Funeral customers protected in proposed settlement in funeral trust case [The Wisconsin State Journal]

June 19--A settlement has been proposed between hundreds of funeral homes in Wisconsin and the Wisconsin Funeral Trust, which was taken over by a court-appointed receiver last year when state investigators found it was millions of dollars short of its expected value.

The settlement would assure both that people who invested in the trust by paying in advance for funerals get "100 cents on the dollar" and that funeral homes are "fairly compensated for their services," said John Wirth, a Milwaukee attorney who is acting as the receiver.

On the remaining issue of litigation against the financial players in the trust's decline, Wirth said: "I think some litigation is almost certain, but I do believe we are very close to settling and receiving a recovery from many of the substantial players."

As for the proposed settlement, "all consumers whose funds were deposited in the trust will receive the funeral, burial merchandise and services called for in their burial agreement. A funeral home that signs the settlement will completely fulfill the contract first, and seek payment from the trust in stages" as the effort to recover losses continues.

The catch is that the hundreds of funeral homes that participated in the trust are not obligated to join the settlement, but those opting out will not be safeguarded from litigation.

"We have already started to solicit funeral homes and have a number who have signed," Wirth said.

If the settlement proposal is approved in Dane County Circuit Court, participating funeral homes can join until Sept. 30. Currently, the trust is reimbursing funeral homes about 60 percent of the balance of a customer's account, according to the agreement and previous statements. If the total trust increases in value, then those funeral homes might get further reimbursement retroactively.

Poor decisions about investments of the money paid by consumers to the trust resulted in major losses in the fund, and also to the fund not meeting promised results and a safe haven for the funds.

"The sad fact is that all of the funds from the trust will likely never be recovered," Wirth said.

He said the settlement solves some problems that have emerged as people with funeral agreements die and their plans have not been sufficiently covered. Those situations include a funeral that is moved to another home and customers who decide to purchase a less expensive funeral or want a refund.

"In all of those special situations, the consumer will get the services as modified, or if the contract is canceled, all of the money he or she initially invested returned," Wirth said.

A copy of the settlement proposal and details can be found at www.wisconsinfuneraltrust.org/funeralhomesettlement.

Since the news broke last fall that the Wisconsin Funeral Trust was worth considerably less than expected -- there were assets of $48 million and obligations of $70.7 million -- Wirth has fired executive director of the Wisconsin Funeral Directors Association, Scott Peterson, moved the trust's assets from Bluepoint Investment Counsel, which had been managing the investments, and sold the trust's life insurance company.

Even without the excluded interest obligations, the trust had $6 million less than what consumers actually deposited, a February report to the court said.

Investigators from the state departments of Financial Institutions and Justice have described years of risky investments made by the Wisconsin Funeral Directors Association's financial advisers. This was contrary to promises made when funeral directors sold the trust agreements to customers, who were told the investments would be safe and would pay for their funerals.

There were 10,835 "consumer-depositors" in the trust through 159 funeral homes across Wisconsin, with account balances from about $20 to more than $28,000.

More than 30 of those funeral homes had more than 100 accounts, and one had 413 accounts worth more than $2.4 million.

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