2 in O.C. Accused of Selling Phony Health Insurance : Indictments: U.S. attorney’s office says thousands of workers were defrauded of $17 million and left with unpaid claims.

Two Orange County men were indicted Thursday for allegedly defrauding thousands of workers of $17 million by selling their companies phony health plans in the late 1980s, the U.S. attorney’s office said Thursday.

Henry Hay, 61, of Orange was accused of seven counts of mail fraud in connection with his marketing and administration of several group health plans. Joseph Bartholomew, 54, of Lake Forest was accused of five counts of aiding and abetting Hay’s fraud.

“There are thousands of employees who were affected in acts dating from 1987 to 1989,” said David Hoffer, assistant U.S. attorney. “The pitch these men made for their health plans was to represent them as fully insured and that was not the case.”

Hay and Bartholomew could not be reached for comment. Their attorneys were traveling and also could not be reached.

The indictment alleges that Hay told his sales staff and clients in 1987 and 1988 that the health plans of his Building Employers Trust company were fully insured by the Landmark Insurance Co. This fraud enabled him to collect as much as $17 million in premiums, Hoffer said.

In 1989, Hay allegedly misrepresented his plans as fully insured by California Benefit Life Insurance Co., which was headed by Bartholomew. In September, 1989, Building Employers Trust filed for bankruptcy protection, leaving small employers and their employees with more than $6 million in unpaid medical claims.

In 1990, Hay also filed bankruptcy for his health plan design and administration companies, and ceased operating another health insurer, Professional Employers Trust, leaving more unpaid claims. Bartholomew helped carry out the fraud, the indictment alleged. If convicted, he faces 25 years in prison and $1.25-million fine.

Hay is expected to appear before a federal magistrate for arraignment in the next few days. If convicted, his maximum penalty would be 35 years in prison and a fine of $1.75 million.