Two men who ran a Hollywood-based health insurance agency and were charged with defrauding more than 400,000 customers have been sentenced in federal court in Illinois.
The ruling comes after a federal judge in South Florida issued a $195 million judgment in a separate civil case against the company, Simple Health Plans LLC, and its CEO, Stephen J. Dorfman. It was handed down just five days later.
A jury in the Southern District of Illinois found Dorfman and John A. Sand, the company's executive vice president, guilty of 13 counts each of various charges, including mail and wire fraud and conspiracy to commit mail and wire fraud. I put it down.
In an 11-day criminal trial, prosecutors said Simple Health Plans deceived consumers into purchasing “fake” health insurance policies by telling them they met the requirements of the Affordable Care Act in 2012. It claimed to have generated more than $190 million in revenue from 2018 to 2018.
A sentencing date will be determined in the future. The men face up to 30 years in prison for conspiracy, and up to 20 years in prison for mail fraud and wire fraud.
The South Florida ruling stems from a 2018 complaint by the Federal Trade Commission that alleged the defendants violated telemarketing sales rules. The ruling prohibits Simple Health, Dorfman, and five related entities from telemarketing and from marketing, promoting, selling, or offering any health care products.
FTC Consumer Protection Director Samuel Levine praised the ruling in a prepared statement. “We are pleased that the court recognized this blatant bait-and-switch and ordered the company and its CEO to hand over the money they extorted from consumers,” he said.
The FTC said in a news release that it plans to use assets frozen in the case to reimburse Simple Health customers.
Mr. Dorfman and Mr. Sand have denied any wrongdoing in the criminal proceedings, and Mr. Dorfman has contested the FTC charges since 2018.
The third defendant, Candida Girouard, Simple Health's chief compliance officer, agreed to settle the FTC charges in February 2021 and entered a guilty plea in the criminal case last November. Her sentencing is scheduled for May 15.
Prosecutors said the company scammed people using deceptive sales scripts that later turned out to be limited coverage plans with caps on medical expense coverage. Prosecutors say that after these limits are reached, patients are responsible for paying 100% of their remaining medical bills.
However, salespeople can be assured that they have low-cost insurance that covers pre-existing medical conditions, prescription drugs, primary and specialty care, inpatient and emergency hospital care, surgical procedures, and medical and laboratory tests. I needed to communicate this to potential customers.
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According to FTC filings, Simple Health created a network of deceptive lead generation websites to lure customers by purporting to provide comprehensive information about government-sponsored health insurance policies. The sites featured misleading logos of well-known insurance companies such as AARP and Blue Cross Blue Shield, but the defendants are not affiliated with such organizations, the FTC said.
Customers were sold “PPO” plans for up to $500 per month. The FTC said the plan was widely accepted by area physicians, and in many cases was described as requiring no co-pays or deductibles.
According to the FTC, customers only realized they had been scammed after undergoing an expensive medical procedure and learning that their insurance would not cover it.
A federal judge in South Florida issued a temporary restraining order shutting down the business on November 1, 2018, when public enrollment in ACA health insurance plans had begun.
A judge's order in Wednesday's FTC case said Dorfman was “well aware of the deceptive practices.” Dorfman “prepared and reviewed” telemarketing scripts and trained employees, according to the order. He also listened to sales calls, became aware of customer complaints and monitored negative online reviews, according to the order.
According to the order, he directed employees to purchase “burner phones” to generate false positive reviews to be submitted to the Better Business Bureau.
There are questions about how much of the $195 million Simple Health will be able to recoup. A court-appointed administrator reported in October that he had saved $28.9 million by liquidating various company assets.
According to the recipient, 13 pieces of jewelry and two luxury cars (a 2013 Land Rover Range Rover and a Rolls Royce Wraith) purchased with business proceeds have not yet been sold.
In 2019, a trustee, against Dorfman's wishes, removed the 2012 model Dorfman and his then-bride Isabella Freetas were photographed in front of at a $300,000 wedding in Bal Harbor in March 2018. The lease for a Lamborghini Aventador has been canceled, records filed by the trustee show. . The couple filed for divorce in May 2020, according to court records.
Benefit Technologies, which provides the plans sold by Simple Health Plans, agreed to repay $100 million to customers in a 2022 agreement with the FTC, but said it had committed “deceptive, unfair and abusive He has neither admitted nor denied the suspicion that he was involved in the act.
Benefit continued to sell association memberships and Medicare Advantage plans promoted on cable news channels by aging celebrities such as Joe Namath, William Shatner, and Jimmy “JJ” Walker.
However, this $100 million payment eclipsed the $27.5 million paid to settle a class action lawsuit and the $11 million paid to resolve claims from the Securities and Exchange Commission related to the company's role in the business. Combined, this led to cash flow problems and forced Benefit into litigation. The company said in its bankruptcy filing last year that it sought bankruptcy protection from creditors.
Ron Hurtibise covers business and consumer issues for the South Florida Sun Sentinel. You can reach me by phone at 954-356-4071, on Twitter @ronhurtibise, or by email. Rhurtibise@sunsentinel.com.
