 million to bring it into compliance with statutory requirements. Sunrise never made the infusion or proposed an acceptable corrective plan.

On May 23, 1997, the department sought and received a court order enjoining the company from draining assets, and on Aug. 11, 1997, a Leon County Circuit Court judge named the department as receiver for the purposes of liquidation.

Investigators said it was in April 1997 that the Sunrise board of directors – knowing receivership was likely – authorized a retroactive payment of $250,000 to Russakoff on the basis that he had not received any salary or compensation since the company's inception. The board then also authorized Russakoff to withdraw up to $400,000 as a return of capital on the basis that all of the company's capital had come from him.

During the following six weeks, Russakoff withdrew a total of $612,500 from Sunrise's accounts, $90,000 of which was taken after the May court injunction was in effect.

The Department of Insurance, Division of Insurance Fraud, investigates various forms of fraud in insurance, including health, life, auto, property and workers' compensation insurance. Anyone with information about this case or another possible fraud scheme should call the Department's Fraud Hotline at 1-800-378-0445. A reward of up to $25,000 is offered for information leading to a conviction.