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FBI probing funeral contract company
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By DAVID A. LIEB
Associated Press Writer
The FBI is looking into alleged misconduct by a funeral contract company that had guaranteed hundreds of millions of dollars of services to families before becoming insolvent.
The FBI has sent letters to numerous funeral directors informing them of the probe into National Prearranged Services Inc. and its affiliated insurance companies, Lincoln Memorial Life Insurance Co. and Memorial Services Life Insurance Co.
The Oct. 29 letter, obtained by The Associated Press from a Missouri funeral home, states that investigators are “looking into allegations of corporate misconduct” involving the companies.
It does not elaborate on the allegations but asks funeral directors to fill out a questionnaire about their contracts with National Prearranged Services and any promises that the company made, and to return it to the FBI's office in St. Louis.
Along with receiving the letter, several Missouri funeral home owners confirmed to the AP that they have been interviewed by the FBI about National Prearranged Services and have turned over boxes of documents related to their preneed funeral contracts.
The FBI letter says the written questionnaire is being mailed to funeral homes because it's impossible for agents to personally interview representatives from the “voluminous number of funeral homes” in 19 states where the company had done business.
Billy Cox, a special agent in the FBI's St. Louis office, confirmed Wednesday that the letter had been sent to funeral homes in multiple states, but he did not specify which ones.
The letter states that the U.S. Postal Inspection Service and the Internal Revenue Service also are involved in the investigation.
St. Louis-based National Prearranged Services and its Texas-based insurance affiliates were placed under receivership in Texas earlier this year. A Texas court in September ordered their liquidation after deciding that further attempts to revive the companies would be futile and would increase the risk of losses to creditors, policyholders and the public.
Donna Garrett, the person appointed to administer the companies after their failure, said Wednesday that she was aware of the FBI investigation but had not seen the letter. She said National Prearranged Services had done business in 43 states and the District of Columbia.
National Prearranged Services had 158,153 active preneed funeral contracts valued at nearly $662 million, Garrett said.
Two of its largest sales-volume states were Missouri and Texas, which combined accounted for more than 110,000 customer contracts valued around $335 million, officials in the two states said Wednesday. Figures from other states were not immediately available.
In preneed funeral arrangements, customers pay for their funeral and burial services before their deaths. For example, a customer who bought a package of funeral services valued at $5,000 in 1995 would receive those same services upon his or her death in 2008, even if the value had rise to $8,500 with inflation.
Under such arrangements, money for a prepaid funeral generally is placed in a trust account that bears interest.
National Prearranged Services used the money in its trusts to buy life insurance policies from its affiliated companies while pledging to funeral homes that it would either provide a fixed rate of return or pay for the full inflation-adjusted cost of the funerals.
“There are going to be some funeral homes that are in severe financial difficulty, and we might even have some that go out of business, particularly if they had a large number of NPS claims and if those NPS claims come due in a relatively narrow time frame,” said Don Otto, executive director of the Missouri Funeral Directors Association.
St. Louis County funeral home owner Jim Buchholz said an FBI agent interviewed him in June about National Prearranged Services and told him that he was the first Missouri funeral home owner contacted as part of the investigation.
“Their big thing was they wanted to find out if we had anything (documented) where it said how much interest we would get if our stuff was rolled over” to National Prearranged Services, said Buchholz, owner of Buchholz Mortuaries.
Among other things, the FBI questionnaire asks funeral homes that rolled over trust accounts to NPS whether they knew the company would be backing up the contracts with life insurance policies, whether they knew loans were taken out on the life insurance policies and whether they knew the policies were converted into term life insurance.
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On the Net:
Company details: http://www.lincolnmemoriallife.com/default.aspx
The FBI has sent letters to numerous funeral directors informing them of the probe into National Prearranged Services Inc. and its affiliated insurance companies, Lincoln Memorial Life Insurance Co. and Memorial Services Life Insurance Co.
The Oct. 29 letter, obtained by The Associated Press from a Missouri funeral home, states that investigators are “looking into allegations of corporate misconduct” involving the companies.
It does not elaborate on the allegations but asks funeral directors to fill out a questionnaire about their contracts with National Prearranged Services and any promises that the company made, and to return it to the FBI's office in St. Louis.
Along with receiving the letter, several Missouri funeral home owners confirmed to the AP that they have been interviewed by the FBI about National Prearranged Services and have turned over boxes of documents related to their preneed funeral contracts.
The FBI letter says the written questionnaire is being mailed to funeral homes because it's impossible for agents to personally interview representatives from the “voluminous number of funeral homes” in 19 states where the company had done business.
Billy Cox, a special agent in the FBI's St. Louis office, confirmed Wednesday that the letter had been sent to funeral homes in multiple states, but he did not specify which ones.
The letter states that the U.S. Postal Inspection Service and the Internal Revenue Service also are involved in the investigation.
St. Louis-based National Prearranged Services and its Texas-based insurance affiliates were placed under receivership in Texas earlier this year. A Texas court in September ordered their liquidation after deciding that further attempts to revive the companies would be futile and would increase the risk of losses to creditors, policyholders and the public.
Donna Garrett, the person appointed to administer the companies after their failure, said Wednesday that she was aware of the FBI investigation but had not seen the letter. She said National Prearranged Services had done business in 43 states and the District of Columbia.
National Prearranged Services had 158,153 active preneed funeral contracts valued at nearly $662 million, Garrett said.
Two of its largest sales-volume states were Missouri and Texas, which combined accounted for more than 110,000 customer contracts valued around $335 million, officials in the two states said Wednesday. Figures from other states were not immediately available.
In preneed funeral arrangements, customers pay for their funeral and burial services before their deaths. For example, a customer who bought a package of funeral services valued at $5,000 in 1995 would receive those same services upon his or her death in 2008, even if the value had rise to $8,500 with inflation.
Under such arrangements, money for a prepaid funeral generally is placed in a trust account that bears interest.
National Prearranged Services used the money in its trusts to buy life insurance policies from its affiliated companies while pledging to funeral homes that it would either provide a fixed rate of return or pay for the full inflation-adjusted cost of the funerals.
“There are going to be some funeral homes that are in severe financial difficulty, and we might even have some that go out of business, particularly if they had a large number of NPS claims and if those NPS claims come due in a relatively narrow time frame,” said Don Otto, executive director of the Missouri Funeral Directors Association.
St. Louis County funeral home owner Jim Buchholz said an FBI agent interviewed him in June about National Prearranged Services and told him that he was the first Missouri funeral home owner contacted as part of the investigation.
“Their big thing was they wanted to find out if we had anything (documented) where it said how much interest we would get if our stuff was rolled over” to National Prearranged Services, said Buchholz, owner of Buchholz Mortuaries.
Among other things, the FBI questionnaire asks funeral homes that rolled over trust accounts to NPS whether they knew the company would be backing up the contracts with life insurance policies, whether they knew loans were taken out on the life insurance policies and whether they knew the policies were converted into term life insurance.
---
On the Net:
Company details: http://www.lincolnmemoriallife.com/default.aspx
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