MEMPHIS, TN - Shelby County District Attorney Bill Gibbons announced Friday that the state Grand Jury for Shelby County has indicted the owners of Forest Hill Cemeteries and Funeral Homes in Memphis for allegedly stealing millions of dollars from trust funds that were set up for the beneficiaries of pre-paid funeral contracts and for the care and maintenance of cemetery properties.
On April 24, the Grand Jury indicted Clayton Smart, 67 of Morris, Oklahoma; Stephen Smith, 60, of Muskogee County, Oklahoma; and Mark Singer, 41, of New Hope, Pennsylvania, each for theft of property, conspiracy to commit theft, and money laundering. Smart and Smith own Forest Hill Cemeteries and Funeral Homes. Singer was a broker for Smith Barney.
The indictment follows a Chancery Court action filed by the Shelby County District Attorney and the Commissioner of the Tennessee Department of Commerce and Insurance (TDCI) to, in part, enjoin the transfer of funds and appoint a receiver to oversee the operations of the cemeteries and funeral homes. Attorney Max Shelton has been appointed as a receiver.
According to the indictment, from June 1, 2004 through December 31, 2006, the defendants unlawfully and knowingly obtained and/or exercised control over trust funds that belonged to the State of Tennessee as well as trust funds paid by the beneficiaries of pre-paid funeral contracts. The indictment also claims the defendants conspired and agreed with each other to commit the thefts. Additionally, the indictment claims the defendants committed money laundering by transferring stolen funds into accounts in the names of various corporations, entities or investments owned or controlled by the defendants. These included Quest Mineral and Exploration, Inc., Redbud Tree Investments, Inc., and Smith Barney investment accounts. The indictment claims the transfers were under the guise of investing the funds for the benefit of the funeral homes trusts and the beneficiaries of the pre-paid funeral contracts. The indictment claims that, in reality, the transfers were for the defendants' benefit, as well as other individuals or relatives. The State of Tennessee contends that, as a result of the transfers, the value of the trust funds has dropped from approximately $29 million to about $9 million-a loss of some $20 million.
The indictment stems from an investigation by the Office of the Tennessee Attorney General under its investigative authority following a financial examination in the summer of 2006 by the Tennessee Department of Commerce and Insurance's Burial Services Division that revealed substantial deficiencies in how Smart was handling the trust funds. The Tennessee Bureau of Investigation (TBI), the Memphis Police Department's investigator assigned to work in the D.A.'s White Collar Crime Prosecution Unit, and the Internal Revenue Service (IRS) also assisted in the investigation. In addition, state investigators worked jointly with law enforcement agencies in the Michigan, Pennsylvania and Oklahoma. Singer's former employer, Smith Barney, has also cooperated in the investigation.
Smart was charged this week in Michigan in connection with the alleged embezzlement of up to $70 million in cemetery trust funds for cemeteries he owns there.
Smart turned himself into Oklahoma authorities on Thursday, April 26. He will be arraigned on criminal charges in both Shelby County and Michigan. Smith was taken into custody in Oklahoma, and Singer was taken into custody in Pennsylvania. TBI agents served a search warrant on Singer's property at the time he was taken into custody. Smith and Singer are awaiting extradition to Tennessee.
"We have three primary goals. First, we intend to hold Clayton Smart and his co-defendants accountable under our state criminal laws. Second, we hope to restore as much funding as possible to the trusts which are intended for cemetery maintenance and to help some 13,000 grieving families pay for their loved ones' funerals. Third, through the receivership action pending in Chancery Court, we hope to place Forest Hill Cemeteries and Funeral Homes in the hands of reputable owners for the benefit of the community," said District Attorney Bill Gibbons. "The Department of Commerce and Insurance works diligently to regulate and protect the public interests of Tennesseans, and it is our mission to ensure compliance with the statutes and rules governing the funeral industry, preneed funeral contract sales and cemeteries," said TDCI Commissioner Leslie A. Newman. "This was a cooperative effort, and we are very proud of the outcome," Commissioner Newman continued. "This is the next phase in securing justice for innocent consumers who have been hurt."
"This office has been pleased to assist District Attorney Gibbons in bringing these defendants to justice, and look forward to helping with the prosecution of the criminal case," said Tennessee Attorney General Bob Cooper. "We will vigorously litigate the civil action in Shelby County to try to restore the missing funds. These legal actions have resulted from the cooperative efforts of a number of federal and state law enforcement and regulatory agencies, and we thank them for their efforts," he added. "These individuals have demonstrated a pattern of deceiving the public. They deserve to be punished for that, and I'm thankful the TBI could play some role in helping bring them to justice," said TBI Director Mark Gwyn.
The theft of property and money laundering charges are Class B felonies, which are punishable by a standard sentence of eight to twelve years in prison. The conspiracy to commit theft of property charge is a Class C felony, punishable by a standard sentence of three to six years in prison.
The Forest Hill Cemeteries and Funeral Homes in Memphis are located at 2440 Whitten Road, 1661 South Elvis Presley Boulevard, and 2545 East Holmes Road.
Under Tennessee law, Forest Hills is required to maintain a trust fund for each cemetery for the purpose of property care and maintenance. The funds are not a part of the assets of the cemetery owners. Also, Tennessee law requires Forest Hills to maintain trust funds for payments from pre-paid funeral contracts.
Assistant District Attorney Linda Kirklen, the chief prosecutor in the D.A.'s White Collar Crime Prosecution Unit has been working for several months with state investigators on the case and will serve as lead prosecutor. Deputy Attorney General Michael Meyer has been assigned by Tennessee Attorney General Bob Cooper to assist in prosecuting the case.