Lilly Frost set up a surrogacy service promising cheap rates and guaranteed pregnancy. Now, the FBI is investigating.
Decades ago, when you couldn’t conceive or carry a child, your options for becoming a parent were limited. But then in 1978, in-vitro fertilization became possible. But IVF can be very expensive. And one method in particular can lead to heartache and scandal.
Today, how one woman’s attempt to offer more affordable surrogacy services collapsed, leaving in its wake heartbroken couples, frustrated surrogates and an FBI investigation. Read the full transcript here.
Host: Gustavo Arellano
Guests: Former L.A. Times national correspondent Emily Baumgaertner
More reading:
She promised babies at bargain prices using surrogates in Mexico. Now the FBI is investigating
LA Times Today: Why the FBI is investigating surrogates in Mexico
The audio of the first test tube baby, Louise Brown, is from a video news release produced by London Television Service and made available by the BFI National Archive.
Gustavo: Decades ago, when you couldn't conceive or carry a child, naturally your options for becoming a parent were limited.
But then in 1978 in vitro fertilization, IVF, became possible. And with it, a booming fertility industry.
baby Louisa Brown: [Baby loud cry] Doctor: The baby cried at 20 seconds….
Gustavo: But IVF can be very expensive. And one method in particular can lead to heartache and scandal.
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Gustavo: I'm Gustavo Arellano. You’re listening to THE TIMES, essential news from the LA Times. It’s Wednesday, August 17, 2022.
Today...how one woman's attempt to offer more affordable surrogacy services collapsed, leaving in its wake heartbroken couples, frustrated surrogates and an FBI investigation.
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Gustavo: Emily Baumgaertner spent months investigating this case for the LA Times. Emily, welcome to The Times.
Emily: Thanks for having me.
Gustavo: So you recently looked into the surrogacy industry and the owner of one enterprise in particular, Lilly Frost. Who is she and how did she first get involved in the fertility business?
Emily: Lilly frost is the owner of Surrogacy Beyond Borders. It was a surrogacy coordination company based in San Diego.
Frost VM tape: [Phone rings.] Hello, you have reached Lilly Frost with My Donor Cycle and Surrogacy Beyond Borders. I am not available to take your call right now.
Emily: She got involved in the industry in her mid twenties.
Frost VM tape: Hi Lilly. This is Emily. Baumgartner calling. I am a journalist at the LA Times.
Emily: She was actually an egg donor to a woman who said that her father-in-law had driven over her only child in the driveway, killing him and Lilly had such sympathy for her that she donated an egg, allowed her to start her family and was so inspired by the experience and experienced so much joy from that, that she decided to open a business, recruiting other donors for other families.
Gustavo: What made her move specifically to surrogacy?
Emily: Frost couldn't stop thinking about how unfair it seemed that many people could not afford surrogacy. People with nontraditional families, or those who were unable to get pregnant naturally, weren't able to afford services that could add up to over $150,000 to start a family. She saw clients who were mortgaging their houses, liquidating their retirement accounts, making all sorts of stretches, just to try to make ends meet.
Gustavo: But why is surrogacy so expensive? What's involved in the entire process?
Emily: Surrogacy is expensive in part because there is inherently so much risk involved. Couples can try IVF over and over without a successful pregnancy. And even when there are healthy embryos, there are many more moving pieces. They have to pay the surrogate. They have to pay the surrogate's medical bills. They pay many of her living expenses. So all of these moving pieces start to add up and success rates can vary by doctor and by region, but it can take two or three or even more attempts to achieve a successful pregnancy. So on top of that, we find families wanna pursue multiple children. And as you can imagine, we're just reaching into the hundreds of thousands of dollars.
Gustavo: So what was Lilly Frost’s pitch to couples in terms of making surrogacy more affordable?
Emily: The ticket to her enterprise was outsourcing.
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Emily: Surrogates in Mexico simply cost less than surrogates in the US, both because of the cost of service and also the fees that they needed to pay to those families and to the surrogates themselves.
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Emily: One of the benefits for Frost’s program was that she was based in San Diego. So many of the surrogates could carry the child in Mexico where the cost of living was low. And then they would travel over the border to San Diego. When it came time to deliver the child, within the US healthcare system. So couples could save over 60% by using surrogates in Mexico, that was her pitch. We're talking about up to $100,000 that families could save per child.
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Emily: But there was another element of her business model that was key. And that was the guarantee. This was a deal that Frost made to her client. She wrote it multiple times in emails that she guaranteed them a child, no matter how many tries it took, as long as they paid the flat fee.
