Funeral Industry News

California AG Sues Funeral Trust

April 20, 2011
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California AG Sues Funeral Trust

SACRAMENTO, Calif. – California’s attorney general sued one of the nation’s largest funeral trust funds Monday, claiming its managers had illegally diverted $14 million that consumers had saved to pay for cemetery plots, caskets and services.

The lawsuit says administrators of the California Master Trust paid themselves excessive fees and gave at least $4.6 million in illegal kickbacks to the 300 funeral homes that participate in the trust.

The 26-year-old trust holds about $63.5 million paid in advance by 27,000 consumers for funeral services.

“The defendants preyed upon thousands of Californians at one of the most vulnerable times of their lives,” Attorney General Kamala Harris said in a statement. “This lawsuit will make sure their money goes where it was intended: to pay for their funerals or the funerals of loved ones.”

Her office filed the lawsuit in Los Angeles County Superior Court on behalf of the state Department of Consumer Affairs’ Cemetery and Funeral Bureau, which regulates the funeral industry.

The Funeral Directors Service Corp., which oversees the trust, filed its own lawsuit against the department last November in a dispute over whether the 300 funeral homes and the fund’s administrator and trustee must return money. The state is attempting to have that lawsuit dismissed in Sacramento County Superior Court.

The corporation is a subsidiary of the California Funeral Directors Association. Both “absolutely deny all of the allegations in this complaint,” said the corporation’s attorney, Grace Bergen. She said the trust was formed in 1985 in consultation with and under the regulation of the Department of Consumer Affairs.

Susan Siravo, a spokeswoman for fund trustee Comerica Bank, said she could not immediately comment. The bank, corporation and association were among those named in the state’s lawsuit.

The lawsuits stem from an audit released by state regulators in July. It found that California Master Trust improperly spent consumers’ money on administrative fees, political lobbying and conventions for the California Funeral Directors Association.

Auditors said the trust kept other money that should have been reimbursed to consumers, their estates or the state treasury when families paid for funeral services because they didn’t know their loved one had a prepaid plan or in cases in which funeral homes went out of business before they could provide the services.

Harris asked the court for an injunction to stop what the suit argues are illegal practices, and asks that those involved with the fund be ordered to repay the $14 million plus interest. The suit also asks the court to replace Funeral Directors Service Corp. as fund administrator.

Department spokesman Russ Heimerich said the trust is one of the nation’s largest, but is just the second largest in California, the most populous state. The largest in California is Service Corporation International with about $120 million under trust, he said.