According to court filings, the reorganization plans for the Wisconsin Master Trust and California Master Trust each seek to eliminate ‘de facto trustee’ relationships that allowed the respective associations’ executives to ‘misuse, misspend, and mismanage millions of dollars’ of trust funds, and to direct funds towards inappropriate and unsuitable investments that served the association’s, rather than the beneficiaries’, goals. The receiver for the Wisconsin Master Trust laid responsibility for abuses of that trust at the feet of the association, and reported to the court that:
The Trust was hemorrhaging from the costs it was incurring. We promptly eliminated between $50,000 and $100,000 per year in administrative costs, $125,000 per year in investment advisor fees and $240,000 per year in payments to the WFDA and its affiliate. We also eliminated a large amount of other fees that did not appear on the Trust’s records but that were built into securities transactions.*
The trust agreements proposed to courts in California and Wisconsin would reinstate the trustee’s duties with regard to investment compliance, controlling trust expenses, and to severe the association’s use of master trust funds. Consequently, it seems odd that executives for the Missouri Funeral Trust would use the circumstances of the Wisconsin and California master trusts to distinguish their own program, and to then file a lawsuit declaring confidential and proprietary all trust documents, client lists and investment contracts. Sources report that while attending the Missouri Funeral Directors and Embalmers Association convention a few weeks ago, master trust representatives declared the program had “deep pockets” and could afford to sue to protect its interests and client relationships. If trust assets are being used to finance the lawsuit, the State of Missouri may legitimately inquire whether the Missouri program also has a de facto trustee. Since Missouri’s preneed financial examinations are not structured to drill for hidden investment costs and inappropriate trust expenditures, the MFT lawsuit seems to be inviting further scrutiny of the trustee by the Division of Finance and the Federal Deposit Insurance Corporation.
*The hidden fees the receiver refers to are 12b-1 fees that the association allowed fund managers to collect off various mutual funds. Those types of fees are often in addition to basis points fees charged by the fund managers.