Date: 07-04-2018

Case Style:

Case Number: 3:14-cr-00182

Judge: David M. Lawson

Court: United States District Court for the Middle District of Tennessee (Davidson County)

Plaintiff's Attorney: William E. Johnson and Cecil VanDevender

Defendant's Attorney: Peter Strianse

Description: Nashville, TN - Former CEO of Tennessee-Based Telemarketing Company Sentenced to Federal Prison

A Brentwood, Tennessee man was sentenced on July 2, 2018 in U.S. District Court to 66 months in prison for his criminal conduct in marketing and misrepresenting health insurance plans, announced Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division and U.S. Attorney Don Cochran of the Middle District of Tennessee.

Timothy Thomas, 55, was also ordered to forfeit $1.5 million dollars and to pay more than $2.5 million in restitution to the victims of the fraud scheme. In March 2018, Timothy Thomas pleaded guilty to committing mail fraud. He was initially indicted in October 2014 for fraudulently marketing limited benefit health plans as major medical health insurance to consumers. Thomas also pleaded guilty to criminal contempt, charges that resulted from a lawsuit filed by the Federal Trade Commission (FTC) and the State of Tennessee in August 2010, wherein a federal judge in the Middle District of Tennessee issued an order freezing Thomas’s assets and placing his company into receivership. Immediately after being informed of the court’s order, Thomas violated it by withdrawing more than $100,000 from a brokerage account and convincing a friend to deposit checks totaling $528,647, constituting proceeds of the scheme, into the friend’s bank account.

According to admissions made as part of his guilty plea, Thomas operated and controlled United Benefits of America (UBA) LLC, which was also known at as United States Benefits (USB) and Health Care America. From at least 2007 to 2010, Thomas 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. Thomas targeted his sales to customers who had been denied traditional health insurance because of preexisting conditions. The sales script used by Thomas attempted to portray the memberships as equal in quality to traditional health insurance, omitting the fact that limited benefit health plans left customers with the vast majority of the financial risk.

Thomas’s 66-month sentence consists of 36 months for mail fraud, to be followed by 30 months for criminal contempt.

“Timothy Thomas exploited innocent consumers who were simply looking for decent health insurance,” said Acting Assistant Attorney General Cronan. “Rather than honestly describing the insurance products his company was selling, Thomas had his salespeople misrepresent the products to thousands of unsuspecting people over the phone. The sentence of imprisonment and order of restitution in this case will hopefully provide some consolation to all those who were victimized by Thomas’ scheme.”

“Tim Thomas used misleading, high-pressure sales tactics to dupe thousands of victims into buying a product that they mistakenly believed was just as good as major medical health insurance,” said U.S. Attorney Cochran. “Then, when a federal court stepped in to shut Thomas’s company down and freeze his assets, Thomas violated that court order by depositing hundreds of thousands of dollars into a friend’s bank account. These crimes implicate not only the public’s trust but the integrity of the judicial system, and the sentence imposed today reflects their seriousness.”

Thomas’s ex-wife, Kennan Dozier Thomas, 60, of Franklin, Tennessee, was also charged with criminal contempt, arising from the violation of the asset freeze. She pleaded guilty in September 2016 and was sentenced last week to time served and placed on two years of supervised release, the first 90 days of which will be spent in a halfway house.

The case was investigated by the FBI, the U.S. Postal Inspection Service, the Department of Labor’s Office of Inspector General and the Department of Labor’s Employee Benefits Security Administration. The FTC, Tennessee Attorney General’s Office, and Tennessee Division of Insurance provided substantial assistance.

Outcome: Defendant was sentenced to 66 months in prison.

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