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A Year of Challenges ...
And It's Not Over Yet
Irwin Shipper, CCE, chairman of the ICFA
Government and Legal Affairs Committee, summarizes and analyzes a difficult year for the funeral, interment and memorialization industry.
Today when industry members hear a reference to Florida or Georgia, no explanation needs to be made. How have the events in those two states affected our industry?
I live in Palm Beach County, which you might say was the epicenter of the Menorah Gardens controversy. While I had no formal connection to the company, I know many
of the families in my community who have loved ones interred there, so I became personally involved in the events.
First, I have to say that the media coverage made a difficult situation worse. Most of the information carried by local newspapers and television were based on allegations by plaintiffs' lawyers and some of the claims have since been disproved. The media coverage upset many people who were not affected by events at Menorah Gardens and I personally believe that a lot of the reporting was irresponsible. So you have to understand that for me, Menorah Gardens was something close and personal because it happened in my own back yard.
What are your thoughts on the Georgia cremation scandal?
It's a lesson about the distress one individual can cause. Who ever could have imagined a crematory that didn't cremate? Even one of the investigators in Georgia was quoted as saying it was more work to hide the bodies than to simply cremate them and return the cremated remains to the families. It makes no sense, but it caused our entire industry to be held in disrepute.
The state of Georgia had a crematory inspection program, but this one crematory was exempt. Perhaps the funeral homes that used this crematory thought the state was performing inspections; I don't know. But it highlights the fact that all crematories should be periodically inspected and that industry members who use a third-party crematory shouldn't assume the government will take care of it.
How has ICFA responded to these events?
I believe that the ICFA was the first industry group to call for an objective investigation of the events in Florida and Georgia. The allegations and innuendo in the media were such that a fair investigation was the only way to separate fact from fiction. So we were pleased when the General Accounting Office (GAO), the investigative arm of Congress, announced it would conduct an investigation. We also contacted the Senate Special Committee on Aging, which held hearings on funeral industry sales practices back in April 2000, to offer our assistance and pledge our cooperation.
Most importantly, we republished and posted on the ICFA Web site model guidelines for handling cremated remains that we issued a few years ago. We also commissioned a lawyer specializing in cremation legal issues to draft model contracts for use by funeral homes and cemeteries when they retain the services of a third-party crematory. This material was also posted on the ICFA Web site and is available to anybody who wants it.
It turned out that Senator Dodd held a hearing instead of the Aging Committee. Why was that?
The chairman of the Special Committee on Aging, Sen. John Breaux (D-LA), initially indicated he wanted to convene a hearing, but I think the announcement of the GAO investigation suggested that any findings and recommendations by GAO should be considered first. On the other hand, Sen. Christopher Dodd (D-CT), who had requested the GAO investigation, decided not to wait for GAO to do its job, but held a two-hour hearing of his Subcommittee on Children and Families on April 26. While we were disappointed the senator felt he had to rush into hearings without waiting for the GAO recommendations, we appreciate the fact that he allowed the ICFA to file post-hearing comments for the record.
Where are these issues headed in Congress?
The 534 members of Congress other than Sen. Dodd seem willing to wait for the results of the GAO investigation before considering further action. In particular, the GAO has been asked to consider whether the state regulation of our industry sufficiently protects consumers or if federal oversight is needed.
I believe the GAO will find that most states responded promptly in reviewing their existing laws and the level of enforcement. Georgia, for example, quickly enacted a new crematory law that requires state inspection of all crematories. However, the ICFA met with Sen. Dodd's staff and we have learned he is drafting a bill he hopes to introduce into Congress very soon.
What will the Dodd bill regulate?
Based on statements Dodd has made, his bill, among other things would regulate certain as yet undefined areas of preneed plans and provide a grant program to states that inspect crematories, funeral homes and cemeteries.
Most important from our viewpoint is the senator's plan to codify the Federal Trade Commission (FTC) Funeral Rule and extend it to all sellers. I should explain that "codifying" means turning the Funeral Rule, currently a trade regulation under FTC jurisdiction, into a federal statute that can be amended by Congress at any time. We believe this would politicize the Funeral Rule and lead to all kinds of amendments detrimental to our industry being pushed by special interest groups. The irony is that none of the problems in Florida or Georgia would have been addressed by the Funeral Rule in the first place.
