Pregnancy for Pay
By Tamar Lewin
CANCÚN, Mexico — Rudy Rupak, the founder of Planet Hospital, a medical tourism company based in California, was never shy about self-promotion. Over the last decade he has held forth about how his company has helped Americans head overseas for affordable tummy tucks and hip replacements. And after he expanded his business to include surrogacy in India for Western couples grappling with infertility — and then in Thailand, and last year, Mexico — he increasingly took credit for the global spread of surrogacy.
But now Mr. Rupak is in involuntary bankruptcy proceedings, under investigation by the F.B.I. and being pursued by dozens of furious clients from around the world who accuse him of taking their money and dashing their dreams of starting a family.
The practice of paying a woman to have an embryo transferred to her womb and bear the child for someone else, known as gestational surrogacy, has been growing steadily over the last decade although it remains illegal in most countries.
Where it is permitted, as in parts of Mexico, businesses like Mr. Rupak’s — many reputable, some not — have flourished by serving as intermediaries connecting clients with egg donors, in vitro fertilization clinics and surrogates. Those able to pay more than $100,000 for services often turn to an American agency in a state where surrogacy is legal and fairly widely practiced. Those with less money often go to India or to Mexico through agencies like Planet Hospital that advertise heavily and charge less than half the American price.
Jonathan C. Dailey, a lawyer in Washington, wired Planet Hospital $37,000 in December 2013, the first installment on a contract for a single mother in Mexico to carry his child. He and his fiancée flew to Cancún to leave a sperm deposit at the clinic that would create the embryo and to visit the downtown house where their surrogate would live while pregnant. They picked a “premium” egg donor from the agency Planet Hospital sent them to. But nothing happened.
“It was just outright fraud,” said Mr. Dailey. “It’s like we paid money to buy a condo, they took the money, and there was no condo. But it’s worse, because it’s about having a baby.”
The emerging Planet Hospital story, which Mr. Rupak characterized as one of mismanagement rather than fraud, stands as a cautionary tale about the proliferation of unregulated surrogacy agencies, their lack of accountability and their ability to prey on vulnerable clients who want a baby so badly that they do not notice all the red flags.
Catherine Moscarello, who worked with Mr. Rupak and handled communications with clients, said the company was engaged in unsavory practices “from the moment I stepped aboard.”
“The object was to get money,” she added. “He would keep changing clinics, and whenever his relationship with a clinic in India or Thailand or Cancún broke off, he would disparage the clinic and the doctors there. But what was really happening was that he wasn’t paying his bills.”
She said Planet Hospital also engaged in unauthorized egg-splitting. In at least one case, Mr. Rupak admitted taking eggs harvested for one intended parent, and giving some to another to keep his costs down. Then, too, Ms. Moscarello said, Planet Hospital did not use proper care in choosing women to be surrogates. Ms. Moscarello, who was herself trying to have a baby through surrogacy, said she was paired with a woman who was only 18, had a 9-month-old child of her own and who had had uterine cysts removed the day before the embryo transfer. The surrogacy did not work.
Mr. Rupak had about 150 domain names on the Internet for his surrogacy business, with web advertisements for Christian surrogacy, gay and lesbian surrogacy, Mexican surrogacy, Indian surrogacy and more.
Earlier this year, he closed Planet Hospital. But this month, he popped back up, once again starting up the company website, offering kidney transplants, gastric bypass, tummy tucks, and other surgery — but not surrogacy.
“My interest is to stay in business and keep this thing going, even though I’m not making any income at the moment,” Mr. Rupak said.
Mr. Rupak said his lawyer had advised him to ignore the bankruptcy, but now he might fight it.
Even with Mr. Rupak out of the Cancún surrogacy business, the demand for affordable surrogacy and the potential profits are such that all the former main players in Planet Hospital — its vice president, the head of the egg-donor agency it worked with, the woman in charge of the Cancún surrogate housing, and Ms. Moscarello, the client representative — are starting their own surrogacy businesses in Mexico.
In fact, hundreds of new surrogacy businesses advertise their services on the Internet because anyone can establish an agency, regardless of background or expertise. Agencies are started and disappear, sometimes reappearing under a new name.
Some agencies have faced legal action, though.
In one case, Tonya A. Collins, the owner of SurroGenesis in California, was sentenced to five years in prison for fraud after taking millions of dollars of client money, supposedly placed in escrow for surrogacy costs.
In another, Theresa M. Erickson, a California surrogacy lawyer and owner of Conceptual Options, was convicted in a baby-selling ring. She was sentenced to five months in jail, nine months of home confinement and fined $70,000. The ring solicited women online to bear children for others and sent them to Ukraine to have embryos implanted — but there were no would-be parents. When the surrogates were more than four months pregnant, Ms. Erickson told them the fictitious parents had backed out, and sold the babies for more than $100,000 each.
“There are more scams and scandals in surrogacy now than I can ever recall seeing,” said Andrew W. Vorzimer, a surrogacy lawyer in Los Angeles. “But I think Planet Hospital is the biggest mess yet.”
‘Some Horrendous Mistakes’
Mr. Rupak, 45, who is Canadian and is also known as Rupak Acharya, started out as a software developer designing video games, then served as chief technology officer for American Apparel, before founding Planet Hospital in 2002.
He said Planet Hospital had a good track record at the start, when the company focused on orthopedics, plastic surgery, dental work and other relatively quick and predictable procedures. But he contended that he became overextended, and fell behind on his payments when he expanded into surrogacy.
Unlike basic surgical procedures, surrogacy is a complicated process with no guarantees that the surrogate will get pregnant, and not miscarry, or that the fetus will not have serious defects. And unlike most medical procedures, surrogacy is a lengthy process, with weeks when the egg donor and the woman who will carry the baby take hormones to synchronize their cycles, all followed by nine months of pregnancy.
