Minutes of the Prepaid Funeral Guaranty Fund Advisory Council - June 1, 2011, 1:30 p.m.

June 1, 2011
1:30 p.m.
Texas Department of Banking
2601 North Lamar Boulevard
Third Floor
Austin, Texas 78705

The Prepaid Funeral Guaranty Fund Advisory Council (GFAC) met on Wednesday, June 1, 2011, in the Conference Room of the Finance Commission Building at 2601 N. Lamar Boulevard, Austin, Texas.

Members in Attendance:
Sandy Booth, Consumer Representative
Tom Elam, Insurance Representative
Jeff Graham, Office of the Attorney General Representative
Charles G. Cooper, Chair and Banking Commissioner, Texas Department of Banking

Others in Attendance:
Russell Reese, Director, Special Audits Division, Texas Department of Banking
Kaylene Ray, General Counsel, Texas Department of Banking
Stephanie Newberg, Investment Officer and Deputy Commissioner, Texas Department of Banking 

Members Not in Attendance:
Dick Owens, Industry Representative 


With a quorum present, Commissioner Cooper convened the meeting of the GFAC at 1:30 p.m. 

Discussion of and Possible Vote to Approve Minutes of the May 26, 2010 Prepaid Funeral Guaranty Fund Advisory Council Meeting 

Tom Elam made a motion to approve the minutes of the May 26, 2010 Prepaid Guaranty Fund Advisory Council meeting as presented.  Sandy Booth seconded and the motion passed unanimously.

Discussion of and Possible Vote to Approve the Activity of the Funds Including Claims Paid by the Department and the     Investment Officer Reports for the Period March 1, 2010 to February 28, 2011

Deputy Commissioner Newberg outlined the activity of the Insurance-Funded Guaranty Fund for the period March 1, 2010 through February 28, 2011.  Deposits totaling $14,727 were placed in the fund for assessments collected; no claims were paid for this period.  The balance for the Insurance-Funded Guaranty Fund as of February 28, 2011 stands at $25,529.79.

Deputy Commissioner Newberg also outlined the activity of the Trust-Funded Guaranty Fund for the period March 1, 2010 through February 28, 2011.  Claims totaling $4,620 were paid relating to two prepaid funeral contracts sold by Walker-Mora Funeral Home, Alice, Texas, that were never trusted.  Restitution totaling $1,400 was received from DJ Turner, Turner Bros Undertakers, Mount Pleasant, Texas.  Restitution totaling $299.18 was also received from Franklin/Deborah Houston, Greenwood Funeral Home, Huntsville, Texas; the District Attorney recently ordered this case closed.  Collected funds will be forwarded to the successor provider, Dixon Funeral Home, Huntsville, Texas. The balance for the Trust-Funded Guaranty Fund as of February 28, 2011 stands at $1,289,619.02.

Sandy Booth made a motion to approve the report of the Guaranty Funds’ activity including the claims paid and the Investment Officer reports for the period March 1, 2010 to February 28, 2011 as presented by Deputy Commissioner Newberg.  Jeff Graham seconded and the motion passed unanimously.

Discussion of and Possible Vote to Approve a Claim Related to Walker-Mora Funeral Home, Inc., Alice, Texas

Director Reese reported on the claim related to Walker-Mora Funeral Home, Alice.  In December 2009, an Order Canceling Permit and Order to Cease and Desist Activity and Order of Seizure of Prepaid Funeral Money and Records was issued against this funeral home as a result of failing to satisfactorily correct cited violations.  The Department issued two invitations for funeral providers to bid on the funeral home’s prepaid funeral contracts, however, no bids were received for either bid.  The Department continued its efforts to secure a successor provider for the outstanding prepaid funeral contracts by contacting funeral homes in the surrounding Alice, Texas area.  Mr. Steven Roberson, owner of Roberson Funeral Home, Alice, Texas agreed to review the prepaid funeral contracts to determine if he would be willing to honor the terms as written.

After reviewing the prepaid funeral contracts and funds held in deposit, Mr. Roberson indicated that there were insufficient funds available for him to honor the prepaid funeral contracts.  However, he did state he would agree to honor and service the contracts if additional funds were awarded.  He requested the difference between Roberson Funeral Home, Alice, Texas current prices and prices on the prepaid funeral contracts.  