What is the status of the FTC's review of the Funeral Rule?
I'm sure most members recall that the FTC has been reviewing the Funeral Rule for possible amendments for over three years now. The major issue has been whether the rule should be expanded to all sellers of funeral goods or services rather than to primarily funeral homes. Fortunately, FTC procedures require a factual showing that a problem really exists; that is, that consumers are having problems getting truthful and accurate price information from cemeteries and other sellers not currently covered by the rule.
At Sen. Dodd's April 26 hearing, he asked an FTC representative why the FTC has not acted to expand the rule after three years. The FTC representatives responded that, so far, the record does not justify expanding the rule to other sellers. I think that information justifies ICFA's position against expanding the rule in the absence of widespread problems as required by the FTC's own rules of procedure.
If Congress acted to codify the Funeral Rule into a federal law, would it have to show first that consumer complaints were prevalent?
No, and that's the problem. Our industry -- not just cemeteries, but funeral homes, crematories, monument retailers and others -- could have federal laws imposed on our businesses without any requirement to show that there's a problem. Unlike the safeguards in the FTC's internal procedures, any group that has lobbying clout with Congress could push for the most onerous laws without having to prove anything. If they've got the votes, then the bill may pass.
I can see where the ICFA and other industry trade associations would have to constantly respond to bills introduced to amend a Funeral Rule "law" every time there's a problem in one state. A member of the Congressional delegation of a state could introduce a bill and our associations would be required to spend time, effort and money to respond.
We have never had this situation at the federal level before, so this is a dangerous precedent that could be established. Frankly, we're hoping that all the trade associations will recognize this danger and oppose any attempt to codify the Funeral Rule regardless of how they think the FTC should amend the rule.
What do you say to those who claim that written price information should be required from all sellers, not just funeral homes, which is the primary purpose of the Funeral Rule?
The ICFA Board of Directors addressed that issue at our last convention, when they approved a new model guideline for state laws that requires all sellers to furnish written price lists for all goods and services they sell before the consumer makes a purchasing decision. So this is a non-issue.
The real issue is whether our industry should be regulated at the state level or should be subject to another layer of regulation at the federal level. Expansion of the Funeral Rule expands the federal regulation of our businesses, not in lieu of state regulation, but in addition to it. The ICFA believes that our industry is most efficiently and effectively regulated at the state level, so if additional consumer safeguards are necessary, they should be enforced by the states. If all of our trade associations understand this, we can effectively address problems when they arise.
Regarding the GAO investigation, what role will the ICFA play in that process?
With the GAO, it's really a matter of them telling us, "Don't call us; we'll call you." The GAO doesn't even issue press releases. We learned of this investigation because of statements by Sen. Dodd and also from Congressman Mark Foley (R-FL), who announced the action the GAO decided to take.
When the GAO investigated our industry back in 1999, which was the first time such an inquiry ever occurred, the ICFA was contacted several times by GAO investigators and we fully cooperated with them. Our members will recall that the 1999 GAO report found that there existed a low volume of complaints in our industry and the complaints involved a variety of things rather than one or two big issues.
The focus of this new investigation is different because it will focus on the problems in Georgia and Florida. The big question will be whether GAO recommends increased federal regulation of our industry. So to the extent that GAO decides to call on the ICFA, we stand ready to assist them in any way we can.
So much attention has been given to the consequences of events in Florida and Georgia, there is some danger of losing sight of other issues, such as the FTC Telemarketing Sales Rule and various tax issues.
That's correct. This is an extremely busy time for our Government Relations program, even without reference to those two states. The FTC seems to have the review of its Telemarketing Sales Rule (TSR) on a fast track, especially the proposal to establish a national Do Not Call registry that many believe would end telemarketing.
When the TSR was enacted in 1995, the ICFA was instrumental in exempting calls that sold nothing over the phone but attempted only to make an appointment for a face-to-face meeting. Since the purpose of the TSR was to prevent fraud and abuse in selling over the phone, the FTC readily agreed to exempt these calls for face-to-face meetings from the requirements of the TSR. As you know, most calls by preneed sellers seek appointments only, so the face-to-face exemption has been important to many of our members.
