MANHATTAN (CN) – Two business groups claim a “nationwide criminal enterprise” bilked them of $85 million by selling “nonexistent” health insurance. The federal RICO complaint claims that defendants William M. Worthy II, David L. Clark, and their Real Benefits Association have been in cahoots and defrauding customers for years.
The institutional defendants are Viking Administrators, United States Contractors Trust, IRG Brokerage dba Insurance Resource Group, Integrated Insurance Marketing, and Real Benefits Association.
CEO Clubs Inc., which claims more than 15,000 members, is lead plaintiff in the 23-page complaint, which also names as defendants William M. Worthy II, David L. Clark, Louis DeLuca, Gary L. Karns Jr., David L. Nellson aka Nelson, and Arnold Katz.
Joining CEO Clubs as a plaintiff are the Metropolitan Business Alliance dba National Association of Business Leadership, and its members.
The complaint calls lead defendant William Worthy II the “head” of the “enterprise.
“Throughout its existence, the criminal enterprise has operated by creating a non-existent master policy, and/or by having policies issued to and by fictitious insurers, and by then selling coverage to association members under the purported master policy through the use of high pressure techniques and false representations,” the complaint states.
After selling the fictitious policies, the defendants sent bogus documentation by fax, email, Internet and snail mail, according to the complaint. The defendants also manipulated “the claim process by delaying claims so that additional premiums can be collected until after additional premiums are paid,” CEO Clubs claims.
“Ultimately the claims are denied, leaving the ‘insureds’ not only out premium dollars, but legally responsible for their medical bills as well,” according to the complaint.
“Once their fraud is discovered, the defendants change the name of their fictitious carrier, infiltrate another association, and repeat the process,” CEO Clubs says.
CEO Clubs claims the defendants also “preyed” on organizations that are not plaintiffs in the action, including the Association of Independent Managers, the Transportation Services Association, and the American Trade Association.
Nebraska ordered Worthy to stop offering limited liability health insurance in that state in 2006, according to the complaint, which says he sold two Nebraskans “a ‘policy’ for which insurance did not exist.” The complaint continues: “After selling the insurance and collecting the premium, Worthy’s company manipulated the claims process, committed bank fraud by issuing a bad check and continued accepting premiums from other association members even though an insurance policy did not exist.”
New Jersey accused defendant David Clark in 2004 of “selling healthy insurance through ‘illegitimate sham unions, submitting false documents to insurers, improperly withholding insurance premiums and unlawfully charging insurers with association or union dues,'” according to the complaint. It claims Clark’s insurance license was revoked by a consent order in 2009, which also found that he misappropriated $91,620 in premiums, which he did not remit to insurers, and “failed to advise insureds that coverage was canceled and/or did not exist (presumably so he could continue collecting premiums from them,” (parentheses in complaint).
Missouri, North Carolina and Tennessee also brought actions against Worthy, Clark and the Real Benefits Association, according to the complaint.
The plaintiffs seek damages for RICO conspiracy, breach of contract, conversion and unjust enrichment.
They are represented by Jeffrey Gold with Gold, Stewart, Kravatz & Benes.