Looks like Randall K. Sutton, Sharon Nekol Province, Doug Cassity, Brent Douglas Cassity, Howard A. Wittner, and David R. Wulf, may have two graves in this lifetime – one that will naturally occur at the end of life and the other that they dug for themselves now. Facing up to 30 years in prison – it’s likely that many named above (if convicted) will spend their last days in federal prison just like Bernie Madoff.
Not that this is any great surprise if you work in the Funeral Profession, but this week the United States Attorney’s Office announced the indictments of six controlling officials of National Prearranged Services, Inc., in a 50-count indictment charging wire, bank, mail, and insurance fraud; money laundering; and multiple conspiracy charges involving the sale of pre-paid funeral services.
Sadly, this brings a “black eye” and causes serious distrust in an industry that provides services to individuals and their families at times when trust is needed the most. Having worked in this profession for the greater part of my adult life, I know the value that prearranging brings – not only emotionally, but financially as well…and for folks to abuse that trust is – well in a word – criminal.
So how big is this disaster? According to the indictment, after taking into account insurance and trust assets expected to be available to pay for future funeral services, and merchandise under prearranged funeral contracts sold by National Prearranged Services, Inc., (NPS), the loss to purchasers, funeral homes, and state insurance guarantee associations will range from $450,000,000 to $600,000,000.
As a business ethics speaker and industry professional, I have interviewed several of the firms affected. This financial fraud and scam will have significant, if not devastating consequences related to the ability of many smaller firms to survive or continue to provide the type of service that they wish to provide.
In an FBI news release the following is stated: According to the indictment, individuals who purchased a prearranged funeral contract from NPS, signed contracts which set forth the terms of that contract. The total price for the funeral services and merchandise was agreed upon, and would remain constant regardless of when the funeral services and merchandise would be needed. The purchaser could pay the agreed upon price either in full, or by periodic installments. NPS agreed to arrange for the funeral with the funeral home designated in the agreement upon the death of the person for whom the contract was purchased. In order to secure the performance of the prearranged funeral contract, a third party received the deposited funds. In Missouri, the purchaser and NPS agreed that the payments made under the contract after the initial 20 percent were to be deposited into a trust with a financial institution, such as a bank, as trustee. The seller of a contract was permitted to retain for its own use, the initial 20 percent deposited by the purchaser. In other states, such as Ohio, Illinois, and Tennessee, the purchaser and NPS agreed that the purchaser would apply for a life insurance policy which would fund the prearranged funeral contract when the funeral services were needed. Beginning in 1983, NPS entered into agreements with several financial institution to act as trustees of the various trusts which were established to hold the funds paid by the purchasers located in Missouri.
The indictment alleges that instead of making the required deposits into trust or forwarding the insurance premiums as paid, NPS obtained insurance in a manner that allowed it to retain money received from purchasers that should have been deposited into trust or paid as a premium to an insurance company. Since NPS and the insurance companies from whom policies were obtained were controlled by the defendants, NPS was able to pay substantially less than the amounts which should have either been deposited into the trusts or to the insurance companies.
The NPS fraud may have started with good intentions, but quickly became nothing more than an intentional fraud according to a former NPS representative whose identity will remain confidential.
According the indictment, NPS borrowed large amounts of the cash surrender values of the insurance policies. NPS had no right to borrow the cash surrender values of these policies. These loans reduced the death benefits which would be available to pay for funeral services after the deaths of the purchasers. Additionally, the indictment alleges that the defendants concealed this practice from insurance regulators. In some instances, the defendants used money obtained from new purchasers to pay premiums of insurance policies on the lives of previous purchasers and also to reimburse funeral homes for the cost of funeral services for the earlier purchasers.
While the indictment states that the defendant removed large amounts of money from prearranged funeral trusts established by NPS, my source tells me that Brent Cassity along with his father Doug Cassity enjoyed the benefits of ill gotten money from NPS. I was told that NPS maintained several limos with a driver available 24/7. The limo was used (according to my source) to transport NPS officials (insiders) to pick up clients and/or provide transportation for personal vacation type trips, etc. This money was allegedly used to enable Doug Cassity to purchase residential real estate, to finance business projects for affiliated companies, to purchase a New York insurance company, Professional Liability Insurance Company of America (PLICA), and to pay personal expenses of Doug Cassity and his family.
