Attorney General Kamala D. Harris Sues California Funeral Directors for $14 Million Over Prepaid Funerals

LOS ANGELES -- Attorney General Kamala D. Harris today filed a lawsuit against one of the nation's largest funeral trusts, which pooled the funds of more than 27,000 California consumers who prepaid for funerals for themselves or loved ones, charging that the organization engaged in conspiracy and kickbacks while illegally diverting some $14 million.

Attorney General Harris filed the suit, seeking a permanent injunction and restitution to consumers, against the California Master Trust, the California Funeral Directors Association, and other defendants in Los Angeles Superior Court. The suit was filed on behalf of the Cemetery and Funeral Bureau of the Department of Consumer Affairs, which regulates the funeral industry in California.

"The defendants preyed upon thousands of Californians at one of the most vulnerable times of their lives," Attorney General Harris said. "This lawsuit will make sure their money goes where it was intended: to pay for their funerals or the funerals of loved ones."

The trust, created in 1985 by the funeral directors, is a "preneed" funeral trust that pools the prepaid funeral payments of individual purchasers throughout California. It controls about $63.5 million.

By the end of 2009, some 27,000 California consumers who were customers of more than 300 funeral establishments, had entrusted funds with the organization for their own or loved ones' funeral services. They were "among California's most vulnerable and trusting consumers," according to the suit.

Preneed funeral contracts are usually purchased by the elderly and paid in installments. Seven years elapse on average between a consumer's purchase of a preneed contract and the beneficiary's death.

The suit alleges that millions of dollars of consumers' money paid to the trust was misspent or mismanaged, that defendants paid at least $4.6 million in illegal kickbacks to funeral homes, and that the defendants paid themselves excessive administrative fees.

The suit seeks an injunction to halt such illegal activities plus restitution of about $14 million with interest. It also seeks to wrest control of the trust away from the Funeral Directors Service Corp., a subsidiary of the California Funeral Directors Association, and place it under a new trustee, and seeks a full accounting of the trust's financial transactions as well as the defendants' financial transactions with the trust since 2000.

Many of the problems with the California Master Trust were uncovered in an extensive audit conducted by the Cemetery and Funeral Bureau and released in June 2010.

Prosecuting the case are deputy attorney generals Nancy Kaiser and Geoffrey Ward.

Consumers with questions can call the Cemetery and Funeral Bureau toll-free at 800-952-5210.