Ill. U.S. Attorney: Jury Convicts Telemarketing Company Owner/CEO and Another Executive of Federal Fraud Charges for Health Insurance Policy Scheme

EAST ST. LOUIS, Illinois, Feb. 15 -- The office of the U.S. Attorney for the Southern District of Illinois issued the following news release:

Following a two-week trial, members of a jury in southern Illinois returned guilty verdicts on multiple federal fraud charges against the owner/CEO and a former executive of a health insurance telemarketing company based in south Florida.

The jury convicted Steven Dorfman, 39, of Fort Lauderdale, Florida, and John A. Sand, 49, also of Fort Lauderdale, Florida, of one count of conspiracy to commit mail and wire fraud, four counts of mail fraud and eight counts of wire fraud.

"The defendants used a south Florida business known as Simple Health to fraudulently sell relatively worthless policies to unsuspecting victims," said U.S. Attorney Rachelle Aud Crowe. "Using a deceptive sales script, Dorfman and Sand caused Simple Health's salespersons to deceive thousands of people, convincing them that the policies they were purchasing would function like major medical insurance. This brazen fraud had disastrous effects for many of the victims, leaving them with tens of thousands of dollars' worth of medical bills that were not covered by the policies they purchased. I applaud the St. Louis Office of the U.S. Postal Inspection Service and Assistant U.S. Attorneys Scott Verseman and Peter Reed for their work to expose this illegitimate operation and secure justice for the victims."

Dorfman was the owner and CEO of Simple Health, which was previously known as Health Benefits One. Sand served as the company's vice president of sales.

According to court documents and evidence presented during the trial, Simple Health employees were trained to use deceptive sales tactics to scam people into purchasing limited indemnity insurance plans. These plans provide relatively low amounts of coverage for medical expenses. When the policies' low caps were reached, the consumers were then responsible for paying 100% of their medical expenses above those caps.

"Simple Health's sale of bogus policies created financial devastation for consumers who were already suffering physically from major medical issues," said Inspector in Charge Ruth Mendonca who leads the Chicago Division of the U.S. Postal Inspection Service, which includes the St. Louis Field Office. "The guilty verdicts in this case put an end to a $190 million business model based on fraud."

The scripts designed and implemented by Dorfman and Sand caused Simple Health's salespersons to mislead consumers about the amount of coverage provided by the policies. For example, the scripts stated that "the whole idea of this plan is to make your out-of-pocket expenses as low as possible" and "when all is said and done, you'll end up owing pennies on the dollar." Evidence at trial also established that Simple Health's commissioned salespersons frequently told additional, off-script lies to the consumers to get them to buy them to buy the policies, with little or no effort by Dorfman and Sand to stop this conduct.

Using the deceptive scripts and the blatant lies of their salespersons, Simple Health sold these limited indemnity policies to more than 400,000 unsuspecting victims across the country from May 2012 through November 2018. This fraudulent conduct generated more than $190 million in revenue for Simple Health. The company sold more than 1,400 of these limited indemnity policies to individuals from all 38 counties in the Southern District of Illinois.

Because the scheme was conducted via telemarketing and victimized ten or more individuals over the age of 55, the maximum penalty for the conspiracy count is 30 years, pursuant to the SCAMS Act. Each mail and wire fraud count carries a maximum sentence of up to 20 years in prison. In addition, the defendants can be ordered to pay full restitution to the victims.

Dorfman's sentencing hearing is scheduled for 10:30 a.m. on May 21, 2024. Sand will be sentenced at 10:30 a.m. on May 22, 2024.

Candida L. Girouard, 47, of Valrico, Florida, was also named in the indictment. She served as chief compliance officer for Simple Health and pleaded guilty to the conspiracy charge on Nov. 30, 2023. Girouard's sentencing is scheduled for May 15, 2024. All three of the sentencings will take place at the federal courthouse in East St. Louis.

The St. Louis Office of the U.S. Postal Inspection Service led the investigation, and Assistant U.S. Attorneys Scott Verseman and Peter Reed are handling the prosecution.

The investigation began with a referral from the Federal Trade Commission's Midwest Regional Office in Chicago. The FTC filed a complaint for civil injunctive relief in October 2018. The FTC's action put an end to the fraud and a court-appointed receiver was appointed to take over Simple Health's business operations.

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Original text here: https://www.justice.gov/usao-sdil/pr/jury-convicts-telemarketing-company-ownerceo-and-another-executive-federal-fraud