State's funeral industry under greater scrutiny

By John Duchemin
Advertiser Staff Writer

After scandals that have roiled the local and national funeral industry in recent months, Hawai'i providers of funeral services are coming under intense official scrutiny.

Critics say laws governing the Hawai'i funeral business, which generates tens of millions of dollars in revenue each year, are among the nation's weakest. They contend that regulation of the several dozen companies in funeral-related businesses is scattered across several thinly staffed state departments, and the laws are loose and do little to protect consumers.

Consumers are uneasy after the Tri-State Crematory incident in Noble, Ga., in which authorities two months ago unearthed hundreds of buried bodies that were supposed to have been cremated. Also shocking Hawai'i was the investigation of Memorial Mortuary in Hilo, in which the state attorney general's office alleged that the mortuary oversaw the burial of two bodies in bags instead of coffins.

After the Hilo investigation hit the national news, U.S. Congressman Mark Foley, R-Fla., asked that Hawai'i be a target of a federal investigation of funeral industry laws.

Hawai'i legislators have joined in the calls for investigation, and industry insiders have begun to push for broader reforms. The National Funeral Directors' Association has added Hawai'i to a list of states needing significant improvements in consumer protection laws.

"In response to what went on in (Georgia), consumers are saying, 'Wait, can that happen here in Hawai'i?' And we want to make sure it doesn't happen here," said state Rep. Kenneth Hiraki, D-25th (Kaka'ako, Downtown, Ala Moana), chair of the House Consumer Protection and Commerce Committee.

The House earlier this month approved a resolution calling for a "death services task force" to determine how to improve funeral industry laws. The proposal, House Concurrent Resolution 53, is now in the Senate.

Some say that the industry has been run professionally for years and that problems have been too few to warrant much change. Bruce Anderson, director of the state Department of Health, which issues licenses to mortuaries and embalmers and clean-air permits to crematories, cautions that more bureaucracy is no substitute for common sense.

But critics argue that existing statutes don't take into account the complexities of the many-layered death care business, which not only includes cemeteries and crematories, but mortuaries, embalmers, casket sellers and other merchandise suppliers, funeral insurance plans, and trust funds for pre-paid funerals and cemetery maintenance. Key sections of the industry are almost entirely unregulated, while others are only covered by public health rules.

Hawai'i has the highest cremation rate in the United States — almost 60 percent of the 8,500 people who died here in 2000 were cremated — but the state's 11 crematories are among the least regulated in the nation. Crematories are required to get clean-air permits once every five years, but they are never inspected to ensure they are working properly. Hawai'i is one of only eight states without laws requiring licensing or registration of crematories, according to the National Funeral Directors' Association.

"Here's the problem: We have one of the highest cremation rates in the nation, but one of the least regulated industries," said Mitchell Dodo, vice president of Dodo Mortuary on the Big Island and president of the Hawai'i Funeral Directors Association, the local chapter of the national group.

The lack of cremation rules has drawn the most concern from industry observers, and the Hawai'i Funeral Directors Association has drafted and lobbied for a "model cremation law" that would require tighter scrutiny of Hawai'i crematories.

Laws governing pre-paid funeral trust funds, another important sector of the business, are less consumer-friendly than in other states, some critics say.

Pre-paid funeral plans let customers pay for their funerals before they die, in some cases decades in advance. The money goes into a trust fund run by the funeral home company. But a decades-old state law lets funeral home companies take 30 percent of the money off the top as "acquisition costs."

While the Hawai'i law lets funeral homes reap some up-front profits, it could also create danger for consumers, said David Morikami, operations manager of Leeward Funeral Home, a family-run mortuary in Pearl City. Less money deposited in trust means less money to guarantee the funeral home can actually pay for the contract whenever a customer dies, Morikami said.

At least 15 states make funeral homes deposit 100 percent of pre-paid funeral money in trust funds. Like Hawai'i, Florida also lets funeral homes keep 30 percent, but recent consumer concern has led Florida legislators to propose a bill to require full deposit in trust.

"I'm not saying our rules need to be changed, but we still need to see whether the system lets customers always get what they're paying to get," Morikami said. "After all, customers are often buying something they will only use 30 years later."

Morikami and Moanalua Mortuary's Hansen, neither of whom sell pre-paid funeral plans, said the proposed funeral industry task force should consider tightening the pre-paid trust fund laws. Hawai'i has no overall funeral industry board or commission to monitor activities. .

The Department of Health issues embalming licenses and annual mortuary permits through its Sanitation Branch, whose 26 inspectors must also inspect the state's restaurants, tattoo shops, fish vendors, beauty parlors, snack machines, massage parlors, public laundries, hospitals, swimming pools and other facilities.

The finances of cemeteries and pre-paid funeral trusts are regulated by the Cemetery and Pre-Need Funeral Authority licensing program in the Department of Commerce and Consumer Affairs. The program's director, Candace F.H. Ito, has one assistant, and also regulates the state's real estate appraisers, dispensing opticians and naturopathic examiners.

"The state has plenty of laws, but it needs to enforce the ones it has," said Haines "Burt" Freeland, vice president of Maui funeral home Ballard Family Mortuary.

On Maui, where the Department of Health has only three sanitation inspectors, visits from regulators are rare, Freeland said.

"Sometimes you have to call and ask when they plan on coming out," he said. "These sanitation officers are involved in everything — restaurants, bars, landfills, you name it — so we certainly don't expect to see them unannounced."

Freeland, Moanalua Mortuary's Hansen, and others in the industry want the state to form a funeral industry commission, which would take over inspection and licensing from the Department of Health and the DCCA. Such a body would need to be more active and strict in enforcing rules, Hansen said.

"Our equipment should be licensed, our facilities should be licensed, and operators should be licensed," he said. "There should be a time frame, and renewal shouldn't be automatic. Hawai'i should be the leader in this. If there's a law and enforcement that's good, fair and strong, we could have a good clean industry."

Next: A look at the big business of cremation.