What’s the worst that could happen?

It’s a question some business executives ask themselves or their attorneys when considering whether to cross the line into illegal conduct: What are the ramifications of violating consumer protection laws? Most businesspeople are aware of the implications of injunctions, the possibility of redress or civil penalties, and the loss of consumer goodwill. Here’s another potential consequence to factor into the decision-making process: 25 years in federal prison.

In 2018 the FTC filed suit against an outfit called Simple Health Plans LLC and related corporations and individuals for violating the FTC Act and the Telemarketing Sales Rule. The gist of the case was that the defendants used an elaborate marketing scheme to bilk consumers out of more than $195 million by falsely claiming to sell them health insurance with comprehensive coverage. Consumers were often led to believe the hundreds of dollars per month they were handing over would cover primary care, treatment by specialists, prescription drugs, hospital stays, ER visits, lab testing, etc. In reality, what the defendants sold them was a medical discount program or an extremely limited program that didn’t deliver on promised benefits. As a result, many of the 400,000 consumers that Simple Health duped didn’t find out until it was too late that they would be stuck with the staggering cost of uncovered medical expenses or wouldn’t be able to get necessary care at all.

Throughout the multi-year course of civil litigation, the FTC remained committed to protecting the interests of consumers injured by the defendants’ illegal practices. Earlier this year the FTC announced a $195 million judgment against Simple Health and its CEO Steven J. Dorfman. The judgment also banned the defendants for life from engaging in telemarketing and selling healthcare products. Chief Compliance Officer Candida Girouard had settled with the FTC several years earlier.

The end of the story? Not hardly. After a referral from the FTC’s Midwest Regional Office, which spearheaded the civil action, the U.S. Attorney’s Office for the Southern District of Illinois conducted a criminal investigation into Simple Health’s operations that resulted in indictments against Dorfman and Girouard. Girouard pleaded guilty and received a six-month sentence. During a two-week trial, federal prosecutors presented evidence to the jury that at Dorfman’s direction, Simple Health salespeople used false and misleading scripts to deceive consumers about the kind of coverage – or rather lack of coverage – the plans would provide. According to the U.S. Attorney’s Office, evidence at trial demonstrated that the company's commissioned salespeople frequently told additional, off-script lies to get consumers to buy the "policies," with little or no effort from Dorfman to stop that conduct.

The jury convicted Dorfman of mail fraud, wire fraud, and a conspiracy count. Last month he was sentenced to 25 years in federal prison for his role in the Simple Health scheme.

We have an idea of what motivates some companies to flout the law – people are enticed by the prospect of sizeable (although illegal) profits – but what leads other businesses to do better? Our years in law enforcement tell us that some businesspeople view compliance as part of being a good corporate citizen. Others say that personal values like honesty and integrity ring hollow if their business practices depend on deception. Still others cite cases like Simple Health, where the risk of law enforcement serves as an effective deterrent.

From our vantage point, we see two key points to take from the Simple Health actions. First, to protect the interests of injured consumers, the FTC won’t back down in the face of litigation. Second, it’s a mistake to dismiss the consequences of law enforcement as “the cost of doing business.” When corporate decision makers weigh the risks of resorting to deceptive practices, they should factor in the simple, but sobering, lessons of Simple Health – because the worst that can happen can be pretty bad indeed.