Gustavo: How do you even guarantee something like that? That’s crazy.
Emily: Well, the way that Frost guaranteed it is, she came up with a model, a calculation that she took into account, the risk of various cases. She called it pooling the risk, those are her words. That she had some cases that were extremely easy. People would pay a flat fee and the pregnancy would go off without a hitch and within 11 months they would be out the door with their baby. There were other families that had a much more difficult journey, but according to her, by pooling all of the funds from all of these clients, these families could share the risk involved with IVF and surrogacy. And ultimately she would break even as a company.
Gustavo: So how successful did Lilly's enterprise become?
Emily: She was quite successful at first, her records show that many of the families did have positive experiences. By her account, there are more than 150 clients that went home happily with children. And it seemed that the beginning, her risk calculation and her financial model stayed afloat for quite some time. She was able to minimize the overhead by having most of her staff working in Mexico, she was able to keep her enterprise very small, was able to just extract a $10,000 or $15,000 fee from each case for her company and otherwise was able to reinvest that cash, to keep the next case going.
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Gustavo: And her clients didn't feel like the guarantee was too good to be true?
Emily: The reason that Frost's guarantee is so compelling for people is that in many cases, this is the strongest desire of their hearts. It changes the calculus for them. This is the deepest longing that they have to have their own children, to have their own legacy. And they've been unable to conceive naturally. So if you imagine being in that position, there's almost no price that you would put on being able to realize a family.
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Emily: When someone promises you the opportunity to have your family expanded, as long as you pay a flat rate for that – many people found that to be so compelling that they didn't wanna turn away. Even when things began to seem difficult.
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Gustavo: After the break, the history of surrogacy and the problem with Lilly Frost's promise of a guaranteed child.
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Gustavo: Emily, when we're talking about surrogacy, we're talking about something that's not even 50 years old, so what's its history?
Emily: IVF started in 1978. That's when the first infant in England made headlines around the world.
Clip: All our tests have shown that the growth of the baby is satisfactory….
Emily: She was the first person who was born after being conceived through IVF
Clip: [Baby crying]
Emily: In the four decades since then, more than 8 million babies have been born that way, the industry has grown steadily, particularly in the United States. Some estimates show that over 2000 babies are born per year through surrogacy.
Gustavo: And when it comes to surrogacy…California is actually one of the most friendly places for that. How did that happen?
Emily: Well, one of the reasons that California is a nexus is because regulations are low. A lot of non-traditional families, such as same sex couples and solo individual adults who want to have a child through surrogacy are able to do so without adopting the baby. They can fill out a pre-birth order. It's basically just a legal process before the child is born to be the parent on the birth certificate.
Gustavo: There's obviously a lot of legal and even ethical implications to IVF and surrogacy. So how do governments regulate the industry?
Emily: It's a very difficult industry to regulate. It's ethically and legally fraught. It's banned in many countries. The regulation is piecemeal by country, and even by region. Generally speaking across the country, there is little government oversight. We can see in records that agencies often sort of punt this issue to one another. And there's no real safety net in place for any of the parties that are involved.
Gustavo: What were some of the more disturbing stories about surrogacy that you came across during your reporting?
Emily: You know, in the beginning of this industry…
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Emily: ..there were many examples when a family or a surrogate changed their mind after the pregnancy was underway. And it just creates a lot of legal complications about who makes the decision, who takes the child, etcetera.
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Emily: In terms of financial scandals, in 2006 there was a surrogacy coordinator in California who was arrested for stealing tens of thousands of dollars from her clients. There was another baby selling ring that pleaded guilty to wire fraud. They had essentially coaxed women in Ukraine to bear children and then had gone ahead and sold their babies for more than $100,000 each.
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Emily: And then in 2017, a recent example, the founder of Planet Hospital, Acharyya Rupak company that was based in Southern California that also coordinated cross border surrogacy was sentenced to prison for international racketeering. One of the clients for that company was actually Lilly Frost’s egg business, My Donor Cycle, but neither Frost nor her company were charged with a crime in that case.
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Gustavo: Lilly Frosts’ surrogacy business had problems, too. You spoke to a number of her clients. What did they tell you about their experiences through her company?
Emily: Over time, we began to see that as we traced the journey of this company, there were more and more troubles that arose in part because of the struggles that the // business faced and in part because of the coordination issues. In one case, there was a family in the Bay Area that was anticipating bringing home a child in the coming weeks.
