United States District Court, E.D. Missouri, Eastern Division
JO ANN HOWARD & ASSOCIATES, P.C. et al., Plaintiffs,
J. DOUGLAS CASSITY, et al., Defendants.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
RICHARD WEBBER SENIOR UNITED STATES DISTRICT JUDGE
matter comes before the Court following a four-week bench
trial. The above-captioned cause of action was filed for
violations of the Racketeer Influenced and Corrupt
Organizations Act, 18 U.S.C. §§ 1961-1968,
violations of the Lanham Act, 15 U.S.C. §§
1051-1141n, state law claims concerning intentional and
negligent fraudulent misrepresentations, negligence and gross
negligence, breach of fiduciary duties, and violations of the
Texas Receivership Act, Tex. Ins. Code §§
443.202-443.205. Plaintiffs' claims against the remaining
Defendants PNC Bank, N.A. (“PNC”) and National
City Bank, N.A. (“NCB”) (collectively
“Defendants”), the only remaining defendants,
allege Defendants breached their duties of trust owed to the
beneficiaries of various pre-need funeral trusts. In March
2015, this matter proceeded to a jury trial pursuant to
negligence and breach of fiduciary duty theories and the jury
determined Defendants were liable to Plaintiffs for $355.5
million in compensatory damages and $35, 550, 000 in punitive
Plaintiffs and Defendants appealed the Court's decisions.
The Eighth Circuit affirmed, in part, and reversed, in part,
the Court's rulings. Jo Ann Howard & Assoc., P.C.
v. Cassity, 868 F.3d 637 (8th Cir. 2017). The Eighth
Circuit concluded Defendants' claims arise under trust
law rather than tort law. Id. at 645. Consequently,
the Eighth Circuit held the claim is properly tried to the
Court. Id. at 649.
Eighth Circuit affirmed the Court's determination the
funeral homes and consumers, as well as NPS, were the
beneficiaries of the Trusts. Id. at 646. It also
affirmed the Court's striking of Defendants'
authorization and in pari delicto defenses.
Id. at 647. As to Defendants' investment advisor
defense, the Eighth Circuit held “PNC is not relieved
of liability unless Allegiant ensured that Wulf was investing
trust assets within the authority of a reasonably prudent
trustee.” Id. at 648. The Eighth Circuit
In summary, we affirm the judgment in part, reverse in part,
and remand for further proceedings. We conclude that
[Plaintiffs] brought a trust-law claim in equity that should
have been tried to the court. The beneficiaries of the
preneed trusts were NPS, Missouri consumers, and the funeral
homes that were to provide services for the consumers. The
measure of damages for the trust claim is defined by §
205 of the Restatement (Second) of Trusts. . . Although the
case was tried to a jury on a tort-law theory, we do no
dictate that the case be retried in its entirety. The
district court is familiar with the evidence and may proceed
based on the existing trial record as it sees fit, with
receipt of additional evidence as the court deems
Id. at 651-652.
considered the pleadings, trial and deposition testimony, and
exhibits, the Court hereby makes and enters the following
findings of fact and conclusions of law in accordance with
Rule 52 of the Federal Rules of Civil Procedure.
FINDINGS OF FACT
Ann Howard and Associates, P.C. is the duly appointed and
designated Special Deputy Receiver (“SDR”) for
National Prearranged Services (“NPS”), Lincoln
Memorial Life Insurance Company (“Lincoln”) and
Memorial Services Life Insurance Company
(“Memorial”), which were placed into receivership
by the Texas Department of Insurance on May 14, 2008, and are
currently in the process of being liquidated. Joint
Stipulation of Undisputed Facts (“JSF”), ECF No.
SDR is authorized to deal with the property, business, and
claims for or against NPS, Lincoln, and Memorial pursuant to
the provisions of the Insurer Receivership Act,
Texas Insurance Code Chapter 443. JSF.
Plaintiffs Missouri Life and Health Insurance Guaranty
Association, Texas Life and Health Insurance Guaranty
Association, Illinois Life and Health Insurance Guaranty
Association, Kansas Life and Health Insurance Guaranty
Association, Oklahoma Life and Health Insurance Guaranty
Association, Kentucky Life and Health Insurance Guaranty
Association, and the Arkansas Life and Health Insurance
Guaranty Association are statutory entities created by their
respective state legislatures to provide protection to their
respective states' resident policyholders in the event of
an insolvency of a member insurance company. JSF.
Plaintiff National Organization of Life and Health Insurance
Guaranty Associations (“NOLHGA”) is a Virginia
nonstock corporation. It is a voluntary association of its
members, which are all of the life and health insurance
guaranty associations of the states of the United States of
America and the District of Columbia. NOLHGA is a plaintiff
in this action as the assignee of claims for collection
purposes only from the following state life and health
insurance guaranty associations: Arizona, California,
Colorado, District of Columbia, Georgia, Idaho, Indiana,
Iowa, Louisiana, Maryland, Michigan, Minnesota, Mississippi,
Montana, Nebraska, Nevada, New Mexico, North Dakota, Ohio,
Oregon, Rhode Island, South Dakota, Tennessee, Utah,
Washington, West Virginia, Wisconsin, and Wyoming. Each state
life and health insurance guaranty association is a statutory
entity created by their respective state legislatures to
provide protection to their respective states' resident
policyholders in the event of an insolvency of a member
insurance company. JSF.
is a nationally chartered bank with its headquarters in
Pittsburgh, Pennsylvania and its designated main office in
Delaware. PNC is the successor-in-interest to NCB, National
City Bank of the Midwest, and Allegiant Bank as a result of
various mergers. JSF.
Allegiant Trust Company, a division of Allegiant Bank, served
as the trustee for NPS Pre-Need Trust I between August 24,
1998, and May 14, 2004 (“Trust I”); Pre-Need
Trust II between August 14, 1998, and May 14, 2004
(“Trust II”); Pre-Need Trust III between August
28, 1998, and May 14, 2004 (“Trust III”);
Pre-Need Trust IV between August 11, 1998, and May 14, 2004
(“Trust IV”); Pre-Need Trust V between March 25,
1999, and May 14, 2004 (“Trust V”); as trustee of
the Mt. Washington Forever Pre-Need Trust between April 13,
2000, and May 14, 2004 (“MTW Trust”); and as the
trustee of the Mason Securities Association d/b/a Funeral and
Cremation Society of America Pre-Need Trust between February
19, 1998, and May 14, 2004 (“CSA Trust”)
(collectively “the Trusts”). JSF.
Allegiant Bank was merged with and into National City Bank of
the Midwest, effective as of July 31, 2004. National City
Bank of the Midwest, in turn, was merged with and into
National City Bank, effective July 22, 2006. Finally,
National City Bank was merged with and into PNC effective in
November 2009. JSF.
started in 1979 and was owned and controlled by the Cassity
family, whose members were Doug, Rhonda, Tyler, and Brent
sold preneed funeral contracts. Under a preneed funeral
contract, a consumer would arrange and pay for a funeral
before the time of need. There were advantages to
prearranging a funeral, including relieving loved ones of
having to make decisions at the time of death and freezing
the price of the funeral to the price at the time of
became the largest preneed seller in Missouri. As part of its
marketing to funeral homes to sell NPS preneed contracts, NPS
would stress the funds received would be held in trust. JSF.
Doug Cassity and Randy Sutton controlled the finances of NPS.
JSF. Randy Sutton was president and/or Chief Financial
Officer of NPS. Mr. Sutton was also President of Lincoln.
JSF. During Allegiant's tenure, Brent Cassity was the
Chief Operating Officer and President of Marketing at NPS.
JSF. Angie Hall was an employee of NPS who reported to Mr.
Cassity family purchased Lincoln to own and control the
insurance company used for issuing life insurance policies to
back the preneed funeral contracts sold by NPS. JSF. Doug
Cassity and Randy Sutton, in addition to controlling
NPS's operations, also controlled the operations of
Practically all life insurance policies issued by Lincoln
were issued to fund the preneed funeral contracts sold by
NPS. Likewise, the vast majority of the NPS Preneed
Trusts' assets during Allegiant's period as trustee
were in the form of life insurance policies issued by
and Lincoln were part of a network of companies each owned
and controlled by the Cassity family. These companies
included Memorial, Lincoln Memorial Services, National
Heritage Enterprises, Forever Enterprises, Forever Network,
and numerous subsidiary funeral homes and cemeteries such as
Hollywood Forever. Ex. P-2372, 56:10-57:3, 58:2-25,
59:8-60:9; BT Vol. VI, 54:5-17; Ex. P-12.
Lincoln Memorial Services was Doug Cassity's private
investment company, and was an entirely different entity than
Lincoln Memorial Life Insurance Company. BT Vol. VI,
54:18-55:3; Ex. P-2372, 60:1-9.
While serving as trustee of the NPS Preneed Trusts,
Allegiant, through its personnel, knew NPS, Lincoln, Forever
Enterprises, Hollywood Forever, and the other companies
within the Cassity consortium were related entities owned and
controlled by the Cassity family. Ex. P-2381, 62:18-63:2,
64:4-14; Ex. P-12; Ex. P-2378, 21:24-23:10; BT Vol. II,
Background of Allegiant, Herbert Morisse, and the Trusts
Herbert Morisse is a resident of Oakland, Missouri. BT Vol.
