Cremation broker may lose Colorado license
A national cremation broker is in hot water with the Colorado Division of Insurance and could face millions in fines and lose its license to do business in Colorado.
Neptune Management Corporation officials have been ordered to appear before the division this month on charges it "misled consumers and manipulated pre-paid, pre-need funeral accounts in order to skirt Colorado law and maximize profits," Insurance Commissioner Marcy Morrison said.
The company has sold about 5,000 pre-paid funeral packages to Colorado residents since 2001, including about 1,500 in the Colorado Springs area.
"We will not stand for businesses that ignore consumer protection laws," Morrison said in a release. "Pre-need funeral plans are prime targets for scams because the service purchased is not provided until an unknown date far into the future."
Division officials were made aware of the company's questionable practices in April by local funeral home owner Costas Rombocos, chief executive officer of the Shrine of Remembrance.
"My motive was not to eliminate competition, it was to eliminate these predatory practices which are a hardship to thousands of families," Rombocos said Tuesday.
Neptune CEO Jim Ford did not return calls seeking comment.
The company is a leader in the cremation business, with offices in 10 states. It contracts with people to set up cremations when someone dies, transports the body to a local facility and returns the urn of remains to the family, according to its Web site.
The insurance division alleges four counts against the company on charges of not properly putting customers' pre-paid funeral services in a trust fund, violating the requirement it contract with local funeral homes, "conditioning the sale or a pre-need contract upon the purchase of a second contract" and violating the Colorado Consumer Protection Act.
In July, Neptune customer Helen Stiles of Colorado Springs complained to the division she was trying without success to get a refund on a pre-need contract she had purchased.
She paid Neptune $1,333 for a package that included "upfront merchandise" like an urn, and for future cremation services, according to the complaint.
"On average Neptune charges over $700 for the Upfront Merchandise," the complaint states. "The urn itself costs less than $13, yet Neptune charges $349 for each urn."
Neptune charges customers a "1,300 percent mark-up" for that upfront merchandise, then refuses to refund it, according to the division.
Colorado law stipulates that companies keep 75 percent of the customer's money for pre-need contracts in trust. Yet Neptune was charging about 55 percent of the contract price for that upfront merchandise and making it unavailable for refund, the division alleges. In some cases, less than 35 percent of the money was put in trust.
"By reducing the amount actually trusted ... Neptune has kept approximately $2.6 million of consumers' money that should have been protected in trust," according to a division release.
Neptune faces up to $5 million in fines - $1,000 for each of the 5,000 contracts sold.
Morrison said Friday that the company can choose to enter mediation with the division.
"We're in wait-and-see mode now," Morrison said.
The hearing is scheduled for Oct. 24 in Denver.
