I've been touched by the many notes and expressions of condolences I've received from Lit Daily readers after I wrote last week about the death of my mother-in-law. Thank you—it's much appreciated.

This is the first time my husband and I have been in the position of arranging a memorial service, and as expected, it's a difficult and exhausting job.

It also means that when I came across this lawsuit—which stems from a massive Ponzi scheme selling prepaid funerals to almost 100,000 consumers in 16 states—well, it was always going to make me angry, but right now, it makes my blood absolutely boil.

The latest development: A federal judge in Missouri just ordered PNC Bank and National City Bank to pay $102 million in damages and interest for their role in enabling the scheme.

The roots of the case go back to 1979, when the Cassity family of St. Louis founded National Prearranged Services, or NPS. According to the FBI, which secured criminal convictions against six defendants, NPS targeted customers looking to save their families the expense and stress of arranging their eventual funerals.

NPS and the customer would agree on a package of prepaid services and a price, and NPS would make arrangements with the customer-designated funeral home. The funds to cover the service were placed with a third party—a financial institution or life insurance company (which would put the money back in a life insurance policy in the customer's name).

So far, it all sounds very reasonable, very considerate—a welcome option for those who want to exercise some control over their final arrangements without burdening their families.

But according to the FBI, NPS “didn't put all of the funds from customers into a trust or life insurance policy, but instead brazenly altered application documents—i.e., changing deposit amounts, naming itself as a beneficiary, converting whole life insurance policies to term life—and used the money for unauthorized purposes like risky investments, payments for existing funeral claims, and personal enrichment.” 

In the words of Frenchy from the musical “Grease,” they're not just rats—they're “fleas on rats, worse than that, they're amoebas on fleas on rats. I mean, they're too low for even the dogs to bite.”

Represented by Denver's Reilly Pozner, the plaintiffs—nationwide life and health guarantee associations and a Texas receiver who've been stuck covering $600 million in liabilities—sued 35 defendants in 2009 in the Eastern District of Missouri, including nine banking and accounting firms.

In their original 138-page complaint, the plaintiffs alleged that the banks failed to properly supervise the assets of the trusts and allowed them to be “pillaged.”

After a trip to the Eighth Circuit, which concluded that the claims arose under trust law rather than tort law, the case was back before U.S. District Senior Judge E. Richard Webber.

All the other defendants settled, including Southwest Bank and Marshall and Ilsley Trust Company, both represented by Winston & Strawn and Armstrong Teasdale; U.S. Bank, represented by Stinson LLP; Bank of America, represented by Bryan Cave; and Comerica Bank and Trust, represented by Dykema Gossett

Only PNC, which was sued as successor to Allegiant Bank, took the case to trial. The bank was represented until 2018 by Williams & Connolly and Thompson Coburn, and defended at trial by Missouri's Dowd Bennett.

“Allegiant did nothing to ensure the prudence of investments,” wrote John McHugh of Reilly Pozner in court papers. “Allegiant did not evaluate a single wire transfer request received to determine the purpose of the wire and thus was unable to monitor if the wire transfers were actually investments. Allegiant never tracked any wire of money out of the trust to determine if an asset was received in exchange.” 

After a four-week bench trial, Webber on July 3 awarded $72 million in damages, $15 million in pre-judgment interest and $15 million in punitive damages, for a total of $102 million.

PNC outside counsel James Bennett of Dowd Bennett referred a request for comment to PNC, which said that the matter “involves issues arising more than 15 years ago at a bank acquired by National City, and years before PNC acquired National City in 2009.”

The Reilly Pozner trial team included Daniel Reilly, Clare Pennington, Larry Pozner, Michael Robertson, John McHugh, Robert Kelly, Farrell Carfield, Tony Giacomini, Stephen Segall and St. Louis local counsel Marcy Graham.

“We sought recovery for losses to the trust, pre-judgment interest and punitive damages and the court awarded a substantial amount for each of those elements of damage totaling more than $100 million,” said Reilly. “This was a true team effort, starting with our clients who have been unwavering in their effort to recover the losses that resulted from the bank trustee's failure to meet its fiduciary duties to protect the trust funds.”