V, 3:18-19. He became an Eagle Scout in the mid to late
1960s. BT Vol. V, 4:8-11. He graduated from Webster Groves
High School in 1971, graduated from Westminster College,
Fulton, Missouri in 1975, and graduated from Washington
University Law School in 1978. BT Vol. V, 4:14-18. He is an
active member of the Missouri Bar. BT Vol. V, 4:23-24.
While at Washington University Law School, he served as a
clerk for one semester for Judge Theodore McMillian. BT Vol.
V, 5:2-3. He was married in 1984. BT Vol. V, 3:23. He began
his legal career in downtown St. Louis with the firm, Luke
& Cunliff in 1978, practicing principally in the area of
insurance defense, worker's compensation and defense
work. BT Vol. V, 5:9-18. He supported a principal in the firm
who was engaged in general practice in estate planning,
probate, trust, closely-held business entities, real estate
contracts, and other areas. Id.
Luke & Cunliff, he was assigned some wills and trust work
including probate of estates, wills, and trusts. BT Vol. V,
6:10-13. There, he developed an understanding of the nature
of fiduciaries. BT Vol. V, 6:18-20. When drafting trust
instruments and wills, he learned, and understood, the roles
of different parties. BT Vol. V, 6:23-6:25. In connection
with estates, he learned “pretty much” detail
about probate administration. BT Vol. V, 6:23-7:1. In the
probate division in the City of St. Louis, he was appointed
to one case, in particular, as guardian ad litem, to review
administration of a decedent's estate, where a charitable
beneficiary objected, either to a settlement or to a final
settlement “not coming down the pike.” BT Vol. V,
7:3-14. There were objections about assets in the estate, and
he performed those ad litem responsibilities, and reported
back to the court. Id. In that work, he looked into
how a trustee should be administering an estate like the one
on which he was working. BT Vol. V, 7:15-18.
his law practice, up until 1995, he gained an understanding
of a trust instrument, and it was always his understanding a
trust is an entity, an abstract entity, and to have a valid
trust, there needs to be a grantor, a trustee, and
beneficiaries. BT Vol. V, 7:22-8:3. He believed
administrative provisions of trusts could provide for many
things. Id. In the area of estate planning, Mr.
Morisse learned how to inquire of clients with respect to
their needs and purposes, for inclusion in drafting of trust
instruments. BT Vol. V, 8:4-7. He knew, under Missouri law,
there were statutory duties a trustee had power to exercise,
and the trust instrument could utilize those, or expand or
restrict powers. BT Vol. V, 8:8-18. He learned the trustee
had fiduciary responsibilities in the performance of trust
duties. BT Vol. V, 8:17-18. He learned the duty of care was
to exercise the responsibilities and duties with which the
trustee was charged accurately and with good care. BT Vol. V,
Morisse knew a trust instrument could incorporate and include
duties, responsibilities and discretions from Missouri
statutes. BT Vol. V, 9:3-9. He believed the trust instrument
could not incorporate all duties, responsibilities and
discretions, “if that was desired, ” but could
create or include broader discretions and powers, or more
restrictive discretions and powers by accordingly drafting in
the powers and discretions' portion of the trust
instrument. Id. He believed the trust instrument
would control over background rules, if the trust instrument
narrowed the duties of the trustee. BT Vol. V, 9:10-14.
1995, Mr. Morisse's private practice was 60 to 70 percent
probate, trust or fiduciary work. BT Vol. V, 9:15-19.
enrollment in continuing legal education courses, Mr. Morisse
elected to focus on estate planning and taxation as related
to fiduciary matters. BT Vol. V, 9:23-10:2.
some of his work, there would be some person serving in the
role of investment management. BT Vol. V, 10:3-5. First, he
believed the trustee's responsibilities typically
included, or would include investment responsibilities and
administration. BT Vol. V, 10:8-10. He believed, if there was
a wish to have an investment advisor appointed to perform the
investment management function of the trust, that could be
accomplished by incorporating that provision in the trust
instrument. BT Vol. V, 10:10-14. In that case, Mr. Morisse
believed the trust instrument would be followed with respect
to the formalities of appointing that investment advisor, and
the investment manager would be responsible for the
investment actions and decisions of the trust. BT Vol. V,
10:15-19. Mr. Morisse had no investment management
experience. BT Vol. V, 10:20-21. In practice for seventeen
years, he learned there are differences in trust
administration and investment management. BT Vol. V,
Morisse believed trust administration was attending to
performance of the administrative responsibilities of the
trust, such as making discretionary or nondiscretionary
distributions, accounting, interacting with beneficiaries,
and attending day-to-day business of the trust, other than
investment management. BT Vol. V, 11:1-10. Mr. Morisse
believed an investment manager would be responsible for
establishing the investment objective for the account and
physically making investment actions and decisions in
accordance with the investment objective. BT Vol. V,
a practicing lawyer, Mr. Morisse sat down with clients
establishing trusts, helped draft trusts, helped interpret
trusts and represented people who were appointed as
fiduciaries to trusts. BT Vol. V, 11:15-24. He represented
fiduciaries as executors and executrixes, trustees of trusts,
and conservators of conservatorships. BT Vol. V, 12:2-5. He
counseled trustees with respect to their responsibilities and
any particular question they presented. BT Vol. V, 12:6-8. He
regularly appeared in St. Louis County and St. Louis City
probate courts. BT Vol. V, 12:9-11.
Morisse described a discretionary trust as “a trust
where the trustee has discretion, and, frankly, is charged
with the responsibility of exercising discretion with respect
to investment management.” BT Vol. V, 12:15-21.
nondiscretionary trust, he believed, “would be the
flip, ” in that the trustee would not have the
authority to engage in investment management. BT Vol. V,
13:1-3. In his view, even if the trustee wanted to try to
exercise investment management decisions, the trustee would
not have the underlying authority to do so. BT Vol. V,
13:7-10. In his law practice, Mr. Morisse learned a directed
trust would be a type of nondiscretionary trust. BT Vol. V,
private practice, Mr. Morisse engaged in activities related
to the profession, including civic activities, and as a
member of the Estate Planning Council of St. Louis, which was
composed of professionals from various disciplines, lawyers,
CPAs, insurance professionals, specifically focused on estate
planning, trust and estate matters. BT Vol. V, 14:20-15:15.
Over a period of time, as a member of the Bar Association of
Metropolitan St. Louis, he served on various probate, trust
and real estate committees. BT Vol. V, 15:18-20; Ex. P-276.
Morisse learned, in private practice, the duty of an
investment manager regarding how assets should be handled,
managed and invested, included their own specific fiduciary
responsibility to manage the assets in accordance with the
trust instrument. BT Vol. V, 15:24-16:9. He observed, there
is the prudent man rule and in Missouri, there is the prudent
investment rule, which is essentially a standard of investing
to meet fiduciary obligations when making investment
decisions for a trust estate. BT Vol. V, 16:14-18.
Missouri Supreme Court appointed Mr. Morisse as a committee
member, under the Office of Chief Disciplinary Counsel, where
he, and four other lawyers and two laypersons, hear
complaints referred for deliberation and action, alleging
violation by attorneys of Missouri's Code of
Responsibility for lawyers. BT Vol. V, 16:21-17:13. He was
finishing his second four-year term at the time of trial. BT
Vol. V, 17:18-20.
Morisse left the law practice in 1995 when he became employed
at United Missouri Bank (“UMB”). BT Vol. V,
17:21-18:3. The law firm was going in a different direction,
and his practice focused more on estate planning,
trust/probate, and closely-held corporations. BT Vol. V,
18:4-9. He worked at UMB from February 1995, to October 1997.
BT Vol. V, 18:13-14. He learned of the job at UMB from
Richard Markow. BT Vol. V, 18:15-16.
Throughout his career, Mr. Morisse worked in the trust
departments of five banks, including UMB, Allegiant, NCB,
PNC, and Wells Fargo. BT Vol. V, 19:19-21. Mr. Morisse
believed he had lived up to the industry custom and practice,
as he understood it, at all times of his career. BT Vol. V,
When he worked at UMB, his duties were to act as trust
administrator of trust accounts. BT Vol. V, 21:16-21.
Day-to-day administration included understanding and
following UMB's trust department's policies and
procedures when performing his responsibilities. BT Vol.
21:22-22:2. Daily, he reviewed the cash balance report to
determine if there were overdrafts in his assigned accounts.
BT Vol. V, 22:3-9. Thereafter, he attended day-to-day
requirements and duties related to the various and specific
accounts to which he was assigned. Id. He interacted
with lawyers of clients who were either grantors or
beneficiaries of accounts for which he was responsible. BT
Vol. V, 22:12-14. Mr. Morisse recognized Mr. Markow's
chief responsibilities were marketing, but he had management
responsibility for the trust department staff. BT Vol. V,
22:15-19. Administratively, Mr. Morisse reported to Don
Edinger at UMB's home office in Kansas City. BT Vol. V,
22:20-21. Mr. Markow worked at UMB from 1993 until 1996. BT
Vol. V, 22:22-23.
