Brentwood Insurance Fraudster Pleads Guilty, Will Pay $1.5M

NASHVILLE, TN -- A Brentwood man who ran a Nashville-based telemarketing company that engaged in a health insurance scam pleaded guilty to federal fraud and contempt charges Wednesday and was ordered to pay back $1.5 million in ill-gotten gains.

Timothy Thomas, 55, will be formally sentenced in June after pleading guilty to mail fraud and contempt. Prosecutors say Thomas' company operated a fraudulent scheme in which limited-benefit health plans were sold to consumers as traditional health insurance. He also violated a 2010 court order that froze his assets and shut down the company.

Thomas admitted he operated and controlled United Benefits of America, which was also known as United States Benefits and Health Care America, between 2007 and 2010.

He hired salespeople to sell over the phone so-called “association memberships” created by third-party companies such as International Association of Benefits and Consumer Driven Benefits of America. These memberships included bundled benefits, such as limited benefit health plans, prescription drug discount cards, accidental death and dismemberment benefits and lifestyle benefits, such as rental car discounts.

The company targeted customers who had been denied traditional health insurance because of pre-existing conditions in the pre-Obamacare era.

The script used by Thomas's employees portrayed the memberships as equal in quality to traditional health insurance, omitting that limited benefit health plans left customers with the vast majority of the financial risk.

Thomas admitted that his employees made flagrant misrepresentations and omissions, using terms like "deductibles" and "copay" to dupe would-be customers.

Customer service employees and the Better Business Bureau routinely notified Thomas about customers complaining that they had been deceived into believing the plans were similar to traditional health insurance. Thomas oversaw a lax compliance program that was understaffed, with usually one employee monitoring up to 60 or 70 salespeople, and levied only occasional fines to salespersons who misrepresented or omitted key details of the plans. Despite knowing of the rampant misrepresentations and omissions, Thomas rarely fired salespeople for lying to customers, but routinely fired salespeople for low sales numbers, he admitted.

In 2009, WSMV ran a story including undercover footage of salespeople discussing misleading sales tactics. Thomas then hanged the name of his company from UBA to USB, instructing a subordinate to sign a letter to the Better Business Bureau claiming that the companies had nothing to do with each other.

The Federal Trade Commission filed a lawsuit against Thomas and his company in August 2010 and a federal judge froze Thomas’s assets and placed his company into receivership.

Immediately after being informed of the court’s order, Thomas withdrew more than $100,000 from a brokerage account and convinced a friend to deposit checks totaling $528,647, proceeds of the scheme, into his bank account.

As part of his plea agreement, Thomas agreed to forfeit $1.5 million, representing the amount he personally gained through the fraudulent scheme.

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