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Tennessee Officials Say Forest Hill Cemeteries Will Start Honoring Prepaid Funeral Contracts

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Tennessee Officials Say Forest Hill Cemeteries Will Start Honoring Prepaid Funeral Contracts; Michigan Authorities Arrest Forest Hill Owner on Charges of Embezzling $70 Million in Customers' Prepaid Money. Read the update below.

I'm a Forest Hill Customer --- What Can I Do?

Unfortunately, the state's not being very forthcoming about what you might expect. Will they appoint a conservator to take over Forest Hill? Will you get a refund? Will they find some other means to force Forest Hill to honor your contracts? We don't know, but we hope the state will start talking candidly so you know what the future might bring. Until then, you should plan on the worst-case scenario: assume Forest Hill is not going to honor your contract, and that you'll have to pay for other arrangements. Follow these tips to do it in the most economical way:
  • Learn your rights - click here to read free information on how to shop for a funeral you can afford (hint: you don't have to buy the $7,000 send-off just because the funeral home says it's "traditional").
  • Shop around - there are four nonprofit Funeral Consumers Alliance chapters in Tennessee with price surveys and helpful tips.
  • Show up for the hearings against Clayton Smart and Forest Hills - the state needs to see the human face of the families affected by this situation. Show up for the hearings and stay abreast of the case. You can check the Web site for the Department of Commerce and Insurance to find out the latest hearing dates here. Or, call 800-342-8385.

UPDATE 4/30/07 ---HOPE FOR FOREST HILL CUSTOMERS; TENNESSEE SAYS THEY'LL START HONORING PREPAID CONTRACTS ---- MEANWHILE MICHIGAN AUTHORITIES ARREST FOREST HILL OWNER CLAYTON SMART

From the Memphis Commercial Appeal:
"Max Shelton, the court-appointed administrator of the funeral homes, said the state had recovered enough missing money to honor the contracts in full. The announcement appeared to mark an end to months of uncertainty that began in July, when funeral home owner Clayton Smart said there wasn't enough money in trust funds to honor the contracts.

That angered people who had paid in advance to prevent their families from having to sacrifice financially when they died. Families reported paying thousands of dollars extra to bury loved ones.

Smart is now in an Oklahoma jail, charged with stealing millions of dollars from trust funds of funeral businesses he owned in Michigan and Tennessee.

For the whole story, visit the Memphis Commercial Appeal

From the Detroit News:

'State regulators are hoping that the arrest Thursday of Clayton Ray Smart, the owner of 28 Michigan cemeteries, will help them recover $70 million of consumer's money they say Smart stole from trust funds for the properties.

Smart, a gas and oil speculator from Oklahoma who bought the Michigan cemeteries in 2004, surrendered to authorities in Oklahoma after Michigan Attorney General Mike Cox obtained warrants charging him with 39 felony counts of racketeering, embezzlement and larceny.

The money taken from the trusts was built up over decades by consumers, who prepaid for burial plots, markers, vaults, crypts and other funeral merchandise. Under Michigan law, a percentage of every such sale must be placed in trust funds to perpetually maintain the cemeteries and to provide consumers the burial merchandise when needed.

"This was a disgusting theft from the dead of Michigan," Cox said Thursday. "He stole money from the dead. The scope of the thefts is staggering." ' For the rest of the story, visit the Detroit News .

UPDATE 3/27/07 --- OKLAHOMA JUDGE THROWS OUT FOREST HILL BANKRUPTCY CASE

From the Memphis Commercial Appeal:
"A federal judge in Oklahoma dismissed a bankruptcy lawsuit filed by the owners of the Forest Hill funeral businesses, saying in an opinion Monday that they filed the suit to avoid a state takeover. The decision by U.S. bankruptcy judge Terrence L. Michael means several class-action lawsuits against funeral home owners Clayton Smart and Stephen W. Smith can move forward, clearing the way for a possible resolution for thousands of people who hold all-but-worthless burial contracts.

"The decision also means Tennessee's civil lawsuit against the Oklahoma businessmen can continue and that Shelby County Chancellor Arnold Goldin can appoint an administrator to control all aspects of the businesses. Goldin has already appointed an administrator whose role is limited to finding missing money.

'. . . the court finds that Smart and Smith [Forest Hill owners] filed this case in order to evade the regulatory authority of the state of Tennessee, and avoid having a (court-appointed administrator) obtain control of Forest Hill in the chancery action,' he wrote."

For the whole story, visit the Commercial Appeal .

UPDATE 1/30/07 --- JUDGE ORDERS STATE TAKE-OVER OF FOREST HILL

From the Memphis Commercial Appeal:
"A Shelby County Chancery Court judge ordered a partial state takeover of the Forest Hill funeral businesses Wednesday, saying he had "little confidence" the owners wouldn't try to take the money. Chancellor Arnold Goldin said a Tennessee administrator will take control of trust fund assets, which he said don't belong to Forest Hill and aren't part of the firm's recently filed Chapter 11 bankruptcy.

He also ordered an extension of an asset freeze that he imposed in January on Oklahoma businessmen Clayton Smart and Stephen W. Smith, who own three Forest Hill funeral homes and three Forest Hill cemeteries in the Memphis area. He said in court that the freeze would cover the individuals and their firm Indian Nation LLC, but didn't mention several other companies the pair control. "

For the whole story, visit the Commercial Appeal .

