Fraudster’s delay tactics cost victims $14.6 million in premiums for junk insurance, FTC says

March 20-- Mar. 20--Tens of thousands of victims are still paying millions of dollars a month for "worthless" health insurance policies because the founder of the company accused of bilking them keeps delaying a key hearing, the Federal Trade Commission charged on Monday in a filing in U.S. District Court in Fort Lauderdale.

The FTC says Stephen J. Dorfman, CEO of Hollywood-based Simple Health Plans LLC, has repeatedly used "procedural maneuvers" to delay a hearing that could extend a court-appointed receiver's control of the seized firm -- and give customers an opportunity to cancel their policies. The FTC is asking the court to rule on the extension without a hearing.

The FTC is accusing Dorfman and Simple Health Plans of deceiving customers into purchasing what they believed was major medical insurance. The product was actually a package of nearly worthless discount plans and limited-benefit hospital indemnity coverage that at most paid out $3,200 a year. The deceit earned Dorfman's company at least $150 million in commissions since 2013, the FTC says.

On Oct. 31, the FTC secured a Temporary Restraining Order from U.S. District Judge Darrin P. Gayles that halted the company's operations and appointed a receiver to control its assets. At the same time, a court hearing was scheduled for Nov. 28 to allow Dorfman to contest the FTC's charges and its request for a preliminary injunction that would keep the company under the receiver's control until the case is resolved.

A preliminary injunction would give the receiver authority he currently lacks under the Temporary Restraining Order -- including an ability to give customers who are still paying monthly premiums an opportunity to cancel.

Those consumers have kept paying -- often without realizing their policies are worthless -- while Dorfman resorted to legal "gamemanship" to delay the preliminary injunction, the FTC said in its Monday filing.

Dorfman did not respond to a request for comment made through his attorney, Ryan O'Quinn, on Tuesday. But in a recent filing, Dorfman accused the FTC of seeking the preliminary injunction "to restrain assets for the benefit of ... [making] restitution," which, his filing states, the FTC is not authorized to do.

Among what the FTC calls procedural maneuvers, Dorfman filed a motion on Jan. 7 seeking to dissolve the Temporary Restraining Order because it was subject to an indefinite delay during the then-ongoing government shutdown. That was a violation of the Federal Rules of Civil Procedure, Dorfman contended.

Dorfman on March 4 appealed the denial of that request to the Eleventh Circuit Court of Appeal. Then on March 13, Dorfman asked Judge Gayles to halt the FTC's case indefinitely while the appeal is underway. Otherwise, Dorfman said, the court might allow the FTC to liquidate all of the Defendant's assets, which would be "irreversible" and constitute "irreparable harm."

While the two sides wrangled between December 2018 and February 2019, consumers who bought sham policies from Simple Health Plans were charged 165,798 times by the company's third-party plans administrator, totaling about $14.6 million, the filing states. In a December filing, the FTC said 37,000 customers were paying $6.3 million a month -- an average of about $170 a month per customer. The Monday filing did not quantify how many customers continue to make monthly payments.

Saying that Dorfman has presented no evidence against the FTC's charges or shown any intention to do so, the agency asked the court to rule on the preliminary injunction request without waiting for the preliminary hearing currently scheduled for April 16.

"The fraud uncovered in this case is especially vast and egregious," the FTC's filing states. "It is difficult to overstate the devastating and irreparable impact Dorfman's scam has had and continues to have on its victims."

Dorfman used his victims' proceeds to support a lavish lifestyle, including rent on a $1.4 million oceanfront condominium, a nearly-$300,000 wedding last March, purchase of more than $1 million in jewelry, plus purchase or lease of a Rolls Royce Wraith and Lamborghini Aventador.

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