Content copyright . Gary R. Snyder. All rights reserved.
The Prearranged Funeral Fraud
About
a year and half ago, Nonprofit Imperative indicated that the pre-paid
prearranged funeral business could be one of the largest frauds perpetrated in
the nonprofit, as well as the for-profit sectors. Several states are
investigating , but it seems to be generating a lot of news in which a funeral mogul, James
Douglas Cassity, and other leaders of his funeral empire — National Prearranged
Services Inc. —that apparently
embezzled as much as $600 million that was supposed to be used to pay
funeral expenses for about 150,000 consumers. National Prearranged Services,
Inc., headquartered in Clayton, MO, is an entity that sold prearranged funeral
services in 19 states. According to a FBI Press Release they, among other
things, altered insurance applications bought at the time of signing and made
himself and his company as sole beneficiary, while extracting $100 million from
the customers’ policies. A
federal investigation of James Douglas Cassity uncovered a scheme full of
intertwined corporations and missing funds. Cassity pleaded guilty of
conspiracy and tax fraud violations in 1982, lost his law license and served
six months in federal prison. Most consumers who paid for funeral plans are
protected by state insurance-guarantee associations (see below the status of
the associations). In some cases, however, the insurance pays only a small
portion of the actual cost of the arrangements, and participating funeral homes
must make up the difference, funeral directors said. Here
is some backdrop that appeared in Nonprofit Imperative in June 2009: A Merrill Lynch
employee sold life insurance policies to finance a pre-need funeral trust. He
received a commission and provided investment advice on the proceeds that went
to the Illinois Funeral Directors Association. An IFDA subsidiary took a piece
of the premium for overseeing the trust and its cut exceeded the legally
allowed amount. The trust had deficits of $10.4 million in 2001, $39 million in
2006 and as much as $100 million at the present time. The state comptroller
wants $10 million to pay for
current funerals. Merrill Lynch has offered $18 million to release them from
liability and that is not acceptable to many funeral directors. The funeral
homes say they are losing an estimated $500,000 each. The undertakers are
crying foul and pointing to the failure of the regulators to do their job.
There is much at stake including dignified burials for the 40,000 Illinois
residents that bought the plans. (The State Journal-Register) It
seems that at least two other states have similar problems and solvency is a
risk there as well.
