IN HB1287 - Funeral Industry Fraud Finally Addressed!

Hats off to the Hoosier State!

For a state plagued in recent years with headline worthy pre-need funeral contract fraud and deception, the state's representatives have finally chosen to represent and take action to protect the consumers in Indiana with tougher legislation targeting the highly sensitive and emotional exploitation funeral and death industry consumer fraud.

Believe me...it was sorely needed and overdue. Better late than never, but let's take a peak at the corruption and destruction leading up to this...

Most recently, in Dec 2008, Eunice Roper-Allen of the Allen Funeral Home in East Chicago pleaded not guilty to the indictment of concealing assets in her bankruptcy filing...along with mail fraud for defrauding a funeral home client of $44,000. Ms. Roper-Allen in confidence advised this client to deposit $84,000 into an Allen Funeral Home controlled account to circumvent probate proceedings. Subsequently, she returned $40,000 to the client, along with $44,000 worth of falsified checks and duped receipts for funeral expenses. Oh, not to mention the $470,000 in unpaid property taxes owed by the funeral home dating back to 1999. You see, in 1992, Ms. Roper-Allen transferred to funeral home and property to the Small Business Administration, who within months sold the funeral home and property to a relative for $1...yes...that is one dollar. A short 5 months later, the relative filed for bankruptcy protection, including the funeral home and property, and although the bankruptcy was dismissed within the same year it was filed, the property continued to be protected from property taxes under the bankruptcy filing.

The property tax "issue" came to light under the mail (funeral) fraud indictment when it was learned that the property was still deeded to the relative...except that the relative has been dead since 1997. It didn't hurt that Ms. Roper-Allen is the former President of the East Chicago NAACP and has close allies and relatives in the Lake County government, who knowingly removed the property from one of the biggest tax sales in Lake County in the Fall of 2007.

Since Indiana is about on par with Illinois for political malpractice, I wonder if that relative voted as well...hmmm...okay, moving on...

Earlier in 2008, the Memory Gardens scandal hit. Robert Nelms and his wife Debora Johnson-Nelms owned Memory Gardens Management Corp., which owned and operated funeral homes and cemeteries in 4 states (IN, MI, NJ & TN). They are charged with raping the perpetual care funds, which is mandated by law to be placed into a trust for ongoing and future ground maintenance and other expenses. I guess Mr. Nelms believe that "other" expenses included a $1.2M home and paying off $13M in personal loans.

While the scheme could be as large as $200M across the 4 states, the Indiana portion is approximately $47M. Fraudulent securities instruments and forged documents were used to transfer the funds to personal accounts. The couple has 5 felony counts each of theft, 1 count of fraudulent or deceitful acts, 2 counts of violation of a cemetery perpetual care fund, as well as other misdemeanor charges. Another "gentleman", business partner Clayton Smart, is also charged in relation to transfers involving 3 cemeteries and funeral homes, as is their Smith Barney broker, who it is alleged encouraged them to find a trustee who would permit these types of improper transactions. That broker, Mark Singer, was charged in 2007 with theft, conspiracy and money laundering in a similar cemetery scheme in TN. The company you keep apparently speaks volumes...

Oops...almost forgot...Memory Gardens and subsidiaries still has active job postings for insurance agents to sell pre-need funeral contracts on Monster.com and CareerBuilder.com, and is still listed on www.local.botw.org/Indiana. I assumed "botw" must stand for best of the worst, but it actually stands for best of the web.

A few years prior, Kent Kellogg of the Kellogg Funeral Home received a 16 year prison sentence for 4 guilty pleas to insurance fraud. Dating back as far as 2002, Mr. Kellogg didn't use clever securities transactions or complex trading schemes for his fraud...he simply falsified death certificates and cashed out life insurance policies entrusted to his funeral home on people who were still living.

