Academic Writing: Compliance Report on United Benefits of America (UBA)

Part 1: Recent Compliance Problem and Enforcement Action

  1. The compliance problem at United Benefits of America (UBA), which is a limited liability (LLC) telemarketing company based in Nashville, Tennessee, occurred when the company was involved in selling limited-benefit health insurance plans to unsuspecting customers in the guise of traditional health insurance, and due to violation by the former CEO and owner Timothy Thomas, of a federal court order that was directed towards freezing his assets and shutting down the corporation. Thomas’s sales model was aimed at reaching out to and expanding the customer and market segment share that still remained unexploited by traditional insurance and therefore aimed at transforming telemarketing and insurance penetration rates to levels that traditional insurance would not have managed. (
  2. Noncompliant behavior that led to the indictment of the UBA CEO in 2014 involved different sales activities where the customers were irregularly exploited by the company. The company had at various times changed its name to Health Care America and United States Benefits (USB). Thomas hired salespeople, between 2007 and 2010, to promote and implement the sales of a health insurance product named “association memberships” through the use of phones. These insurance products were in turn developed by third party insurance firms such as Consumer Driven Benefits of America and International Association of Benefits. Subscription to the products was embedded with policy benefits such as prescription drug discounts, limited benefit health insurance policies, permanent disability and accidental death benefits, in addition to lifestyle benefits that would include rental car benefits. This was a breach of compliance regulations since the insurance plans practically left most of the consumers with an immense financial risk as the two types of plans are entirely different in their approach to risk. (
  3. The regulatory agent, the Federal Trade Commission (FTC), sued the firm on August 2010 at Middle District of Tennessee Court. This was in consequence to an event where a local TV station, WSMV, ran a story exposing the salespeople in this company discussing their misleading sales tactics. Even after this expose, Thomas didn’t bother to make major changes to how the business and especially sales processes were done. Instead, he altered the company name to United States Benefits (USB) from UBA, later instructing one of his workers to write to the Better Business Bureau where they misleadingly claimed that the two firms were not related in whatever ways. Prior to the legal suit, Better Business Bureau and customer service workers often informed Thomas on different customer dissatisfaction and complaints, which he not only failed to address, but only emphasized on sales closure while ignoring the role of compliance in the business. UBA was therefore in violation of the relevant regulations set and monitored by the regulatory body, FTC. Also the fact that he had an understaffed compliance team that was equipped with very meager resources to maintain the company under the relevant checks and balances failed in doing so in large scale. For example, one compliance officer had the responsibility of monitoring up to 70 salespeople and hence resulted in long delays before breaches could be discovered within the sales mechanisms of the company. (
  4. The punishment for this noncompliant behavior is that Thomas had his assets frozen and his company placed under receivership following a court order issued by a federal judge back in 2010. This was in response to a lawsuit against the Thomas and his firm by the Federal Trade Commission (FTC) in the Middle District of Tennessee. Surprisingly, Thomas would go ahead to violate the court order when he withdrew amounts totaling to about $100,000 from one of the brokerage firms that owed him some payouts. He also attempted to escape the punishment when he convinced a friend of his to help in depositing some of his proceeds from the fraudulent scheme totaling to about $528,647 into his own account in an attempt to escape the wrath of the law and compliance. A forfeiture of $1.5 million was agreed upon his taking of plea, where this amount was a representative of the gains he had personally obtained from the impending fraud. (
  5. Given that this problem in UBA arose primarily from corporate governance inefficiencies and failures, the company can rectify its sales script by developing more innovative products that will attract people from the market segment that is untapped by the traditional insurance products. This can include cheaper health insurance plans that will reflect the financial risks that accompany the price of the insurance products. In addition, the company can still construct meaningful partnerships and make attractive benefits to its clients by ensuring that the risks are pooled together and hedged against by the insurance capital float that is brought about by the increased number of subscribers to their services.

Most importantly, UBA should create a strong risk and compliance department whose work will center on all other business processes and functions, especially sales and finance departments. An actuarial department should be created within the risk and compliance department in order to ensure that the risk being insured of the policyholders consummates with the price of the respective products. Further, to ensure that cases of operational risks will not happen again, the company should train their salespeople on the implications of different actions and processes that violate the regulations set by the regulatory body – FTC. This can be achieved through launching a new project that would seek to define all the sales business processes and defining their various risks and constraints and the different ways in which these risks can be mitigated.  This would ensure there is due diligence in the company’s processes and financial positions. (


Part 2: My Opinions Concerning the Recent Problem and Enforcement Action at UBA

I think it was imprudent of Thompson and his company to defraud the unsuspecting customers in the guise of selling them innovative products at overwhelmingly low prices. This is unexpected within the insurance industry where already consumers have very low levels of trust for the industry. Considering the low penetration rates of insurance in United States, this presents an incredible opportunity those market entrants who wish to make impact in an industry dominated by traditional insurance products that are usually similar in their offering across different insurers. Therefore this would present an opportunity for any aggressive innovator.

