Former CEO of Tennessee-Based Telemarketing Company Pleads Guilty to Misrepresenting Health Insurance Plans

Wednesday, March 7, 2018

The former owner and chief executive officer of a Nashville, Tennessee-based telemarketing company pleaded guilty this morning to overseeing a fraudulent scheme in which limited-benefit health plans were sold to consumers as traditional health insurance, and to violating a federal court order that in 2010 froze his assets and shut down the company, 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, of Brentwood, Tennessee, pleaded guilty to one count of mail fraud and one count of contempt before U.S. District Judge David Lawson, sitting by designation in the Middle District of Tennessee.  He is scheduled to be sentenced by Judge Lawson on June 25.  Thomas was charged in a 15-count indictment filed in October 2014.

According to admissions made as part of his plea, Thomas operated and controlled United Benefits of America (UBA) LLC, which was known at various times 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, he admitted.  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 admitted that salespeople working for him made even more flagrant misrepresentations and omissions and used terms such as “deductibles” and “copays” to make customers believe they were buying traditional health insurance.  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.  When in 2009 a local news station, WSMV, ran a critical story on UBA featuring undercover footage of salespeople discussing misleading sales tactics, Thomas did not institute any meaningful changes in business practices.  He merely changed the name of his company from UBA to USB and instructed a subordinate to sign a letter to the Better Business Bureau falsely claiming that the companies had nothing to do with each other.

When the Federal Trade Commission (FTC) filed a lawsuit against Thomas and his company in August 2010, 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, he admitted.

As part of his plea agreement, Thomas agreed to forfeit $1.5 million, representing the amount he personally gained through the fraudulent scheme.

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 and Tennessee Division of Insurance provided substantial assistance.  Trial Attorney William E. Johnston of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Cecil VanDevender of the Middle District of Tennessee are prosecuting the case.

Federal Grand Jury Indicts Union Official for Allegedly Extorting Cash Payments from Local Business

Wednesday, July 12, 2017

CHICAGO — A high-ranking official in a Chicago-area labor union threatened a local business with economic loss if it didn’t pay him quarterly cash payments of $25,000, according to a federal indictment returned today.

JOHN T. COLI SR. used the threat of economic harm to extort quarterly payments of $25,000 from a local company, according to the indictment. The attempted extortion occurred from approximately October 2016 to April 2017, while Coli served as President of Teamsters Joint Council 25, a labor organization that represents more than 100,000 workers in the Chicago area and northwest Indiana. The organization has approximately 26 local union affiliates, including Teamsters Local Union 727, where Coli also served as Secretary-Treasurer during the time period referenced in the indictment.

The indictment was returned today in U.S. District Court in Chicago. It charges Coli, 57, of Chicago, with one count of attempted extortion and five counts of demanding and accepting a prohibited payment as a union official. The indictment seeks forfeiture from Coli of at least $100,000.

Arraignment in federal court in Chicago will be held at a future time to be set by the Court.

The indictment was announced by Joel R. Levin, Acting United States Attorney for the Northern District of Illinois; Michael J. Anderson, Special Agent-in-Charge of the Chicago office of the Federal Bureau of Investigation; and James Vanderberg, Special Agent-in-Charge of the U.S. Department of Labor’s Office of Inspector General in Chicago.

According to the charges, Coli accepted a $25,000 cash payment on July 7, 2016; two cash payments totaling $25,000 on Oct. 4, 2016, and Nov. 29, 2016; and $25,000 cash payments on Dec. 22, 2016, and April 4, 2017. The indictment does not identify the individual who made the payments nor the company Coli allegedly extorted.

Coli previously served as International Vice President of the Central Region of the International Brotherhood of Teamsters, the indictment states.

The public is reminded that an indictment is not evidence of guilt. The defendant is presumed innocent and entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Attempted extortion is punishable by a maximum penalty of 20 years in prison. Each count of demanding and accepting a prohibited payment is punishable by up to five years in prison. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory U.S. Sentencing Guidelines.

The government is represented by Assistant U.S. Attorneys Amarjeet S. Bhachu and Abigail Peluso.