The accused architect of a massive health insurance scheme recently shut down by the Federal Trade Commission was given a fraction of the frozen funds he requested despite the agency’s argument to a federal judge that he and his wife have plenty of money at their disposal.
Steven J. Dorfman, CEO of -based Simple Health Plans LLC, filed an emergency motion Monday seeking $15,000 a month for living expenses and $200,000 for legal representation to fight the FTC’s lawsuit seeking to permanently close the business.
After a hearing Thursday in federal court in Miami, District Judge Darrin B. Gayles ruled that Dorfman can have $75,000 for legal fees and $5,000 a month from the personal assets frozen as part of an Oct. 31 restraining order.
In his emergency motion, Dorfman said the restraining order — which transferred to a receiver control of corporate and personal accounts, two luxury cars and jewelry purchased with corporate funds — left him “unable to meet his daily living expenses, such as rent, health insurance, food and transportation or pay his attorney fees and access.”
But in a written response filed Tuesday, the FTC said that Dorfman should not be allowed access to any of the $3.9 million in funds seized in the case, and the money should be preserved to give back to victims if the FTC prevails in permanently shutting down the operation.
The FTC said Dorfman’s motion omitted that he has already paid his attorneys a $75,000 retainer and that his wife, Izabela Freitas, “currently holds over $125,000 in unfrozen funds that are available to pay their living expenses.”
The response also argued, “Dorfman’s motion does not identify an emergency or begin to justify his request to use hundreds of thousands of dollars of frozen assets rather than funds from other sources.”
“These telling omissions from Dorfman’s motion make it clear that it should be denied,” the FTC said.
The FTC is charging that Simple Health Plans LLC collected more than $150 million in commissions over three years convincing tens of thousands of consumers they were purchasing comprehensive health insurance that covered pre-existing conditions, prescription drugs, surgeries and visits to primary care physicians, specialists and emergency rooms.
Using deceptive sales pitch scripts that Dorfman “wrote, reviewed, and approved,” the consumers were “confused and misled … into purchasing limited benefit and medical discount plans” that “at most, provided meager reimbursements and possible discounts for an extremely limited class of medical services.”
In addition to hundreds of dollars a month in “premiums,” many victimized consumers “now carry thousands of dollars in debt due to uncovered medical expenses,” the FTC said.
Dorfman, meanwhile, “used the proceeds of the fraud to fund his extravagant lifestyle, including by transferring money directly from the corporate bank accounts to casinos and using corporate credit cards to pay for luxury goods and private jet travel,” the FTC said.
Although he has not yet filed a detailed response to the FTC’s charges, Dorfman in his emergency motion asserted his innocence, calling the allegations “misguided” and saying the agency “abused its power by seeking an obtaining the asset freeze.”
Assets frozen by the FTC so far include about $3.1 million in corporate funds, $804,166 in personal funds that had been controlled by Dorfman, three vehicles and several pieces of jewelry.
In a sworn financial statement submitted to the FTC and court-appointed receiver, Dorfman disclosed having cash and personal property totaling about $60,325 and a multimillion-dollar Las Vegas property held in a revocable trust of which Dorfman is the only trustee.
Dorfman also reported that his wife had unfrozen assets totaling $140,799, including $85,100 in cash and $43,199 in a bank account, plus $10,000 worth of jewelry.
The FTC also took issue with a breakdown of monthly living expenses Dorfman listed in a sworn statement accompanying an earlier asset release request. They included $6,600 for rent, $2,000 for food, $1,500 for health insurance, $750 for transportation, $276 for utilities and $4,000 for “other expenses.”
Asked to clarify the need for $4,000 for “other expenses,” Dorfman did not respond, the FTC said.