The difference in the preneed prices and current prices for the eight contracts totaled $12,022.  In addition to this amount, a $6,728.85 shortage exists when comparing the total required principal to the amount of funds held in deposit with the approved depository.    

A lengthy discussion of this claim continued amongst the group and centered on the statutory requirement of the Guaranty Fund to guarantee performance of the contract.
Tom Elam made a motion to approve the claim totaling $18,750.85 related to Walker-Mora Funeral Home, Inc., Alice, Texas as presented by Director Reese.  Sandy Booth seconded and the motion passed unanimously.

Discussion of and Possible Vote to Approve a Claim Related to Burgess-Fry Funeral Home, Bowie, Texas 

Deputy Commissioner Newberg reported on the claim related to Burgess-Fry Funeral Home, Bowie, Texas.  

On September 13, 2010, the Department received an email regarding a prepaid funeral contract purportedly sold by Burgess-Fry-Owens-Brumley Funeral Home, Bowie, Texas.  Our research revealed that the contract purchaser, Mr. Grover Lee Watkins, was not shown in the records seized from the funeral home.  Although the purported contract date is during the time that Burgess-Fry-Owens-Brumley Funeral Home had an active permit from the Department, Mr. Watkins was unable to provide a copy of the prepaid funeral contract.  Rather, Mr. Watkins provided copies of receipts from Burgess-Fry-Owens-Brumley Funeral Home with the references “preneed or prearranged.”  The receipts indicate that a total of $5,500 was paid by Mr. Watkins to Burgess-Fry-Owens-Brumley Funeral Home.

Discussions centered around the requirements of Title 7, Section 25.19(b)(1) of the Texas Administrative Code, that notes a claimant shall file “a copy of the prepaid funeral contract” with the claim.  However, neither Mr. Watkins nor the new owners of the funeral home were able to provide a copy of the prepaid funeral contract.
Sandy Booth made a motion to deny the Claim Related to Burgess-Fry Funeral Home, Bowie, Texas as presented by Stephanie Newberg. Tom Elam seconded and the motion was denied.

Discussion of Collection Efforts

Director Reese recapped the collection efforts and fines and penalties received and those paid in full as summarized on the Activity Report. 

The following have been paid in full:  Myrtlewood Memorial Services, Inc. dba Harlingen Combes Memorial, Harlingen, Texas; Threadgill Enterprises, Henderson, Texas; Leatherwood Memorial Chapels, Inc. Brady, Texas; Jeffrey Gentry dba Gentry Fife Funeral Home, Junction, Texas; Jackson Mortuary, Inc. Houston, Texas; and, Ms. Rosario Gallegos-Pyle, owner of La Blanca Kountry Funeral Home, La Blanca, Texas.

The following have been reported as uncollectible:  Greenwood Funeral Home, Huntsville, Texas; in August 2010 the Walker County District Attorney issued an Order to Discharge.  The Court was aware that restitution was still due but the decision was made to close the case.  In April 2011, the Office of the Attorney General advised the Department to not pursue collection on Timothy J. Gaffney, Killeen, Texas.  In August 2010, a final order was issued for Walker-Mora Funeral Home, Alice, Texas directing management to pay restitution of $9,410, a penalty of $16,000 and court costs totaling $992.45.   In October 2010, this matter was referred to the Office of the Attorney General but collection is considered unlikely.

Discussion of Legislative Changes and Future Meeting Dates   

Deputy Commissioner Newberg highlighted specific changes to HB 3004.  The changes included: (1) Extends guaranty fund coverage to third party funeral providers under prepaid funeral benefits contracts purchased after the effective date of the bill; (2) Establishes the actions a permit holder must take to find a new funeral provider willing to assume the contractual obligations of the defaulting funeral provider, with the assistance of the guaranty fund; (3) Changes the composition of the Guaranty Fund Advisory Council to remove the Attorney General representative; and, (4) Authorizes the council to meet by conference call, videoconference, or other similar telecommunication method if certain notices and requirements are met.

Members Tom Elam and Sandy Booth would both like to be advised once these bills get signed by the Governor.

The meeting of the GFAC was adjourned at 2:44 p.m.

/s/ Stephanie Newberg for        
Charles G. Cooper 
Chair of the Guaranty Fund Advisory Council and Banking Commissioner        

/s/ Brenda Medina 
Brenda Medina
Executive Assistant to the   Guaranty Fund Advisory Council