Tape: Um, are you guys both there?...
Emily: They were contacted by Lilly Frost and informed that their surrogate had been faking the pregnancy the whole time.
Frost: Yeah, so unfortunately, what we learned is she definitely was lying and forging documents
Emily: They went back and looked at their ultrasound photos and discovered that the dates had been cropped out, that the photographs of the pregnancy were downloaded from her Facebook from years before.
Frost: And so our thought is even the pictures that she sent with her being pregnant were also very likely from a prior pregnancy.
Emily: Their particular pregnancy had never actually happened, even though they had paid all of the bills for it.
Frost: From a financial perspective, it doesn't impact you because obviously it's a fixed price program. So we take full, you know, accountability for that, and it won't impact financial things moving forward. I don't, you know, think that that's a huge, uh, you know, relief necessarily. ;Cause obviously you want, you were expecting to have a baby with you soon.
Emily: In another case, a family was pretty far into their pregnancy when Lilly Frost promised to transfer their surrogate from Cancun to Mexico city, where she would get a high level of medical care as her pregnancy came to a close, but the surrogate was never transferred.
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Emily: Gabrielle and Matt Ackerman are one of the early cases that began to go awry with Frost’s operation. They partnered with frost and a surrogate in Mexico who had a relatively smooth pregnancy until about halfway through the pregnancy. When the surrogate presented with a dangerous condition called preeclampsia about 26 weeks into the pregnancy. The doctors in Mexico that we spoke to acknowledged that they were not able to provide the care that was necessary for a premature baby. So they chose to keep the pregnancy going as long as possible. And unfortunately, because of that decision, the surrogate miscarried and the child was a stillborn.
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Emily: Another example is a family in Europe, in Switzerland, the husband named Enzo Serratore signed up for a program with Lilly Frost and began paying for the care for a surrogate. But the surrogate continued to test positive for sexually transmitted infections before her pregnancy began. And this family was expected to pay her medical bills over and over. And because Frost denied a request for a refund, this family started with a new surrogate and the surrogate came back with the same infections. Eventually they dropped out of the program, but they lost their money as well.
Gustavo: How much money are we talking about that some of her clients lost?
Emily: There was quite a range. Some families invested $50,000 or $60,000 in those early stages. So the payments to have a surrogate screened or to begin the IVF process. Other families, like the family that invested in a pregnancy that ultimately was faked, lost almost $200,000 in that process.
Gustavo: What about the surrogates and doctors that Lilly was working with, what were they experiencing?
Emily: Surrogates were often paying out of pocket for their own care because the agency was no longer paying their bills. There were doctors that were refusing to work with some of the patients and turning them away from services because the bills hadn't been paid. At one point, we recovered a document that had been circulated by a fertility center in Mexico that had been sent to families saying that it was ceasing business with Frost, even though it had their embryos, because she was pressuring doctors to cut costs. That was their view of the situation, that she did not have this surrogate or the family's best interest in mind, but was trying to save money wherever she could.
Gustavo: How did Lilly respond to her clients about all of these issues?
Emily: Frost said that she regretted some of the issues that the families had faced, but maintained that they really were out of her control. She said that in some cases, clients expect far too much. That they don't acknowledge that sometimes pregnancies fail and sometimes people have miscarriages and sometimes surrogates are unreliable and that these are natural risks associated with the process that she can't be held responsible for.
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Emily: It became clear that the financial stress that Frost and her business were facing was all stemming from that singular promise she made to guarantee a child no matter how many attempts it took. She would apologize profusely for some of the issues she ran into.
Frost: I can't imagine what you must be dealing with and. Mm-hmm , from my deepest, deepest heart and from my family's heart. Cause of course my family knows what's been going on and you know, but we'll do what we need to do to get you back up and uh, and go from there, OK? Ok.
Emily: But ultimately she was unable to maintain that promise. She was banking on IVF and surrogacy performing at a specific rate. She was using IVF clinics that she says were performing at 66 to 70% success rates and that they immediately plummeted to between zero and 10%. And because the success rates began to plummet, she ended up having to pay a lot more cash than the cash that was coming in. The promise was also an issue because in the beginning of the pandemic, she wasn't able to acquire new cases, new families. And as a result of that, she lost the cash flow that would've allowed her to pay for some of those guaranteed programs that were already under way.
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Gustavo: More, after the break.
