Funeral director took $550,000, FBI says

Man accused of draining customers' accounts prepaying for services

January 23, 2007|By Matthew Dolan | Matthew Dolan,Sun reporter

In a state where the cost of a funeral often exceeds the national average, customers who prepaid for services at Stella Funeral Home tried to buy a little financial security.

That confidence might have been shattered this week after federal agents raided the home and business of Baltimore funeral director Paul Stella, whose state license was yanked quietly late last fall.

In court papers unveiled yesterday, the FBI detailed an eight-month investigation that the agency says found evidence Stella and his employees secretly drained more than $550,000 from 140 client trust accounts set aside for future funerals.

"The majority of these customers were not aware that their accounts had been closed," FBI Special Agent Lance Griffin wrote in a search warrant affidavit filed in U.S. District Court in Baltimore.

In November, an undercover FBI agent recorded Stella saying that he had signed a customer's name on the back of a refund check for a closed funeral bank account, court documents show. According to the tapes, Stella said the bank had made multiple errors and expressed confidence that clients granted permission for his actions.

Proceeds from the theft, according to the FBI, appear to have afforded Stella a lavish lifestyle. Court papers say that the 43-year-old was able to cover more than $100,000 in gambling losses at casinos in Atlantic City, N.J., and Las Vegas by tapping into personal bank accounts where he had earlier deposited his customers' funds.

Stella, who has not been charged with a crime, did not return a message left yesterday with his funeral home's answering service. His home number is disconnected.

On Friday, FBI agents searched Stella's funeral home in the 7500 block of Harford Road, just shy of the county line, as well as his Forest Hill residence, according to federal prosecutors. Authorities wrote in court papers that they were looking for bank records, computers, telephone records and travel documents. No details were provided about what they seized.

Authorities said they made the unusual decision to publicize the search because agents need help with their fraud investigation.

"We're concerned that other people have been victimized," said Marcy Murphy, a spokeswoman for the Maryland U.S. attorney's office.

The Maryland State Board of Morticians suspended Stella's license in an emergency action Nov. 29, stripping him of his ability to work as a funeral home director and shutting the doors of his business. A report on the suspension includes allegations similar to those contained in FBI documents filed in federal court.

The board did not change its decision after a subsequent hearing this month. Board Executive Director Laurie Sheffield-James said yesterday that Stella will have a hearing before the 12-member board if he wishes to appeal the ruling.

Paying for a funeral in advance is a common industry practice, experts said.

"It's more common for people who are getting ready to go into an assisted-living situation or nursing home," said David Weber, a licensed funeral director and spokesman for the Maryland State Funeral Directors Association.

By putting money in a trust account, the money cannot be tapped to pay for old age care, Weber said.

Advanced payments could be especially desirable in Maryland, a state that commands some of the highest prices for funerals in the country.

Studies have found that people in Maryland are more likely than those from other states to choose cremation. But when they choose a funeral with a burial, the costs can be higher than similar states because of strict regulation, which some think restricts competition.

"Marylanders spend $500 to $1,000 more than people in other states of similar character with funeral industries that are less regulated," said David Harrington, an economics professor who specializes in the funeral industry at Kenyon College in Ohio.

But Weber, of the state directors association, said that Maryland also has strict guidelines to protect consumers.

"When someone places money into a trust fund, we have to report annually to our state board the date it was deposited, the amount of interest and when the person dies," he said.

Once arrangements have been completed, the funeral home is also required to show the date and reason funds were withdrawn from the account, a process that also requires an accountant's approval.

Those safeguards may have failed some of Stella's customers. They told FBI agents that they first suspected a problem when they did not receive annual tax documents showing the status of their funeral accounts.

According to the FBI, the amounts paid by customers to set up the interest-bearing accounts ranged from $500 to $7,500.

When the so-called "pre-need" customers contacted Madison Bohemian Savings Bank, they learned their accounts had been closed without their permission, according to the FBI.

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