FTC fears thousands defrauded by LV firm

Grace Leong

Wednesday, April 17, 2002 | 11:26 a.m.

The Federal Trade Commission said it raided a Las Vegas company, found evidence of wrongdoing and had $1.2 million of its assets frozen by a federal judge.

Electronic Processing Services Inc. -- which sold "work-at-home" opportunities in medical claims billing nationwide since November 2000 -- and its owner, David Stewart, were accused by the FTC in a lawsuit last week of defrauding consumers by misrepresenting the medical billing business as "viable and lucrative."

The FTC won a temporary restraining order on April 11 to freeze the defendants' assets and now wants a permanent freeze of the assets. The $1.2 million in assets is believed by the agency to be the amount of money lost by defrauded consumers.

The FTC also wants to obtain a preliminary injunction to stop the company from making misrepresentations about the earnings potential of the medical billing business after it found documents supporting its allegations.

A hearing is scheduled April 24.

"Our goal is to have the defendants cease and desist from making misrepresentations about the medical billings business opportunity and to comply with the law," said Jerome Steiner, an FTC attorney. "We also want to help consumers who were defrauded get restitution. We don't have any specific figures yet on the number of consumers affected, but we believe they may potentially be in the thousands."

In Friday's raid of the company's offices at 4820 Alpine Place, suites F-203 and F-201B, the FTC said it found and copied company documents that allegedly provide instructions to some 12 Electronic employees on what to say and how to attract consumers.

Steiner said he couldn't specify if the company is still in operation.

Electronics, which is believed to have operated for one and a half years and purports to train people to file medical claims for doctors electronically, was accused of claiming that it's "easy" for people to find doctor clients because many of them -- now allegedly "experiencing a 30 percent rejection rate" from insurers and "losing tens of thousands of dollars" when they file medical claims by paper -- are switching to electronic claims filing.

"Medicare and Medicaid are in the process of no longer accepting paper claims from doctors. And that is why Entrepreneur magazine has rated our business, medical claims processing, as one of its top home-based businesses," according to a company document found by the FTC.

"What we do is train people to file claims electronically and thereby reduce the rejection rate down to less than 2 percent. That means you can give the average doctor a 28 percent revenue increase," Electronic said in another document. "You only need to work with three (doctors) to work full time. Do you think you will have a hard time finding doctors who would like a 28 percent pay raise on average?

Electronic, which charges a $480 one-time fee to train, certify, provide medical billing software and clearinghouse access to its agents, was also accused by the FTC of directing its employees to "extol the earnings potential of their business opportunity" to consumers.

The FTC said company offered medical billing jobs that allegedly pay up to $5,000 a month" and that consumers can expect to earn up to $60,000 a year.

"The average doctor will give you about 100-200 claims per week. The doctors will pay you the industry average of $3-$7 per claim times the 100-200 claims per week, per doctor. Well, you do the math. ... If you take on two doctors it doubles. Three doctors it triples. So it is up to you how much money you want to make depending on how many hours you work."

But Steiner disputed Electronic's claims. "The representation was that the doctors would be willing to use agents to do medical billing. But the reality was that people tried and could not sign up any doctors. Few, if any, consumers who purchased defendants' medical billing employment opportunity earn any income."

The FTC said the company also failed to furnish the names and addresses of doctors it claims to have obtained from the federal government. The list allegedly identifies which doctors are still filing paper claims and have to switch over to electronic filing.

The defendants could not be reached for comment on the FTC's allegations.