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State of Indiana announces agreement in lawsuit restoring approximately $20 million in raided cemetery trust funds State of Indiana announces agreement in lawsuit restoring approximately $20 million in raided cemetery trust funds

April 30, 2010

Agreement negotiated in securities fraud case, sale of cemeteries bring stability to company and benefit consumers

INDIANAPOLIS – An investigation and lengthy receivership action initiated by Indiana Secretary of State Todd Rokita’s Indiana Securities Division, represented by Indiana Attorney General Greg Zoeller’s office, has resulted in a settlement agreement that will restore more than $14.6 million in cemetery trust funds associated with Ansure Mortuaries.

According to the settlement, which was accepted by Johnson County Judge K. Mark Loyd, cemetery properties in Indiana and several other states owned by Ansure Mortuaries – a company owned by Robert Nelms of Greenwood and formerly known as Memory Gardens Management Company – will be sold to StoneMor Partners, LLC. The agreement restores more than $14.6 million in trust funds for cemeteries related to perpetual care and maintenance misused by Robert Nelms. Combined with approximately $5 million that a court-appointed receiver recovered, the total amount restored to the trust funds through the lawsuit will be approximately $20 million.

“The diligent work of the Indiana Securities Division has averted potential financial disaster for many Hoosiers,” said Secretary Rokita. “Families can now have peace of mind knowing that their loved ones’ memorials will be cared for today, tomorrow and in the future.”

The Indiana Securities Division began investigating Nelms in 2007 and uncovered evidence that he had used fraudulent securities instruments similar to corporate bonds to misappropriate millions in cash and assets from the cemetery trust funds. In Indiana, the owner of a private cemetery is required by law to provide for the creation and establishment of an irrevocable perpetual care fund. The fund is designed for the purpose of permanently maintaining cemeteries for the benefit of the community and those who purchase lots there.

The sale to StoneMor Partners will preserve the existing trust funds. According to the receiver, the trusts will be financially sound and secure when StoneMor makes the deposit on the properties in accordance with the agreement. When StoneMor Partners closes on the cemeteries, the Securities Division will request the court to end the receivership.

Additional benefits associated with the purchase agreement include:

  • It guarantees with certainty a restoration of trust funds in excess of $20 million, where this amount would likely have been reduced through a trial process.
  • It will end the receivership; the offer from StoneMor envisions a closing date sometime in May, 2010.
  • It will not require bankruptcy proceedings for Ansure and the delay and increased costs associated with such proceedings.

“The appointment of a receiver enabled the Securities Division to effectively remove Nelms from his position as CEO of this company,” said Secretary Rokita. “The receiver in this case did an excellent job of preserving assets and maintaining the viability of this company.”

The sale, approved in Johnson Circuit Court, provides that Nelms will sell his 11 cemeteries in Indiana, along with those in Ohio, Iowa and Michigan, to StoneMor Partners. He cannot receive any cash or stock from the sale.

The Indiana Attorney General’s Office represented Securities Commissioner Chris Naylor and Secretary Rokita before the Court in the litigation against Nelms. The Attorney General also has jurisdiction whenever perpetual trusts are endangered.

"The breathtaking scope of fraud in this case undermined the very trust that loved ones depended upon at their time of bereavement," Zoeller said. "This legal settlement is carefully structured so that the trusts are replenished through the sale of the business, and consumers' pre-need burial plans will be honored while new ownership will maintain the 11 Indiana cemeteries."

Zoeller noted the nearly three years of investigation, litigation and negotiation by the State of Indiana to ensure that the public’s interests were protected. Zoeller commended the deputy attorneys general in his Litigation Division who worked on the case. He also thanked the Indiana General Assembly, which in 2009 passed a new law, House Enrolled Act 1287 that was prompted by the Nelms case and tightens protections on cemetery trusts.

Separate from the civil case and the approved sale, Nelms plead guilty in August, 2009, to criminal charges of theft and securities fraud in Marion County and was sentenced to four years in a work-release facility and four years on home detention. The Indiana sentence will begin after Nelms completes a prison sentence in Michigan for his portion of the cemetery-fraud scheme that occurred in that state.

For more information on how to avoid becoming a victim of investment fraud, visit www.IndianaInvestmentWatch.com.

To file a consumer complaint, visit www.IndianaConsumer.com.

Download the sale order.

Media Contacts:

Secretary of State’s Office
Jim Gavin, 317.233.8655, jgavin@sos.in.gov

Indiana Attorney General’s Office
Bryan Corbin, 317.233.3970, Bryan.Corbin@atg.in.gov

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