More Fall Out From the Nelms/Memory Gardens Case

For those following this blog, I am playing catch up after a protracted illness. Which is why I am combining what might otherwise be two separate posts. In the past week, developments occurred in the General Assembly and with the Memory Gardens receivership.

The Indianapolis Star reports on new legislation concerning cemetery trusts. In Bill seeks to protect cemetery trusts, The Star has the following sidebar:

Cemetery bill

Recent fraud cases spurred state legislators to toughen restrictions on cemetery trust funds meant to cover grounds maintenance and prepaid contracts for burial services. House Bill 1026, which has passed both chambers of the General Assembly, now heads to Gov. Mitch Daniels' desk.

Some of its provisions:

Restrictions: Classifies funeral, cemetery and burial trusts as charitable trusts; tightens standards for their use; and establishes fiduciary responsibilities for institutions holding them. Gives the state attorney general tools to go after abuses of a trust in court, including restraining orders, restitution and appointment of a receiver.

Abuse: Makes knowingly or intentionally paying out money for an improper purpose a Class C felony, giving prosecutors and regulators the ability to go after owners and bankers. Establishes fines for other violations.

Verification: A trustee must verify a person's death before releasing money held in a burial or funeral trust for a prepaid contract and must confirm the services were provided. Trustees of funds created after June 30 cannot be affiliated with the cemetery owner.

Restoration: Compels owners who abuse trust funds to restore the lost principal.

Disclosure: Requires owners to disclose in writing that a vault is not airtight or watertight.

Study: Charges the Probate Code Study Commission with reviewing cemetery and funeral trust laws to determine whether additional changes should be made in Indiana. Its report is due by November.

The reporting on the Memory Garden receivership came from WISH TV 8. The report, Testimony shows company in difficult position, millions lost has some interesting things to say about the running and powers of a receivership (if even only seen obliquely and partially).

"JOHNSON COUNTY, Ind. (Johnson County Daily Journal) - A cemetery and funeral home managing company was struggling to make ends meet and could be short as much as $24.5 million in trust fund money."

Less than two months ago, Memory Gardens Management Corp. didn't have enough money coming in to pay all its bills, said Lynn Gray, who was appointed to oversee the company's finances and management.

Gray cut about $1.5 million out of the yearly budget, including projects the business could do without and the salary, benefits and vehicles of the company's owner and a former manager of a funeral home and cemetery the company operates on State Road 135.

Now, the company, which has a staff of more than 180, can pay its weekly bills, she said.

But concern remains over the future, such as what Gray believes is a shortage in the company's trust funds and larger bills, such as for caskets or other services and merchandise, which eventually need to be paid.

Gray testified in a hearing Monday about her work as court-appointed receiver of Memory Gardens, which includes Forest Lawn Memory Gardens and Funeral Home.

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The hearing that began Monday will determine whether Gray should stay in her role or whether those responsibilities should be turned back over to the company.

She testified that turning the company back over to Nelms could harm customer confidence in the business, which includes cemeteries and funeral homes in Indiana, Michigan and Ohio.

There also are other issues that need to be investigated, Gray said.

One of the main issues is whether the trust funds have the amount of money required by law.