Brentwood Fraudster Gets 5 Years In Prison

NASHVILLE, TN -- A Brentwood man who ran a Nashville-based telemarketing company that engaged in a health insurance scam will spend five and a half years in prison.

Tim Thomas was CEO of a company that 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. In addition to the prison sentence, a federal judge ordered him to forfeit $1.5 million and pay $2.5 million in restitution.

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When he pleaded guilty to fraud and contempt in March, 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.

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