Federal district courts in Ohio and South Carolina have temporarily halted allegedly fraudulent practices used by three telemarketing schemes to sell medical equipment to consumers nationwide, following Federal Trade Commission charges. Accord- ing to the FTC, in each of the cases, the defendants pitched one type of product to consumers -- for example, a scooter -- but then obtained physician approval and made insurance claims for other, more expensive, equipment -- such as a motorized wheel- chair. In some instances, the FTC charged, the defendants filed insurance claims listing items and accessories that were never discussed with, or ordered by, consumers.
The FTC filed separate complaints detailing its charges against:
- Independence Medical, Inc., which is based in Mount Pleasant, South Carolina; Independent Medical of America, Inc., which has offices in Jacksonville, Florida, and does business out of the same Mount Pleasant office as Independence Medical; and corporate officers Jerry Rodney Rogers and Jeffrey S. Marmer;
- Freedom Medical, Inc., based in Hilliard, Ohio; company president Robert A. Patten; and vice president Robert L. Grden (Grden is the correct spelling); and Freedom Medical of Wisconsin, based in New Berlin, Wisconsin; and
- Motion Medical, Inc., based in Blacklick, Ohio, and which has another office in Charlotte, North Carolina; and company president Anton Albert Wood.
This is the first time the FTC has brought charges against entities for victimizing consumers in order to perpetrate a fraud against health insurers, and these cases were built on FTC exper- tise in prosecuting telemarketing fraud. They also represent extraordinary cooperation among federal and state law-enforcement authorities.
The FTC has asked the court in each case to permanently bar the defendants from making misrepresentations to consumers, doctors and insurance companies that would allow the defendants to obtain reimbursements from insurers that they otherwise would not be entitled to. Pending hearings on the FTC charges, the courts have frozen the defendants' assets to preserve any funds for disgorgement, and appointed receivers to oversee the corporate operations.
According to the FTC complaints, telemarketers in each of the three schemes engaged in similar misrepresentations. The complaints allege that the defendants made unsolicited sales calls to handicapped and medically disabled persons whose names had been obtained from such places as motor vehicle department records and trade shows for the disabled. The telemarketers allegedly told consumers that the medical equipment they were selling would cost the consumers nothing out-of-pocket, because their health insurers would pay for equipment they ordered and the defendants would accept whatever payment the insurers sent and waive any co-payments.
According to the FTC, the defendants then contacted con- sumers' physicians to obtain prescriptions or "certificates of medical need," and submitted claim forms to their health insur- ers. In many instances, the FTC charged, the defendants made claims for costlier equipment that would be covered by insurance. The defendants also billed for items and accessories which had not been ordered by the consumer, according to the complaints.
In investigating and bringing these cases, the FTC staff worked with the Department of Justice through its U.S. Attorney's Offices in Columbus, Ohio, and Columbia, South Carolina. FTC staff also worked with the Department of Defense's Office of Inspector General, Division of Criminal Investigative Service, in Ohio; the Office of the State Comptroller in Florida; the FBI in Health Fraud--05/25/95)
Ohio and South Carolina; the Southern District of Ohio Health Care Task Force (coordinated by the Southern Ohio U.S. Attorney's Office); and the South Carolina Attorney General's office. The FTC's Cleveland Regional Office also assisted in these cases.
The FTC filed its complaints against Freedom Medical and Motion Medical in the U.S. District Court for the Southern District of Ohio, Eastern Division, in Columbus. The complaint against Independence Medical was filed in U.S. District Court for the District of South Carolina, Charleston Division. The complaints were filed May 22. A hearing on the Motion case is set for May 31. Hearings on the Freedom and Independence cases are set for June 1.
The Commission vote to file the complaints was 5-0.
NOTE: The Commission files a complaint when it has "reason to believe" that the law has been or is being violated and that a proceeding is in the public interest. The complaint is not a finding or ruling that the law has actually been violated. These cases will be decided by the courts.
Copies of the complaints are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.
Civil Action Nos. Independence Medical-- Z95 1581 18
Freedom Medical -- C2-95-510
Motion Medical -- CD-95-511 FTC
File Nos. Independence Medical -- 952 3007
Freedom Medical -- 942 3232
Motion Medical -- 942 3234