Fraudwatch: Medical Billing BizOpp Marketers Settle FTC Charges

(FranchisePick.Com)  In his post Business Opportunity Fraud Rising?, attorney Michael Webster points out that small business opportunity schemes and “business in a box,” scams are believed to be on the rise, in part because of corporate layoffs and general job in-security.

One of the fave concepts for scammers continues to be medical billing business opportunities have been a popular concept for scammers. One such group of business opportunity “marketers” who told consumers they could make substantial income processing medical claims from home have agreed to settle Federal Trade Commission charges that they misled consumers.

The defendants are Mazzoni & Son, Inc. d/b/a EDI Healthclaims Network and d/b/a Concept Trading Company, Breeze Freeze, Inc., Dolele & Associates, LLC, Four Seasons Beverage & Equipment, Inc., Metro Plymouth Business Park, LLC, Mazzoni & Sons, LLC, Chester J. Mazzoni, Jr., individually and as an officer or principal of all of the above-named entities except Dolele & Associates, and Leo Douglas Lepo, a/k/a Douglas L. Lepo, individually
and as an officer or principal of all of the above-named entities except Mazzoni & Sons.

According to an FTC press release, “They are charged with violating the FTC Act by falsely representing that they would provide assistance that allows consumers easily to obtain clients, that consumers are likely to earn at least $1,200 per month, and that certain references have purchased one of the defendants’ billing businesses or will provide reliable descriptions of their experience. They also are charged with violating the FTC’s Franchise Rule by failing to provide prospective franchisees with accurate and complete franchise disclosure statements as required, and failing to provide earnings claims documents and make other disclosures required by the Rule.”

The FTC reveals how these medical billing scams operate:

…in mass mailings to consumers throughout the nation, the defendants offered a business opportunity – electronically processing health care providers’ medical claims for insurance reimbursement – and that they would help consumers find their first medical billing client and provide them with lists of providers in their area. Consumers were told that they could earn $1,200 per month with one client, and they were promised software training and upgrades, review of all claims processed, and marketing and technical support.

As stated in the complaint, consumers were provided with names and telephone numbers of references represented as current licensees, some of whom were the defendants’ officers and directors. After consumers paid a “licensing fee” of $4,985 to $5,985, the defendants never provided a franchise disclosure statement, an earnings claim document, or any other information substantiating their earnings claims. At their own expense, the complaint notes, consumers attended a training session where they learned that the representations were false, and that they would have to make cold calls and personal visits in order to get clients. Once back home, they learned that obtaining clients was extremely difficult, if not impossible, because the market was saturated, most processors already functioned electronically, and the few who processed manually had little interest in entrusting their billing to inexperienced or unknown persons.

The proposed stipulated final order prohibits the defendants from engaging in further violations and imposes a monetary judgment of $17,660,000, which will be suspended upon payment of $50,000 by the corporate defendants, and the defendants furnishing information necessary for collecting and reporting any delinquent taxes. The full judgment will be imposed if the defendants are found to have misrepresented their financial condition. A separate stipulated judgment, filed in the U.S. Bankruptcy Court for the Eastern District of Michigan, Southern Division, provides that the debt owed to the FTC by Chester J. Mazzoni, Jr. cannot be erased by filing for bankruptcy. In addition to the $50,000, the corporate defendants will pay any money remaining from assets ordered frozen in 2006.

Copies of the complaint and stipulated judgment and order are available from the FTC’s Web site at http://www.ftc.gov.  For more information on a variety of consumer and investment topics, click http://ftc.gov/bcp/consumer.shtm.

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