California Department of Consumer Affairs reports that California Master Trust, one of state's largest preened trust services providers misused and misspent nearly 6 million dollars between 2001 and 209. The money was spent on political lobbying, conventions and other administrative fees.

According to the estimates of the Cemetery and Funeral Bureau about 27,000 people in CA have put thir money in California Master Trust to service their preened funeral needs. The company manages a fund worth of $70 million dollars.

Nearly 300 California funeral homes use California Master Trust (CMT) as the manager of their preened services fund. The money is collected by the funeral homes from the consumers. CMT has one third of CA funeral home preened market share.

Russ Heimerich reports from the CA Department of Consumer Affairs

As a result of the audit, the Bureau has determined that the CMT is not in compliance with several laws and regulations governing the administration of pre-need funeral trust funds, and that at least $6 million should be returned to the trust.

The Bureau audit, which covered the period from January 1, 2000 through August 31, 2009, was initiated as a result of a complaint filed with the Bureau. Among the findings are:

    * The FDSC acted as a trustee, in violation of California's Funeral Directors and Embalmers law. Under the law, FDSC does not qualify as a trustee, but it has taken certain actions that only a trustee may take, to manage and control the trust.
    * Consumers' monies paid into the trust have been misused and misallocated. Monies were paid for non-trust costs, such as lobbying fees, conventions and other unrelated activities. Reasonable fees for administering the trust can be paid out of each year's trust income. In at least two years, administrative fees were paid when there was no income, and therefore those fees should not have been paid.
    * Money for administrative fees was paid from the trust to funeral establishments as “participation distributions.” The money paid to funeral establishments should have remained invested in the trust.
    * ' In 2001 and 2002, the trust incurred losses and therefore should not have paid administration costs. However, to overcome those losses and pay annual fees for trust administration, FDSC mischaracterized the purchase of nearly $10 million dollars of its own liabilities as income.

The audit also revealed that at least $1.6 million that should have been paid to consumers or their estates, or escheated to the state, was not.

The audit and responses from the Funeral Directors Service Corporation (FDSC) and Comerica Bank were released Thursday, July 1, 2010.

The Bureau provided funeral establishments which participate in CMT with a copy of the audit report, which identifies deficiencies and corrective actions. These funeral establishments must respond to the Bureau by July 21, 2010 with a report as to how they have implemented these corrective actions. The licensed funeral establishments are ultimately responsible for making sure the money is properly safeguarded so that when the need arises, the funds are there to pay for a consumer's funeral service.

Funeral establishments that fail to demonstrate ongoing compliance with the law may be subject to disciplinary action, including license suspension, revocation or probation.

The DCA and the Bureau will work aggressively with all appropriate State agencies to ensure that the money that has been inappropriately taken from the trust is returned to it, and that money that should have been returned to consumers is returned.

Consumers who have questions should call the Cemetery and Funeral Bureau toll-free at (800) 952-5210.