The Federal Trade Commission has halted two health care scams that were designed to trick consumers into paying for phony “discount” cards, which the scammers falsely claimed would provide consumers with health insurance, or help them pay for prescription drugs.
Under settlements with the FTC and a default judgment entered by the court, the operators of a drug discount scheme directed at seniors have been banned from selling healthcare-related benefits or discount programs. In a separate action, a federal court temporarily halted a scheme that targeted Spanish-speaking and other consumers by pitching them a nearly worthless discount card and falsely claiming it would provide them with health insurance. The FTC seeks to permanently shut down the operation and return victims’ money.
According to an FTC complaint filed in 2013, 10 defendants, calling from a call center in Montreal, Canada, pitched prescription drug discount cards they said would provide consumers with substantial discounts or even free prescription drugs. But the cards were available for free elsewhere and typically provided no discounts for anyone who had insurance. The defendants also led consumers to believe they had to buy the $299 card to continue receiving Medicare, Social Security, or medical insurance benefits. The court halted the scheme and froze the defendants’ assets, pending litigation.
Under the settlement orders, Fawaz Sebai and 9210-7838 Quebec Inc., and Stephane Scebba and 9262-2182 Quebec Inc., also are banned from telemarketing. All of the settling defendants are permanently prohibited from misrepresenting any good or service, failing to provide information for consumer redress, disclosing or otherwise benefiting from customers’ personal information, and failing to dispose of such information properly.
The settlement orders against Sebai and 9210-7838 Quebec Inc., and Scebba and 9262-2182 Quebec Inc., impose a $1,091,450.68 judgment, reflecting the amount of consumer harm. The judgments will be suspended when Sebai has surrendered certain investments, and Scebba and 9262-2182 Quebec Inc. have turned over $7,752.51.
The settlement orders against Dupont, and Lamborn and CAL Consulting LLC, also bar them from deceptive and abusive telemarketing tactics, and they impose judgments of $887,841.68 and $203,609, respectively, reflecting the total consumer payments each processed. The judgments will be suspended when Dupont has surrendered his interest in a house in Weston, Wisconsin, and Lamborn and CAL Consulting have given up $39,329.38. The full judgments under each order will become due immediately if the covered defendants are found to have misrepresented their financial condition.
The court entered a default judgment against the remaining three defendants, AFD Advisors LLC, AMG Associates LLC, and Park 295 Corp. It bans them from selling healthcare-related benefits or discount programs, permanently prohibits them from deceptive and abusive telemarketing tactics, and from misrepresenting any good or service, and imposes a monetary judgment of $887,841.68.
The Commission vote approving the proposed settlement orders was 5-0. The settlement orders and default judgment were entered by the U.S. District Court for the Northern District of Illinois, Eastern Division.
In connection with this scheme, a federal grand jury in East St. Louis, Illinois, recently returned an indictment charging Sebai and others with defrauding older Americans. The United States Attorney’s Office for the Southern District of Illinois is prosecuting the matter. More information is available here about the FTC’s Criminal Liaison Unit, which works to increase the criminal prosecution of consumer fraud.
The FTC would like to thank the Better Business Bureau Serving Wisconsin; the Wisconsin Department of Agriculture, Trade and Consumer Protection; the Wisconsin Department of Justice; the Oregon Department of Justice; the Canadian Anti-Fraud Centre; and the Royal Canadian Mounted Police for their valuable assistance in this case.
Partners In Health Care
At the FTC’s request, a federal court temporarily halted, pending litigation, a scheme that tricked Spanish-speaking and other consumers into buying a nearly worthless discount card. The defendants’ telemarketers told consumers they were buying a qualified health insurance plan under the Affordable Care Act (ACA).
According to an FTC complaint against Partners in Health Care, the defendants targeted consumers who needed health insurance or were paying high premiums for coverage because they had lost their jobs or had pre-existing medical conditions. Many of the consumers had submitted their contact information to lead-generation websites that claimed to provide information about health insurance. Others responded by telephone after hearing Spanish-language radio ads that falsely claimed the discount card was an ACA-qualified health plan.
The defendants’ telemarketers allegedly assured consumers that the “insurance” would pay for doctor and emergency room visits, and other services, in many cases with very low co-pays or deductibles. Instead, consumers received nearly worthless “discount cards” and were left uninsured, despite paying an enrollment fee and monthly payments ranging from $99 to several hundred dollars.
The defendants are Gary L. Kieper and Partners In Health Care Association Inc., also doing business as Partners In Health Care Inc., and their marketers, Walter S. Vargas, Constanza Gomez Vargas, and United Solutions Group Inc., also d/b/a Debt Relief Experts Inc. Kieper and Partners In Health Care provided the medical discount cards that various marketers, including United Solutions Group Inc., offered consumers.
All of the defendants allegedly misrepresented the discount cards as health insurance, in violation of the FTC Act. Kieper and Partners In Health Care also allegedly violated the Telemarketing Sales Rule (TSR) by misrepresenting the cards and assisting and facilitating telemarketers that were violating the TSR.
The Wisconsin Department of Agriculture, Trade and Consumer Protection and the Better Business Bureau Serving Wisconsin provided valuable information in support of the FTC’s investigation.
The Commission vote authorizing the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the Southern District of Florida. On August 25, 2014, the court entered a temporary restraining order halting the deceptive scheme, freezing the defendants’ assets and appointing a receiver to manage the corporate defendants.
The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.
Office of Public Affairs
William J. Hodor
FTC Midwest Region
Partners In Health Care
Gary L. Ivens
Bureau of Consumer Protection