Legal Issues and Investment Losses and Investing and Banking & Finance and Law

Sale of Memory Gardens restores $20M in trust funds

April 30, 2010

A settlement agreement announced Friday by the Indiana Secretary of State’s office restores nearly $20 million in cemetery trust funds associated with the Memory Gardens Management Co.

Johnson County Judge Mark Loyd approved the settlement, which is part of a deal to sell the Indianapolis-based cemetery and funeral home business.

Memory Gardens fell into court-appointed receivership after owner Robert Nelms pleaded guilty to theft and securities fraud in July. The receiver recovered $5 million of the nearly $20 million in trust funds.

Nelms and his former wife, Debora Johnson, bought Memory Gardens 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.

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

Judge Loyd has approved the sale of Memory Gardens to Pennsylvania-based StoneMor Partners LLC. The acquisition could be finalized in May.

As part of a court order, the buyer of Memory Gardens would have to refund millions of dollars missing from the trust funds.

“The diligent work of the Indiana Securities Division has averted potential financial disaster for many Hoosiers,” Secretary of State Todd Rokita said in a prepared statement. “Families can now have peace of mind knowing that their loved ones’ memorials will be cared for today, tomorrow and in the future.”

In Indiana, the owner of a private cemetery is required by law to provide for the creation and establishment of an irrevocable perpetual care fund. The fund is designed to maintain cemeteries.

The settlement follows a three-year investigation by the Indiana Securities Division.
 

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