While at UMB, Mr. Morisse administered a variety of fiduciary
accounts, including revocable and irrevocable trusts, as well
as other types of accounts. BT Vol. V, 23:1-4. At UMB, there
was a portfolio manager on premises who performed investment
management for discretionary trust accounts. BT Vol. V,
23:9-12. No. portfolio manager or investment manager was
assigned to nondiscretionary accounts. BT Vol. V, 23:13-16.
the time Mr. Morisse's book of business had increased
beyond the capacity that was the model for a trust
administrator. BT Vol. V, 23:21-25. When no additional
administrative assistants were hired, contrary to
representations made to him, Mr. Morisse elected to resign,
for health reasons. BT Vol. V, 24:1-5. Mr. Morisse joined
Allegiant Bank shortly after leaving UMB in November 1997.
Ex. P-0276; BT Vol. V, 24:22-25:2.
Allegiant Bank was founded in St. Louis Missouri in the
spring of 1989. In the beginning Allegiant Bank did not have
a trust department. JSF.
Shaun Hayes, the President and CEO of Allegiant Bank, wanted
Allegiant to have a trust department so it would be
“perceived as a full service financial
institution.” Ex. P-2378, 11:23-12:3. Allegiant's
trust department was created as a marketing technique to give
a mere “perception” Allegiant had a trust
department. Id. at 12:10-23. The trust department
was never a core competency of Allegiant Bank, and was never
intended to be. Id. at 18:4-16. The trust department
was so small Mr. Hayes “paid no attention” to it,
as it was not where the Bank made its money. Id. at
or about October 1, 1997, a date preceding Herbert
Morisse's affiliation with Allegiant Bank, Mr.
Morisse learned, through Richard Markow, Allegiant Bank was
going to open “a brand-new trust department.” BT
Vol. II, 33:23-34:1; BT Vol. V, 24:6-9. Mr. Morisse was going
to be invited to be the first and only trust administrator in
Allegiant's new trust department. BT Vol. II, 34:8-10.
There were no trusts on the books at the time Mr. Morisse
became employed at Allegiant Bank. BT Vol. II, 34:11-15. At
that time, he had handled no preneed trusts and had not
worked on preneed trust accounts, but, as an attorney, he had
worked with many clients with respect to creation of trusts
and how assets should and could be transferred to trusts. BT
Vol. II, 35:3-17. Mr. Morisse became familiar with Allegiant
Bank operations, prior to him joining the Bank. BT Vol. V,
24:15-21. The Bank offered traditional banking services from
making loans, maintaining deposit accounts, issuing
Certificates of Deposit and offering safety deposit boxes.
Richard Markow was going to be designated as the person
responsible for administering the activities of Allegiant
Bank's trust department. Ex. P-2001, pg. 2; BT Vol. II,
40:4-8. Allegiant Bank employed Mr. Markow as president of
its trust department. BT Vol. II, 41:21-23. Even though the
minutes of a board of directors meeting on September 17,
1997, designated Mr. Markow as trust administrator, Mr.
Markow was never the administrator. Ex. P-2001; BT Vol. II,
85:22-24. Mr. Markow had no training or experience in
administering trusts, and was, instead, hired by Allegiant
for his marketing and sales abilities. Ex. P-2381,
Morisse met Richard Markow through his affiliation with the
Estate Planning Council of St. Louis. BT Vol. V, 20:5-9. Mr.
Morisse knew he had a law degree from the University of
Missouri, was a CPA, and worked as an associate in the tax
department of Laventhol and Horwath. BT Vol. V, 21:2-12; Ex.
P-276, pg. 7. Mr. Morisse knew Mr. Markow was previously
involved in marketing at United Missouri Bank
(“UMB”) and knew Mr. Markow had never served
“in the slightest capacity as actual hands-on
administering any trusts.” BT Vol. II, 40:12-19,
41:12-15. Mr. Morisse knew Mr. Markow had no prior experience
with preneed trusts, and did not recall Mr. Markow as having
any experience as a trust administrator, even though he was
appointed head of its trust department. Ex. P-2001, pg.2; BT
Vol. II, 42:11-18. Mr. Morisse recognized, from the first
day, Mr. Markow was hired for marketing only. BT Vol. II,
57:17-58:1. Mr. Morisse believed Mr. Markow was a qualified
trustee executive. BT Vol. V, 21:13-15.
Morisse was the sole trust administrator at Allegiant Bank.
Previously, he was trust administrator at UMB where he had no
investment responsibility, received no training in investment
management, and was never employed as trust counsel. BT Vol.
II, 23:10-24:3, 25:6-12. He understood, at UMB, other people
in the trust department were experienced in investment
management. BT Vol. II, 25:13-17. This was Mr. Morisse's
first time acting as trust administrator. Ex. P-276; BT Vol.
Allegiant's trust department was small, and thinly
staffed on purpose. Ex. P-2378, 18:4-16; 18:21-19:6. It had
only three employees - including Mr. Markow and Mr. Morisse -
at the time Allegiant took over as trustee for the Trusts.
JSF. Pam Buchanan was the third person in Allegiant
Bank's trust department behind Mr. Markow and Mr.
Morisse. BT Vol. II, 46:3-6. She was hired to be back-office
support for Mr. Morisse. BT Vol. II, 46:7-9. She had no
experience as a trust administrator, was not hired to judge
prudence of any investment in the Trusts, and Mr. Morisse
would not have relied on her judgment as to prudence of
investments in the Trusts. BT Vol. II, 46:10-22. Neither,
would Mr. Morisse have relied on Mr. Markow to judge prudence
of investments in the Trusts. BT Vol. II, 46:23-47:1. Mr.
Morisse was not trained to look at the assets in the Trusts
and judge whether they were prudent investments. BT Vol. II,
47:4. The Court concludes the Trust Department was severely
underfunded for all of the six years of Allegiant's
tenure, and understaffing contributed to cause
Allegiant's failure to comply with keeping, protecting,
and controlling trust assets as required by Chapter 436.
Mary Schmidt arrived in the trust department shortly
thereafter. BT Vol. V, 25:24-26:3. Ms. Schmidt formerly
worked at First Bank and then UMB for a number of years as a
trust administrator, when Mr. Morisse worked at UMB. BT Vol.
V, 26:5-9. A document from Allegiant describing the employees
of the trust department, shortly after it was established,
described Mr. Markow as having overall management of the
trust company. Ex. P-276, pg. 5. He had thirteen years of
experience at UMB. Id. Mr. Morisse believed the
trust department at Allegiant Bank, at the time he arrived,
was “up to the tasks that were then facing it.”
BT Vol. V, 27:10-12.
When he joined Allegiant Bank, it had recently had its trust
powers reactivated by the Missouri Division of Finance. BT
Vol. V, 25:3-7. This was memorialized in an October 10, 1997,
letter from the Missouri Division of Finance authorizing
Allegiant Bank to exercise fiduciary powers, about a month
before Mr. Morisse arrived at Allegiant Bank. Ex. P-276, pg.
4; BT Vol. V, 25:19-23.
1997, during Mr. Morisse's employment at Allegiant Bank,
the trust department administered $2, 277, 000.00 in trust
assets, over which he performed no management
responsibilities. Ex. P-0496; BT Vol. II, 39:8-40:3. Mr.
Markow did not involve himself in the day-to-day
administration of any of the accounts in the trust department
at Allegiant Bank. BT Vol. II, 47:20-23.
There was no investment manager on staff at Allegiant Bank
when Mr. Morisse arrived as an employee. BT Vol. V, 27:13-15.
The Bank required certain back-office support as a trust
accounting system, and contractually engaged a firm named
Midwest Trust Company (“Midwest”) from Overland
Park, Kansas. BT Vol. V, 27:16-23. Mr. Morisse worked with
individuals from that firm. BT Vol. V, 27:24-25.
Midwest was comprised of “professionals who knew how to
run trust administration” and which provided support
for newer trust departments. Ex. P-2381, 53:1-11.
Allegiant's contract with Midwest “allowed the
state [of Missouri] to be comfortable with activating”
Allegiant's “charter, the trust powers.” Ex.
P-2383, 81:9-19, 85:10-18.
Midwest provided operations services, maintained the trust
vault, maintained and ran the trust and accounting systems,
and provided investment management services. BT Vol. V,
28:1-6. Midwest Trust Company worked with Allegiant for at
least a year, maybe two years, until Allegiant Bank obtained
its own trust accounting system and, in effect, an operations
manager. BT Vol. V, 28:12-18. Shortly thereafter, Allegiant
Bank merged with Southside Bank. BT Vol. V, 28:19-22. Mr.
Morisse visited Midwest to develop an understanding of what
they did. BT Vol. V, 28:23-25.
