HODGENVILLE, Ky. -- There are only so many funerals in a town of 2,874 people.
So when Bobby Brownfield built an expansive new mortuary in a field by the Dairy Mart and lavished it with cut-glass doors, antiques in its parlors and concrete urns atop the front gate, folks here clucked a little.
"I just teased him," recalled Ellice Kidd, an 87-year-old retired contractor who'd prepaid Brownfield for his future embalming and burial. "I said, `You're spending my money, aren't you?' But he said, `No, I can't spend that until you die."'
It turns out Brownfield couldn't wait that long, prosecutors say.
Even before the new home opened five years ago, they say, Brownfield cashed the $5,200 check Kidd wrote for his funeral. Other funds were also pocketed -- Sydney and Judelle Bunnell's matching checks for $5,481, Bobby Garrison's $6,121, Myrtle Blakeman's $25,000.
The claims of fraud don't end there. Customers like Pearl Lobb, 87, prepaid for their funerals by signing insurance contracts. So Brownfield waited a while and then notified Forethought Insurance Co. that Lobb and others had died and claimed payment for funerals he'd supposedly provided. To do that, he even allegedly forged relatives' signatures.
"I'm the lady who's been dead for two years," Lobb said, rising from a velour armchair in her living room and offering her hand to a recent visitor.
In all, Brownfield is accused of stealing several hundred thousand dollars -- a more precise figure is hard to come by because of separate investigations by various local and federal agencies.
That so many people signed up with Brownfield points to the rising popularity of prepaid funerals and burials here and across the country, but does not always deliver what it promises consumers.
Known in the trade as "preneed", such services now account for more than one in five funerals. The amount of money invested in pre-death trust funds and insurance policies is estimated at up to $60 billion.
The growth of preneed coincides with the rise of deathcare conglomerates -- huge, publicly traded companies that have bought up many smaller operators. The pace of those acquisitions has left the large companies struggling under heavy debt loads. The Loewen Group, the nation's No. 2 funeral and cemetery firm, is operating under bankruptcy protection.
The financial shakiness of the major companies has raised concerns about the security of prepaid trust funds. It also explains, in part, efforts by some state and federal officials to more strictly protect those accounts.
Among those states is Florida, where a bill has been introduced that would tighten control over prepaid funeral funds. That comes after two major deathcare firms won permission from state regulators last fall to take $84 million in prepaid funeral funds and replace the money with bonds backed by an insurance policy.
Preneed arrangements prove a comfort to many because their families are spared the anguish and cost of planning a funeral. There's also strong appeal for those looking to beat inflation. The average American funeral costs $5,000, up from about $3,400 in 1989, according to the Funeral Directors Association of America. Burial adds another $2,500.
But even as it reassures customers, preneed has also triggered a flurry of troubling questions and widely scattered abuses.
"Consumers are giving their money and control of their money over to the industry," said Adrienne Oleck, an AARP consumer protection advocate. "It's too easy to take advantage, especially when the consumer is an older, vulnerable person."
Aside from instances of outright fraud, problems include contracts that fail to cover all costs or that are so packed with restrictions that they may be largely unusable if a consumer dies far away from the funeral home they signed with.
Funeral industry executives say such problems are rare exceptions. Instead, they say, growth in the preneed business is a testament to its value.
"When we talk to families, while we point out the benefit of locking in the price, the real issue is `How do you handle this event?'," said Brian Marlowe, chief operating officer of Stewart Enterprises Inc., the nation's third-largest deathcare firm. "We think the most important aspect is the decision-making, removing the burden from one another and from the children."
But a number of preneed fraud cases have arisen around the country. Among them:
--In Pennsylvania, six men were convicted last fall in an investment scheme that defrauded 27 mortuaries of $5.9 million in prepaid funeral funds. Funeral directors and a banker collected commissions for funneling consumers' money from bank trust funds to a New York investment firm that bought, among other things, a Bronx strip club.
--In Oklahoma, a funeral director who once ran for Congress was sentenced in January to nearly five years in prison for fraud. Elijah Thomas Dunlap Jr. admitted using $853,000 from his company's accounts, most of it preneed funds, to secure a bank loan for a house in Dallas and to inflate his self worth to attract investors to his company.
--In Minnesota, state auditors are examining the books at two cemeteries operated by Loewen after the company admitted in 1997 that it had failed to place in trust $3.8 million in prepaid burial funds for a Minneapolis cemetery. The company reportedly told consumers that it had installed the underground vaults they had paid for, but in reality many of the vaults had never been built.
--In West Virginia, regulators have sorted through four preneed cases, including one in which problems surfaced only after Service Corp. International, the nation's largest deathcare company, bought a Martinsburg funeral home and determined the previous owner had taken $2.8 million in prepaid funds. SCI made good on the payments.
