Lawyer Pleads Guilty to “Ponzi-like” Funeral Fraud

On Tuesday, two more defendants pleaded guilty in the St. Louis pre-arranged funeral fraud case. The defendants included the former chief financial officer of National Prearranged Services, and Howard A. Wittner, 76, of Chesterfield, the former lawyer of the company. Wittner pleaded guilty to two counts of making false statements with the intent to deceive insurance regulators, and willfully permitting a felon to engage in the insurance business, reported the St. Louis post-dispatch.

Under the plea deal, Wittner faces up to five years in prison, while the former chief financial officer of the company faces up to seven years in prison.

In his plea, Wittner admitted that he had lied to state regulators to conceal the source of money used for buying a medical malpractice insurer. The company was owned by James "Doug" Cassity, a convicted felon.

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Last week, Doug Cassity and his son pleaded guilty in federal court to mail fraud, wire fraud, money laundering and related charges.

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Cassity had set up the National Prearranged Services to sell funeral policies in which the customers were promised low funeral costs, and the money was to be held in trust or in an insurance policy. Assistant U.S. Attorney Charles Birmingham termed the business as a "Ponzi -like scheme," in which both the main company and associated insurance companies looted trust accounts, took unauthorized loans on the insurance policies of customers and lied to regulators.

According to prosecutors the prearranged funeral scam has already affected up to 150,000 customers across the country. Eventually the scheme could cost up to $600 million as customers keep dying and funeral costs keep piling up.

The company collapsed in 2008 following scrutiny by regulators. State insurance guaranty associations will cover only the face value of the insurances, while funeral directors would have to pay the rest and bear the brunt of losses.