Markow drove Mr. Morisse to Midwest in Kansas to meet with
Midwest's managers and representatives, for approximately
one to two days, to discuss areas the Bank was contracting
for fiduciary services, one of which was investment
management. BT Vol. V, 29:39. Any specific investment
decisions were made by Bill Courtney, a portfolio officer
assigned to work with Allegiant. BT Vol. V, 29:14-18. The
customers of Allegiant knew the Bank had contracted with
Midwest to perform investment management services as well as
backroom services. BT Vol. V, 29:22-30:5.
meetings with customers of Allegiant, face-to-face or by
phone, Mr. Courtney was identified as a portfolio manager
with Midwest. BT Vol. V, 30:1-5. Midwest also assisted with
policy procedures and provided the Bank with an initial
policy and procedure handbook. BT Vol. V, 30:6-12. The first
trusts that came into the Bank while Mr. Morisse was trust
administrator were either revocable or irrevocable trusts
affiliated with Mr. Markow's father-in law, Dr. Aronberg.
BT Vol. V, 30:13-18.
Shortly after he arrived at Allegiant, Mr. Morisse started
looking into the Trusts. BT Vol. V, 30:19-21. That started
when Mr. Markow advised him, Shaun Hayes and Mr. Markow were
planning a meeting to discuss and potentially pursue business
with NPS; Mr. Hayes on the loan side and Mr. Markow on the
trust side. BT Vol. V, 30:22-31:1. On December 9, 1997, a
financing and trust services proposal for the benefit of
Forever Enterprises, Inc. was presented to Allegiant. Ex. P-290.
It was a combined commercial loan proposal and a trust
services proposal. Ex. P-290, pg. 2. Mr. Markow proposed an
account of $1, 650, 000.00 in preneed funds and an endowed
care account of $834, 000.00 to land a $2.4 million
combination of preneed accounts with the prospect other NPS
preneed accounts would follow. Ex. P-290, pg. 9; BT Vol. II,
Bank was going to try to land all of the Trusts, which would
dwarf all of the other accounts at Allegiant's trust
department. BT Vol. II, 52:1-12.
Morisse learned the trusts that could potentially move to
Allegiant were preneed funeral trusts, governed by a specific
Missouri statute. BT Vol. V, 31:12-19. Mr. Morisse made an
effort to familiarize himself with that statute, before he
even got copies of trust agreements or statements to review.
Morisse's recollection was, at some time either before
the first meeting, or shortly after, but before a follow-up
meeting Mr. Markow and Mr. Hayes had with Cassity family
members, Mr. Morisse hand-wrote a list of questions he
thought would be relevant in obtaining information to
understand what the trusts were and the operation of them.
31:23-32:4. His notes are dated November 25, 1997, within the
month of his arrival at Allegiant Bank. Ex. P-283.
purpose in creating these notes was to understand what the
trusts were, what would be required in connection with their
administration and, or, management and what would be expected
of the Bank. BT Vol. V, 32:25-33:4. Mr. Morisse had
previously participated in intake of new accounts. BT Vol. V,
33:5-7. Mr. Morisse tried to follow that general due
diligence procedure with the Trusts. BT Vol. V, 33:8-10. His
first hand-written note was “Is the current corporate
fiduciary serving as trustee under, ” and then its
blank. Ex. P-283. He did not know the name of the trustee and
he wanted to understand who was serving in what capacity and
who it might be. BT Vol. V, 33:16-19. His answers came from a
number of sources. BT Vol. V, 33:20-25. He discovered the
trustee at the time was Mercantile Bank. Id.
Additional information came from NPS's attorney, Jean
Maylack. BT Vol. V, 34:1-3. When asked if he had formed an
opinion as to her quality, capability, and honesty as an
attorney, he responded, “Yes, she was then practicing
as an attorney with a firm that I recognized in St. Louis,
County.” BT Vol. V, 34:6-9.
Morisse's second question, in his notes, was “what
is the current value of assets in trust?” Ex. P-283. He
wanted to know what the Bank's responsibility would be.
BT Vol. V, 34:15-16. His next question was, “What is
the asset allocation? Fixed, equity, cash, other and
unique.” Ex. P-283. He received answers to that
question. BT Vol. V, 34:17-22.
Morisse defined fixed assets as “fixed income, which is
essentially bonds, notes.” BT Vol. V, 34:23-35:1.
Equity, he defined, as stocks, and “cash [was]
cash.” BT Vol. V, 35:2-5. He wanted to dig into
“unique assets, ” to find out if there were any,
and if there were, what would be expected or required. BT
Vol. V, 35:6-11. He discovered the accounts substantially
contained life insurance which he considered a unique asset.
BT Vol. V, 35:12-16.
Next, on his hand-written list, he wrote, “Are
investments directed or discretionary?” Ex. P-283. He
knew it would make a difference, in terms of the Bank's
responsibility if it accepted appointment as successor
trustee, if they were solely administrative or included
performing investment management duties. BT Vol. V, 35:19-24.
According to Mr. Morisse, if investments in the Trusts were
directed, the Bank would not have investment responsibility.
BT Vol. V, 36:5-8. If investments were discretionary, that
would mean the Bank would have investment management
responsibility, and there would need to be discussion of
Midwest's services in the area. BT Vol. V, 36:9-14. Mr.
Morisse found out the accounts were directed. BT Vol. V,
36:15-16. Mr. Morisse “at all times, even up to today
 believed the NPS trusts were directed.” BT Vol. V,
36:17-19. At no point in time from 1997 to the present, did
any person ever tell Mr. Morisse these investments were
discretionary, where Allegiant would have investment
responsibility. BT Vol. V, 36:23-37:1.
Morisse's third question was, “What are the total
number of preneed contracts?” Ex. P-283. He believed he
needed an understanding as to the volume and with respect to
what responsibilities or expectations there would be and the
Bank's ability to provide what was expected. BT Vol. V,
37:4-8. His next question was, “How many contracts
involve premium payments, monthly, quarterly,
annually?” Ex. P-283. He knew a premium was the amount
due on an insurance policy to keep it in force. BT Vol. V,
Morisse asked Mercantile Bank and NPS how many contracts
involved premium payments to determine the requirements for
the Bank to make monthly, quarterly and annual premium
payments. BT Vol. V, 38:5-14.
Morisse was told the Bank would not need to make any premium
payments; any premiums paid would be handled by the outside
investment advisor. BT Vol. V, 39:9-15. He also understood
Mercantile Bank was not making premium payments. Id.
Mr. Morisse understood, with respect to the life insurance
policies, they were ordinary or whole-life policies, paid-up.
BT Vol. V, 39:16-19.
sixth note, intended for NPS, was, “Please furnish a
sample report provided by you to the trustee.” Ex.
P-283. He received a sample of a packet supplied monthly by
NPS, which was one used by Mercantile Bank. BT Vol. V,
39:23-40:3. His use of “packets” as trustee, were
identical to what he understood Mercantile had been using for
some time. BT Vol. V, 40:8-11. His next question on number
five was, “How often do you furnish the reports?”
Ex. P-283. He wanted to understand the frequency with which
activity would be required to understand the expectations
matched against the capabilities of the Bank. BT Vol. V,
40:18-20. The last question was, “What term for trustee
services at quoted fee?” Ex. P-283.
Morisse also had some questions for a person name Kathi, who
he believed was with Mercantile Bank. BT Vol. V, 41:9-14. He
took notes of the conversation about acceptance of the trust
on November 25, 1997. Ex. P-283. He believed he received
sufficient information about the trust to deliberate on
whether the accounts should be accepted. BT Vol. V, 41:21-24.
first issue addressed in his conversation with Kathi was
“Company reputation, ” to get a comfort level or
understanding of the client in the community. Ex. P-283; BT
Vol. V, 42:2-4. The next question was sufficiency and
frequency of reports furnished by NPS to the trustee. Ex.
P-283. Next, he asked for the number of contracts.
Id. After that, the question was the number of
contracts with premium payments monthly, quarterly, annually.
Id. He also wrote, “Get copy of Missouri
Statute for trustee responsibilities and reporting
requirements to Missouri.” Id. Someone had
mentioned a statute governed preneed funeral contracts and he
wanted to be sure he obtained and understood it. BT Vol. V,
Morisse also participated in drafting a request for
information to NPS in the1997 time period, asking questions
to determine if Allegiant Bank was able to submit a proposal
to serve as trustee for the NPS preneed trust. Ex. D-729; BT
Vol. V, 43:21-25. Mr. Morisse asked if the current trustee
was serving under the provisions of Section 436.005 through
.071 RSMo. Ex. D-729. He next asked for the most recent
preneed trust annual report as filed with the
“Registration of the Missouri Department of Economic
Development.” Id. Next, Mr. Morisse asked,
“What is the current value of assets in trust and what
value of assets is allocated to equity, fixed income and
cash?” Id. Question four was, “Are the
trust investments directed or discretionary?”
Id. He was told this was a directed trust. BT Vol.
Skipping to question six, Mr. Morisse asked, “What is
the current number of preneed contracts having monthly,
semi-annual, and annual premium payments?” Ex. D-729.
He was told Mercantile was not making premium payments. BT
Vol. V, 47:1-6. The seventh question was, “Please
furnish us with a sample copy of the report you provided your
current trustee. How often do you furnish this report?”
