Death Care Law Blog : Kansas Death Care and Preneed Lawyer & Attorney : Stalter Legal Services Law Firm : Funeral Law, Elder Law : Kansas City

Yesterday, the St. Louis Post Dispatch reported on the federal indictments handed down against six NPS officials. The article includes two statements that hint at the legal strategies to be employed by NPS and federal prosecutors.

"We have anticipated this (indictment) for a number of years, and he is looking forward to finally confronting these allegations line by line in court," Rosenblum said.

In 1992, Missouri filed a civil suit against National Prearranged that led to a court agreement on minimum deposits into trust accounts. That deal wasn't followed, and the defendants concealed their transactions from regulators in Missouri and other states, the federal indictment alleges.

The first statement, made by Doug Cassity’s attorney, is a posturing statement that warns of a long public trial. The message is twofold: we’re going to make you spend a lot of money and we’re going to flyspeck the actions of Missouri regulators. Mr. Cassity’s legal team will likely assert that NPS complied with Missouri law, and did nothing to conceal its actions. Earlier this summer, NPS attorneys commented that the company was doing fine until regulators intervened in 2008. (If that were the case, why would Mr. Cassity have been anticipating the indictment for a number of years?)

Basing a defense on any failure of the State Board serves as a subterfuge. However, the federal prosecutor must respond by showing how NPS concealed its actions. With some Missouri funeral homes criticizing the former Attorney General for having let NPS off the 1992 hook, a NPS trial serves as a stark reminder to Governor Nixon of the lax enforcement of Chapter 436.

Missouri funeral directors should anticipate a get tough response from the Attorney General’s Office like that taken recently in Bates County.
 

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The wait for Ms. Garrett’s lawsuit against NPS, the Cassity family (and anyone remotely connected with the Cassity Consortium) ended on August 7th.

If half of the allegations made in the NPS Complaint are true, the misconduct perpetrated on funeral homes and consumers is shocking to say the least. The Complaint provides a bevy of reform issues to explore. However, NOLHIGA and state regulators must be careful in their zeal to recover assets and implement reform.

A search of the Complaint for the term “independent investment advisor” will produce ten hits, with most of the substantive issues addressed on Pages 52 through 57. Chapter 436 of the Missouri statutes authorizes a preneed seller to designate an independent investment advisor to make investment decisions for the trust when it has more than $250,000 of assets. In doing so, the trustee is relieved of all liability regarding the investment decisions by the investment advisor.

As many larger Missouri sellers did, NPS designated an ‘independent’ investment advisor. The Complaint alleges that the investment advisor gave NPS free reign over the various trusts to perpetrate various frauds, including the purchase of the Lincoln Memorial insurance policies.

With regard to the fiduciary duties of the independent investment advisor, Complaint Paragraph 179 hits the nail on the head:

As purportedly “independent” investment advisors, Defendants Wulf and Wulf
Bates owed fiduciary duties to NPS as the entity that settled and funded the NPS pre-need trust accounts, and to the funeral homes and consumers as the beneficiaries of the pre-need trusts. Those fiduciary duties include, without limitation, loyalty, care, good faith, candor, sound business judgment, forthrightness, and fairness, through their direction and control over the trust funds.

In rubberstamping the NPS instructions, this investment advisor neglected his duties to the funeral homes and consumers.

In an effort to hold the NPS trustees accountable under Section 436.031, the Complaint alleges the investment advisor was not ‘independent’. This begs more than one question, but the first one that comes to mind is: independent of whom?
 

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News of Randy Sutton’s arrest was greeted by honking hearses in Missouri, Texas, Illinois, and a dozen or so other states. But, the question funeral directors are asking: What about the Cassity family?

Federal investigators need for someone to rollover and give up the Cassity crew, and apparently, Mr. Sutton is their choice.

Matt Damon’s new movie, the Informant will be out soon. That movie is about Archie Daniels Midland, a mega-food conglomerate based in Decatur, Illinois, my old hometown. Part of the movie was shot in the little town of Moweaqua, where my wife’s family lives. For weeks, we received photos of Matt Damon obliging the local residents. The story is about an ADM executive who turned informant on his employer’s misdeeds, but took a fall due to his own conduct.

As the Feds put the screws to Mr. Sutton, funeral directors can only hope those investigators can connect the dots. If they do, and the Cassity family is implicated, who will play Mr. Sutton in the movie?
 

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Yesterday, the St. Louis Post-Dispatch ran an article that examined the history of NPS, and raised some of the questions that need to be explored in depth in the months to come.   The system failed in several states, for both consumers and funeral homes.   While most funeral homes will try to make good on the NPS promises to consumers, regulators must share in the responsibilities for what went wrong and what has to be done.

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