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Wis. investigates prepaid funeral plan

MILWAUKEE (AP) — The state Department of Justice and the Department of Financial Institutions are investigating whether a prepaid funeral plan offered through Wisconsin Funeral Directors Association violated state securities laws.

Since 1999, the Wisconsin Funeral Directors Association has marketed a prepaid funeral plan to funeral directors around the state. Under the plan, a consumer pays a local funeral director, who then sends the funds to the trust.

On Friday, a Dane County judge appointed a Milwaukee lawyer to take control of the association in order to protect an estimated 10,500 consumers who had money in the plan. The prepaid funeral fund should have about $70 million in it, but documents filed by the state indicate the fund is at least $21 million short.

The Milwaukee Journal Sentinel reported (http://bit.ly/RVIoO0) that at least two state agencies — the Department of Justice and the Department of Financial Institutions — are investigating the association and Fiduciary Partners, the formal name of the Wisconsin Funeral Trust that held the funds.

The court documents filed in Dane County court say neither the funeral directors association nor investors who each gave the trust thousands of dollars “had any input or authority over the investment of the trust funds.”

The documents say the trust never told consumers their investment strategy, never revealed that there was a significant shortfall between assets and liabilities and never said that amounts invested by one consumer may be used to fund funerals for others. The trust was not registered as a security, which violates state law, documents say.

Court documents likened the trust to a Ponzi scheme, “endangering the ability of current investors to ever recover their original investment, let alone the returns they have been promised.”