Ex. D-729. He learned the report was a packet received
monthly. BT Vol. V, 47:13-16.
November 25, 1997, the Bank sent a letter to Jean Maylack,
attorney for NPS, signed by John Meek, loan officer of
Allegiant. Ex. P-284. Mr. Morisse learned Allegiant Bank, in
addition to having an interest in the trust business, was
also interested in making a loan. BT Vol. V, 48:9-15. The
letter stated, “Allegiant Bank would like to propose
financing, ” for a loan to Forever Enterprises, Inc. in
the aggregate amount of $2.2 to $2.4 million. Ex. P-284. At
this time, Mr. Morisse believed the credit department of the
Bank was supportive of having a business relationship with
businesses associated with the Cassitys. BT Vol. V,
Allegiant Bank requested further financial information
related to the trust proposal being considered. Ex. P-284.
Item eight in the letter asked, “What regulations and
requirements govern preneed sales?” Id. Item
nine asked, “Are preneed services adequately funded?
How are the assets managed, and by whom?” Id.
Based on due diligence calls and documents provided, Mr.
Morisse concluded preneed services were adequately funded by
life insurance. BT Vol. V, 50:10-16. He learned assets were
managed by an outside investment manager, named Wulf, Bates
& Murphy. BT Vol. V, 50:17-20. As to regulations and
requirements governing preneed trusts, Mr. Morisse learned
Chapter 436 applied to preneed trusts and another section
dealt with the annual report with the state agency. BT Vol.
Morisse hand-drafted a formal trust company proposal. Ex.
D-728, pg. 2-3; BT Vol. V, 51:1-3. In the proposal, Mr.
Morisse wrote, “Allegiant Bank is prepared to act as
trustee for your firm's preneed trust account and endowed
care fund trust account in accordance with Missouri Statutory
provisions governing those types of accounts, ” with
section numbers stated. Ex. D-728. He believed the
appropriate staffing and backroom services were available and
adequate to meet expectations. BT Vol. V, 52:7-15. He
believed he was qualified to read Chapter 436 and understand
its requirements. BT Vol. V, 52:20-22.
Morisse stated in the proposal, “Since you have
designated a qualified investment advisor to provide
investment management services as trustee for the preneed
trust account . . .” Ex. D-728. Mr. Morisse, at all
times from before he took in the Trusts until he resigned May
13, 2004, believed there was a qualified investment advisor
that provided investment management services for the preneed
trust accounts. BT Vol. V, 53:17-21.
Morisse next described services Allegiant Bank would be
willing to provide. First, he described “custody of the
assets.” Ex. D-728. Mr. Morisse believed he did that
for the whole time he was trustee, “by maintaining-by
keeping, maintaining, owning, and controlling assets that
were deposited to and/or part of the trust estate.” BT
Vol. V, 54:9-14. Mr. Morisse believed he lived-up to this
service listed in his handwritten proposal. BT Vol. V,
54:15-17. As to “Receipt of Deposits, ” Mr.
Morisse believed the Bank would have the capability to
receive deposits either by check or wire, deposit them to the
account, and have it accounted for and booked. BT Vol. V,
54:21-23. He believed he lived-up to that the whole time he
was trustee. BT Vol. V, 54:24-55:2. The Court concludes, by
clear and convincing evidence, Mr. Morisse did not lawfully
receive deposits, did not lawfully deposit them to the
account, and did not lawfully have deposits accounted for and
next service mentioned was, “Transfers to and
interaction with investment advisor.” Ex. D-728. To
learn more, Mr. Morisse went to the Wulf, Bates & Murphy
office at the Heritage office building in Clayton, Missouri.
BT Vol. V, 55:14-22.
next service Mr. Morisse identified Allegiant Bank would be
willing to provide was any required account review and
calculations related to distribution of income. Ex. D-728.
Mr. Morisse understood NPS, as grantor of the trust, was
entitled to distribution of income. BT Vol. V, 56:9-12. He
believed administrative reviews in a directed account were
done in accordance with the Bank's policy and procedures
throughout the period of Allegiant Bank's tenure. BT Vol.
V, 56:13-19. The Court disagrees with Mr. Morisse.
next title was, “Distribution of income in accordance
with applicable statutory provisions.” Ex. D-728. Mr.
Morisse believed he understood when income should be
distributed. BT Vol. V, 56:24-57:4. His view was, income
could be distributed if the value of the trust assets equaled
the total amount of deposits to the account and would not be
reduced below the total deposits to the account by the income
distribution. Id. He believed he distributed income
by that standard at all times. BT Vol. V, 57:5-7. Clearly,
Mr. Morisse did not follow the statute in either regard. The
next title was, “Monthly statements showing account
transactions and account value, ” and then, “year
-end tax information” was the last item. Ex. D-728. Mr.
Morisse provided monthly statements which were generated by a
third-party provider to the Bank, “outside the state of
Missouri and printed, assembled and mailed monthly.” BT
Vol. V, 57:17-22. The statements went to NPS, attention Randy
Sutton, and to Wulf, Bates & Murphy. BT Vol. V, 57:23-25.
Allegiant Bank entered into a lending relationship with the
Cassity-owned companies. BT Vol. V, 59:15-18. A memorandum
was prepared by the Allegiant Bank lending group, dated
December 5, 1997, in which John Meek was involved, on the
loan or credit side of the Bank. Ex. P-12. The promissory
note was for $2.2 million, amortized over 20 years at 8.625%,
and was secured by a first deed of trust, naming Bellerive
Heritage Gardens cemetery, formerly Hiram. Id.
Allegiant Bank was also willing to extend to NPS a working
capital line of credit of $100, 000.00 for twelve months. Ex.
P-12. Additionally, Allegiant Trust Company extended a
commitment to provide custodial services for their perpetual
care and preneed trust totaling $2 million. Id.
Later, Allegiant Bank took on many more of the Trusts. BT
Vol. V, 61:8-10. The current administrator was Mercantile
Bank, and the registered financial advisor was Wulf, Bates
& Murphy. Ex. P-12. After Wulf, Bates & Murphy took
over at Allegiant Bank as investment advisor for the Trusts,
Mr. Morisse always believed that firm was managing
investments for the trust, and he believed this memorandum
documented that belief of the Bank in 1997. BT Vol. V,
61:16-23. The memorandum referenced that “substantial
other trust accounts exist” and they are interested in
leaving Mercantile. Ex. P-12.
Morisse believed Lincoln Memorial Services was affiliated
with Lincoln Memorial Life Insurance Company. BT Vol. V,
62:14-16. The Banking Relations Memorandum showed Forever
Enterprises was wholly-owned by Heritage Enterprises, Inc.
Ex. P-12. Heritage Enterprises was a Missouri holding
company, which also owned National Prearranged Services,
Inc., Lincoln Memorial Services, Lincoln Heritage
Corporation, Lincoln Memorial Life Insurance Company and
Memorial Life Insurance Company. Id. Brent Cassity,
and his family, controlled majority ownership of all
corporations. Id. “The holding company reports
$55 million in annual revenue with net profits exceeding $2
million.” Id. When the Trusts came in, Mr.
Morisse believed there was financial wherewithal behind the
companies. BT Vol. V, 62:21-23.
From the Banking Relations Memorandum, Mr. Morisse knew the
Cassity family had been in the funeral business over forty
years, and in 1996, in the section on “Financial
Condition, ” he saw cemetery revenue was $774, 000.00.
Ex. P-12. Interim financial statements the Bank received for
September 30, 1997, showed virtually all revenue generated
was attributed to cemetery sales with the company reflecting
gross profits of $850, 000 in nine-month sales of $1, 056,
000.00. Id. The banking memorandum described the
strengths and weaknesses related to the to the Forever
Enterprises business. Id.
memorandum noted “Excellent cash flow coverage of 1.56
times with no reliance on increased sales brought on by the
new mausoleum; Conservative LTV of 62% on marketable property
with no reliance on developed cemetery property; Consistent
earnings stream coupled with good liquidity; Significant
trust relationship totaling $2MM with additional trusts
available.” Ex. P-12, pg. 4. Mr. Meek listed no
weaknesses identified by the Bank's lending department.
Ex. P-12, pg. 4. When the Bank accepted the Trusts, Mr.
Morisse believed NPS-affiliated entities were able to pay
their bills as they came due. BT Vol. V, 66:2-5.
Morisse assisted in drafting a formal proposal letter for
signature by Mr. Markow to Brent Cassity, presenting the
proposal for trust services. BT Vol. V, 66:9-12; Ex. P-292.
The letter was of the same substance as the previously
discussed handwritten version. Ex. P-292.
Allegiant Bank submitted a financing and trust services
proposal for the benefit of Forever Enterprises signed by Mr.
Meek and Mr. Markow. Ex. P-290. Included was a letter
committing the Bank to the commercial real estate loan and
working capital line of credit for $2.25 million. Ex. P-290.
The Bank was willing to extend a working capital line of
credit for an amount not to exceed $100, 000.00. Id.
