The Fraud Examiner

Funeral Fraud: Scamming the Dearly Departed
 

By Misty Carter, CFE, CIA

March 2015


Scamming the elderly or taking advantage of the mentally disabled are considered among the most repugnant of fraud schemes. But what about when fraudsters scam the deceased?


Believe it or not, many criminals take advantage of those who have died using funeral fraud schemes. These types of frauds come in many forms and mainly target and affect the families of the deceased. One of the most common funeral fraud schemes involves prepaid funeral expenses. According to the Federal Trade Commission, millions of Americans prearrange their funerals by entering into contracts and prepaying all or some of the related expenses. Some states have laws in place to regulate these contracts,. Other states, however, are more lenient, which leaves a window of opportunity for unscrupulous individuals.


Consider the case of James “Doug” Cassity, a disbarred attorney and resident of St. Louis, Missouri. His company, National Prearranged Services Inc. (NPS), engineered a fraud scheme that caused fraud losses of more than $600 million. Cassity devised a scheme to defraud purchasers of prearranged funeral contracts or insurance policies obtained through NPS.


How did the scam work? NPS promised customers that, for a fee, the company would cover all their funeral expenses when they died. Depending on the type of funeral arrangements requested, customer’s fees could run upwards of $10,000. After finding out what customers wanted, NPS determined an agreed-upon price and accepted payment. NPS then made arrangements with the funeral home designated by the customer. NPS supposedly placed the funds in a trust — to be used for safe investments or to purchase a life insurance policy — with a third party in the customer’s name.


What customers didn’t know was that NPS, instead of putting their funds in a trust or life insurance policy, often altered documents by changing deposit amounts and listing the company as a beneficiary. NPS then converted these policies and used the money for risky investments, to pay existing funeral claims, and to purchase personal items. According to court documents, Cassity sold approximately 100,000 prepaid funeral contracts. The scheme was discovered when several agencies reported suspicious practices by NPS to the FBI. Cassity was sentenced to nine years in prison.



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