When NPS first collapsed, the estimate of the company’s liabilities to funeral homes was reported to have been as much as a billion dollars. When the SDR finally brought the case to trial, the damages awarded by the jury were less than half of the original estimate. While this author believes the actual damages are closer to the original estimate, the truth may be that no one, including those who ran NPS, knew all what had been promised funeral homes. Chapter 436’s lax standards for regulatory oversight and fiduciary duties meant that no one was asking NPS for records that would have shown whether the trusts were appropriately funded. Consequently, it is ironic that members of the Missouri funeral industry are now suggesting that the State Board of Embalmers and Funeral Directors has exceeded its audit authorities, and that the Board’s members could have personal exposure for doing so.
At a recent State Board meeting, it was suggested that a Supreme Court decision now puts Board members at risk for personal liability. In North Carolina State Board of Dental Examiners vs Federal Trade Commission, the Supreme Court held that the members of an industry board could not claim state action immunity because the state had not provided adequate supervision of an entity that was acting more for the benefit of the industry than for the good of the public. The North Carolina dental board passed regulations controlling who could provide teeth whitening services, and the FTC found the regulations to be in violation of antitrust laws.
The Missouri State Board has a history with the FTC and the antitrust laws. About eight years ago, the Board passed a regulation controlling who could sell caskets. As a part of the settlement with the FTC, the Board had to include disclosures on its website. The North Carolina case also reminds us of the time when California regulated the funeral industry with an industry board. That state board retained its own legal counsel and pursued issues which seemed closely aligned with the state association. Eventually, the California Funeral Board was eliminated by a sunset law, and regulation of the industry was transferred to the Cemetery and Funeral Bureau.
We have heard the industry’s frustrations with the Missouri audit process. Auditors have written up issues that could have been explained through an exit interview. Audit exceptions based on insurance policy assignments made decades ago for an accommodation to families. The auditor’s failure to incorporate explanations into reports forwarded to the State Board. Exceptions left open without a formal response by the State Board. But, it is disingenuous to raise the North Carolina decision in context with the preneed audit process. However flawed the process may be, audits are not intended to further industry interests over those of the public. That may be best typified by the obvious friction between the State Board and the state association over the audit of their master trust. Second, the State of Missouri provides oversight of the State Board through a staff and attorney who are Division of Professional Registration employees.