Thousands of people paid millions of dollars for prearranged funeral services, but it turned out to be just an elaborate scam.
“Our suspect took the money that was supposedly for the pre-arranged funeral services and used it for his own personal gain,” explained U.S. Postal Inspector Donald Washington.
Investigators say Doug Cassity and his partners were charged with defrauding people out of millions of dollars while running a prepaid funeral services company called NPS. Nationwide losses are believed to be almost $500 million. While the financial toll is extensive, the emotional toll was heartbreaking.
"When our victims came in to claim the prearranged services that they paid for to bury their loved ones, there was no money available. This was very difficult for them to deal with," said Washington.
Inspectors say the long-term scam was run like a Ponzi scheme. New clients were paying off old claims.
"For a long time the payments were made by people and you heard funeral homes saying, 'They are paying me right on time.' And again, that is not unusual in a scheme as proven by the U.S. prosecutors office," explained Donald Otto, Jr. with the Funeral Directors Association.
But then, investigators say sthe money began running out and NPS started making desperate offers.
"Then just before things began to collapse the NPS announced a new program instead of giving you the growth on your money you were supposed to get, instead you get a new casket," Otto added.
By then, NPS was under federal investigation. The total number of victims added up to be 4,000.
"They misappropriated those funds by using those funds to buy expensive gifts for their own personal gain such as cars, homes, and trips," said Washington. "When the victims needed that money during a time when their loved ones need to be buried, those funds were no longer available."
Cassity received a nine-year prison sentence and his son got five years. The two men along with other partners were also ordered to pay more than $400 million in restitution.
According to the Better Business Bureau, among the abuses involved with prepaid funeral plans are:
- Lack of portability. The plan can only be used to obtain goods and services at a single funeral home or cemetery.
- Often a substantial penalty is imposed for cancellation.
- Unexpected expenses. At times the purchaser's survivors find that a plan does not cover all funeral and burial expenses, and that an additional amount is required in addition to the "guaranteed" expenses.
- Marketing abuses. Many sellers of "preneed" plans use high-pressure sales techniques. The seller generally tries to convince the purchaser to buy more expensive goods and services.
- Difficulty in detecting fraud. Because there is potentially a time lag of years between purchase of a plan and the purchaser's death, the more fraudulent sellers can and do vanish before their fraud is uncovered.
Before purchasing a prepaid funeral or burial plan the Better Business Bureau suggests the following tips:
- Be sure to compare prices. Costs for funeral merchandise and services can vary drastically.
- The Federal Trade Commission's Funeral Rule requires itemized cost disclosures from funeral directors, though it does not cover cemetery sales.
- Review the plan carefully. Request a copy of the proposed contract and financial information about the trust itself.
- Review all documents with an attorney, accountant and/or a financial adviser.
- Visit the facility. Do not depend on the good faith of the person selling the plan, especially if it's a door-to-door sales pitch. Investigate the seller's reputation.
- Check the company out with the Better Business Bureau, funeral boards, attorney general's office or consumer protection agency.
- If you suspect fraud, act fast. The quicker you act, the greater the chance of regaining any funds you have invested in a prepaid plan.