'Robbing the Grave' Pre-need funeral contract fraud and mismanagement has been on state's radar for 10 years

Last modified: Monday, July 21, 2014
NORTHAMPTON — The challenge of making sure consumers get what they paid for in pre-need funeral contracts is not limited to the now-defunct Ryder Funeral Home. Nor is it a new concern.

A former Boston funeral home director, Joseph V. O’Donnell, 55, was being held last week on larceny charges for allegedly taking more than $12,000 in pre-payment funds from an elderly couple to cover two future funerals at his now-closed funeral home in Dorchester.

In a related development, an ongoing investigation into O’Donnell’s former business by the Suffolk district attorney’s office led Thursday to the discovery of the remains of a dozen human bodies in a storage unit in Weymouth and cremated remains in a storage unit in Somerville.

O’Donnell’s license had lapsed in 2008 and police and prosecutors also are investigating the validity of funeral arrangements for which O’Donnell took money.

A decade ago, state lawmakers were analyzing these same issues in the wake of incidents of funeral home fraud and mismanagement of pre-need contract funds.

In a 2003 policy brief titled “Robbing the Grave” by the state Senate Committee on Post Audit and Oversight, lawmakers examined the state’s consumer protections regarding pre-need funeral contract fraud and loss. It found that while Massachusetts law and regulations governed pre-need contracts, they did not offer enough protection to adequately protect those investments.

The review by the Senate’s investigative arm cited at least eight separate documented cases in which Massachusetts consumers were deprived of funds due to fraud or other actions by funeral home officials. The review offered several recommendations on ways to strengthen oversight.

It identified regulation loopholes and reporting glitches, including not having the names of each consumer investing in pre-need services listed on the pre-need reports that funeral homes are supposed to file each year with the state. Adding the names would allow the state Board of Funeral Directors and Embalmers to contact consumers in cases of fraud or abuse, lawmakers recommended at the time.

“When cases of fraud occur, the board is often only aware of the problem if consumers come forward to complain about lost funds,” the Senate’s investigative committee found. “It is possible there may be victims of pre-need fraud and abuse who have lost money but are too grief stricken to notify the board of their loss, or may not yet be aware that their money has been lost or misused.”

The committee found that at least nine other states at the time provided mechanisms to protect the money consumers invest in pre-need contracts and recommended Massachusetts do the same so that people like the Rys family of South Hadley have more protections when questions arise and their money can’t be found. No such mechanisms exist in the commonwealth’s funeral industry and little reform resulted from the study.

Pamela Rys, of Ludlow, is still trying to locate nearly $17,000 her family invested in March with the now-closed Ryder Funeral Home for her parents’ future funerals.

“My money is nowhere,” Rys said. “It’s not there.”

Peter Stefan, a Worcester funeral director and member of the state Board of Registration of Funeral Directors and Embalmers, is pushing the state panel to strengthen consumer protections regarding the handling of pre-need funeral service money.

“Something is needed to bring an end to this,” said Stefan of alleged mismanagement of pre-arranged funeral money.

In the absence of a state fund to reimburse consumers who may have lost money in the more recent O’Donnell and Ryder cases, Stefan suggested funeral directors in the commonwealth pitch in and provide some financial relief to families.

“When they (investigators) find out what’s lost, I’ll put up the first $1,000,” he said.

Dan Crowley can be reached at dcrowley@gazettenet.com.

thing on top of caring for aging parents.”

Rys may not be alone. As the Ryder case unfolded and investigators try to make sense of his financial affairs, it turns out state regulators have their own problems that might have flagged questionable business practices at the Ryder Funeral Home long before this year.

Ryder and his family have not publicly addressed the events that led to the unraveling of their funeral home business, which was established in 1953. Last month, Ryder’s South Hadley attorney, Paul Boudreau, told the Gazette that he had confirmed that $1.5 million paid by customers for pre-need services with Ryder could be accounted for.

However, state regulators acknowledge there is an undetermined sum of pre-paid funeral service money that still cannot be found. Boudreau did not respond to an interview request for this story.

State filings non-existent

Rys said she turned over her records to the Division of Professional Licensure, but the state may be hard-pressed to locate any unaccounted-for cash.

That’s because for at least the last three years, Ryder has failed to submit a required annual filing detailing the funeral home’s pre-paid funeral contract activity. When the Gazette sought the filings through a public records request, officials said they had no such documents on file.

The so-called “Pre-Need Report” is supposed to be filed by funeral homes with the DPL and state Board of Registration of Funeral Directors and Embalmers by June 30 each year. The filing details the number of pre-need contracts a funeral home has entered into during the past calendar year and names the banking institutions, trust companies and insurance companies with which the funeral home invests money for pre-arranged funeral services.