--In South Carolina, funeral home owner Joseph Palmer is charged with stealing up to $250,000 in prepaid funds from nearly 50 customers. Palmer took the money over six years, prosecutors say, a pattern of irregularities never detected by state regulators.
"They took all the savings they had out of the bank, plus my dad sold all his cows to pay for his prearranged funeral," said Margie Jean Dozier Minick, whose parents and uncle, all ailing and in their 80s, turned over nearly $17,000 to Palmer.
Both Palmer and Brownfield have pleaded not guilty to charges. Brownfield refused to talk about the case, and his attorney, Doug Hubbard, would not comment on what happened to the money his client was supposed to have put in trust.
"Certainly he feels like he has been entrusted to bury these people and he certainly wants to fulfill his side of that bargain," Hubbard said.
Prepayment has its roots in the rural South of the 1930s, when salesman went door-to-door pitching burial insurance. Millions of Americans have long embraced one of the most elementary forms of prepaid deathcare -- buying cemetery plots.
But preneed really began to take off in the late 1980s. That's when companies like SCI, Loewen and Stewart stepped up acquisition of family-owned funeral homes. The companies aggressively marketed preneed funerals, and smaller companies followed suit.
"There's a lot of competition that we all have and the more active the larger acquirers became... the more concerned anyone would be about preserving their market," said Ron Troyer, manager of Kok Funeral Homes in St. Paul Park and Cottage Grove, Minn.
At the same time, a growing number of consumers -- particularly aging Baby Boomers -- have flocked to prearranged funerals.
"Boomers plan everything," said William Burns, an analyst who tracks the deathcare industry for the Johnson Rice brokerage firm in New Orleans. "A lot of them are starting to go to their first serious funeral, for their parents, and they see how many decisions have to be made, and that you don't want to make these decisions under duress."
Meanwhile, many older consumers have embraced prepaid funerals to help them qualify for Medicaid, which pays nursing home bills for lower-income seniors. For single seniors, Medicaid will only provide those benefits to people worth $2,000 or less, a figure so low it leaves many struggling for ways to spend or shelter assets.
"When they call and say they're going to need Medicaid at some point, (prepaid funerals are) one of the things we encourage them to do if they have any funds left at all," said Robyn O'Neill of the Legal Assistance Foundation of Metropolitan Chicago, which counsels seniors on long-term care.
Ray Fields, 68, of Melbourne, Fla., purchased prepaid funerals for about $6,000 each for himself and his wife, Opal, as they moved up in age.
"You begin to say to yourself, "Well, what I can do to make things easier for my family when it happens?"'
A 1998 survey by the AARP found that about a third of Americans have prepaid some or all of their funeral or burial expenses, with most of those consumers concentrated in households with incomes under $40,000.
Consumer advocates criticize the practice, saying that it locks seniors into arrangements they may outgrow if they move, remarry or change their minds. They say many consumers would be better off setting money aside in a certificate of deposit.
And the recurrence of problems is too troubling to label an aberration, they say.
"The problem is that we don't know if anyone is really watching these funds," said Robert Shreve, AARP's former chairman, in testimony before the Senate Special Committee on Aging last year.
Meanwhile, the large deathcare companies are revising their approach to preneed in an effort to make it more profitable.
The industry is moving increasingly from trust funds to insurance policies. Consumers would pay a regular premium to an insurer that will eventually cover their funeral cost. The arrangement also nets the funeral home or cemetery a sales commission from the insurance company.
The questions surrounding preneed have left consumers weighing their choices. But in Hodgenville, people who turned their money over to Bobby Brownfield say they only have regrets.
"Every time I think about it, it really hurts" said Judelle Bunnell, 77, rocking forward in her chair. "You work for it all your life and then somebody can just take it from you."
Consumer advocates, funeral industry officials and the Federal Trade Commission offer advice for those considering funeral prepayment:
--Read the contract carefully and know what you're paying for. Does the contract guarantee the many services that constitute a funeral, or does it only cover only products, like a casket?
--Be aware that many prepaid funeral contracts will limit your flexibility to make changes should you remarry, relocate or rethink your arrangements.
--Only a few states require that contracts include specific disclosures about any right to cancel, and only a few have recovery funds in case of fraud.
--Find out where your money is going. Many states require funeral directors to report new contracts to regulators, then send a confirmation to the consumer.
--Rather than prepay for a funeral, some advocates advise consumers to set up a savings account or certificate of deposit in a bank. Interest earned should keep pace with inflation.
--Make sure your family knows about any prepaid funeral arrangements you make. Planning and money are wasted if nobody knows about those plans before you die.
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