At least two class-action lawsuits have been filed this month by dentists and other medical professionals who claim they were victims of a Ponzi scheme involving computerized patient education systems installed in their offices.
The lawsuits center on the Exhibeo patient education system for dental and medical offices. The plaintiffs charge that Exhibeo developer Brican America and marketing partner NCMIC Finance -- doing business as Professional Solutions Financial Services (PSFS) -- defrauded some 2,000 dentists, optometrists, and chiropractors across the U.S. who signed leasing agreements for the Exhibeo system.
Dentists who have joined the litigation say they've been left holding the bag for Exhibeo contracts that are costing them hundreds of dollars a month, without receiving the marketing-support funds they thought they'd be getting to offset the cost of the system.
In-office education
A typical Exhibeo package includes a 17-inch liquid crystal display, a digital camera, a 42-inch plasma television, and customized informational videos. Once installed in a medical office, a typical Exhibeo system plays a video loop on dental or medical procedures that might be available in the practice.
— Alan Raskas, D.D.S., Cherry Hill, NJ
Exhibeo systems were marketed to U.S. medical and dental professionals through an August 2005 deal between Brican America and PSFS, under which PSFS provided financing for medical professionals to lease Exhibeo.
"It was a nice set up," said Alan Raskas, D.D.S., of Cherry Hill, NJ, who used the system to educate patients on topics ranging from implants to periodontal disease.
The equipment could be purchased outright for $22,000 or leased for $508 a month for 60 months. However, Brican America also offered a customer marketing agreement under which the company paid doctors $500 a month to offset the costs of the lease if they agreed to let Brican run a 10-second advertisement for the Viso Lasik Med Spa -- another venture being developed by Jean-Francois Vincens, president of Brican America.
"I guess it was too good to be true, but it sounded pretty good," Dr. Raskas said.
Exit clause
The customer marketing agreement also provided that if Brican stopped making the advertising payments, the customer had an exit clause under which they could either stop paying the lease or Brican America would buy back the system and lease agreement so that the customer would have no further financial obligation.
But last year, PSFS sued Brican for $38 million, claiming that it never knew about the exit clause when it signed the 2005 contract with Brican, and that PSFS thus was not required to honor the clause (the lawsuit was subsequently dismissed). Then, in January 2010, Brican announced that it would no longer honor its customer marketing agreements due to a lack of funds and "market conditions."
The issue came to a head this month, when two class-action lawsuits were filed against Brican and PSFS representing dentists and other medical professionals
Heavy investments
The issue, according to attorney Ron Gossett of law firm Gossett & Gossett -- which on March 17 filed a class-action suit in Florida against Brican and PSFS on behalf of 200 dentists and optometrists -- was that PSFS became too heavily invested in the Exhibeo leases. PSFS paid $24,000 per lease to Brican, and while the total equipment costs were less than $3,000, there was "additional overhead," Gossett told DrBicuspid.com -- including a commissioned sales force and a 4% cut to Vincens and his partner, Jacques Lemacon, for each lease sold.
"In short, the lease of equipment with a marketing or advertising contract was a Ponzi scheme which could survive as long, and only as long, as more and more transactions were closed to fund the payment of the marketing contracts," the Gossett & Gossett complaint states. "In fact, unless sales of contracts outpaced the payments due under the marketing and advertising contracts, the Ponzi scheme would, and did, collapse."
PSFS acknowledged the importance of new sales in keeping the business model running in a document sent to customers in early March 2010. The document stated that PSFS only learned about Brican's customer marketing agreements in April 2009, and PSFS filed suit against Brican for breach of contract a month later.
"Based on the terms of the marketing agreement, for each sale that Brican made they were incurring an obligation to their customers (and thus PSFS' lessees) in an amount larger than what PSFS funded on behalf of the lessees when they acquired an Exhibeo system," PSFS stated in the document. "In short, Brican could only stay in business by continuing to originate new sales (and receiving the upfront payment by the funding source) to pay for its existing obligations to its customers."
Customers still accountable
PSFS also stopped funding the leases, which meant that customers stopped receiving the monthly $500 payments for running the Viso ads. When this happened, many -- including Dr. Raskas -- took advantage of the exit clause that they thought would enable them to stop making lease payments. But PSFS maintains that because it was originally unaware of the agreement between Brican and its customers, Exhibeo customers are still liable for the leases.
"I stopped paying my lease and got a letter from PSFS saying that if I didn't pay, I was obligated for the entire amount of the lease and would be sued," Dr. Raskas said. He complied, but now is considering joining one of the class-action suits.
"While PSFS regrets the difficulties Brican's customers are facing due to discontinuance of the advertising … PSFS cannot forgive or release any lessee's lease obligation, but will certainly attempt to be flexible in working the lessees on repayment of their lease contract," the company stated.
Having written 1,672 Exhibeo leases, PSFS stands to make $10 million over the course of the five-year contracts ($6,000 per lease), according to Gossett.
"Our primary goal is to have the leases held to be unenforceable and to recover the plaintiffs' attorneys' fees," he said.
Another Florida firm, Charlip Law Group, filed a similar class-action lawsuit against Brican and PSFS on March 3. In its complaint, Charlip refers to the Brican leasing arrangements as a pyramid scheme.
"Like all pyramid schemes, it was destined at its outset to eventually collapse under its own weight when it could not attract a sufficient and ever-growing number of new customers to generate sufficient cash to pay the ever increasing marketing payment charges," according to the Charlip complaint.
What do PSFS and Brican America have to say at this point? A spokesperson for PSFS referred DrBicuspid.com to the document it sent out to its customers earlier this month "for all comment from us on this matter."
And in a statement e-mailed to DrBicuspid.com, Vincens claimed that too many people are "misinformed" about the facts.
"Allegations and accusations of fraud, scams, and pyramid schemes are rampant, but none have provided even a glimpse of the truth with respect to this issue," he wrote. "We, at Brican America, realize the difficulty for our customers to believe or trust any of the parties involved in this matter, but courts and judges, over time, will establish responsibilities and re-establish the truth. In any case, we continue to work hard in order to find alternative cash solutions to help … minimize the impact of this unfortunate situation."
In the meantime, hundreds of dental professionals are left holding the bag, according to Gossett.
"There are 2,000 people looking to be compensated for their damages," he said.
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