Mr. Morisse recognized a promissory note from borrower
Forever Enterprises, dated January 5, 1998, for $2.25
million. Ex. P-304; BT Vol. V, 68:15-18.
Included in the proposal was the letter Mr. Morisse drafted
for Mr. Meek and Mr. Markow to sign. Ex. P-290. The letter
stated “Allegiant Trust Company can serve as trustee of
[Mr. Cassity's] firm's preneed trust account and
endowed care fund trust account governed by Missouri
statutory provisions of Section 436.005 et seq.  and
Section 214.320 et. seq. , respectively.”
Id. Further in the letter Mr. Morisse drafted, he
wrote, “However, in light of the fact that Allegiant
Trust Company will be relieved of investment responsibility
(and we would appreciate the opportunity to review the
agreement with your financial advisor) . . .” Mr.
Morisse, then, described fees. Ex. P-0290, pg. 10.
Morisse believed being relieved of investment responsibility
meant the Bank, through some provision of the Trust Agreement
or otherwise, did not have investment responsibility because
of the appointment of an investment advisor. BT Vol. V,
71:1-6. Mr. Morisse viewed the Trust Agreement as a
significant document for the work he would be doing if he
were selected as trust administrator. BT Vol. V, 71:13-16.
From the time Mr. Morisse started at Allegiant Bank in
August, 1998,  and the time he left in May 2004, as trust
administrator, he believed Allegiant, and himself, lived up
to what he said he would do, and all of these services
provided in the proposal. BT Vol. V, 59:10-14. The Court
disagrees with Mr. Morisse.
Allegiant trust department was successful in landing all of
the NPS preneed accounts in 1998. BT Vol. II, 61:15-18. The
trust department, which had three total accounts valued at
$2, 277, 000.00, increased its accounts to a total of $137
million, the vast majority being NPS accounts. JSF; BT Vol.
II, 61:19-62:1. Of the $52 million in trust assets in Trust
IV, $50, 231, 407.30 (96.38%) were in the form of Lincoln
life insurance policies. JSF. Over 97% of Trust I's
assets were certificates of debentures from NPS totaling
approximately $1.7 million. JSF. Mr. Morisse participated in
the intake process of the Trusts. BT Vol. V, 31:7-9.
When the Trusts came to Allegiant Bank, the entire trust
department was Mr. Markow, Mr. Morisse and Pam Buchanan. BT
Vol. II, 48:23-49:2.
the release of Allegiant Bank's 1998 annual report, Mr.
Hayes and the Board of Directors talked about the growth of
Allegiant Bank. Ex. P-371, pg. 6. The annual report was
intended for investors and potential investors in Allegiant
Bancorp. BT Vol. IV, 226:10-13. On page 9 of the 1998 annual
report, it stated: “Trust company ends first year with
$130 million under management.” Ex. P-0371, pg. 9.
the $137 million in trust assets at Allegiant Bank, almost
all were the Trusts, which were not under the management by
the trust department. BT Vol. IV, 225:13-21. “Under
management” had a specific meaning in trust
terminology, and at Allegiant Bank, the statement
“under management” meant the trust department was
actually managing the investments. BT Vol. IV, 225:22-226:3.
According to Allegiant's definition of “under
management, ” this statement in the report about the
amount of assets under management was not true. BT Vol. IV,
228:4-12. Mr. Morisse agreed this “wouldn't be my
characterization, ” and the NPS numbers should have
been deducted because they were not under management. BT Vol.
IV, 228:12, 229:11-14.
When Allegiant took over the Trusts, the Trust Agreement
referenced Mark Twain Bank, a predecessor of Mercantile Bank,
but such references did not change the Trust Agreement. Ex.
P-168; BT Vol. V, 72:3-8. Mr. Morisse carefully read the
Trust Agreement, and considered every paragraph, including
the definitions section. BT Vol. V, 72:16-21.
the definitions section of the Trust Agreement, Article I,
1.1 described “Owner shall mean each person who shall
execute a funeral agreement with the Seller for the purposes
of funeral expenses, articles and facilities agreed to be
furnished thereunder and either the person designated as his
successor in the funeral agreement or if there is no such
designation his legal representative.” Ex. P-168. In
Section 1.2, “Trustee shall mean [Allegiant
Bank]and successor to the fiduciary business of
said corporation, or any successor Trustee named by Seller
hereunder which is agreed in writing to accept the trust
property and act as Trustee.” Id. In this
case, NPS was Seller. BT Vol. V, 73:24-25.
Section 1.5, “Beneficiary, is the person designated in
writing by the owner of a funeral agreement as the person who
is to be subject of the disposition and is to receive the
funeral and/or burial services therein described, or if no
such person is designated then the Owner thereof.” Ex.
P-168. Until the litigation began, Mr. Morisse believed the
beneficiaries were NPS and Allegiant. After depositions and
at the bench trial, Mr. Morisse said his understanding was
the beneficiary meant “consumer” or the
“person” who is going to get the funeral. BT Vol.
Section 2.1 described the obligations of
“Seller:” “Seller shall deposit with the
trustee any sums received by it from owners, which are
required to be deposited in the trusts by the laws of the
State of Missouri.” Ex. P-168. Mr. Morisse understood
his responsibility concerning the “sums” was to
receive them and deposit them. BT Vol. V, 75:6-9. He believed
he always did that. BT Vol. V, 75:10-11.
Morisse believed the trust instrument required the seller,
NPS, to keep evidence of the amounts on deposit for a
particular customer. BT Vol. V, 94:16-19. He was asked,
“And do you believe that your view that NPS is who is
supposed to keep information about the amount held in trust
for each particular consumer, do you believe that that is
reflected in the trust instrument, itself?” Mr. Morisse
answered “Yes.” BT Vol. V, 94:20-24. This
mistaken belief by Mr. Morisse was a breach of trust.
Section 2.2, provided, generally, for the trustee to have
management responsibility for the assets of the trust,
provided if the preneed trust exceeds $250, 000.00, Seller
may appoint an outside investment advisor - or may appoint an
independent qualified investment advisor. Ex. P-168. Mr.
Morisse believed the Trusts' values always exceeded $250,
000.00. BT Vol. V, 75:23-76:2. From the day Allegiant was
named as trustee, and Mr. Morisse as trust administrator,
there was a large negative value for Trust IV.
Morisse believed an independent investment advisor could be
appointed by looking at the balance of the assets in the
accounts. BT Vol. V, 76:3-4. He believed NPS appointed an
independent, qualified investment advisor. BT Vol. V,
Section 2.2 of the Trust Agreement described the requirement
for the investment advisor to comply with Missouri law. Ex.
P-168. The advisor must be registered with the federal
government or the state. Id. The last clause stated,
“. . . and the Trustee shall have no liability for any
investment decision made by such investment advisor.”
Id. This was a term understood in the industry as an
exoneration provision, according to Mr. Morisse. BT Vol. V,
77:14-18. “Exoneration would be having no
liability.” BT Vol. V, 77:21.
Mr. Morisse had experience, in his legal practice, where on
appointment and acceptance of appointment by a successor
trustee, the successor trustee would have no liability, or
would be exonerated from the acts of the prior trustee. BT
Vol. V, 77:22-78:13. In any number of trusts with which he
was affiliated “there was similarly an outside
investment advisor appointed.” Id. He saw
cases where the trust protector was exonerated or excused
from or relieved of liability “if the duties per - -
are performed in - - under his best belief and
efforts.” Id. Mr. Morisse understood the
investment advisor for the NPS trust had served during
Mercantile's tenure. BT Vol. V, 78:14-20.
Section 2.3 stated, “[n]o owner shall be deemed to have
individual ownership of any asset in the Trust.” Ex.
P-168. This Section also provided the ownership of all assets
comprising the trust shall be solely in the trustee. Ex.
P-168. Mr. Morisse thought he met that requirement, by either
holding and having on the trust company's books
marketable securities, or securities that were able to be
held and registered in that fashion. BT Vol. V, 78:24-79:7.
In the case of the evidence of life insurance in the NPS
preneed trust, Mr. Morisse thought he met the requirement by
having verification and certification of ownership and
control, and also being named as beneficiary. Id.
Mr. Morisse was mistaken.
Section 2.4 stated, “With each deposit, Seller will
provide a breakdown of how much of said deposit is to be
created to each owner, described by number and
name of Owner.” Id. “[Allegiant]
accepted and relied upon the information NPS provided to the
Bank in the monthly packet.” BT Vol. V, 79:24-25. Mr.
Morisse believed it was the obligation of NPS, the Seller, to
provide this breakdown, under Section 2.4. BT Vol. V, 80:1-3.
Neither the Trust Agreement or Chapter 436 recognized this as
a substitute for “how much of said deposit is to be
created to each ‘Owner,' described by number and
name of owner.”
Article III, Section 3.1 of the Trust Agreement referenced
“Dispositive Distributions:” “The trustee
shall hold, protect, and conserve the trust corpus through
the management, investment and reinvestment of the trust
property, and shall apply and distribute the principal and
cause to be applied and distributed the income as
provided.” Ex. P-168. Mr. Morisse understood this
provision governed his behavior at all times he was trustee,
and he believed he complied with it. BT Vol. V, 80:14-18.