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Gustavo: Emily at what point then did all the problems with Lilly Frost's business get public. And how did the FBI get involved?
Emily: The issues that the business began to become more public as families began to find out about one another. Many of these individuals thought they were just a case of bad luck that they were unusual based on how many successful cases that Frost had had. And over time, a couple of concerned employees began telling clients about other clients and other client cases, and they began to start putting them in touch. They began to discover that there was a web of people with similar issues, who had walked away from Frost’s program with a huge loss of cash and no baby. The FBI was tipped off to it and began interviewing some of these families. Several of the families joined together in a support group that they called “Frosted.”
Gustavo: All these allegations seem pretty damning, but how did it look to you as you were reporting the story? And once you actually talked to Lilly?
Emily: This was an absolutely fascinating case to report, and a heartbreaking case to report, in part, because it wasn't a black or white story.
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Emily: When the tip first arrived in my inbox, it was a family telling me that somebody had stolen all their money, had become rich off of manipulating them. And the more I reported the story, the more I discovered that it was much more nuanced and much more intriguing than that.
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Emily: It was a story of a woman who had a big dream and the dream didn't come through, and she didn't know when the right time was to step back and stop.
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Emily: I had a meeting with Frost in Oregon, an extended interview. She lives outside of Portland now. She was willing to speak with me after several months of me encouraging her to share her side of the story.
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Emily: The interview really rounded out my understanding of this story. I sat across the table from a woman who was very self-assured, very warm, very confident. And she very much regretted what had happened, but she did maintain that a lot of these issues were out of her control.
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Gustavo: Did you believe her?
Emily: Fortunately in this case, we had so many documents to compare to what various sources were telling us. We spoke to families at length and we spoke to Frost at length, but we also had thousands of pages of documents. We had lots of emails. We had lots of medical records, bank records, financial and court records. We were able to sort of piece together the story of how things had come to be and compared what each of the sources were saying. When you do an investigation that takes this long, you begin to see that even though everybody has an agenda, everybody is sharing some slice of the truth. And it's about putting those together in a way that matches the records that you have.
Gustavo: What did you learn ultimately from this investigation?
Emily: To me, this was the story about the blinding power of hope. That when we have dreams, any of us have dreams that we feel passionate about and we cling to, we become emotionally hostage to those dreams. And in this case, financially hostage as well. I think when it comes to children and something that is so close to the hearts of so many people, the desire for children, the desire for a legacy, it leads people to do incredible things and to continue investing in things even when they seem fraught because it's something that compels them to continue on in hopes that they'll eventually realize that dream.
Gustavo: Yeah, hope like that, do you think that complicates the fertility industry's chances for reform? Or is there some way for all these tragedies to galvanize people and push for something good?
Emily: Many advocates in the surrogacy industry believe that these cases are a prime moment to sort of reflect and reform as you mentioned. It's an opportunity to think about, not how to do away with surrogacy, but how to create a system where there's accountability for all parties, there's fair regulation. And yet the benefits of this can be realized so that surrogates are able to experience the economic benefits for their own families of this opportunity. And families are able to come home with biological children as well.
Gustavo: Finally Emily, what about Lilly Frost’s former clients…members of the “Frosted” group…What are they doing now?
Emily: Some of them are still pursuing legal action.
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Emily: Others are saving up money to try to go through other agencies.
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Emily: There are a couple success stories. The Ackermans are a prime example. They're a family that ultimately, walked away from Frost’s program after they had their stillborn. And went to Ukraine of all places and had two successful biological children through a surrogacy program in Ukraine. So for many of these families, one of the messages they give to one another is that there's always still hope.
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Gustavo: Emily, thank you so much for this conversation.
Emily: Thanks for having me.
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OUTRO: And that's it for this episode of THE TIMES, essential news from the LA Times. Kasia Broussalian and Ashlea Brown were the jefas on this episode and Mark Nieto mixed and mastered it.
Our show is produced by Shannon Lin, Denise Guerra, Kasia Broussalian, David Toledo and Ashlea Brown. Our editorial assistant is Madalyn Amato.
Our engineers are Mario Diaz, Mark Nieto and Mike Heflin. Our editor is Kinsee Morlan, with help from Lauren Raab. Our executive producers are Jazmin Aguilera and Shani Hilton. And our theme music is by Andrew Eapen. Like what you're listening to? Then make sure to follow THE TIMES on whatever platform you use.
I'm Gustavo Arellano. We'll be back next week, with all the news and desmadre. Gracias!