June 18, 2013
An alleged former officer in a pre-paid funeral scheme that may have bilked 150,000 people out of $600 million pled guilty to being involved in the sale of prearranged funeral contracts and the misappropriation of insurance premiums intended for them.
Sharon Nekol Province, 69, pled guilty in a plea bargain yesterday before U.S. District Judge Jean Hamilton. The U.S. Attorney's Office in the Eastern District of Missouri said Province faces up to three years in prison for her role in one of the largest frauds ever prosecuted in the Eastern District of Missouri.
From around 1992 to 2008, National Prearranged Services Inc. sold prearranged funeral contracts in states including Missouri, Illinois and Ohio. Customers typically paid a single sum of money up-front for the contract. Insurance companies affiliated with the company issued life insurance policies related to the contracts. National Prearranged Services informed customers the money would be kept in a secure trust or insurance policy as required under state law.
Instead, the company "operated as a fraudulent Ponzi-like scheme, where customer funds were neither kept safe in bank trusts or insurance policies but instead were utilized for unauthorized purposes and the personal enrichment of NPS' officers and others," the U.S. Attorney's Office said in a statement.
"In turn, new business became the source of funding for funerals that prior customers had previously paid for in advance," the U.S. Attorney's Office said.
Millions of Americans have signed contracts to arrange their funerals and prepay some or all of the related expenses and some states have protections for these consumers, according to the Federal Trade Commission.
"But protections vary widely from state to state, and some state laws offer little or no effective protection," the FTC said on its website about planning funeral services. "Some state laws require the funeral home or cemetery to place a percentage of the prepayment in a state-regulated trust or to purchase a life insurance policy with the death benefits assigned to the funeral home or cemetery."
