Justice Department takes on Telehealth Providers over Deceptive Practices
The complaint alleges that Cerebral, under the direction of its C-suite personnel, misused patients’ private information for profit and misled consumers about its cancellation practices.
A proposed order, pending approval from the U.S. District Court, would require Cerebral Inc. to stop “misusing and improperly disclosing” patients’ personal information, according to a U.S. Attorney’s Office press release. It must also stop misusing its security practices and misrepresenting cancellation policies.
If the District Court approves the order, Cerebral will be required to pay $5 million in consumer redress as well as a $10 million civil penalty, which would be suspended to $2 million due to Cerebral’s inability to pay the full amount.
The lawsuit names founder and CEO of Cerebral, Kyle Robertson and another executive, Alex Martelli, who was the Director of Product and Group Project Manager. Martelli’s role in the company was “‘buil[ding] the growth engine that drove the company[’s]’ revenue, according to the amended complaint.”
The lawsuit also names Zealthy, Inc. (later renamed Gronk Inc.), another telehealth company Robertson started after leaving Cerebral, Bruno Health (an affiliated corporation), and the medical director of Gronk, German Echeverry, according to the complaint.
In misusing consumer data and misleading patients about company policies, the Justice Department alleges Robertson and company violated the Federal Trade Commission Act (FTC Act), the Opioid Addiction Recovery Fraud Prevention Act of 2018 (the Opioid Act) and the Restore Online Shoppers’ Confidence Act (ROSCA), say prosecutors.
The complaint alleges Robertson violated the FTC Act in two ways:
- Under Robertson’s guidance, the company failed to protect consumer data by employing online tracking technology without their consent. The data was then used by third-party businesses for advertising purposes, contravening the company’s stated policy of information being “private” and “secure.”
- The company failed to secure consumer data from “unauthorized disclosure.” They also violated the FTC Act by having employees impersonate patients and leave positive reviews while suppressing negative ones.
Furthermore, Cerebral, Inc. violated ROSCA by not getting patients’ informed consent before billing them and not providing a transparent way to cancel subscriptions. These deceptive practices resulted in millions of dollars in failed cancellations.
Robertson’s deceptive and fraudulent practices didn’t end after he left Cerebral. He continued to violate the FTC Act and ROSCA with Zealthy Inc., later renamed Gronk Inc., say prosecutors. In a repeating pattern, Robertson and Echeverry allegedly violated ROSCA by not clearly disclosing subscription terms or obtaining informed consent before charging consumers and failing to provide a simple cancellation process.
The Justice Department also accuses them of violating the FTC Act by engaging in deceptive business practices, including unauthorized billing, misleading subscription terms, ignoring cancellation requests, and improperly handling consumers’ sensitive data.
“The Justice Department is committed to stopping companies and their executives from mishandling and misusing individuals’ sensitive personal health information, and from implementing predatory billing practices,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division in the press release.
Boyton added that consumers who use telehealth companies should expect their private information to remain private, not used “for the sake of profits and growth.”
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