Thursday, April 26, 2018
News Roundup

Merger gives funeral corporation SCI a big piece of the Tampa Bay market

The cemetery was running out of room, but management had a time-tested solution.

For 25 years employees at the Los Angeles-area facility "at the direction of management routinely broke open outer burial containers and caskets and discarded human remains in a 'dump' area ... in order to make more graves fit in the cemetery."

Until last week, that was just an allegation in a class-action suit by more than 25,000 families against Service Corporation International. While denying any wrongdoing, the company settled the suit on Thursday for $80.5 million. It's not the first time it has faced allegations of desecrating its customers' graves.

In 2003, SCI agreed to a $100 million settlement after it was accused of overselling plots and moving bodies to make room for new ones at Menorah Gardens Cemetery near West Palm Beach.

Despite its legal entanglements, Houston-based SCI has spent decades buying up the competition, becoming the world's largest owner and operator of funeral homes and cemeteries.

In Tampa Bay, SCI will soon be handling nearly one in four bay area deaths. By comparison, Anderson-McQueen, the area's largest independent chain, handled 7 percent.

And don't expect SCI's ambitions to cool.

"Remember, traditionally people purchased cemetery property in their early 60s," said CEO Tom Ryan. "So with the baby boomers turning a range from 50 to the age of 68 this year, our best days remain ahead of us."

• • •

Until recently, SCI owned more than 1,400 funeral homes. Its closest competitor, Stewart Enterprises, owned 217.

In December, the Federal Trade Commission approved the company's $1.4 billion acquisition of Stewart. The merger means SCI will grow to more than 25,000 employees, with revenues of nearly $3 billion. SCI said it will own 1,595 funeral homes and 477 cemeteries in 43 states, Canada and Puerto Rico.

In Tampa Bay, the merger will raise SCI's market share from 16 percent to 24 percent.

That kind of size means higher prices for customers, according to Clarence Prevatt Jr., who owns Prevatt Funeral Home in Hudson and co-founder of Independent Funeral Directors of Florida.

"I would bet my next paycheck, and my last four or five paychecks, that you cannot go to any state where corporations own funeral homes and cemeteries and you can save money,'' he said. "Corporations are known to be more expensive than independents, I don't care where you go."

Keenan Knopke, chief executive officer of the independent Curlew Hills Memory Gardens in Clearwater, worked for Stewart for nearly 20 years after selling his family's funeral home in the mid 1980s. He said that when a company the size of SCI buys funeral homes in bulk, they must inevitably make up for those that perform poorly or close.

"Will prices go up?" Knopke said. "I can't speak to SCI. I can only represent my days at Stewart. And that is that yes, they always went up. Maybe not right away, but it was never far behind."

A report cited by Bloomberg Businessweek in 2013 pegged SCI's total average service nationally at $6,256, compared with $4,405 for independently owned funeral homes.

Concern about pricing is not universal, however.

"I don't buy the argument about selling off and raising prices to offset losses," said consultant Dan Isard of The Foresight Companies in Phoenix. "Cemetery pricing is usually akin to real estate pricing in a new development, subject to the effect of supply and demand. The (acquisition of Stewart) will not affect pricing in this area."

Spokeswoman Jessica McDunn said SCI "has a price point for almost every consumer," and that J.D. Power surveys have shown a majority of families said they got their money's worth.

• • •

For all its size, SCI cultivates a local, family-friendly image. A funeral home's name or website, for instance, might give little clue that it is part of a big chain.

The home page of Moss-Feaster, which has four funeral homes in Pinellas County, talks about its beginning in 1932, when Jack Moss and his wife founded the Moss Funeral Home in Clearwater.

The website of Blount & Curry Funeral Homes and Cremation Services tells the story of Frazier T. Blount, who co-founded Tampa's Blount Henderson Funeral Home in 1913.

Similarly, Sylvan Abbey Memorial Park boasts a history dating back to 1853, as deeply rooted as the "more than 1,000 mature southern live oaks shrouded with Spanish moss" on its grounds. It is also home to Pinellas County's first recorded burial.

Though the ownership has changed, the names remain the same. Funeral homes build loyalty through family names, and SCI isn't about to chuck those away. Jack Moss died in 1974, but his picture is still on the Moss Feaster website. The company history doesn't mention SCI's acquisition of Moss Funeral home in 1977, or its subsequent purchase of Feaster Memorial Homes in 1984.

"They keep those family names because those are old family names people recognize," said Prevatt, the Hudson funeral home owner.

McDunn, the SCI spokeswoman, said the merger won't affect consumers except to enhance their opportunities through the Dignity Memorial network, a brand owned and operated by SCI in more than 1,800 locations, which offers travel benefits and other perks to bereaved relatives. The trademarked Dignity name and the image of a rose that comes with it — visible on the websites of those SCI properties, including ones formerly owned by Stewart — is about as close as the company will get to showing customers its name.

"Our primary focus is the families, and we will continue meeting their needs," McDunn said. "Pre-need" or advance plans made by customers at acquired homes will be honored, she said.

• • •

SCI was founded in 1962 in Houston by Robert Waltrip, a licensed funeral director who grew up in the business. Waltrip started with a small network of homes, floating resources between them as needed, a technique known in the funeral business as "clustering."

The company went public seven years after it was founded, and hit the New York Stock Exchange in 1974. The company has made several large acquisitions since, including its then-closest competitor in 2006.

SCI has enjoyed a reputation of catering to the upper end of funeral consumers, through well-appointed funeral homes and a proven track record of success.

In the meantime, private homes market themselves as the authentic product.

"It's about a relationship," said Terry Brett, who with his brother Tim has owned the Brett Funeral Home that his father started in 1960. "You want to know the person face-to-face. You want to know that the person whose name is on the sign outside is the person who's going to be talking to you on the inside."

• • •

Last week, the Los Angeles Superior Court granted preliminary approval of a settlement that grants relief to the more than 25,000 families of people buried at Eden Memorial Park, one of the largest Jewish cemeteries in the Los Angeles area.

According to plaintiff's attorneys, the cemetery's employees forced additional space between existing plots to make room for new ones, even if that meant breaking vaults and disturbing remains.

"Basically, 'Make it fit' became the mantra of the cemetery for over two decades," Michael Avenatti, the plaintiffs' lead attorney, told the Times on Thursday. "It's been incredibly traumatic and very upsetting, certainly a very, very long road for these families."

According to news reports, the settlement sets up a $35.25 million reimbursement fund for people who want to remove their loved ones from the cemetery or who bought services such as prepaid gravesites.

The company also agreed to pay $250,000 to notify people of the settlement, and it will make changes to correct problems and prevent future misconduct that could cost it an additional $45 million, including loss of future business.

The company denied wrongdoing.

"While we do not believe the allegations are representative of the standard of care and service our professionals provide, it is in the best interest of our client families, our shareholders and our associates that we put this litigation behind us, move forward and focus on the work we do every day,'' McDunn said. "We have strict policies and procedures in place at all of our cemeteries. We strive to serve all our client families with respect, compassion and transparency."

Andrew Meacham can be reached at [email protected] or (727) 892-2248.

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