Money woes reported at firms involved in surrogate births


Two California-based firms involved in pairing infertile couples with surrogate mothers have stopped paying surrogates, raising fears about the status of thousands of dollars in advance payments from prospective parents, according to clients and employees of the firms.

Some pregnant surrogates say they have been left with no assurance of payment. One surrogate who recently had a caesarean section is owed nearly $14,000 and has not yet been cleared by her doctor to return to work, according to her case manager at one of the firms, SurroGenesis USA.

Families were warned earlier this month in e-mails from a high-ranking employee at SurroGenesis that the company had received numerous complaints about surrogates, egg donors and vendors not getting paid. The money for those payments was supposed to have been placed into trust accounts.


“We want you all to know that after failing to receive satisfactory answers regarding the holding companies’ financial status, and in the interest of protecting those dependent on receipt of funds . . . we have contacted the authorities and requested an investigation,” said the messages, which The Times reviewed.

Many families now fear the worst. Some who sought help having children from SurroGenesis and its partner, Michael Charles Independent Financial Holdings Group, say the funds they deposited with the firms amount to their life savings.

At least one costly egg retrieval was canceled at the last minute after the doctor learned that money deposited to cover the fees was missing, according to Andrew Vorzimer, an attorney from Woodland Hills who was contacted by the doctor for advice.

Los Angeles resident Virginia Fout, 38, said she and her husband, Michael Whetstone, had about $21,000 in an account with the Michael Charles group and now fear it is gone.

“I’m angry, to be quite honest,” Fout said. “I feel completely duped . . . and blindsided.”

The money that families are concerned about totals at least $2 million, according to attorneys working with couples and surrogates, who come from across California, elsewhere in the United States and Europe and China.


“In this industry, it doesn’t get any worse than this,” said Vorzimer, who has been advising some of the families. “For some of these couples, it is just devastating.”

Some couples said they had filed reports with local and federal authorities. Several others said they had given information to Vorzimer and a second attorney, Sterling Johnson, who said he has been in contact with law enforcement officials.

FBI spokesman Steve Dupre confirmed Friday that the bureau’s office in Modesto, where the companies are based, is evaluating several complaints that it received last week. Dupre said the case is too new to declare it an official investigation.

Jack Kiserow, president of the Michael Charles group and one of SurroGenesis’ directors, told The Times that he is cooperating fully with federal agents.

“We know who the guilty party is,” he said, adding that authorities need to be given time to do their jobs.

According to the payment schedule listed on the SurroGenesis website, prospective parents paid the company a $12,000 fee.


The company also required payment to surrogate mothers of at least $18,000, as well as legal fees and money for maternity clothing, medical care and other expenses that add thousands to the bill.

To pay those costs, SurroGenesis recommended that prospective parents set up trust funds administered by the Michael Charles group, clients said Friday.

Two SurroGenesis employees, Cynthia Kiser, a case manager, and Ann Robinson, the firm’s quality assurance officer, told The Times that they believe a substantial amount of money is missing. Both women said they had been contacted by law enforcement agencies looking into the matter. Robinson said she has provided investigators with company records.

Kiser said families have been frantically trying to find out what happened to that money. “We’re all grasping at straws,” said Kiser, who added later that she was laid off Friday and did not receive her scheduled paycheck.

She said she had called her boss, Tonya Collins, last week looking for answers. Kiser said she asked Collins: “Where’s the money?”

She said Collins responded: “All I can tell you is talk to my lawyer.”

Collins is listed in company papers as president and chief executive of SurroGenesis and a director of the Michael Charles group.


Phone numbers given for Collins have been disconnected. A call to Kevin Clancy, a Texas attorney who Kiserow said is representing Collins, was returned by someone in Clancy’s office who said Clancy would have no comment on a pending case. Clancy’s website describes him as a criminal defense attorney.

By Friday, portions of the SurroGenesis website listing offices across the country were accessible only through Internet caches of the pages. The website for the Michael Charles group, which was operational as recently as late Thursday, was listed as suspended by its host company.

One surrogate, Natash McDuffy, 33, of Houston, is on doctor-ordered bed rest, eight months pregnant with twin girls. She said that she waited for her $2,800 monthly check from SurroGenesis to arrive early this month but that it didn’t come.

The bills quickly started stacking up. Her landlord sent her an eviction notice. And her family’s budget became tighter because she said her husband lost his postal service job in January and she had been unable to work since February. A replacement check sent by the prospective parents arrived Friday, she said.

“How dare they take a special moment like this?” McDuffy said, referring to the companies. “The parents are already stressed.”

The couple who hired her told The Times that they had talked to the FBI in Modesto and police in Austin, Texas, where they live.


Prospective father Michael Materie, a SurroGenesis client, said that despite getting the company’s e-mail, he was initially not too worried. Materie, of Simi Valley, said he thought he and his wife would be protected by their contract. But he grew concerned when he learned of more people saying payments to their surrogates had stopped.

He said he and his wife had already spent $30,000 at a La Jolla fertility clinic and paid SurroGenesis’ $12,000 fee. In addition, they had placed $50,750 in a Michael Charles holding account, money Materie now believes is gone.

Materie said they had been holding out hope that embryos already transferred to their surrogate would result in a baby. But on Thursday, their fertility doctor told them the surrogate was not pregnant.

“I was thinking that something positive could come from this,” Materie said. “Now, we don’t have the money to continue on.”

For the last two weeks, his wife had been knitting a blanket for a baby, he said, that may never come. “Today she said to me, when we found out we won’t be having a baby, that we need to give this blanket to someone that can use it.”



Times staff writers Rong-Gong Lin II and Ben Welsh and Times researcher Maloy Moore contributed to this report.