Funeral fraud case took more than a year for slap on wrist, legislative report concludes

CHARLESTON, W.Va. — A state legislative report concludes a board overseeing West Virginia’s funeral industry acted more to protect a funeral home director than the needs of the public in a fraud case over cashing in prearranged funeral plans for people who hadn’t died.

The state Legislative Auditor’s office presented findings Sunday afternoon to the Joint Committee on Government Organization. The report focused on how the state Board of Funeral Examiners dealt with the case of Chad Harding, a funeral home director in Poca.

“Ultimately, it is the opinion of the Legislative Auditor that the Board chose to give preference to the licensee rather than to the interest of the public,” wrote John Sylvia, director of the state Legislature’s Performance Evaluation and Research Division.

“Given the history of this Board and the most recent case of Mr. Chad Harding, the Legislative Auditor concludes that the Legislature should consider terminating the Board and placing the regulatory function under another health-related state agency such as the Department of Health and Human Resources’ Bureau for Public Health.”

MORE: Legislative auditor’s report on funeral home board

If the Legislature doesn’t take that step, the auditor recommends reconstituting the current board by replacing two members — and by adding two citizen members of the board, requiring that they have no affiliation with the funeral home industry.

The problems with Harding Family Group, a funeral and cremation company in Poca, Putnam County, became apparent in August, 2015, when Homsteaders Life Insurance Co. of Iowa filed a federal lawsuit claiming Chad Harding committed fraud against 111 consumers with preneed policies.

The lawsuit claimed Harding had filed false death claims and claims of providing funeral services prior to the actual deaths of those who held the policies — receiving $900,000 by cashing in the claims.

By August, 2016, a federal judge had ruled in favor of the insurer and against Harding and his wife for about $2.8 million, concluding that Harding had violated the Racketeer Influenced and Corrupt Organizations Act, which provided for triple damages.

Dealings between Harding and the Board of Funeral Examiners stretched out after that.

The Legislative Auditor concluded that the board received a copy of the federal complaint about Harding in August 2015 but didn’t begin discussing Harding’s actions until March 2016.

In bold type, the audit report concluded:

“The Board Allowed 13 Months to Elapse From the Time It Became Aware of Fraudulent Activities Before It Initiated Disciplinary Action Against Mr. Harding, and an Additional 10 Months Before the Board Suspended His
License.”

An assistant attorney general had told the board during a March, 2016, meeting that it could not take disciplinary action against Harding without a complaint setting forth the violation of the funeral service laws.

But the report concluded that state boards may suspend a license prior to a hearing if the licensee constitutes an immediate threat to the public.

A written response to the audit by Regina Anderson, executive director of the Board of Funeral Service Examiners, stated that counsel provided by the state had always advised to await a conviction before instituting additional sanctions.

“We now find ourselves chastised for failing to act according to the interpretation of your attorneys when our attorneys have advised to the contrary,” Anderson wrote.

Speaking at Sunday’s legislative interim session, Robert Kimes of the West Virginia Funeral Directors Association praised the work done by the auditor’s office and spoke largely in agreement. He recommended removal of current board members and current office staff of the Board of Funeral Service Examiners.

“Even as we speak the West Virginia consumer remains at risk,” Kimes told legislators.

He added, “We feel that a complete overhaul of the board needs to take place.”

Delegate Vernon Criss, R-Wood, asked a series of questions to Ronald McVey, a member of the Board of Funeral Service Examiners. Criss was trying to find out the board’s mindset in accepting the revocation of Harding’s pre-needs license but imposing only a six-month suspension on his other duties as a funeral director.

“He’ll be able to go out and do funeral servicing and embalming in six months,” McVey said.

“And that’s OK with the board?” Criss asked.

“Yes,” said McVey.

A timeline laid out in the audit shows that the board first contacted Harding by letter in late September, 2016. A followup letter sent in November, 2016, advised Harding there was probable cause to believe he had violated the West Virginia Funeral Services Act.

On Dec. 22, 2016, Harding filed a petition in Kanawha Circuit Court to try to stop the board’s disciplinary action. Harding stated that “he will suffer irreparable harm if the disciplinary hearing is allowed to proceed.” Harding’s motion was later dismissed.

A disciplinary hearing for Harding that had been repeatedly delayed was eventually canceled, and the board voted 3-2 to accept a settlement proposal that called for Harding’s funeral director and crematory licenses suspended for six months, followed by probation for another six months.

By this past July 20, three members of the board resigned. The board president stated in his resignation letter:

The decision made at the teleconference call on Friday, July 14, 2017 I feel that we let our Profession down being more concerned about legal fees than we were with WV Funeral Service Act WV Code 30-6-1. Doing this we let a man embezzle close to a million dollars set his own fate. I was compelled to sign the consent agreement and order as president of the WV Board of Funeral Service Examiners against my better judgment.

Another board member wrote in his resignation letter:

Recent actions have caused me to question my involvement with this body, and I feel I can no longer serve in the capacity for which I was appointed. The integrity of any profession, especially one as sensitive as funeral service, is only as good as the ethical, moral, and legal underpinnings that hold it together. Recent actions will undermine the integrity, in my opinion (and I suspect others share it as well), weaken the Board’s authority in these types of matters.

The Legislative Auditor’s office concluded that the board took too long to act and then went too far to accommodate Harding.

“The Board improperly called for an emergency meeting 11 days prior to Mr. Harding’s scheduled disciplinary hearing to agree to a settlement that would allow Mr. Harding to eventually retain his funeral director and crematory licenses,” according to the audit. “It also appears that the Board allowed Mr. Harding to intimidate it with court costs and dictate the outcome of this case. This is further supported by the board president’s resignation letter.”

The audit continues to note that grieving families may be susceptible to fraud without measures to ensure appropriate behavior by providers.

“Consumers of funeral services and goods are often in a distraught emotional state when making these high cost transactions. The evidence demonstrates a relatively high risk of dishonest business practices by unprofessional funeral service providers.”





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