Opposite Day in IL Politics and Death Industry

A game that the children in my life love to play is Opposite Day...whereby everything you say means exactly the opposite of it's intent. The game is used to garner the desired result when the actual result is not delivered and is generally not agreed to beforehand. For instance, no means yes, up means down, etc...so when the answer to the question of "can I play ball in the street" is NO, Opposite Day suddenly comes into play, which makes the answer YES, of course you can play ball in the street.

This seems to be the game being played in IL as it relates to the fraud, misrepresentation and politics surrounding the Illinois Funeral Directors Association Trust ("the trust"), the investment vehicle used to "protect" the funds of IL consumers who purchased pre-paid funeral contracts through their local, trustworthy funeral home. By the way...this fund was written down by $59M last Fall to cover the shortage in funds...it seems Opposite Day was in effect even in naming it.

It begins in 1980, when then IL Comptroller, now US Senator, Roland Burris provided the license to the IFDA to manage the trust. Call me crazy, but when did being a funeral home operator somehow enlighten you to the nuances of managing money...and the money of other people to boot. And don't forget...this is the same Roland Burris who was hired to lobby current IL Comptroller Dan Hynes on behalf of the IFDA and their ability to continue to manage the trust, which had shown signs of mismanagement since 2001. By the time Hynes office got around to noticing, the fund had somehow lost $59M, and NOT due to market fluctuations.

But, let's not be hasty and place the entire blame on Sen. Burris's shoulders, the writing was on the wall before he concluded that funeral homes = money managers. As written, IL law allows funeral homes who sell pre-need funeral and burial contracts to keep up to 5% of the capital paid up-front as pure profit for pre-need funerals and up to 15% of the cost of a burial vault up-front as pure profit, as well as keeping 25% of the trust's earnings. Shockingly, even if the funeral home who sold the contract provides absolutely no funeral goods and/or services at the time of death, they are still allowed to keep $300 or 10% of the value, whichever is less.

Here's how the trust works...the IFDA is a non-profit entity. To manage the trust and be able to accept the 25% of earnings from the trust, they formed a for-profit branch named IFDA Services, and both entities share the exact same board of directors.

While the existing law provides a play-by-play game plan for Opposite Day, allowing IFDA Services to take 25% of the earnings that should be allocated to the consumers who purchased the contract, that wasn't good enough. Even though IFDA Services collected nearly $2.4M in 2006 and nearly $2.1M in 2007 in earnings from profits, the trust somehow continued to hemorrhage money. It could be the investment policy of the trust, which mandates a mix of bonds, equities and mutual funds. In reality, the investment policy utilized was purchasing life insurance policies...not on the contract holders, but on funeral directors themselves and on IFDA insiders, whose life expectancy statistics do not match the actuarial life expectancies of the contract holders. Classical case of Opposite Day...the aggregate life expectancy of the policy holders was 20 years whereas the aggregate life expectancy of the contract holders was 10 years. Seems to be a recipe for disaster.

Or, it could be the spending policy of the IFDA and IFDA Services. According to the IFDA's 2007 tax return, then IFDA Executive Director Paul Dixon received $175,784 in salary and $40,000 in unspecified benefits, of which more than $147,000 was paid directly by IFDA Services and two other senior IFDA executives received the bulk of their salary paid directly from IFDA Services, although it is stated that they are 40-hour a week employees of the IFDA. The prior two years of tax returns listed no salaries paid.

Or, other minor expenses, such as $24,600 in expenses to cover board meetings, $68,000 in automobile allowances or $22,000 for lobbyists, like for our friend Roland Burris. In fact, since 1996, the IFDA and it's political action committee have spent nearly $263,500 for politician and political party contributions, nearly $98,000 of that money spent after June 2006, when the IL Comptroller sent a warning letter to the IFDA and IFDA Services warning them that the trust had an "intolerable" shortfall and, per a lawsuit filed by 6 funeral homes, since that time the deficit in the trust has grown by over $20M.

Then again, per a 2007 audit, more than half of the investment management fees paid to IFDA Services were spent outside of that entity. $850,000 was given directly to the IFDA, $270,000 was spent on the IFDA museum...not to mention the personal loans. IFDA Services had nearly $10M in outstanding personal loans to IFDA insiders. David Reynolds, IFDA Treasurer, had an outstanding $900,000 mortgage loan for a new funeral home in Marion, IL, with a population of about 17,000 that already had 2 existing funeral homes. This new, clearly much needed funeral home, didn't get around to paying the 1999 property taxes until 2002. As an aside, according to online obituaries, Marion, IL experiences about 61 deaths per year...or about 1 per week. Thus, it is totally understandable and substantiated with 1 death per week and 2 existing funeral homes why IFDA Services would approve a $900,000 mortgage for Mr. Reynolds to start a new funeral home. Once again...Opposite Day...

Oh, and the loans are made with no written policy stating what information should be in the loan file. Therefore, you have 5 loans made to IFDA board members, but 1 file has no underwriting or approval paperwork and at least 2 files have no credit reports. Apparently, you get rubber stamp approval with no documentation, underwriting or approval needed...sort of like a checking account using other people's money. We all need one of those!

Once the IL Comptrollers office finally got around to following up on the glaring mismanagement since 2001...that would be in 2006...the license of IFDA Services was revoked and it was determined that the trust would actually have to have a fiduciary trustee...which to me seems like step 1 rather than one of the final steps. The first trustee selected, Morgan Keegan Trust, a TN investment firm retained by the IFDA in 2008, backed out because the life insurance policies are difficult to calculate a valuation on and they felt they should be liquidated in the best interest of the trust, even though that meant a significant tax liability. Once Morgan Keegan declined the business and the voice of reason no longer a concern, the selected trustee was Merrill Lynch...the same employer of the broker who sold the life insurance policies to the trust in the first place and the same broker whose license has been suspended for fraudulent activities in relation to those policies, which require the signature and authorization of the contract holder before purchasing a life insurance policy but that was the small print disclaimer that Merrill Lynch and IFDA Services chose to ignore.

