SACRAMENTO, Calif. (AP) — California’s attorney general sued the Neptune Society on Monday, claiming the well-known company pocketed $100 million that it should have kept in reserve for those who signed up for its prepaid cremation service plans.
As a result, many of the company’s customers failed to get their full refunds if they canceled their contracts, and thousands of other prepaid customers could also lose their money if they cancel, the lawsuit said.
The company also falsely claimed to use its own crematoriums when in fact it contracted with others and illegally accelerated payments when customers died, among other misleading business practices, the lawsuit said.
In a statement, Neptune’s Texas-based parent company, Service Corporation International, said the society has passed regular inspections and annual audits and is in full compliance with state and federal law.
The corporation called the attorney general’s claims a gross misinterpretation of the law that contradicts the AG’s own past opinion on the legality of Neptune’s business practices. The statement said Neptune had filed a complaint seeking a court “declaration of its rights.”
The lawsuit also names another subsidiary, Trident Society.
The company and its subsidiaries are North America’s largest provider of funeral, cremation and cemetery services.
Attorney General Xavier Becerra and three San Francisco Bay Area district attorneys said they broke California law by failing to hold in a fully refundable trust more than $100 million customers paid for the cremation plans.
The lawsuit does not say that anyone lacked the money when it came time to be cremated, only that it’s a possibility because Neptune doesn’t properly set aside the money it collects. But it said the company short-changed customers who were entitled to a full refund if they canceled their contract.
“Everyone dies,” begins the lawsuit, noting that two-thirds of Californians choose to be cremated. Many prepay for those services through companies like Neptune.
The company is “swindling customers who were simply trying to look out for their families and prepare for one of life's most difficult moments,” Becerra said in a statement.
The suit alleges that Neptune steered virtually all customers to its Standard Neptune Plan that included both cremation services and related products, but then illegally put into trust only that half of the money that it earmarked for the cremations.
It did not put aside the money for the products, which include a memento chest with a photo frame lid, an urn, a plaque, thank you cards, a planning guide and access to an online memorial, according to the lawsuit. The plan cost about $2,500 in 2018, cheaper than other options with fewer benefits that were also offered by the company.
The suit says Neptune thus deceived consumers who thought all their money was protected, as required by California law.
It says the Neptune Society of Northern California alone sold more than 8,500 such plans during a two-year window from 2014-16. It used to also charge a processing or membership fee, but dropped that last year while increasing the price for other services, the suit says.
“Consumers should expect the money paid toward future funeral needs will be fully protected and available to pay for the necessary services when the need ultimately arises so family and loved ones are not further burdened,” Marin County District Attorney Lori Frugoli said in a statement.
The suit says the company made some changes after officials pointed out faulty business practices last year, without solving the alleged problems.
Neptune Society of Colorado, now a company subsidiary, was accused in 2008 by the Colorado Division of Insurance with similarly underfunding the required trust account there, according to the lawsuit.
It agreed to stop the practice a year later, the suit says, only to start a “fundamentally identical” business practice in California five years later. The lawsuit does not address whether the alleged faulty practices are used in other states.