The FTC has proposed retaining the face-to-face exemption but with a number of conditions. The most controversial is that even these appointment calls would be prohibited from calling anyone on the national Do Not Call list. I should point out that preneed callers are already required to maintain in-house Do Not Call lists for any consumer who requests not to be contacted again. So the requirement to also maintain the proposed national list in addition to the in-house list seems onerous. It also seems like the FTC is treating appointment calls like sales calls, which they are not.
The ICFA filed comments and testified at a June 7 FTC public forum on the TSR. Paul Elvig, who is our vice president of industry relations, testified on behalf of the ICFA at the forum and did an excellent job of explaining our concerns with the FTC proposals affecting the face-to-face exemption. At this point, the FTC can either publish a revised proposed TSR for comments or go right to a final revised rule. Whatever happens, I think the FTC intends to move quickly.
Are there any parties opposed to maintaining the face-to-face exemption for preneed calls?
Yes. Not surprisingly, Lisa Carlson's group, the Funeral Consumer Alliance, has asked that funeral home and cemetery preneed callers be excluded from this exemption. Ms. Carlson testified at the public forum, but her group offered only a couple of anecdotes to support its position.
More surprisingly, the National Funeral Directors Association filed comments also calling for the exclusion of funeral home and cemetery preneed callers. The NFDA comments provided no supporting documentation and, frankly, I have to wonder who NFDA thinks it's representing by taking such a position.
Regarding documentation, the ICFA pointed out that the FTC received only two complaints related to preneed telemarketing during the last four years, so we think we've supported our position that preneed appointment calls are not causing problems.
Let's turn to federal tax issues. Can you highlight some of the recent developments in this rather complicated area?
Les Schneider, a member of the ICFA Tax Subcommittee, has written an excellent article in this issue of the magazine (see page 20) on some recent and very positive IRS rulings concerning the accrual and cash methods of accounting, so I won't repeat that information here.
I think it's worth noting that the IRS is continuing to examine the question of whether sales expenses, including commissions for preneed sales, can be expensed when incurred or whether they must be capitalized over a period of years. Earlier this year, the IRS solicited comments from the public on this issue as it related to the sale of intangible property and our Tax Subcommittee developed some excellent proposals for a common sense approach. By the way, the various ICFA comments and testimony I have mentioned can be viewed on the ICFA Web site under "Government Relations."
The IRS has also issued some private letter rulings within the past year that would be interpreted as good news by some non-traditional funeral providers. One ruling held that a church can sell caskets and the proceeds it receives are exempt from federal income tax as long as the caskets are used in the church's religious burial services.
Another ruling held that a church could receive the proceeds from the sale of cremation niches and cenotaphs located on its property without paying federal income tax on those amounts. In addition, amounts paid by the purchasers in excess of the fair market value for the niches and cenotaphs are deductible as charitable contributions.
There was yet another ruling involving a nonprofit cemetery that wanted to establish a for-profit pet cemetery. The IRS gave the green light to this plan, provided the pet cemetery was operated as a subsidiary of the nonprofit cemetery.
I believe these various rulings suggest we are going to see a lot more activity from so-called "non-traditional" funeral providers. Polling data also shows that the public is more open to exploring non-traditional types of funeral services, disposition and memorialization than ever before. What all this means, in the Government Relations sense, is that future laws and regulations will probably focus more on what is being sold instead of who is selling it.
I'm pleased to say that the ICFA is uniquely positioned to represent both the traditional and non-traditional providers, because we haven't isolated ourselves by representing only one segment in the allied industries. This approach will make our association very effective in speaking for the combined interests emerging in the
marketplace.
Last year, the new Congress repealed the onerous ergonomics program enacted in the last weeks of the Clinton administration. However, President Bush said he would be proposing a new ergonomics program. What is the status of that?
The ergonomics program is administered
by the U.S. Department of Labor's Occupational Safety and Health Administration (OSHA). Its purpose is to reduce musculoskeletal injuries in the workplace, such as carpal tunnel syndrome or back problems.
As much as some sort of safety program may be needed, there was a consensus that the plan hammered out by the Clinton administration was complicated and expensive. The Bush administration promised a cost-effective approach based on common sense prevention techniques.
