CHICAGO - It was only a matter of time: Lawmakers in Illinois recently unanimously voted to set up a task force to investigate the preneed trust fund of the Illinois Funeral Directors Association.
The association wrote down the value of its trust $59 million last fall and was stripped of its license as trustee. Merrill Lynch Trust Co. now serves as trustee, and one of its former advisers, Edward Schainker, has been accused by the secretary of state's office with failing to tell how the association's funds were invested. The association itself and many of its past and former executives, including NFDA Secretary Randall Earl, are being sued in multiple lawsuits.
The task force will be composed of 10 members, including six lawmakers as well as representatives from the state comptroller's office and the Department of Financial and Professional Regulation. Its goal is to find out what went wrong with the trust fund and who is responsible for its miserable performance. Findings may result in changes in state law, which currently allows funeral directors to keep 5 percent of funds paid for most goods and services and as much as 15 percent of funds used to buy burial containers. Trust administrators can currently keep as much as 25 percent of interest earned.
"This is a potential scandal of multimillions of dollars, and your constituents and my constituents could very well be the victims of whatever has transpired," Rep. Bill Black, a Danville Republican, tells the Daily Herald newspaper. "I have a funeral director in my district that estimates his losses alone in the preneed burial program at $1 million. I have constituents calling me who wonder if their preneed burial program will, in fact, be paid."
In a response to the Daily Herald, the association's executive director, Duane Marsh, says the organization will cooperate with the task force. "It is an important process, and we support it," he says.
In related news, it's been reported that funeral home directors who put money in the trust received free life insurance. The secretary of state's office reported that news in an April 1 civil complaint against Schainker. The investment adviser allegedly convinced some funeral directors to join the program by offering them a free $25,000 policy that would be funded by IFDA, according to the complaint. It's unclear how those policies were funded.
- By Thomas A. Parmalee
Posted May 14