The actions that resulted from this legal battle are expected to have far-reaching implications for insurance industry and the consumers. The already existing distrust for the insurance companies and products for the consumers who cannot afford the traditional health insurance products might increase. From a compliance perspective, other insurance companies would become more vigilant in embracing compliance regulations that help in protecting their clients against cases of fraud. The action by the government to punish the companies that breach the compliance rules helps in deterring potential rogue companies and executives, bearing in mind the hefty fines and the possibilities of the company being placed under receivership.

Part 3: My Opinions of the Role of Compliance in Business

  1. Even though I had an understanding of the meaning of Governance, Risk and Compliance (GRC), this article provided me with exposure to real-world problems relating to its application and consequences. This served to fortify my understanding of the different dynamics and aspects concerning GRC, which posits the key capabilities that are needed to be synergized within an organization in order to achieve prudent corporate governance, routine compliance activities, risk mitigation and management, collectively termed Principled Performance. GRC impacts on all business divisions – HR, finance, marketing and sales, IT, risk and compliance, legal, and internal auditing departments. It also affects the board, the executives and the various lines of business. They are affected according to the nature of work handled in each division of the business. Therefore, GRC is a global issue in any organization. GRC results in many benefits, if applied properly, such as reduction in legal costs, reduction in duplication of activities, more coherent operational efficiencies, increased quality in information disseminated across different functions, an increased capacity for gathering sales (and other) data more efficiently and quickly, and an increased capacity for repeating business processes with a high degree of consistency and accuracy. (
  2. Of particular notice is that organizations have always been subject to GRC for a long time in the history of business. However, most enterprises had not perfected their approach to these modalities in a formal and pragmatic manner but the emphasis was there for the different operational and business processes to work coherently towards realizing a common goal of maintaining integrity while remaining ethical and profitable without risking its reputation or sustainability. In a forward-looking company, compliance is regarded as a nucleus of all means and resources that are applied to realize Principled Performance. Therefore, GRC serves to enhance improvement and support for the business and not burden it.
  3. According to, the average base pay for Compliance jobs salaries is $57,000 per annum. The upper limit and lower limit in these jobs is $107,000 and $35,000 respectively. The types of jobs in Houston in the field of compliance include QA & Compliance Co-Ordinator, Compliance Analyst ($37k-$51k), Compliance Officer ($43k-$78k), and so forth. I look forward to landing one of these jobs upon graduation. I think compliance jobs have a higher pay due to the benefits they have on enterprises such as preventing risk that may lead to liquidation. By saving investors millions of dollars that would otherwise go to legal settlements and SEC, compliance jobs are more regarded and compensated. (
  4. Compliance is not limited to those trained and certified in this profession but rather a responsibility of everyone in any business process or activity. If I was posted in a position that did not have ‘compliance’ in its title, I would still perform and excel in that job since compliance is an all-rounded field that integrates with other fields easily. As a graduate looking to establish myself in a career in compliance but having landed a job without the compliance component in it, I would be patient since most companies prefer to recruit and hire internally. Therefore, graduates who come from backgrounds such as accounting, legal, business commerce, economics, accounting, actuarial and so forth, are often employed first in junior positions and later pursue professional qualifications in compliance in preparation for a successful career in compliance which promises steady career progression and growth in an industry that is rapidly growing and expanding.
  5. Compliance functions in the U.S. legal environment of business is going to flourish in the next 5 to 10 years since this field is continuing to gain recognition and now attracts top-notch talent. Furthermore there is a growth in the professional bodies serving this field of practice which are all instrumental in ensuring better practice and principles are followed and adhered to in business operations. In the recent years there have been major changes in the dynamism of compliance as a career and profession. Compliance roles play significant roles in product development, advising on the feasibility of a firm on pursuing different products or services. Compliance has become an instrumental role for companies in times when they are making decisions on whether to enter a new market. It is likely that opportunities in this profession will continue to increase remarkably over the next 5 to 10 years due the dynamic nature of the modern markets where the financial future of businesses is constrained by different and diverse variables and regulations.

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