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Thursday, May 5, 2011
OKLAHOMA CITY – Anti-fraud experts from the Oklahoma Insurance Department and the Creek County District Attorney’s Office have collaborated to investigate and charge a former funeral director from Bristow for misusing funds intended to provide prepaid burial services.
Ronald C. Schumacher, 62, was arrested in Creek County Wednesday and charged with three crimes in connection with his alleged mishandling of $4,513.82 in prepaid funeral funds for George and Lois Livezey of Depew. Schumacher was charged with two felonies, embezzlement and prepaid funeral fraud, plus a misdemeanor count of accepting prepaid funeral payments without a license.
On Thursday, two additional felony charges of embezzlement were filed against Schumacher in Okfuskee County, where $2,980 was allegedly embezzled from victims Carl and Cleta Bonner of Castle and a further $1,200 from Penny McVeigh of Okemah. In the McVeigh case, investigators say that $500 of her deposit for a prepaid cremation came through charitable donations from fundraising efforts after it was revealed in her community that she suffered a serious illness and lacked funeral insurance.
OID Anti-Fraud investigators allege that Schumacher Funeral Home of Bristow collected payments toward prepaid funerals, but did not properly maintain trust funds to pay for each customer’s final arrangements. Oklahoma law requires that all proceeds collected toward prepaid funeral benefits be held in an interest-bearing, non-investment account and are only for the use, benefit and protection of the policy’s purchaser.
Schumacher is the sole shareholder and president of Schumacher Funeral Home. The investigation into Schumacher’s prepaid funeral practices is ongoing.
“Few bonds of trust should be more sacred than the pledge to care for a client’s final arrangements upon their death,” said Oklahoma Insurance Commissioner John Doak. “Ronald Schumacher violated a promise made to local people who trusted him with their money, and who were prepared to trust him with their remains.”
“This is the first time our office has had to file charges related to prepaid funeral arrangements,” said Max Cook, District Attorney for Creek and Okfuskee counties. “Hopefully justice will prevail in this case.”
Organizations operating prepaid funeral trusts are required to submit annual financial reports to the Oklahoma Insurance Department. According to OID records, Schumacher failed to submit his reports in a timely manner for the years 2007 and 2008. In response, OID hired an independent certified public accountant to audit the trust accounts held by Schumacher Funeral Home, with a report completed in January 2008 revealing an unfunded liability of at least $100,000 and showing that Schumacher had commingled about $66,000 in prepaid funeral trust money into non-authorized accounts. The audit found that some prepaid funeral funds were placed in a trust as required by law, some were placed into investment vehicles and some were simply unaccounted for.
On March 17, 2009, OID instituted an action in Creek County District Court wherein the agency sought and received a temporary order appointing the insurance commissioner as receiver and trustee over Schumacher Funeral Home’s prepaid funeral trusts. Schumacher agreed to convert all prepaid funeral trusts into guaranteed annuity contracts with American Century Life Insurance Company so that his clients’ burials would be fully funded, and in December 2009 Schumacher claimed all corrective measures had been completed.
Despite these assurances, OID found that Schumacher failed to identify every purchaser of prepaid funeral policies and did not convert every balance into insurance-funded accounts. Rather, bank records suggest Schumacher used these clients’ balances to bankroll normal operating costs of his funeral home, including the covering of overdraft notices on his business account from Community Bank of Bristow. When concerns arose about the solvency of Schumacher Funeral Home’s prepaid services, Schumacher did not respond to certain victims’ requests to transfer their funds to another funeral home’s plan.
OID detective Jimmy Smith, a law enforcement officer with more than 41 years of experience, investigated the case. Wednesday’s charges against Schumacher were filed for District Attorney Cook’s office by Michael S. Loeffler, Assistant District Attorney for Creek County, Bristow Division.
Randy Brogdon, OID’s Deputy Commissioner of Fraud and Consumer Affairs, praised both his anti-fraud team and the District Attorney’s Office, and vowed to continue the Insurance Department’s pursuit of those who commit fraud against Oklahoma consumers.
“Oklahomans deserve to receive the full services for which they have contracted, whether those are prepaid funerals in this case, life and health benefits, or insurance coverage against other losses such as fire, storm and auto accident,” Brogdon said. “When individuals and companies fail to provide the protection they promise, the Insurance Department will not fail in its job to collect the benefits victims are owed and to pursue criminal charges when the evidence warrants.”
Commissioner Doak concluded: “As Oklahoma’s Insurance Commissioner I expect absolute honesty and full fiduciary responsibility from those who collect premiums in exchange for insurance coverage or future benefits. Oklahoma’s consumers and its reputable insurers demand and deserve nothing less.”
Oklahoma Funeral Board Executive Director Mark Riley provided the following statement concerning today’s announcement:
“I appreciate the Oklahoma Insurance Department’s and the Creek County District Attorney’s office vigilant efforts in pursuing this case. I am saddened that Mr. Schumacher has allegedly compromised these families trust and am hopeful that, if the allegations are proven, the Oklahoma Insurance Department will be able to recover the consumer’s funds. While events like this can cast a dark shadow on the entire funeral industry within Oklahoma, the public can be assured these actions do not represent the practices of a vast majority of prepaid funeral service providers. The Funeral Board will continue to work closely with the Insurance Department to ensure heightened consumer protections within the funeral industry.”
In September 2010, The Oklahoma Funeral Board revoked the establishment license of both his Bristow and Okemah Funeral Homes, along with his Funeral Director’s license.
Oklahoma Funeral Directors Association President Richard Dugger provided the following statement concerning today’s announcement:
“The Oklahoma Funeral Directors Association supports consumer protection and strives to provide our members with ethical business practice issues and education on regulatory and compliance matters. We appreciate the efforts of Commissioner Doak and the Insurance Department Anti-Fraud unit for their continuance of bringing this matter to justice for the citizens of Creek County.”
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