Minutes of the Prepaid Funeral Guaranty Fund Advisory Council - May 16, 2013

May 16, 2013
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 Thursday, May 16, 2013, 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
Dick Owens, Industry Representative 
Stephanie Newberg, Investment Officer and Deputy Commissioner, Texas Department of Banking for Charles G. Cooper, Chair and Banking Commissioner, Texas Department of Banking

Others in Attendance:
Russell Reese, Director, Special Audits Division, Texas Department of Banking
Dan Wood, Assistant General Counsel, Texas Department of Banking
Jesse Saucillo, Review Examiner, Texas Department of Banking


With a quorum present, Deputy Commissioner Stephanie Newberg convened the meeting of the Prepaid Guaranty Fund Advisory Council at 1:36 p.m. 

Discussion of and Possible Vote to Approve Minutes of the May 17, 2012 Prepaid Funeral Guaranty Fund Advisory Council Meeting 

Dick Owens made a motion to approve the minutes of the May 17, 2012 Prepaid Guaranty Fund Advisory Council meeting as presented.  Tom Elam seconded and the motion passed unanimously.

Discussion of and Possible Vote to Approve the Activity of the Funds and the Investment Officer Reports for the Period March 1, 2012 to February 28, 2013

Review Examiner Jesse Saucillo outlined the activity of the Insurance-Funded Guaranty Fund for the period March 1, 2012 through February 28, 2013.  Deposits totaling $48,303.00 were placed in the fund for assessments collected and $154.65 for interest earned; no claims were paid for this period.  The balance for the Insurance-Funded Guaranty Fund as of February 28, 2013 is $144,365.02.
Review Examiner Saucillo also outlined the activity of the Trust-Funded Guaranty Fund for the period of March 1, 2012 through February 28, 2013.  Claims totaling $6,486.50 were paid relating to three prepaid funeral contracts sold by Walker-Mora Funeral Home, Alice, Texas, Roselawn Funeral Home, Mineola, Texas, and Memorial Operations Company, Paris, Texas.  Travel reimbursement expenses were also paid to Guaranty Fund Advisory Council Member Dick Owens.  Restitution totaling $1,985.54 was also received from Turner Bros Undertakers, Mount Pleasant, Texas and Roselawn Funeral Home, Mineola, Texas.  The balance for the Trust-Funded Guaranty Fund as of February 28, 2013 is $1,279,625.97.

Sandy Booth made a motion to approve the report of the Guaranty Funds’ activities and the Investment Officer Reports for the period March 1, 2012 to February 28, 2013 as presented by Jesus “Jesse” Saucillo, Review Examiner.  Tom Elam seconded and the motion passed unanimously.

Discussion of and Possible Vote to Approve Administrative Memorandum 2016

Review Examiner Saucillo reported that we are required to review Administrative Memorandum 2016 which is the Investment Policy for Funds Under the Oversight of the Guaranty Fund Advisory Council, every two years.  He also stated that both he and Deputy Commissioner Newberg attended Public Fund Investment Act Training in February 2013.  Although the Guaranty Funds are not subject to the Public Funds Investment Act, our policy is emulated to the guidelines stipulated under the Act to the extent it affects current policy.  The primary amendments to Administrative Memorandum 2016 changed the frequency that the Investment Officer shall provide a report to the Council and the frequency of the review of the policy from a bi-annual to an annual review.
Dick Owens made a motion to approve amended Administrative Memorandum 2016 as presented by Jesus “Jesse” Saucillo, Review Examiner.  Sandy Booth seconded and the motion passed unanimously.

Discussion of and Possible Vote to Review and Ratify Claims under $6,500 Paid From the Guaranty Fund

Director Russell Reese reported on the claims paid by the Department for the period of March 1, 2012 to February 28, 2013 that were under $6,500. 

The first claim paid of $3,856.50 is related to Remembrance Marketing and Management Corporation, dba Roselawn Funeral Home, Mineola, Texas.  This claim was made by the successor funeral home, Beaty Funeral Home, Mineola, Texas.  Mr. Beaty requested $3,856.50 for servicing the prepaid funeral contract (PFC).
 
The second claim paid of $1,095.00 is related to Meadowbrook Gardens, Paris, Texas.  The purchaser was refunded this amount for the outer burial container and opening and closing costs that were never provided.

Tom Elam made a motion to ratify the claims paid from the Guaranty Fund as presented by Russell Reese, Director of Special Audits.  Dick Owens seconded and the motion passed unanimously.
Discussion of Potential Claims to Guaranty Fund

Attorney Dan Wood provided an update on a potential Guaranty Fund claim for Howell-Doran Funeral Home.  This seizure was done in June 2011.  There were approximately 100 partially and unfunded contracts.  The Department did a cease and desist and took over the funeral home’s prepaid records.  Because trust and insurance funded contracts were sold, the Texas Department of Insurance was involved.  Both agencies referred the cases to the San Saba District Attorney’s Office for prosecution.  Attorney Wood and Director Reese recently met with the San Saba Assistant District Attorney and the defense attorney.  June 20, 2013 is the final date to settle a plea bargain or the case will go to trial.  

All parties agreed to a settlement that will be paid to the Department and the funds will be deposited into the Guaranty Fund to administer to the people due restitution.  The dollar amount that will be agreed upon is unknown, but the Department calculated restitution at $180,000; this amount includes the unfunded trust contracts sold legally and illegally.  Mr. Keeney has already been sued many times by individuals and groups, and he has paid the settlements for those suits.  Deputy Commissioner Newberg added that when this case closes and after the restitution is paid, we can still have an administrative hearing for fines and penalties.  Attorney Wood stated that the insurance companies have sued and settled.  There is a local funeral home now honoring the contracts.

Deputy Commissioner Newberg mentioned that she and Director Reese participated in a seizure at Vandiver Funeral Home, Waco, but it will not be a claim to the Guaranty Fund because the funeral home was not licensed to sell prepaid funeral benefit contracts.  

Discussion of Collection Efforts

Director Reese outlined the collection efforts and summary of restitution paid for the period of March 1, 2012 to February 28, 2013.  The Department tracks monthly payments received to ensure everybody is current, and sends out letters demanding payment for those who are non-compliant.  

Discussion of Future Meeting Dates

The next meeting of the Guaranty Fund Advisory Council will be determined at a later date.

The meeting of the GFAC was adjourned at 2:25 p.m.

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

/s/ Brenda J. Medina                                     

Brenda J. Medina

Executive Assistant to the Guaranty Fund Advisory Council