Finally, count 49 charges Doug Cassity with insurance fraud for his participation in the insurance business, after being previously convicted of a felony, which prohibits him from engaging in the insurance business. Count 50 charges Randall Sutton, Brent Cassity, and Howard Wittner with permitting Doug Cassity to engage in the insurance business.
Sources say that NPS used very aggressive tactics to sell their services and fund their need for cash. By hiring attractive young women, (insiders called them “Barbies”), NPS would play on funeral directors emotions and financial needs by promising aggressive growth rates, generous trips and other incentives.
The quickest way to spot a fraud is to recognize that if it falls outside of industry norm and sounds too good to be true – it likely is – an many times is a clear indication that a scam or fraud is in play.
Examples of how the fraud took place are featured in an article in the “White Collar Crime News Blog” shown in full here with excerpts to follow:
For example, at the time they purchased prearranged funeral services, many customers completed applications for life insurance policies indicating they were making payment in full for insurance policies that would fund their funerals. Employees at National Prearranged Services, with the knowledge and under the direction of Sutton, simply whited-out the indications that payments had been made in full and altered the documents to make it appear as though the customers had made partial payments. The altered documents were forwarded to life insurance companies such as Lincoln Memorial Life, who adopted the policies and assumed the obligation to pay a lump sum at the time of the customer’s death. National Prearranged Services, meanwhile, diverted the difference between the true full payments and the falsified partial payments from the customer’s insurance policy, thus retaining the vast majority of the customer’s lump-sum payment while transferring the obligation of future pay.
As another example, National Prearranged Services’ employees used white-out or cross-outs to change the names of beneficiaries on insurance applications in order to extract money. Customers completed applications for life insurance policies naming themselves or their funeral homes as a beneficiary. With Sutton’s knowledge, employees at National Prearranged Services simply whited-out or crossed-out other beneficiaries named in the applications and made National Prearranged Services the sole beneficiary. Once National Prearranged Services was listed as the sole beneficiary on policies, it was able to extract money from customers’ policies in at least two separate ways:
First, customers’ insurance policies were pledged as collateral for loans to National Prearranged Services without the customers’ knowledge. Typically, the loans were made by insurance companies within the same family of corporate entities, such as Lincoln Memorial Life, allowing Sutton and others to extract funds from these insurance entities under false premises. In total, as alleged in the indictment, National Prearranged Services received in excess of $65 million from such policy loans. Often, the proceeds of these policy loans were immediately turned around and used to pay outstanding premiums due from other customers.
Second, once it had altered applications to name itself as sole beneficiary, National Prearranged Services then converted customers’ whole life insurance policies to monthly renewable term polices, extracting from the insurance company the difference between the cash surrender value of the whole life policy and the first monthly premium of the renewable term policy. By doing so, National Prearranged Services extracted more than $40 million from the customers’ policies at Lincoln Memorial Life without their knowledge.
In addition to the fraud charges, upon a finding of guilt, the defendants will be subject to a forfeiture allegation, which will require them to forfeit to the government all money derived from their illegal activity.
Randall K. Sutton, 65, Chesterfield, MO;
Sharon Nekol Province, 66, Ballwin, MO;
Doug Cassity, 64, Clayton, MO;
Brent Douglas Cassity, 43, Clayton, MO;
Howard A. Wittner, 73, Chesterfield, MO; and
David R. Wulf, 58, St. Louis County.
If convicted, the maximum penalty ranges for each of these charges range from five to 30 years in prison and/or from $250,000 to $1,000,000.
As is always the case, charges set forth in an indictment are merely accusations and do not constitute proof of guilt. Every defendant is presumed to be innocent unless and until proven guilty.
Today NPS policies are in the hands of a Receiver and subject to limited payout of the face amount of the policy.
IF YOU HAVE DIRECT KNOWLEDGE OF THE NPS SCAM – YOUR COMMENTS ARE WELCOME.