In an interview, Mr. Rupak said he had good intentions, but “made some horrendous mistakes.”
“What happened is entirely 100 percent my fault, but it’s mismanagement rather than outright fraud,” Mr. Rupak said. “I am an entrepreneur, but I am notoriously, notoriously bad at contracts.”
Many of his clients take a darker view of what they say was a trail of lies, excuses and broken promises that left them heartbroken and out thousands of dollars — in some cases, their life savings.
Former Planet Hospital clients seeking to have a baby through surrogacy in India and Mexico share similar stories of unpaid bills, switched clinics, reversed credit-card charges, pleas for more time and promises to make it up with free services.
Mr. Rupak started his surrogacy program in India, the country with the largest surrogacy industry, but moved to Thailand, and, last year, Mexico, after India closed its doors to gay couples seeking babies through surrogates, as well as singles and those married less than two years.
“By the time you realize how deep you’re in, you’ve lost all your money and you’re stuck,” said Rhyannon Morrigan, who, with her husband, signed an Indian surrogacy contract in October 2012. “They liked to do everything by phone, and put as little in writing as possible.”
In retrospect, she said, there were warning signs.
“Even at the start, when we sent the contract in and asked for a signed copy back, we never got one,” she said. “We got so tired of excuses and lies. By July 2013, I’d pretty much let go of the idea of getting my money back, but I didn’t want it to happen to anyone else.”
So she began posting her problems with Planet Hospital online, and soon her family began receiving online threats and slurs from Mr. Rupak.
Mr. Rupak has said that if people attacked him, he felt free to retaliate.
Warning Signs Overlooked
In Thailand, too, there were problems with Planet Hospital.
“We contacted Planet Hospital because we knew that India was closing to gay couples. Thailand is familiar to us, and we thought it would be good to have an American agency with a lot of experience with surrogacy,” said Jim Carrington, an Australian who paid $25,000 for a Thai surrogacy in March, 2013. “Looking back, I’m annoyed with myself that I didn’t pick up how they made lots of assurance, but they kept everything verbal, on the phone.”
And all their questions, including a request last fall for a refund, got evasive responses. “It was always, ‘I’m out of the country, I can’t get to a computer, I’m in Europe, I’m not sure what happened, I’ll look into it,’ ” Mr. Carrington said.
Mr. Carrington received a $5,000 refund from the clinic, and Mr. Rupak agreed to wire another $5,000. But, Mr. Rupak said, he decided that although they did not achieve a pregnancy, they received enough services that no further refund was warranted — and he canceled the wire.
Cancún’s white-sand beaches and party reputation have helped make it a hot spot for people, including many gay couples, looking to start a family through surrogacy. In one blog post announcing the Mexico program, Mr. Rupak wrote, “ ‘Cancún baby! Woohoo’ takes on a whole new meaning now, doesn’t it?”
But Cancún is not in the state of Tabasco, the only one in Mexico where surrogacy is legal. So women here who agree to be impregnated and carry babies to term have to fly about 450 miles to Tabasco to deliver their babies.
Ms. Moscarello, the former Planet Hospital client representative, said her new venture, IP Conceptions, would operate in Tabasco.
Planet Hospital worked with two clinics here, Fertility Center of Cancún and Irega. Both said their Planet Hospital experience left scars.
Jaime Elorriaga, a spokesman for the Fertility Center of Cancún, said that his clinic had ended its surrogacy program altogether.
“We’ve had problems with other companies that come to Mexico, too, but not as bad as Rudy,” he said. “They like to cut corners to save a few dollars, and that can turn into disaster.”
Tori Brown, the international patient coordinator at Irega, said, “We have tried to put the whole Planet Hospital nightmare behind us. We followed through with the clients we had, and we’re not going to discuss the situation anymore.”
One Santa Fe couple, Chris Pommier and Jonah Winn-Lenetsky, paid $22,500 for the first phase of their Planet Hospital contract, the largest chunk. The first-phase fees, typically $22,000 to $37,000, covered the surrogate recruitment, semen deposit, egg donor, in vitro fertilization and embryo transfer.
Phase Two, when a heartbeat was confirmed, was $13,000 to $22,000 and went mostly to pay the woman carrying the fetus and to pay for her housing. At Phase Three, the cost was $3,000 to $12,000 to cover delivery if the client got that far. The money was paid to Planet Hospital, which coordinated the process and served as a billing agent for the other clinics involved in the process.
“We had flown down to do our semen deposit and testing in July, and shortly after that we got an email that Planet Hospital had not paid the clinic fees” at Fertility Clinic of Cancún, Mr. Pommier said. “Planet Hospital and the clinic blamed everything on each other. At first the clinic told us they’d do whatever we wanted, but then they changed their tune when we wanted to transfer the semen, because they hadn’t been paid.”
In February, with complaints mounting and Planet Hospital’s reputation plummeting, Mr. Rupak made an offer to some of those who had lost money.
“I genuinely want to make all of you financially whole,” he said in a group email. “I do not want to live the rest of my life feeling that I hindered your dreams. This is not who I am.”
He proposed to pay them back — minus costs for services rendered — over the next 18 months, with an initial pool of just $10,000 to $15,000 to distribute.
“All I ask in exchange is that you refrain from disparaging me and my company publicly so that I have the ability to make an income and pay you back as aggressively as I possibly can.”
That same month, in an email complaining about the doctors he had worked with, and turning down a bid by a client for a refund, Mr. Rupak wrote, “Here is a little secret for all of you. There is a lot of treachery and deception in I.V.F./fertility/surrogacy because there is gobs of money to be made.”