A U.S. district court entered a judgment against five individuals and the telemarketing operation they ran for violating the Federal Trade Commission Act and the FTC’s Telemarketing Sales Rule.
The court order permanently bars the defendants, who operated under a variety of names - including NHS Systems Inc. - from telemarketing, charging consumers’ bank accounts and making false and misleading statements. It requires them to pay almost $6.9 million, the amount the scheme bilked from consumers.
Judge Juan R. Sánchez wrote that, “All defendants have acted with reckless disregard for the financial interest and security of thousands of consumers. They have demonstrated their continued ability, desire, and success in committing the same deceptive acts. The danger of recurrent violations is real.”
A complaint from the Federal Trade Commission, filed in 2009, said the defendants used third-party telemarketers to "unfairly and deceptively market and charge consumers for one or more discount health programs."
During sales calls, the telemarketers led consumers to believe they were from, or affiliated with, U.S. government agencies - including the Social Security Administration, the Internal Revenue Service, and Medicare. They promised consumers they would receive substantial deposits into their bank accounts – in the form of grants, tax refunds or tax rebates – if they first provided their account or credit card information. In many cases, the callers told consumers that they had been unconditionally selected.
The defendants’ telemarketers also allegedly used deceptive tactics to obtain a “verification” of consumers’ authorization to charge their accounts, and often created false verification recordings. In some cases, the telemarketers told Medicare beneficiaries that they had to provide their financial information to continue receiving their benefits. In some cases, the defendants charged consumers’ financial accounts without any notice and without their authorization.
Consumers often were charged $29.95 to receive health care information, $299.95 to enroll in the program and $19.95 per month thereafter, finding themselves in a “discount health care program” they never agreed to purchase.
In granting summary judgment against the NHS defendants, the court found that their conduct was unfair, as it “caused and was likely to cause substantial financial injury to the consumers.” The court also found that that their conduct was deceptive and that the defendants’ telemarketers made the alleged misrepresentations to consumers, in violation of the FTC Act.
Finally, the court found that the NHS defendants violated several provisions of the Telemarketing Sales Rule by: 1) misrepresenting the total cost of the programs; 2) overcharging consumers; 3) charging consumers who were not enrolled in the healthcare program; 4) charging consumers to enroll in what was supposed to be a free program; 5) misrepresenting aspects of goods and services sold; and 6) using audio authorizations that did not comply with the Rule.
The judgment announced Wednesday resolves the FTC’s charges against the following individual defendants: 1) Nicole Bertrand; 2) Barry Kirstein; 3) David James Greer, also known as “Dannie Boie”; 4) Linke Jn Paul; and 5) Tasha Jn Paul, as well as the following corporate defendants: 1) NHS Systems Inc., also doing business as (d/b/a) National Healthcare Solutions and National Health Net Online; 2) Plus Health Savings Inc.; 3) Physicians Health Systems Inc.; 4) Physician Health Service LLC, also d/b/a American Health Benefits On Line; 5) Health Management LLC; 6) 6676529 Canada Inc.; 7) PHS Enterprises Inc.; 8) First Step Management Inc.; 9) Gold Dot Inc.; and 10) Nevada Business Solutions Inc.
The following defendants previously settled the FTC’s charges: 1) Harry F. Bell, Jr.; 2) John E. Bartholomew, Interface Management Inc., and Beginning Again Inc.; and 3) Donna Newman.