The ICFA supports this approach and even recommended to OSHA that it consider private sector incentives to reducing these types of injuries. For example, we suggested that identifiable work-related ergonomic injuries could be classified under state worker compensation laws, thereby giving businesses and their insurers incentives to reduce insurance premiums by initiating safety programs. This approach also would help avoid the heavy-handed carrot-and-stick approach of threatening ruinous fines in order to obtain compliance.
A few months ago, OSHA issued the first of its new ergonomic standards, focused on hazardous industries. Eventually, OSHA intends to address virtually all industries, so we should be
prepared to work with the agency to develop some common sense programs based on the needs of our employees.
So many of the federal regulations affect the business operations of our members, but litigation in the federal courts can also have an impact. Can you review the status of some pending cases?
The ICFA is monitoring a number of lawsuits in both state and federal courts that could affect our members. One case we decided to enter as a third-party "friend
of the court" is Warner v. City of Boca Raton. That case involves the question of whether lot owners in a memorial park-type cemetery can ignore the park's rules and regulations to erect vertical memorials and decorations. The memorial park is operated as a municipal cemetery in Boca Raton, Florida, and it did win a favorable ruling in the federal district court in 1999.
The plaintiff-lot owners appealed on the basis that their personal religious beliefs were being violated because the cemetery did not permit them to install vertical memorials at the graves of their loved ones. The U.S. Circuit Court of Appeals for the 11th Circuit certified a question regarding the state's "religious freedom" law to the Florida Supreme Court. At that point, attorneys representing the cemetery (which is an ICFA member, I should add) asked if the ICFA could intervene to discuss the history and nature of memorial parks in this country.
We are concerned that if lot owners can ignore reasonable cemetery regulations governing the style of memorials, it will be impossible to establish the orderly management of cemetery grounds. In addition, the cemetery will be unable to assure other lot owners that the cemetery regulations will be uniformly enforced. In other words, a cemetery will be unable to enforce its own rules.
At the time the ICFA filed its brief with the Florida Supreme Court, there was some concern the ICFA might be suggesting that it favored memorial parks over the traditional upright monument cemeteries. Can you comment on that?
The ICFA would have taken the same position had the cemetery defendant been a traditional monument cemetery and the plaintiff lot owners wanted to install flat, ground-level memorials. The issue really had nothing to do with the particular types of markers the cemetery allowed, but with whether a cemetery had the right to enforce a longstanding rule that lot owners were aware of when they purchased their burial rights.
The point we made in our brief to the court was that the regulation was content-neutral; that is, it did not permit some vertical objects but not others. We also cited a long list of court decisions dating back to the 19th century to show that the cemetery's actions were perfectly legal.
We recently became aware of a similar case in the New England area involving a cemetery that requires grave decorations be collected after they have been at the grave site for a week. Apparently, some people objected to the cemetery staff removing American flags from the graves after the time period had expired and they filed a lawsuit against the cemetery. We have started monitoring this litigation to watch where it's going.
On another topic, there's a lawsuit in Pennsylvania that challenges the state funeral board's rule that only licensed funeral directors may discuss preneed funeral arrangements with consumers. And still pending is a case in the federal district court in New York concerning whether cemeteries can sell monuments, operate a funeral home and hire outside management companies. The ICFA filed a "friend of the court" brief in this case in support of the New York Association of Cemeteries some time ago but so far no ruling has been made.
(Editor's note: For more on recent court cases, see Washington Report.)
Do you a sense a trend in any of the court decisions in recent years?
Very definitely. The trend, especially in federal court, is away from protectionist laws or practices that restrict who may sell to the public. Many ICFA members will recall the decisions back in the 1980s that held that cemeteries could not prohibit outside installers from being hired by families to set markers and memorials in the cemetery. More recently, three federal courts in three different states struck down as unconstitutional various laws that restricted the sale of caskets exclusively to funeral directors.
So I think it's safe to say that the legal tide is moving in favor of open competition, and that will present either opportunities or problems, depending on how you operate your business. This trend, combined with the rise of non-traditional providers, as I mentioned before, is rapidly changing the market in our industry in many places.
You mentioned earlier the effect the media has on the public when it distorts facts, such as when it makes reckless claims by using the word "alleged" before each accusation. How does the ICFA respond when the media seems to go on the attack against our industry?
