Settlement reached over funeral fund shortfall
- July 10, 2013 - 12:40 PM
MADISON, Wis. — A recently approved settlement requires about 180 funeral homes that sold prepaid funerals through a state trust to honor those contracts.
More than half of the funeral homes stuck with contracts through the Wisconsin Funeral Trust have already signed the settlement, which releases them from further liability.
The agreement was approved Monday by Dane County Circuit Judge Peter Anderson.
The trust was placed in receivership last fall when state regulators disclosed it had a shortfall of more than $21 million, a figure that has grown to $24.5 million.
Under the settlement, the trust will reimburse the funeral homes for at least 60 percent of the burials and related costs covered by the prepaid plans. The ultimate amount of the reimbursement will depend on how much money the receiver is able to collect from a variety of money managers, consultants, attorneys, accountants and other service providers who worked with the trust since its inception in 1999.
Information on who pays how much to settle will be kept secret, though the defendants will eventually be identified.
Investments in the trust were sold as a conservative vehicle to park money for funeral expenses. However, the money was invested instead in a variety of risky investments, such as leveraged hedge funds. The trust was supposed to have more than $70 million on hand last fall and it incurred a real loss of about $6 million, according to records filed in court when the trust was placed into receivership.
The amount owed by the funeral directors could fall to about $10 million, depending on the outcome of negotiations or litigation with other groups that were involved with the funeral trust, said John Wirth, the court appointed receiver for the trust.
"At least one of the lawsuits could be pretty substantial," Wirth told the Milwaukee Journal Sentinel.
About 10 percent of the recovery will likely be spent to pay lawyers, money managers, consultants and others working on the receiver's team, Wirth said.
Funeral directors have until Sept. 30 to agree to the settlement.
Christopher Stroebel, lawyer for the funeral home directors, told the Wisconsin State Journal that the settlement will make it easier for Wirth to focus on resolving issues involving the trust.
The receiver's website, www.wisconsinfuneraltrust.org, will include lists of the funeral homes that have signed on and those that have not, Wirth said.
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