The great Illinois Funeral Directors Association Preneed Scandal is an issue in the Race for governor of the State of Illinois. The Preneed Trust Scandal has forced Financial hardship on many Funeral Directors in the State. Many will have to work into retirement. Some funeral homes have closed. 100 million dollars is gone! Bankruptcy is being considered by some Funeral Directors.
THe Illinois Funeral directors Association Ponzi scheme my disqualify Comptroller Dan Hynes from becoming Governor.
The situation is still unresolved, tied up in the Courts. The Association is in need of a trustee because Merrill Lynch has pulled out. The political question is-Has the way Comptroller Dan Hynes handled the (IFDA)matter disqualified him to be Governor of the State of Illinois?
Summary:
In 1980, the Comptroller’s office licensed Illinois Funeral Directors Association to administer a “pre-need” funeral trust fund. Using these funds, consumers can plan and pay for funerals in advance. In this case, the funeral costs were paid to local funeral directors, who then invested the consumers’ deposits in the IFDA trust fund. Over time, about 50,000 consumers paid $300 million into the fund.
Normally, these pre-need funeral trust funds – which by law are supervised by the Comptroller’s office – are conservatively invested. That way, the funds generate a modest but reliable profit, so funeral home directors do not lose money when they provide a funeral in 2010 that was bought at 1995 prices.
100 million dollars is gone from the trust fund
However, in the mid-1980s, IFDA Services embarked on a risky investment scheme, using the bulk of consumers’ money to buy expensive “variable universal life” (VUL) insurance policies on funeral home directors.
VUL policies do not provide a specified death benefit; instead, the actual payout depends on the ups and downs of the stock market. They carry hefty management fees, and they can trigger huge tax penalties on payout. These policies also have low cash values, so fund managers can’t readily bail out and find better investments if the stock market tanks.
The entire scheme depended on receiving frequent cash injections from these insurance policies. That meant the insured funeral home directors had to die on schedule – which, not surprisingly, they failed to do.
These VUL insurance policies do have one huge advantage – for the agents who sell them. The premiums on these policies are very high. A lawsuit against the IFDA states that the fund paid $90 million in premiums on insurance policies with total death benefits estimated at $357 million. Since the scheme’s final collapse in 2009, the majority of those policies are being cashed in – for about $100 million.
The IFDA trust fund apparently used money from new investors to pay a modest but steady stream of “profits” to previous investors. That is the “Ponzi scheme” system made infamous, most recently, by Bernard Madoff.
The Illinois Funeral Directors Scheme was like that of Bernie Madoff
As a result, an estimated $100 million in consumer dollars vanished from the fund, and hundreds of family-owned funeral homes throughout Illinois are facing serious financial losses – even bankruptcy.
Dan Hynes the Comptroller Now candidate for Illinois Governor
“We all know that Dan Hynes waited far too long to act on disturbing reports about conditions at the Burr Oak Cemetery,” Austin said. “The IFDA scandal shows that Comptroller Hynes has a decade-long history of ignoring serious problems – with disastrous consequences for 50,000 Illinois consumers.”
Austin noted that Hynes has refused to provide documents requested by Bruce Rushton, a reporter for the Springfield State Journal-Register, that might shed light on the Comptroller’s delay in acting to end the fraud and protect consumers.
“When well-respected journalists file legitimate requests for information from his own office, Comptroller Hynes loses his enthusiasm for transparency, accountability, and the public’s right to know,” Austin said.-summaryvia davidormsby.wordpress.com
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