With regard to the life insurance companies, Mr. Morisse
believed he complied by, “The trust company, once
again, owned and controlled the policies that were part of
the assets of the estate, and distributions were made in
accordance with the provisions of the Trust Agreement which
paralleled the statute.” BT Vol. V, 80:19-23. There is
no doubt Allegiant Bank never controlled the insurance
policies. Mr. Morisse actually drafted a custody agreement
whereby custody of the policies was turned over to NPS.
Mr. Morisse understood there would be obligations, under the
Trust Agreement, upon the death of a beneficiary as defined
in Section 3.2(a). BT Vol. V, 80:24-81:5. Section 3.2(b)
covered what happened when NPS or the owner cancelled the
contract. Ex. P-168. When someone passed away and received a
funeral, “the Bank relied on information that was
included in the monthly packet that related to an affidavit
that was supplied by Randy Sutton on behalf of NPS as the
seller. And the affidavit affirmed as to certain matters with
respect to the death or cancellation.” BT Vol. V,
81:14-18. Every month “in support of the affidavit, a
copy of a death certificate - - well, a listing of the
individuals who had died was included.” BT Vol. V,
81:19-23. “The death certificates relating to those
individuals on the list” were also included. BT Vol. V,
Mr. Morisse received evidence funerals occurred from the
monthly report showing copies of cancelled checks received
from respective providers of funeral services. BT Vol. V,
82:2-7. During his term as trustee, he received evidence NPS
paid for “thousands and thousands and thousands”
of funerals, and he received many copies of cancelled checks
and death certificates. BT Vol. V, 82:11-14. He never
received notice, from 1998 to 2004, NPS was not paying for
provided services. BT Vol. V, 82:17-20. He was never
contacted by a consumer, with respect to funeral services not
being provided. BT Vol. V, 82:24-25. Mr. Morisse believed the
documentation he received under section 3.2(a), (b) and (c),
worked well. BT Vol. V, 83:1-4.
Section 3.2 of the Trust Agreement stated the net income of
the trust belonged to NPS, as Seller, and NPS was entitled to
distributions of principal for deaths and cancellations. Ex.
P-168. NPS was income beneficiary and was also entitled to
principal. Ex. P-168; BT Vol. V, 83:24-84:1.
Article IV of the Trust Agreement described the trustee's
powers and duties. Ex. P-168. Section 4.1 provided “As
receipt of payment, the trustee shall be accountable to the
seller and owner, only for the funds paid over to it by the
seller under such owner's funeral agreement.”
Id. Mr. Morisse's understanding of “only
for funds paid over to it” meant “the 80 per cent
of the contract that was - - that would have been deposited
to the trust by NPS.” BT Vol. V, 87:21-25.
Section 4.1's next provision provided the trustee shall
have no duty to see payment received complies with provisions
of the funeral agreement. Ex. P-168. Mr. Morisse believed
“the trustee has no responsibility or authority with
respect to the terms and conditions of the actual or
underlying preneed contract.” BT Vol. V, 88:6-8. The
final section of 4.1 provided “The Trustee shall not be
obliged to collect any payments from the Seller nor be
obliged to see that any payments so made to it are deposited
according to the provisions of the Funeral Agreement.”
Section 4.2 outlined investment authority of the trustee or
investment advisor. Ex. P-168. The last sentence of section
4.2 (a) referenced the investment advisor's authorization
and empowerment regarding investment, stating the
“investment advisor may invest any part or all of the
funds in the trust in any common or preferred stocks,
open-end or closed-end mutual funds, corporate [bonds],
debentures, convertible debentures, commercial paper life
insurance on the life of any beneficiary as the term
beneficiary is defined in paragraph 1.5, U.S. treasury bills,
notes and other securities, real estate mortgages and deeds
of trust.” Ex. P-168. He recognized the trust
invested in notes, and accepted mortgages and deeds of trust
as security for those notes. BT Vol. V, 92:21-93:1.
Immediately below the language in Section 4.2(a), referenced
above, for acceptable investments, the trustee “shall
in its absolute discretion select without regard to any of
the restrictions of the laws of any jurisdiction applicable
to investments of fiduciaries except that the Trustee
shall exercise such judgment and care which men of ordinary
prudence exercise in the management of their own affairs with
regard to the permanent disposition of their
funds.” Ex. P-168, pg. 7 (emphasis added). Mr.
Morisse believed, by using an investment advisor and looking
at the categories of investment permitted, he always complied
with sections 4.2 and 4.2(a). BT Vol. V, 93:2-5.
Mr. Morisse believed he could rely on information supplied by
NPS, because Section 4.2(1) of the Trust Agreement authorized
the trustee to rely upon any affidavit, statement,
certificate, notice, or other written or oral communication
believed by the trustee to be genuine and upon any other
evidence deemed by it sufficient. BT Vol. V, 93:7-13. Mr.
Morisse received affidavits from Randy Sutton at NPS, and he
received statements, certificates and notices, as well, about
the insurance policies. BT Vol. V, 93:21-94:1. He believed at
the time he received those affidavits, certificates, and
statements, the Trust Agreement specifically authorized him
to rely on them. BT Vol. V, 94:2-6.
Section 4.3 of the Trust Agreement stated: “Trustee
shall at all times maintain accurate books and records
reflecting all transactions in any way pertaining to the
trust.” Ex. P-168. Mr. Morisse believed he
maintained accurate books and records reflecting the
transactions pertinent to the trust. BT Vol. V, 95:8-11. He
described his process in that “receipts and
disbursements were reflected in transactions descriptions,
booked to the trust accounting system, and reported in the
statements.” BT Vol. V, 95:13-15. He did not say the
Bank made records of assets kept by the Bank. Mr. Morisse
believed relying on material in the monthly packets satisfied
the requirements of the Trust Agreement. Section 4.3
specifically referred to accurate books and records
reflecting transactions. Ex. P-168. Mr. Morisse provided
Seller (NPS) an annual statement of account, showing all
investments, receipts, disbursements, and other transactions
effected by the trustee during the year covered by the
statement, as required by the Trust Agreement. Ex. P-101D,
pg. 1602; BT Vol. V, 96:13-20.
Article VII of the Trust Agreement listed the governing law
for the agreement, which included Missouri Statute Chapter
436. Ex. P-168. When Allegiant Bank was considering whether
to accept appointment as successor trustee of the preneed
accounts, in his process of conducting due diligence, Mr.
Morisse made a copy of Chapter 436 and made notes on it. Ex.
D-5; BT Vol. V, 103:21-104:1; BT Vol. II, 121:9-11. He read
Chapter 436 closely, at the time having spent 17 years as a
trust lawyer. BT Vol. V, 104:12-16. He read the definitions
section. BT Vol. V, 104:17-19. Mr. Morisse kept a copy of
this statute in his files at Allegiant the whole time he was
administrator of the Trusts. BT Vol. V, 104:23-105:1.
times, Mr. Morisse referred to the document and sent a copy
to Jean Maylock, NPS's attorney. BT Vol. V, 105:2-4. At
all times when Mr. Morisse was trustee, he believed he was
complying with Chapter 436. BT Vol. V, 105:5-7. He understood
Section 436.031 dealt with legal requirements for a financial
institution to qualify as trustee, and the powers and duties
of the trustee. BT Vol. V, 105:8-12. His intention in taking
notes was to identify what he understood to be duties of the
trustee per the statute. BT Vol. V, 105:15-20. Mr. Morisse
made an effort to cross-reference the statute with the Trust
Agreement. Id. Mr. Morisse believed Allegiant Bank
met the institutional requirements of paragraph one of
Chapter 436.031. BT Vol. V, 105:23-106:5.
The second duty of the trustee was “to administer the
trust per the statute.” BT Vol. V, 106:6-9. Next to the
last sentence of 436.031.1, which concerned a trustee
maintaining adequate records of all payments received, Mr.
Morisse made a notation, which he described as “Trustee
- - oh, ‘duty to maintain records,' so the note
there is that trust system entries and statements would
satisfy perfor - - would exemplify or embody that
duty.” BT Vol. V, 107:5-8. Mr. Morisse defined
“trust system entries, ” as “each trust
department or trust company maintains its records on a trust
accounting system, which is a computer software particularly
designed for use by trust companies and trust organizations.
And so entries are made into this trust accounting system
that encompass the entirety of administrative activities as
well as investment management activities. When those entries
are entered into the trust accounting system, it remains as a
constant in that trust accounting system. In other words, it
can't be changed, unless there's an adjusting entry
which reflects in the data for that trust accounting system.
So that whether we see a transaction on the computer screen
that I described, which is pulled up from data from that
screen, that's going to match word-for-word and
dollar-for-dollar information printed on the statements
that's mailed to the appropriate parties. BT Vol. V,
107:9-108:3. Mr. Morisse's belief was “we were
meeting that obligation [in] that transactions and activities
posted to the trust accounting system would be appropriately
maintained and be able to be accounted for as needed.”
