MADISON (WKOW) -- State officials say the management of a trust fund of pre-payments for funeral services in Wisconsin for over 10,000 customers has left the fund millions of dollars short of what's needed to cover all contracted services.
A Dane County judge has approved a receiver to handle the proceeds of the fund. The fund was formerly managed through the Wisconsin Funeral Directors Association.
Court documents state just over $69 million is required to cover services under pre-payment contracts. Documents state the fund is $21.5 million short of that amount.
The appointed receiver, Milwaukee attorney John Wirth tells 27 News no fund assets will be paid out for now, as he sorts through the fund 's financial practices. Wirth said the interest of depositors to the fund will be prioritized. State officials filed the receiver court action and are investigating what happened with fund assets.
Former Funeral Directors Association president Pete Gunderson of Madison-based Gunderson Funeral Homes says his business will honor all services promised to customers, with or without fund assets. Gunderson says he believes other funeral home directors with customer money in the fund will do the same.
Gunderson says the trust fund in the past has outperformed other investment instruments linked to funeral services.
But court documents state the trust "fraudulently procured more than fifty million dollars," and states improper investments were made in mortgage-backed securities and other instruments, in violation of the trust fund's rules or state or federal laws.
"Trust is operating like a Ponzi scheme," states the court action filed by Attorney General J.B. Van Hollen and others. A Ponzi scheme involves artificially high pay-out to certain investors, with the use of money of newer investors, endangering their ability to realize any returns.
Spokespersons for the Wisconsin Funeral Directors Association have yet to respond to requests for comment.
Court documents identify the trust's investment advisers as brothers Michael and Patrick Hull.
Neither Michael or Patrick Hull have returned calls from 27 News seeking comment.
A 27 News reporter visited the offices of the Hulls' Madison company, Bluepoint, and observed mostly vacant offices. A staff member said the business began operation at the location in June. That's two months after Waukesha County property records show Michael Hull purchased an Oconomowoc home for $3.2 million dollars.
No criminal action has been alleged against Hull, his brother, or anyone else connected to the trust fund.
Gunderson says the funeral industry in Wisconsin has a good reputation, and is governed by tighter rules than in several other states.
Gunderson says the trust fund issues are concerning. "This is very personal stuff to our consumers and to us."
