Fraud and Lawsuits and Deals and Criminal Charges and Law

Local funeral home operator interested in troubled Memory Gardens

December 16, 2009

A local funeral home operator is one of two companies that have emerged as potential suitors of the embattled Memory Gardens Management Corp.

Memory Gardens, an Indianapolis-based cemetery and funeral home business, fell into court-appointed receivership after its owner, Robert E. Nelms, 41, pleaded guilty to theft and securities fraud in July.

Indianapolis-based Wilson St. Pierre Funeral Service & Crematory said in court filings that it wants to purchase Memory Gardens and its six cemeteries in Indiana. They include Forest Lawn Memory Gardens & Funeral Home in Greenwood and Lincoln Memory Gardens in Boone County.

Wilson St. Pierre already operates seven funeral homes—one in the Fountain Square neighborhood and two on the south side of Indianapolis, and one each in Greenwood, Franklin, Bargersville and Pendleton.

It is competing against the much larger StoneMor Properties in Pennsylvania, a publicly traded company that operates 235 cemeteries and 59 funeral homes in 25 states and Puerto Rico.

Paul St. Pierre, vice president of Wilson St. Pierre, said in an e-mailed statement that his company is a better fit to purchase Memory Gardens, given its strong ties to Johnson County.

“I just get nervous for consumers to see another out-of-state company that I don’t know come in and buy Forest Lawn again,” he said.

Nelms and his wife, Deborah Johnson, bought the Memory Gardens cemetery and funeral home business from Fred Meyer Jr. and his family for $27 million in December 2004. Within days, prosecutors said, the couple drained all $24 million from their newly acquired company’s trust fund, which was supposed to be used to maintain grave sites in numerous cemeteries.

Most of the money, about $13.7 million, was transferred to repay a $13.5 million loan that Nelms used as a down-payment to buy the business.

The Meyer family filed suit in early 2008, asking the court to appoint a receiver to oversee the business amid questions about the status of the trust fund. Marion County prosecutors filed charges two weeks later, though the charges against Johnson since have been dropped.

Wilson St. Pierre once managed the Greenwood cemetery and funeral home on State Road 135 for the Meyer family, but Nelms terminated the contract after he purchased Memory Gardens. Wilson St. Pierre then sued Nelms, claiming it had not been paid for management work and that Forest Lawn continued to use its name after breaking the contract. That lawsuit is pending in federal court.

“It is sad what Mr. Nelms’ company did with the cemetery trusts,” St. Pierre said. “We want to see the consumers in our area whole, and see 100 percent of the missing cemetery trusts restored.”

Lynn Gray, a Franklin attorney appointed by Johnson Circuit Court to oversee Memory Gardens’ operations, said a sale likely will not occur until after the first of the year.

Johnson Circuit Court Judge Mark Loyd ordered the company sold as part of a civil lawsuit transferred to his court and consolidated with the receivership proceedings.

Richard Shevitz of the Indianapolis-based Cohen & Malad LLP law firm filed the complaint in January 2008 on behalf of the Meyer family. Shevitz is seeking class-action certification to include everyone who paid into the trust funds—a number he estimated to be “in the thousands.” The suit is set for trial in June.

“We’re litigating it vigorously and looking forward to trying it in the summer,” he said.

Among defendants named in Shevitz’s suit are Nelms; New York-based Smith Barney, the brokerage that handled Nelms’ transactions; and Batesville-based Forethought Federal Savings Bank, the former trustee for Memory Gardens and a provider of funeral planning products and services.

As part of a court order, any buyer of Memory Gardens would have to refund at least some of the millions of dollars missing from the trust funds. The remainder could come from a judgment in the civil suit, if successful.

Nelms’ plea agreement in July will allow him to avoid prison and instead serve an eight-year sentence through community corrections programs and two years of probation. He is scheduled to be formally sentenced Jan. 6 in Marion Superior Court.

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