UPDATE 1/11/07 --- STATE SUES FOREST HILL, ASKS COURT TO APPOINT RECEIVER TO MANAGE CUSTOMERS' MONEY AND STOP FURTHER FRAUD

Tennessee filed a lawsuit in Chancery Court (state court) asking the court to freeze the assets of Forest Hill cemeteries and funeral homes so the owners can't do any more damage to customers' prepaid money. The charges read like a laundry list of the worst kinds of fraud. They accuse owner Clayton Smart and his subsidiary companies of cashing out cemetery trust funds and investing in oil exploration schemes, lying to state auditors about the amount of money in trust funds, lying to banks in an attempt to get his hands on money that belonged to his customers, and simply failing to deposit customer's money in a trust fund as required by law. Hats off to the state of Tennessee for moving so agressively to stop this thievery. Click here to read a copy of the state's complaint.

1/2/2007 --- The Tennessee State Board of Funeral Directors and Embalmers and the Tennessee Department of Commerce and Insurance have charged cemetery owner Clayton Smart with violating state and federal regulations designed to prevent funeral fraud. Smart owns the now-infamous Forest Hill cemeteries and funeral homes. In 2006, Smart told Tennessee media he had no intention of honoring the prepaid funeral and burial contracts at the prices guaranteed to the more than 13,000 families who bought them since the 1970s.

Obviously things were a lot cheaper in 1965," Smart told the Memphis Commercial Appeal, "but inflation has struck, and we could not continue to stay in business if we honored those policies now."

The charges against Forest Hill include violating the Federal Trade Commission's Funeral Rule and its prohibition against deceptive sales practices, failing to submit accurate records of prepaid funeral accounts to the state, and failing to deposit 100 percent of customers' prepaid money in a trust account within 30 days as required by law. According to the insurance department's complaint, Forest Hill failed to report more $21 million dollars in trust account money to the state in 2006. In addition, the state says Forest Hill simply never deposited $705,014.70 it collected from new customers in 2006.

Forest Hill's owners are required to appear at public hearings before the board of funeral directors on January 9, 2007, and before the Commissioner of Insurance on January 22, 2007. But it's likely Forest Hill's lawyers will ask for extensions on these first hearings, and such requests are usually granted. If Forest Hill is found guilty, the owners could face loss of their licenses to conduct business, as well as "civil penalties," according to the complaint. What this means in practical terms for customers left holding the bag is unclear.

"The overall goal of the department is to make the consumers whole, that's our number one priority, said attorney Adrian Chick, who represents the Department of Commerce and Insurance. When we asked if any penalties the state collected would go back to consumers victimized by Forest Hill, Chick couldn't say.

According to the Detroit News , the state of Michigan just took control of Clayton Smart's 28 cemeteries after the state Cemetery Commissioner accused Smart of mismanaging prepaid trust money, failing to file reports with the state, and failing to deposit customers' prepaid money. The newspaper also reported Smart took $61 million in customers' money and put it in "high-risk hedge fund investments in the Cayman Islands" and in a "gas and oil exploration company in Oklahoma controlled by Smart's family members."

Michigan appointed a conservator to watch over the remaining money to make sure prepaid customers aren't further harmed. We asked Dept. of Commerce attorney Chick whether Tennessee will do the same.

"At this point the state has not sought receivership. An order of conditional suspension has been issued . . .that's somewhat like a precursor to receivership," he said. "That's a procedural step we want done in case it comes to that."

Since this scandal first broke, 23 families have written to Funeral Consumers Alliance. Their complaints (some of them bought multiple funerals and graves) are nearly uniform. Despite contracts promising to furnish funerals, caskets, and burial spaces at the agreed-upon price, Forest Lawn is now telling them they'll have to pay extra - a lot extra.

"We have recently spoken with a 'Family Service Counselor' at Forest Hill East, who informed us that the most we can expect to receive is $899 per funeral," wrote one main who paid $1,798 in 1980 for two full funerals for he and his wife. "He said they are currently offering a service 'at cost' for $4,000."

Starting January 1, 2007, Tennessee law has established a preneed protection fund to help families in case a similar situation happens in the future. Let's hope the state proceeds swiftly to make sure the families caught in the Forest Hill mess are protected as well.
Last Updated ( Tuesday, 04 December 2007 12:35 )  
Comments (3)
1 Thursday, 22 May 2008 21:28
Wow!! And to think this was an independent, just another good old boy trying to survive in a world of corporate funeral homes (So tired of hearing that) This along with the NPS scandal that most independents jumped on board with, is just another chapter in the way the independents get themselves in a big fix. You can’t blame that on SCI. Hold the same standard for the owners who make such foolish decisions and make them pay, and no I’m not an SCI employee, but one who has a great interest in the market.
2 Friday, 21 September 2012 17:06
Toni Farmer
Recently, we checked on a contract we entered into with Rosemont Gardens Funeral Chaper/Cemetery, Inc. in Jackson, MS (I-55). We were advised that they had been taken over by Tudor Funeral Home in Magee, MS. We contacted Tudor and they told us there was no record of the downpayment, nor the 13 bank drafts that paid the contract. After two days of going back and forth, they said they could only honor the plot and no other paid services, unless we provided the 2004 proof of payment. I don't understand how the law allows them to get away with not honoring an irrevocable, trustee based contract. If funeral homes can cheat you at will, then they should not be allowed to make contracts. I have been advised to contact the Attorney General and plan on doing so on Monday. My mother-in-law who purchased this for her emotionally and physcially disabled son, is 85 years old and has no means to replace the plot and graveside memorial.
3 Monday, 15 October 2012 16:45
Stacey Howard
Had the same experience with Rosemont Gardens today as stated above. Came home and googled it and found this comment. Hope the person making above statement called the Attorney Generals office because we will be calling also.

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