Former President Of National Prearranged Services, Inc. And CEO Of Lincoln Memorial Life Insurance Company Pleads Guilty To Fraud And Money Laundering Charges
St. Louis, MO - RANDALL K. SUTTON pled guilty today before United States District Judge Jean C. Hamilton to participating in a fraudulent scheme involving the sale of prearranged funeral contracts and misappropriation of insurance premiums. Sutton faces up to 84 months in prison for his role.
In court, Sutton admitted that beginning in 1992 and continuing until 2008, National Prearranged Services, Inc. ("NPS") sold prearranged funeral contracts in several states, including Arizona, Florida, Illinois, Iowa, Kansas, Kentucky, Missouri, Oklahoma, Ohio and Tennessee. During that time, insurance companies affiliated with NPS, including Lincoln Memorial Life Insurance Company, issued life insurance policies related to those prearranged funeral contracts. As part of the contracts, the total price for funeral services and merchandise for an individual was agreed upon, and that price would remain constant regardless of when the funeral services and merchandise would be needed. Customers entering into prearranged funeral contracts would usually pay a single sum of money up-front to NPS either directly or through a funeral home that was also a party to the contract. NPS represented to individual customers, funeral homes and state regulators that funds paid by customers under the prearranged funeral contracts would be kept in a secure trust or insurance policy as required under state law.
Sutton admitted, however, that NPS made use of funds paid by customers in ways that were inconsistent both with its prior and continuing representations and with the applicable state laws and regulations. In some states, such as Illinois, insurance premiums were misappropriated before an insurance policy was issued. In other states, such as Ohio, unauthorized policy loans were taken against insurance policies owned by individual policy holders. In Missouri, NPS received withdrawals from the preneed trust of funds and assets that were required by its agreements and by the applicable state law to remain in trust. Ultimately, NPS operated as a fraudulent Ponzi-like scheme, where customer funds were neither kept safe in bank trusts or insurance policies, but instead were utilized for unauthorized purposes and the personal enrichment of NPS' officers and others.
At various times during the time period between 1981 and 2008, Sutton held the titles of Chief Financial Officer, Director and President of National Prearranged Services, Inc.; Vice President, Chief Executive Officer and Director of Lincoln Memorial Life Insurance Company; and Vice President and Director of Memorial Service Life Insurance Company. His duties for NPS included management responsibilities relating to operations and finances.
Sutton pled guilty to one count of bank fraud (count 7), one count of mail fraud (count 24), one count of money laundering (43) and one count of misappropriation of an insurance premium (count 48). Sentencing has been set for November 7, 2013.
Last week, Sutton's co-defendants James Douglas Cassity and Brent Douglas Cassity pled guilty to participating in this same scheme. Sutton's co-defendant Sharon Nekol Province pled guilty last month. Sutton's co-defendants Howard A. Wittner and David R. Wulf are scheduled to appear for trial starting on August 5, 2013. As is always the case, charges do not constitute proof of guilt and every defendant is presumed to be innocent unless and until proven guilty.
Sutton's case was investigated by the Internal Revenue Service-Criminal Investigation, the Federal Bureau of Investigation and the Postal Inspection Service. Assistant United States Attorneys Steven Muchnick, Charles Birmingham and Richard Finneran are handling the case for the U.S. Attorney’s Office.