Antitrust Lawyer Blog
On July 31, the U.S. District Court for the Northern District of Georgia barred a purported former preacher, his two sons, and his companies from selling a healthcare business opportunity promising consumers millions of dollars if they participated in an alleged network of Medicaid providers. In fact, according to the Federal Trade Commission (“FTC”) complaint, the defendants' business model required participants to break numerous state and federal laws.
Using “healthcare conferences” at hotels and convention centers across the United States, the defendants promised consumers that they would receive “guaranteed” Medicaid patients and would receive help from the lawyers, doctors, and other professionals on their staff in establishing their healthcare businesses. The FTC charged that the defendants misrepresented the assistance they would provide and that participants could legally earn money from the business, and did not provide participants with the required disclosure statement and earnings disclosures for a franchise. The U.S. District Court granted a temporary restraining order, prohibiting the defendants from continuing their deceptive business practices, freezing their assets, and appointing a receiver.
The operation targeted church-going audiences, advertising their upcoming conferences on Christian radio and television networks. Their traveling road show visited at least 18 different U.S. cities, drawing crowds of up to 1,000 attendees, with many persons paying a $65 registration fee to attend. The defendants held “conferences” in Atlanta, Baltimore, Durham, Chicago, Dallas-Ft. Worth, Memphis, Jacksonville, Nashville, Macon and Columbus, Georgia, St. Louis, Philadelphia, Jackson, Mississippi, Norfolk, Richmond, and Austin.
At the conferences, individual defendant Jeffrey W. McLain mixed references to his alleged career as a preacher with descriptions of the huge rewards flowing from his business opportunity. The defendants claimed that they were millionaires and multimillionaires and that for a $2,495 investment, participants would have an opportunity to become as rich as they were. The defendants also ran a telemarketing operation in Marietta, Georgia through which they sold their business opportunity.
The defendants instructed participants to incorporate two companies – a non-profit organization, such as a church, and a for-profit healthcare company which would provide services to Medicaid-eligible clients. The defendants stressed to the participants that the ownership of the non-profit corporation needed to be untraceable to the healthcare company. The non-profit collected donations, such as clothes and furniture, and distributed it to those in need, provided they gave the non-profit their Medicaid information. The participants then funneled the Medicaid information to the for-profit medical services company that supplied its products or services to the recipient and billed Medicaid. The participant also sold the Medicaid information to other providers and received a referral fee between $100 and $500.
According to the FTC's complaint, the defendants failed to disclose that their business model exposed participants to either criminal or civil monetary penalties, as it violated numerous federal and state laws. The complaint also alleged that they misrepresented purchasers could legally make substantial earnings, and receive assistance in establishing and managing their business venture. Finally, the FTC charged that the defendants failed to provide purchasers with the required disclosure statement and made unsubstantiated earnings claims.
Authored by
Camelia C. Mazard
202-589-1837
cmazard@dbmlawgroup.com