Tennessee Telemarketing CEO Gets 66 Months for Selling Limited Benefit Plans as Health Insurance

The bottom line: a sales script that leaves out the key limits of a product can be fraud, and a weak compliance program is not a defense. It can be evidence.

Background

Thomas, 55, of Brentwood, Tennessee, operated and controlled United Benefits of America (UBA) LLC, also known as United States Benefits (USB) and Health Care America. According to his admissions, from at least 2007 to 2010 he hired salespeople to sell "association memberships" over the phone. The memberships bundled limited benefit health plans, prescription drug discount cards, accidental death and dismemberment benefits and lifestyle perks such as rental car discounts.

Thomas admitted that he targeted customers who had been denied traditional health insurance because of preexisting conditions. His script tried to portray the memberships as equal in quality to traditional insurance. It left out the fact that limited benefit plans left customers with most of the financial risk.

The compliance failures

The plea admission includes a detailed list of what not to do:

• Salespeople used terms like "deductibles" and "copays" to make customers think they were buying traditional health insurance.
• Customer service staff and the Better Business Bureau routinely told Thomas about deceived customers.
• One compliance employee usually monitored 60 or 70 salespeople.
• Thomas rarely fired salespeople for lying to customers, but routinely fired them for low sales numbers.
• After a local news station, WSMV, aired undercover footage in 2009, Thomas made no meaningful changes.

The court order

The Federal Trade Commission (FTC) and the State of Tennessee sued in August 2010. A federal judge froze Thomas's assets and placed the company into receivership. Immediately upon learning of the order, Thomas withdrew more than $100,000 from a brokerage account and convinced a friend to deposit checks totaling $528,647 into the friend's bank account.

Thomas pleaded guilty in March 2018 to mail fraud and criminal contempt. His 66-month sentence consists of 36 months for mail fraud followed by 30 months for contempt. His ex-wife, Kennan Dozier Thomas, pleaded guilty to criminal contempt in 2016 and was sentenced to time served and two years of supervised release.

Why it matters

The case shows how a telemarketing company's internal records can be used against it. Complaint logs, staffing ratios and firing patterns all became part of the story. It also shows that violating an asset freeze turns a civil case into a separate crime.

What this means for you

1. Describe products accurately, including what they do not cover.
2. Staff compliance at a level that can actually review sales calls.
3. Discipline misrepresentation at least as seriously as low sales.
4. Act on complaints and press coverage, and document what you changed.
5. Comply fully and promptly with court orders.

A compliance program is measured by what it does, not what it is called.