Ryder Funeral Home is not the only business for which these filings are late and not on file. This month, state funeral industry regulators are sending out letters to more than 200 funeral homes in the state reminding them that they have not met this year’s June 30 filing deadline, officials told the Gazette.

The penalties for a funeral home that fails to submit the pre-need reports are vaguely defined. Also, it is not clear whether some or many of these business are, like the Ryder Funeral Home, years behind in detailing their financial activities with consumers. The DPL did not respond to questions submitted by the Gazette a week ago.

Morgan G. Mitchell, a funeral director in Easthampton and chairman of the state Board of Registration of Funeral Directors and Embalmers, said state regulators must do more to monitor the reporting of pre-need funeral contract activity.

“If we don’t have records, the responsibility is on the board and DPL. The buck stops with us,” Mitchell said.

“It’s something we should look into immediately.”

The board last week instructed the DPL to open complaints against funeral homes that do not meet the deadline.

Others who work with elderly people and monitor the funeral industry agree. They say measures to protect consumers with pre-arranged funeral services must be taken seriously, especially since funeral directors are handling large sums of money and there is no limit on the cash value of such contracts.

“You could have Queen Elizabeth’s funeral with the horses walking down Main Street,” said Carol Klyman, an elder law attorney in Springfield. “It’s unbelievable that the state’s not policing these things.”

‘How can he keep up?’

In Massachusetts, funeral directors are not permitted to hold a client’s pre-need funds in their own bank accounts; they must invest consumers’ money through a trust account or insurance policy. Consumers are to be provided a standardized pre-need funeral contract, an itemized statement of funeral services and goods and a trust document with a bank or insurance policy, according to the Office of Consumer Affairs and Business Regulation.

The DPL has one investigator who is responsible for inspecting not only the entire funeral home industry in Massachusetts, but also the commonwealth’s veterinary services. As part of state inspections of funeral homes, this inspector is supposed to conduct spot-check reviews of pre-need report filings on premises.

Klyman, among others, questions whether one inspector can adequately cover this vast territory. “It’s sort of a ridiculous job,” Klyman said. “How can he keep up?”

Carol N. Coan, a spokeswoman for the Funeral Consumers Alliance of Western Massachusetts, which is part of a national organization that advocates against pre-need funeral contracts, said it’s worrisome that funeral directors are not filing required paperwork with the state. The pre-need contract money belongs to consumers, not funeral homes, and there needs to be oversight, she said.

“It’s hard to know how closely they (regulators) are paying attention,” said Coan, who is also a past president of the nonprofit alliance. A requirement that funeral directors file such paperwork with the state is “as close as we’re going to get to transparency,” said Coan. “If they’re not filing them, then that’s a breach of their responsibility.”

Others in the funeral industry say the system of monitoring and safeguarding consumers’ pre-need contract money is ineffective.

Peter Stefan, owner and director of Graham Putnam & Mahoney Funeral Parlors in Worcester and a member of the state Board of Registration of Funeral Directors and Embalmers, described the pre-need filings by funeral homes as “totally useless.”

“If you’re going to steal something, you’re not even going to report it,” Stefan said. “If I stole money, I’m not going to list it. Why would I?”

In his view, the system of accountability doesn’t work because the DPL doesn’t have enough staff — and because the way consumers pay funeral homes for pre-need contracts is flawed.

Stefan said the state board, which can set rules and regulations, needs to forbid the practice of asking consumers to write checks to funeral homes and directors. Instead, consumers should write checks directly to guaranteed trusts and insurance companies.

“When it comes to pre-paid funeral contracts, cash is not acceptable,” said Stefan, who introduced the idea to the state funeral board last week. “Then you eliminate all this gobbledygook that’s going on.”

Stefan said the state should go even further, requiring funeral directors to submit balance sheets by certified public accountants guaranteeing that funeral homes are dealing with legitimate companies with reserve funds to back pre-need funeral contracts.

“Right now, the consumer at this point needs some backup,” Stefan said. “Take the money out of the funeral directors’ hands. I don’t see why anybody can have any gripes with that.”

For the past several weeks, the Czelusniak Funeral Home in Northampton has been helping the state sort out the paperwork and finances at the Ryder Funeral Home, say state regulators. Meantime, the Northwestern district attorney’s office said it would not comment on a “potential investigation” and is referring anyone who has complaints or concerns regarding finances related to the former Ryder Funeral Home to contact Bob Williams, the state’s funeral home investigator. The DPL did not respond to questions about the status of any investigations under its purview.

As for consumers who may have lost pre-need contract money with the Ryder Funeral Home, Stefan, the Worcester funeral director, said state lawmakers ought to provide them with financial relief and set up a fund for any future losses in similar circumstances. Other states have done so.

“The state legislators ought to do something to reimburse these people, because they haven’t provided enough protections to these people,” he said.

Dan Crowley can be reached at dcrowley@gazettenet.com.