An Oklahoma funeral director faces serious prison time over the deposit of preneed funds to his business operating account. The Oklahoma Department of Insurance decided to go to a local prosecutor when a Department audit found the funeral director had routinely failed to deposit consumer funds to the preneed trust required by state law. The funeral director’s attorney has suggested to news sources that although the funeral director admitted the funds were deposited to the operating account, no funds were missing. Consumers were getting their funerals, and his client was only guilty of being ‘sloppy’. But, the Department would have no part of the ‘no harm, no foul’ defense. The Oklahoma authorities have taken the position that criminal intent is determined by the decision on whether to comply with the deposit requirement, not whether the funeral director has intent to honor the contract.
Missouri and Illinois funeral directors have similar deposit requirements with regard to consumer preneed funds. So do Missouri cemeteries that sell merchandise and services on a preneed basis. Prior to the overhaul of Chapter 436 in 2009, the Missouri preneed law was ambiguous regarding the deposit requirements for consumer funds. Today, Section 436.440 requires consumer funds to be deposited directly to trust within 60 days of receipt by the seller. The ‘deposit directly to trust’ brought objections from large operators that include finance charges and other fees in the preneed sale, and an accommodation was made by the State Board to allow deposits to a clearing account. However, Missouri funeral homes that use a clearing account bear the burden of proof that the account is merely an extension of the trust.
Until December 2016, the Missouri funeral director who fails to deposit consumer funds to trust within 60 days of receipt has exposure to class c felony charges. Subsequent to January 2017, these violations of Chapter 436 will carry a class d felony penalty. With the 2009 law change, the preneed auditors of the Missouri State Board of Embalmers and Funeral Directors are now on the front line for determining compliance with the trust deposit requirement. While Chapter 436 provides concurrent jurisdiction to the Missouri Attorney General and local prosecutors, the law contemplates the State Board first referring possible prosecution matters to the AG. As an industry board, the State Board will lean towards giving funeral directors every opportunity to ‘get right with the Lord’, but we are five years into the ‘new’ law and that should be enough time to figure out which deposit book to use. Restoring consumer confidence requires proactive use of the authorities granted by the Legislature in 2009, including the Oklahoma option.