Ameriplan Settles Fraud Allegations for $200,000

November 22, 2006

Montana State Auditor John Morrison announced he has reached a settlement agreement with AmeriPlan to resolve allegations of insurance and securities fraud. In July, Morrison issued a cease and desist order after charging AmeriPlan USA, its founding officers, Dennis and Daniel Bloom, and Shirl Shelley, a Montana resident, with numerous violations of both the Montana Insurance Code and the Montana Securities Act. The action taken against AmeriPlan was the first of its kind in Montana, relying on a new law governing medical care discount cards. Morrison requested the legislation last session to ensure that medical care discount card providers were legitimate before they were allowed to sell their products in Montana.

“This settlement agreement serves to remind medical discount card companies that protecting Montanans is our number one priority,” said Morrison. “If discount card providers refuse to play by our new rules, they will pay the price and won’t be allowed to operate in Montana.”

Under the agreement, AmeriPlan must pay an administrative fine of $200,000 and create a restitution fund for Montana customers who were duped by the company. Montana customers of AmeriPlan can expect to receive a letter informing them that they are eligible to submit a claim to the restitution fund. In addition, AmeriPlan is banned from marketing and selling its products in Montana for two years.

AmeriPlan and its agents and officers were accused of failing to contract with the medical care providers (including doctors, nurse practitioners, physician’s assistants and hospitals) they advertise as participants in AmeriPlan’s medical care discount program. The Auditor alleged that more than 700 Montana AmeriPlan members in the state were unable to use the discount cards because there were few, if any, providers in Montana. Additionally, AmeriPlan is charged with conducting an illegal pyramid promotional scheme because it sold “broker packages” for the purpose of recruiting memberships. Because the memberships were for discounts that did not exist, Morrison alleged there was no actual product being sold. AmeriPlan’s largest source of income in Montana was from the sales of these “broker packages,” according to the Auditor’s charging document.

According to the auditor, AmeriPlan’s website and other advertising, including oral assertions from some of its agents, claimed to have medical care providers, dentists, and chiropractors contracted to provide a significant discount through the purchase of its card. When the Auditor’s office investigated these claims they were unable to find a medical care provider or chiropractor who honored the discount cards. The only dentist who had contracted with AmeriPlan was located in Forsyth and was on probationary status with the Montana Board of Dentistry for his unlawful activities in Colorado. The new law requires the discount card companies to have contracts for services with providers located within a 60 mile radius of the card holder.

The company was told to stop its activity in Nov. 2005 but AmeriPlan continued to market its discount cards until the matter was referred to Morrison’s legal staff in late April. Additional charges included securities fraud, using deceptive or fraudulent practices in the marketing of their discount cards, selling unregistered securities by unregistered salespersons and failure to stop marketing the cards when they were not properly registered.

“With insurance premiums on the rise consumers are searching for ways to obtain medical care coverage at a manageable cost,” said Morrison. “These fake discount card operators are preying on folks who are trying to find alternative solutions to the high cost of heath insurance. Our main goal is protecting Montanans while aggressively pursuing those bad actors in the industry who are exploiting the health care crisis facing consumers.”

The settlement agreement can be found at Montananswith questions regarding the settlement are being directed to call the State Auditor’s Office at 800-332-6148.

Source: Montana State Auditor’s Office

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