The Labor Department announced the indictment of a group of businessmen in North Carolina yesterday, charging them with collecting millions of dollars in premiums for phony health insurance and leaving hundreds of people with huge medical bills and no coverage.

Victims of the scheme, all of whom were involved with employee leasing services, include the family of a 3-year-old leukemia patient now facing $250,000 in medical bills and no insurance, according to papers filed by the government. Another is a warehouse worker who supports two children on $211 a week and must somehow pay off $12,000 in medical bills he ran up following two heart attacks.

In all, some 1,350 families or individuals were left without medical insurance, and the unpaid claims in the case total more than $2 million, the Labor Department charged.

Under employee leasing arrangements, workers, mostly for small businesses, become the legal employees of the leasing company, although they continue to do the same jobs as before. The small business pays the leasing company, which in turn issues paychecks to employees and takes care of taxes and fringe benefits.

Because medical insurance and other benefits are often difficult for small employers to obtain on affordable terms, employee leasing is growing rapidly in popularity. A leasing company with many small-company clients can buy insurance at better rates, and it can also handle other items such as pensions and savings plans economically.

"Employee leasing can be a legitimate business, but it provides a large cash flow and opportunities to divert part of that cash to" the leasing company or its officials, the department said in court papers. " ... The large sums submitted {by client companies} for employee benefits do not have any immediate safeguard. Some of this money can be diverted to other purposes without any immediate warning signs for the employer or employees."

The department also indicated that health-care fraud is becoming increasingly common.

"Currently, the Office of Labor Racketeering is conducting another three dozen investigations of similar health insurance schemes in virtually every other area of the country," Labor Department Inspector General Julian W. De La Rosa said in a statement issued in Charlotte. Some of those cases also involve employee leasing, officials said.

In the North Carolina case, the government is also seeking to seize the accused men's assets, up to $20 million, which is the amount the government charges they took in their alleged activities.

The six men under indictment operated a group of businesses known by various names, including Cap Programs, Cap Staffing, Cap Leasing and Universal Staffing Associates.

In addition, the indictment charged the men with operating an "investment scam" that defrauded investors in what the department called "a classic 'Ponzi' scheme." Investors were promised 15 percent to 40 percent returns on purported vehicle- and equipment-leasing ventures, but the defendants instead used the money to pay expenses and to pay off earlier investors, the indictment said.

Named in the indictment were Robert W. Long, Cap Programs's chief executive, along with Jerry M. Wolicki, Victor S. Blackwell and D. Ronald Harris, also Cap officials. In addition, Michael H. Spieles and Michael A. Krebser, partners in Universal Staffing Associates of Palm City, Fla., were indicted. None could be reached for comment.