Here's the best (worst) part...this is his quote during his trial to justify his actions, "I didn't try to deceive anyone out of their money, I was just trying to maintain my business. I've lost everything. It is my fault, I'm not trying to blame anyone else, but I've been through a lot". Yes, that is his actual quote as he knowingly and intentionally filed false death certificates, he "didn't try to deceive anyone out of their money" and he apparently believes that we all should feel forgiveness and leniency because he's "been through a lot". What about those folks who are still alive but have no life insurance...you know, the life insurance they bought and paid for...I think that they're the ones who've been put through the wringer, and at no fault of their own.

Here's an even more simple plan...in Morocco, IN, H. Robert Long of the Long Funeral Home was charged with 13 felony counts of insurance fraud after he just simply chose not to deposit funds intended for life insurance policies by trusting consumers with the insurance company. A few got a bit suspicious when they never received a policy and the insurance company had never heard of them.

In 2008, Grandview Memorial Gardens Cemetery in Madison, IN settled a class action case for missing pre-need funeral and cemetery funds placed into their care...once again, by trusting consumers. The $4M settlement will be paid by 4 banks involved and 3 cemetery and/or funeral home affiliates. The settlement was based on what the account value should have been based on the funds paid in by consumers and what the value actually was...$100,000. Not that Grandview entered into this willingly...you see an "intentional fire" per investigators was set in the office. After fire fighters put the blaze out, they found all of the client file drawers had been pulled out of the cabinets, assumably for an easier burn.

I suppose the fact that several bodies had to be exhumed in 2007 due to mass cemetery flooding caused by an improper drainage system likely didn't help the case.

Now...my favorite...in a very sad and emotionally disturbing way...

In 2007, Union City, IN elected town councilman and funeral director, Russell Reichard, of Reichard Funeral Home, pleaded guilty to fraud. He forged two signatures on a life insurance policy to make the funeral home, rather than the 2 sons of the policy holder, beneficiary. Here is the interesting part...

As an elected official, Mr. Reichard obviously has many connections. The court received 22 letters from people in Randolph County and neighboring Drake County, OH speaking highly of his integrity and requesting leniency. Most impressive is the fact that the daughter of the deceased, defrauded woman actually spoke in court in Mr. Reichard's defense, quoting "Russell is a good guy". This man just forged her mother's signature on her life insurance, after she died, to steal the inheritance from her two brothers...and she tells the court that he is a good guy...the fact that her two brothers were beneficiaries and she was not listed could indicate her motivation...

"I cut a corner and got in a hurry to do something and I apologize for what I did"...that was Mr. Reichard's defense. "Cut a corner and got in a hurry to do something"???...This translates to me as he got in a hurry to commit fraud and apologizes for getting caught.

FINALLY...some sanity!!!

Cheers to IN State Representative Dave Cheatham (D-North Vernon), co-author of HB1287, a bill that provides further clarification and refinement of the state funeral trust rules that he pushed through the IN General Assembly in 2008 in a direct response to the Grandview scandal.

Violations of perpetual care trust funds can be punishable as a class C felony and allows for two more important changes:

1) It changes the statute of limitations for pursuing a fraud claim to 5-years from withdrawal of pre-need funeral contact funds from the original language of 5-years from initial investment. This is critical, because most people realize the fraud when they make claim to the funds they have paid, which very well may be later than 5-years; and

2) It specifies that any property used to commit the crime be seized to recover damages. For instance, if the funeral director drove to work, the vehicle could be seized to recover damages. It allows for a broader range of assets which can potentially be included to compensate those defrauded.

On March 26, 2009, HB1287 passed the state Senate and goes back to the state House to consider any changes recommended by the state Senate, then proceeds to the Governor for final action. Cross your fingers that "My Man Mitch" (Gov. Mitch Daniels) does the right thing and signs this legislation into law.

Until then...I will continue to encourage all consumers to protect themselves from a very avoidable and financially devastating fraud which occurs everyday. Learn more at www.FuneralPlannersInc.com...we can and do help.

copyright 2009 Funeral Planners Inc.