I've always believed that an important part of government relations is public relations, and the two are really inseparable. We will probably never know, for example, how much Sen. Dodd's interest in pursuing federal legislation is the result of media coverage of the events in Georgia and Florida. I do know that the phones at ICFA headquarters rang almost incessantly in January and February as these two stories broke and our industry seemed the target of a classic media "feeding frenzy." Many ICFA members received calls from local media and from their own customers asking if the reported events in Georgia and Florida could happen in their communities.
Fortunately, the ICFA had proactively prepared for these types of inquiries and quickly circulated our model guidelines for state laws, cremation procedures and model contracts and other materials to assist our members, answer our critics and provide assurance to the public.
Another factor that proved of enormous help was our 20 years of administering
the Cemetery Consumer Service Council (CSCC) and the positive relationships we formed with many government agencies, both state and federal. Many of the consumer inquiries and complaints we receive are referrals from government agencies, sometimes from the offices of members of Congress.
When our staff legal counsel, Bob Fells, met with Sen. Dodd's staff, he was able to provide a 3-inch binder filled with 28 model guidelines for state laws that quickly established the ICFA's credentials in support of meaningful regulations. This type of documentation doesn't happen overnight. It takes years of planning by our Government and Legal Affairs Committee to anticipate future needs, and support by our progressive leadership that has learned to think "outside the box."
Another far-sighted project is the Government and Legal Fund, for which you have been chairman since 1990. Can we assume fund resources were helpful?
Yes, and thanks to the generosity of ICFA members who contributed to the fund through the years, we had at our immediate disposal the necessary resources to do whatever needed to be done. In times like these, when we are confronted by a crisis, it's too late to raise the necessary resources. The resources were gathered earlier, when some might have said, "There's no need for this." Fortunately, a large majority of the ICFA membership saw the need to contribute to the Government and Legal Fund even when we weren't in a crisis-management mode.
Since we don't know yet where these issues will go or whether we will be faced with serious efforts to enact federal legislation -- some of it possibly punitive in nature -- to regulate our industry, we have appealed to our members who have not given to the fund to finally see the need and contribute. I think they'll come through.
With so much activity going on, is there any easy way for ICFA members to stay updated on everything?
The ICFA has made it easy for members to stay in the information loop. All a member needs is access to the Internet, and frankly, if you're not on the Internet by now, you're still driving a horse and buggy when the rest of us are in automobiles. So assuming a member is online, I recommend that every day he or she go to News Page on the ICFA Web site (www.icfa.org) for the latest in state, federal and industry-related news. This section is updated every business day and it's the equivalent of scanning through dozens of newspapers and news services to find news you can use.
The second easy way to stay in the loop, especially in the area of government relations, is to read the ICFA WIRELESS, our bi-weekly electronic newsletter sent directly to your e-mail address. WIRELESS is a free member benefit for all ICFA members in good standing, so if you have an e-mail address but are not yet receiving it, just call ICFA headquarters to get on the list.
Irwin, you've shown us that the industry faces more issues than ever before, but can you look ahead, as we traditionally end this interview, to what could be coming in the next 12 months?
Well, last year I said that we should expect much more scrutiny in the years ahead, but frankly, I had no idea how quickly that prediction would be realized. Right now, the future direction of Congress and federal agencies toward our industry will depend, at least in part, on the findings and recommendations of the GAO. We can expect a report probably in the fall.
Another factor will be whether there are any more events like Florida or Georgia in the next 12 months. The Florida situation is still under investigation by local authorities, but as the Georgia crematory situation was examined, it became clear the problems occurred due to a highly unique set of circumstances. This finding does not excuse what happened, but it establishes that another Georgia situation anywhere else is highly unlikely. That was not apparent at first; hence the media feeding frenzy.
I think the greatest challenge in the next year is whether our national and state trade associations can effectively work together to communicate the message that the introduction of federal bills having little or no relationship to reported events -- in other words, "window dressing" -- is actually counterproductive to the goal of consumer protection. Hopefully, all our trade associations will work together in this effort to preserve and enhance, and in some cases restore, the confidence the public has a right to expect in all of us.
Copyright ICFA 2002
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