Thomas was also ordered to forfeit $1.5 million and to pay more than $2.5 million in restitution to the victims of the fraud scheme.
“Tim Thomas used misleading high-pressure sales tactics to dupe thousands of victims into buying a product they mistakenly believed was just as good as major medical health insurance,” said U.S. attorney Don Cochran. “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.”
In March, 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 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. 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.
Thomas operated and controlled United Benefits of America LLC, which was also known as United States Benefits 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.
“Timothy Thomas exploited innocent consumers who were simply looking for decent health insurance,” said acting assistant attorney general John Cronan. “Rather than honestly describing the insurance products his company was selling, Thomas had his salespeople misrepresent the products to thousands of unsuspecting people over the phone. The sentence of imprisonment and order of restitution in this case will hopefully provide some consolation to all those who were victimized by Thomas’ scheme.”
At sentencing Tuesday, Judge David M. Lawson observed that Thomas “sought to profit from misrepresentations to people in a particularly vulnerable state,” noting that this sentence “sends the message that this type of conduct will not be tolerated.” Thomas’ 66-month sentence consists of 36 months for mail fraud, to be followed by 30 months for criminal contempt.
Thomas’s ex-wife Kennan Dozier Thomas, 60, of Franklin, 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.