TENNESSEEA federal judge sentenced a Brentwood, Tennessee man this week to five years and six months in prison for his criminal conduct in marketing and misrepresenting health insurance plans, according to authorities.
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, officials said.
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, according to officials.
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 his guilty plea agreement, 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.
“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 Don Cochran of Tennessee. “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.