Legal Issues and Lawsuits and Judgments and Johnson County and Regional News and Criminal Charges and Law

Judge OKs sale of cemetery, funeral home company

April 14, 2010

A Johnson County judge on Tuesday approved the sale of an Indianapolis-based cemetery and funeral home business that fell into court-appointed receivership after its owner pleaded guilty to theft and securities fraud.

Pennsylvania-based StoneMor Properties, a publicly traded company that operates 235 cemeteries and 59 funeral homes in 25 states and Puerto Rico, has agreed to buy the embattled Memory Gardens Management Corp.

Its properties include Forest Lawn Memory Gardens & Funeral Home in Greenwood and Lincoln Memory Gardens in Boone County.

Memory Gardens fell into court-appointed receivership after its owner, Robert E. Nelms, 41, pleaded guilty to theft and securities fraud in July.

Nelms’ plea agreement allowed him to avoid prison and instead serve an eight-year sentence through community corrections programs and two years of probation.

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 against Nelms and Johnson two weeks later, though the charges against Johnson were dropped.

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 civil suit in January 2008 on behalf of the Meyer family. Loyd rejected Shevitz’s request for class-action certification to include everyone who paid into the trust funds—a number Shevitz estimated to be “in the thousands.” Shevitz is appealing the judge’s decision.

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, the 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.

The sale of Memory Gardens to StoneMor still needs to be approved by the court-appointed receiver and the state securities commissioner.
 

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