Six top officials of National Prearranged Services, Inc.
(NPS) have been hit with 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.
The individuals indicted are:
- 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.
Pyramid scheme
The indictment, announced by the United States Attorney's
Office, states that after taking into account insurance and trust assets
expected to be available to pay for future funeral services, and merchandise
under prearranged funeral contracts, the loss to purchasers, funeral homes, and
state insurance guarantee associations will range from $450,000,000 to
$600,000,000.
According to the indictment, consumers who purchased a
prearranged funeral contract from NPS, signed contracts that 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 that would fund the prearranged funeral contract when the funeral
services were needed. Beginning in 1983, NPS entered into agreements with
several financial institutions to act as trustees of the various trusts that
were established to hold the funds paid by the purchasers located in Missouri.
Empty promises
According to the indictment, 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 that should
have either been deposited into the trusts or to the insurance companies.
NPS borrowed large amounts of the cash surrender values of
the insurance policies although, according to the indictment, the company had
no right to borrow the cash surrender values of these policies. These loans
reduced the death benefits that 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.
Diverted funds
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.
The indictment claims the defendant removed large amounts of
money from prearranged funeral trusts established by NPS and 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.
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.
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.
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.
