Copyright 2008 St. Louis Post-Dispatch, Inc.All Rights Reserved St. Louis Post-Dispatch (Missouri) August 25, 2008 Monday FIRST EDITION
SECTION: EDITORIAL; Pg. A16
LENGTH: 640 words
HEADLINE: See no evil
We've all heard those pitches for prearranged funerals: Make arrangements now so your loved ones don't have all that stress in a "time of need."
That might be a good idea, but how's this for stress: You lay out thousands of dollars for a prearranged funeral, only to discover that the funeral company blew all the money. And nobody in government was watching.
The prearranged funeral industry rakes in $90 million to $100 million a year in Missouri. By law, the operators can take 20 percent off the top for a quick profit, but they're supposed to set aside 80 percent to pay for funerals years from now. However, the state conducts no audits to see if the money actually is there or whether it is invested properly.
Two years ago, the Missouri Legislature rejected a bill to require regular audits of companies providing pre-arranged funerals. The bill would have required that 100 percent of customer payments be invested, ending the quick 20 percent rake-off by sales companies and funeral directors.
Naturally, such a common-sense bill had no chance in a Legislature dominated by business interests.
"I was met by major opposition from NPS [National Prearranged Services of Clayton] and other third-party sellers," said the bill's sponsor, Rep. Tim Meadows, D-Imperial. "They've donated thousands and thousands and thousands to Missouri political candidates. . . . If we had done something then, we could have stopped this from happening."
By "this" Mr. Meadows means the mess perpetrated by NPS. The firm sold prearranged funerals to 46,000 people in Missouri alone. It invested the money in a Texas insurance company it owns, and then yanked the money out of the insurance policies.
NPS is affiliated with Forever Enterprises, also a Clayton-based company. Forever was founded by Doug Cassity, formerly a lawyer in Springfield, Mo., who lost his law license and served a prison sentence in the 1980s after being convicted of conspiracy and tax evasion. The company also owns two insurance companies in Texas.
In the 1990s, NPS sold contracts for prearranged funerals to families in 18 states. Then it invested much of the money in life insurance policies issued by its Texas insurance companies. The death benefit on the policies was supposed to pay for the funerals.
But in 2005, NPS began to drain money from the policies, eventually leaving insufficient funds to cover burial costs.
No one noticed for about two years. Texas insurance regulators audited the insurance companies in 2005 but noted no big problems. By the time they discovered the mess last fall, it was too late.
NPS is about to be liquidated, and state insurance guarantee funds are stepping in to fill most of the funding gap. Funeral homes will get most of what they were promised, state officials say.
Pre-need companies operate across state lines, making state regulation difficult. "The system is so thoroughly broken it's in a shambles. It's time for the feds to step in," says Joshua Slocum, executive director of the Funeral Consumers Alliance.
In the meantime, the Missouri Legislature should:
- Require annual audits of pre-need companies, either by the state or by independent auditing firms. Give the state the authority to conduct surprise inspections of the books.
- Forbid pre-need companies from using insurance policies issued by their own insurance companies.
- Set licensing requirements to keep criminals out of the business, and make sure salespeople don't mislead customers.
- Require that at least 95 percent of customers' money be kept in trust, and set rules for prudently investing it. Pre-need companies say this would kill their business, but, as Mr. Slocum notes, 29 states require 100 percent investment, and consumers still buy pre-need funerals in those states.
"Missouri has the sixth-worst law in the country," says Mr. Slocum. It's time to change that.
NOTES: Our View
funerals
LOAD-DATE: August 25, 2008
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