Funeral firm head linked to multi-million dollar life insurance fraud


The head of a St. Louis, Mo., prearranged funeral service was indicted on numerous charges, including using “white-out” to change the names of beneficiaries on life insurance applications to extract money.

Officials with the FBI and the United States Attorney’s Office for the Eastern District of Missouri allege Randall Sutton was involved in a ten-year, multi-million dollar fraud scheme involving the sale of pre-paid funeral services.

Sutton was the director, president and CFO of National Prearranged Services, a business that sold services in 19 states either directly through the company or through funeral homes. National Prearranged Services purchased life insurance policies from Memorial Service Life Insurance Co. and Lincoln Memorial Life Insurance Co. of Austin, Texas, to fund the funerals when its customers died, according to authorities. Sutton was director of both of life insurance companies.

The indictment alleges that between 1998 and 2008, Sutton and others defrauded National Prearranged Services’ customers, states’ guaranty funds and funeral homes doing business with National Prearranged Services.

Through prearranged funeral services, a pre-payment is made by the customer so no additional expense comes at the time of death. Authorities said in the ordinary course of business, the seller of such services uses the customer’s pre-paid funds to purchase a life insurance policy, holds the funds in trust or makes reasonable use of the funds, to ensure they are available to provide funeral services at the time of the customer’s death.

The indictment alleges that Sutton and others used “a series of deceptions” to extract funds from National Prearranged Services and related entities such as Lincoln Memorial Life. As a result of their actions, National Prearranged Services and Lincoln Memorial Life collapsed in 2008.

Sutton and others led customers and funeral homes to believe funds would be in a trust or life insurance policy, but never informed customers that their purchase of prepaid funerals involved risk, according to authorities.

Among the allegations in the indictment are that Sutton and others altered life insurance policy documents. Employees at National Prearranged Services are alleged, with the knowledge and direction of Sutton, to have “whited-out” indications that payments were made in full, changing the documents to show only partial payments, authorities said.

The altered documents were then sent to life insurance companies such as Lincoln Memorial Life, which adopted the policies and assumed the obligation to pay a lump sum at the time of the policyholder’s death, authorities allege.

National Prearranged Services is alleged to have diverted the difference between the true full payments and the falsified partial payments, thus retaining the vast majority of the customer’s lump-sum payment, according to officials.

National Prearranged Services’ employees are also accused of using white-out or cross-outs to change the names of beneficiaries on insurance applications to extract money, making the company the sole beneficiary.

That allowed the company to receive money through policy loans and converting customers’ whole life insurance policies to monthly renewal term policies, extracting from the insurance company the difference between the cash surrender value of the whole life policy and the first monthly premium of the renewable term policy.

Through these two mechanisms alone, authorities allege that National Prearranged Services received in excess of $105 million from customers’ policies.

The indictment also alleges that Sutton was licensed by the Missouri Department of Insurance, but had his secretary study for and take the qualifying exam online assuming his identity.

Sutton is licensed to sell life and fixed annuities in Pennsylvania, according to the website for the state’s insurance department. His license expires Sept. 1.

If convicted, each count of mail and wire fraud carries a maximum penalty of 20 years in prison and/or fines up to $250,000; money laundering carries a maximum penalty of 10 years in prison and/or fines up to $250,000. Restitution is mandatory, according to the state’s attorney’s office.

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