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 says.
The company, which has Bay Area locations in San Jose and Oakland, 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 says.
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Beth Dombrowa, a spokeswoman for Neptune and its parent company, Texas-based Service Corporation International, said she could not immediately comment. The lawsuit also names subsidiary Trident Society.
The company and its subsidiaries are North America's largest provider of funeral, cremation and cemetery services.
California Attorney General Xavier Becerra and three Bay Area prosecutors said that 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 says the company short-changed customers who were entitled to a full refund if they canceled their contract.
"Everyone dies," begins the lawsuit, noting that in California nearly two-thirds choose to be cremated when the inevitable happens. Many choose to 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 99% of customers to its Standard Neptune Plan that included both cremation services and related products, but then illegally kept about half the money because it was earmarked for the products.
The suit says Neptune thus deceived consumers who thought all their money was protected, as required by California law.
"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.