IL consumers can depend on their politicians to fight for their rights in this mess. Several lawmakers have endorsed House Resolution 177, passed by the House on April 22nd, which would form a Funeral and Burial Pre-Arrangement Investigative Task Force, with a 10-member board to report it's findings by December 31, 2009. The bill was sponsored by Representative Dan Brady (R-Bloomington), a former IFDA member and IFDA committee official. He admirably stopped accepting campaign contributions about 2 years ago. Or, IL consumers could count on IL House Speaker Michael Madigan, who since 2006 has accepted $16,000 in political contributions from the IFDA political action committee, double the amount contributed to him in the previous decade.

IL consumers...you do not have to be victimized, duped and betrayed. Learn more, plan ahead and protect yourself and your loved ones at www.FuneralPlannersInc.com.

copyright 2009 Funeral Planners Inc.

The Death Industry - Always Recession Proof

“The honest-to-goodness truth of the matter is that everybody does die,” says Arvin Starrett, a spokesman for the National Funeral Directors Association and the owner of Starrett Funeral Home in Paris, TX in a 4/18/09 N.Y. Times article.

And, let's face facts...as invincible as we may at times feel, and in an economic and political environment that changes with the wind, it is the one honest-to-goodness truth we all can believe. That is why funeral homes, crematories and cemeteries...otherwise known as the "death industry", is booming when the global and domestic economy around them is crumbling. I recently read that by most accounts, the real estimated average cost of a traditional funeral is over $8,000. $8,000!!! In a financial climate of 46 states reporting over-the-month unemployment rate increases and the jobless rate in all 50 states and the District of Columbia posting increases! (March 09, U.S. Bureau of Labor Statistics) How can that be? How can consumers continue to lose their jobs and their security...and when the final event of devastation occurs...the loss of a loved one...the death industry ruffles its feathers and zeroes in like a vulture to pick the remains of the fresh corpse and their families. It's just not right...but unfortunately...it is one of the other truths that we are forced to live with.

According to senior industry analyst Toon van Beeck, of research firm IBIS World, the revenue of the U.S. funeral industry will grow by 1.2% this year to a $20.7 billion dollar industry, which, in all fairness, is down from a 2% revenue gain last year. My heart breaks for their loss.

The annual death rate of 2.5 million Americans a year is expected to increase by about 1% per year, and expected to spike by early 2020 as baby boomers reach their mid 70's. Rest assured...this is just the famine before the feast for the death industry, as their mouths water in anticipation of the aging baby boomers dying off...and perhaps the push to sell pre-need contracts. While they have to accept their measly 1.2% growth during a period of the U.S. experiencing a decrease in 2008 annual GDP of 6.3% (March 09, U.S. Bureau of Economical Analysis), they have derived clever new ways to push their growth numbers back up, particularly in light of the growing interest in "green" burials and cremation, which analysts expect to account for 38% of deaths this year. Let's see what they're up to...

The Video Tribute: This is the newest innovation from enterprising entrepreneurs and funeral homes. The services range from creating a video tribute to the departed using photographs and other memorials to live web-casting or recording the funeral as it takes place. Funeral homes offer this service to the families for hundreds of dollars. That big hearted gesture just brought tears to my eyes...until they turned to tears of anger as I realized that the necessary "capital expenditures" of the funeral home was a laptop and an internet connection. Virtually all laptops today are designed with web cam capabilities and you just need the knowledge of how to stream it (many free on-line tutorials, it really is not difficult). If the laptop does not have this feature, a web cam can be purchased, ranging from $10 to $50. Even newer Netbooks, the smaller, more compact versions of laptops, have web cam capabilities. Once again, thank you compassionate funeral homes, for taking the emotional and financial situations of the bereaved into consideration when designing your promotional offers.

Casket Rental: As the cremation percentage rises, funeral homes are feeling the pressure on the typically highest priced, and highest mark-up item...the casket. So, they are generously offering those who opt for cremation but would like a viewing to rent a casket. I recently saw one funeral home that offered a "discounted" rental fee of $1,000 for a "beautiful and ornate" casket rental. What they fail to mention is that they purchased that casket at wholesale, up to 800% below what they would sell it to you for, and after only a few, if that, rentals, the casket has paid for itself but they continue to rent it for years at the same rate. Does the phrase "cash cow" come to mind.

Others are offering grief counseling referrals, with a kickback from the referral source, and what is referred to as "thumbies"...14k gold earrings, rings, pendants or other jewelry that is made from the thumbprint of the deceased. To each his own, but you certainly do not need to pay a funeral director a fee above what the jewelry cost to be made...there are literally hundreds of vendors who provide this service without the "commission" being paid to the funeral home to Google a jewelry maker and give you a referral.

Another way that families are saving money and personalizing funerals is to have the viewing and funeral services take place in their homes or other places, sometimes with the aid of a funeral director and others that do not. That is a whole different subject and one I will cover in my next entry...wait and see!

In summary, the death industry is basically immune from the economy, or any other factor, because they have a very specific and select prospect list...everybody who is alive today! Beware of special promotional offers and be smart when selecting the types of funeral and burial goods and services. There are innumerable ways to save money through a comprehensive and documented pre-need funeral plan, you just have to take the first step.

Please learn more at www.FuneralPlannersInc.com. Everyday, we help consumers understand their rights and help them protect themselves and their families, while saving money in the process...Guaranteed. An informed consumer is a prepared consumer, an we can help.