The Clayton Smart debacle has been, and will continue to be, the subject of articles calling for preneed reform. A recent AARP article titled R.I.P. Off will be one of the more controversial (leading to frequent citations by consumer advocates). While the article is biased and should be rebuked by the death care industry for its various flaws, the industry should examine the Smart affair and the public’s reaction to Mr. Yeoman’s issues (including the comments posted to the AARP website).
Mr. Smart exploited the Tennessee laws to divert millions of dollars of trust assets. While Forest Hill’s new owners should be applauded for taking steps to minimize the loss to consumers, the industry should not ignore the magnitude of the fraud committed. Over the next few months, I plan to revisit the Smart affair and the issues it spawns. But for this post, consider the missing fiduciary.
In its April 2007 edition, the American Funeral Director reported in detail about Mr. Smart, including his appointment of a small Indiana institution as Forest Hill’s preneed trustee and the revision of the governing trust instrument. While another of Forest Hill’s trustees discharged its duties to consumers by refusing Mr. Smart’s distribution instructions, the Indiana institution followed Smart’s instructions to terminate life insurance policies that would result in millions of dollars of loss to the trust. Too frequently, funeral directors exhibit the similar business ethics by shopping for a trustee that will do what it is told.
Many of our country’s larger banks now refuse to accept death care trusts either because the laws are ambiguous or because of the industry’s reputation. Death care companies need to develop procedures and controls to ensure compliance, accountability and transparency. Restoring the confidence of financial institutions and consumers will take time.