BT Vol. V, 108:4-7. Mr. Morisse thought the trust accounting
system met the adequate records described under the statute.
BT Vol. V, 108:8-10.
The top paragraph of 436.031.1 stated “Payments
regarding two or more contracts may be deposited into and
comingled in the same preneed trust so long as the
trust's grantor is the seller of all such preneed
contracts and the trustee maintains adequate record of all
payments received.” Ex. D-5. One of Mr. Morisse's
handwritten notes acknowledged this trustee duty. BT Vol. II,
122:7-9. He testified maintaining adequate records of all
payments received was an obligation of Allegiant Bank's
trust department, regardless of whether an investment advisor
was appointed. BT Vol. II, 122:10-14. Mr. Morisse knew he was
required to maintain adequate books of account of all
transactions through the trust and pertaining to the trust.
BT Vol. II, 122:22-123:1. Mr. Morisse never maintained
account specific records for each consumer. He never knew how
much money was on deposit at Allegiant for each consumer.
Section 436.031.2 was about investment of trust assets. Ex.
D-5. To the left, where his handwritten notes appeared, Mr.
Morisse wrote “investment management by trustee.”
Id. He recognized that section would be applicable
if the trustee had investment management responsibility and
authority. BT Vol. V, 108:18-20.
Mr. Morisse recognized any qualified investment advisor must
be “by a federally registered or Missouri-registered
independent, qualified investment advisor designated by the
seller who established the trust.” BT Vol. V,
109:15-20. Mr. Morisse determined Mr. Wulf was a
federally-registered investment advisor. BT Vol. V,
109:21-24. Mr. Morisse believed Mr. Wulf met the requirement
on independence, because Mr. Wulf was independent from the
Bank; he was not an agent, employee or representative of the
Bank. BT Vol. V, 109:25-110:5. Mr. Morisse made a
hand-written note, “Corporate resolution authorizing
officer designate investment advisor, corporate officer's
designation of investment advisor, investment advisor's
directions to trustee.” Ex. D-5. Mr. Morisse testified,
“that was the current procedure, you know, dealing with
insurance policies.” BT Vol. V, 110:13-17. Mr. Morisse
attempted to comply with his notes on how to do investment
management by an investment advisor. BT Vol. V, 110:18-21.
Mr. Morisse never claimed independence from NPS was required.
the left, Mr. Morisse also wrote “Insurance in
trustee's name, monthly verification to trustee of
insurance in force.” Ex. D-5. He was referring to the
certification affidavit of Lincoln with respect to the
policies included in the evidence of insurance listing. BT
Vol. V, 111:3-7. There is nothing in the statute about
“evidence of insurance.” It appears he already
had resolved to go with the monthly packet and evidence of
insurance, rather than holding the policies. While Mr.
Morisse was trust administrator, he believed this procedure
complied with the statute. BT Vol. V, 111:8-11. He was
Chapter 436.031.3 stated, “The seller of a preneed
contract shall be entitled to all income, including without
limitation, interest, dividends, and capital gains and losses
generated by the investment of preneed trust property
regarding such contract, and the trustee of the trust may
distribute all income, net of losses, to the seller at least
annually.” Ex. D-5. However, the statute did provide
limits on distribution: “. . . but no such income
distribution shall be made to the seller, if and to the
extent that the distribution would reduce the aggregate
market value on the distribution date of all property held in
the preneed trust, including principal and undistributed
income, below the sum of all deposits made to such trust
pursuant to subsection 1 of this section for all preneed
contracts then administered.” Ex. D-5. Mr. Morisse
believed he complied with that provision of Chapter 436 while
he was trustee. BT Vol. V, 112:3-5. Determining market value
of the Trusts, Mr. Morisse believed, included the
“evidence of insurance” at face value and the
value of other assets held in the Trusts. BT Vol. V, 112:6-9.
When Mr. Morisse became trust administrator, Trust IV had a
negative value. The only way NPS would have been entitled to
an income distribution was because he valued the policies at
face value. Mr. Morisse did not conduct the market value
test, and erroneously sent many millions of dollars out of
the Trusts in violation of Chapter 436.
Chapter 436 referenced maintaining books and records. Ex.
D-5. The first sentence of Section 436.031.5 read, “The
Trustee of a preneed trust shall maintain adequate books of
accounts of all transactions administered through the trust
and pertaining to the trust generally.” Id.
Mr. Morisse erroneously claims he kept track of every
transaction administered through the trust “through the
entries into the trust accounting system.” BT Vol. V,
112:20-24. As to maintaining other adequate records
pertaining to the trust generally, Mr. Morisse used
“the monthly packets and information or data, including
information provided by NPS, affidavits, exhibits, death
certificates, cancelled checks, et cetera.” BT Vol. V,
112:25-113:5. The Bank also maintained the wire transfer
request forms. BT Vol. V, 113:6-8. All of the records
maintained at the Bank were in “computer form”
including the monthly trust statements. BT Vol. V, 113:9-12.
Mr. Morisse said he was not aware of an obligation requiring
Allegiant Bank to maintain specific records by customer of
specific amounts on deposit. BT Vol. V, 113:23-114:1.
Section 436.031.5 stated, “The Seller shall furnish to
each contract purchaser, within fifteen days after receipt of
the purchaser's written request, a written statement of
all deposits made to such trust regarding such
purchaser's contract.” Ex. D-5. Mr. Morisse
believed he was not required to keep specific customer
account information. BT Vol. V, 113:23-114:1. Mr. Morisse was
Mr. Morisse did not maintain a written statement of deposits
made to the Trusts regarding each purchaser's contract
because he did not believe it was required by the statute. BT
Vol. V, 114:22-115:1. It was his view the statute required
NPS, as Seller, to keep those records, and he believed his
interpretation of the statute was the same as his
interpretation of Section 4.3 of the Trust Agreement. BT Vol.
V, 115:2-9. Even though the Trust Agreement was more
restrictive than the statute, he still believed both the
Trust Agreement and the Statute supported his record-keeping
approach regarding deposits of individual consumers. BT Vol.
V, 115:8-13. The language cited from the Statute by Mr.
Morisse pertained to collection and administration of
payments made under a preneed contract. This did not abrogate
the trustee's duty to maintain records of deposits to the
trust after getting the information from Seller, as provided
under the Trust Agreement for the trustee to furnish
information to the contract purchaser.
Mr. Morisse did maintain records related to the transition
from Mercantile. BT Vol. V, 113:13-15.
Mr. Morisse explained NPS was the remainderman from his
interpretation of Chapter 436.031.7, which referenced any
trust property remaining at the termination of the trust
shall be paid over to Seller. Ex. D-5, pg. 10; BT Vol. V,
Mr. Morisse made the notation, “Trustee duty,
distribute to Seller amount deposits for purchaser though
defaults on payments when seller cancels contract upon
delivery of purchaser's receipt, grantor
affidavit.” Ex. D-5, pg. 12. He believed the reference
to “grantor affidavit” would be the affidavit
from Randy Sutton of NPS included in the monthly packet. BT
Vol. V, 116:25-117:2. The procedure for handling
cancellations, “was the packet included a copy of a
preneed contract owner's actual request for cancellation
of the contract.” BT Vol. V, 117:3-9. Mr. Morisse
recognized, Chapter 436.045, stated, upon notice of provision
of funeral services, the trustee, in his words, has a
“duty to distribute to seller the amount - - the amount
of deposits for a preneed paid contract paid out due to death
upon delivery of provider's receipt.” BT Vol. V,
117:10-16. The actual words of the statute stated,
“Upon delivery to the trustee of the provider's
receipt for such payment, the trustee shall distribute to the
seller from the trust an amount equal to all deposits made
into the trust for the contract.” Ex. D-5. Undisputed
evidence in this case shows Allegiant Bank did not keep
independent records on money paid by consumers into the
Trusts, but relied on NPS to have that information. Money
went out of the Trusts, upon request of NPS by wire transfer,
before Allegiant Bank ever received information if providers
had been paid, for whom money was being paid, or if the
amount being paid tied to any contract. That information came
to Allegiant Bank later in the monthly packets, but when it
came to Allegiant, no specific account entries were made for
statute, consumers “had a right to contact the trustee
and request confirmation of what was on deposit for them in
the trust.” BT Vol. V, 87:1-5. Mr. Morisse understood,
as trust administrator he had to administer the trust in the
way that protected the rights of the consumers and he
believed he did so in the way he described. BT Vol. V,
Allegiant Bank retained outside counsel to aid in
understanding the Bank's responsibilities under Missouri
law 436. BT Vol. II pg. 58:11-16. Mr. Morisse did not use
them to determine the identity of beneficiaries of the
preneed accounts, prior to the Bank becoming trustee of the
accounts. BT Vol. II, 58:24-59:3. He never inquired of
outside counsel to determine if it was permissible, under the
law, to ask NPS to keep the records. BT Vol. II, 59:4-8. He
never went to outside counsel seeking any advice concerning
the preneed accounts Allegiant Bank was about to inherit, and
he did not explain to outside counsel neither he, nor Richard
Markow, had any experience with preneed trusts. BT Vol. II,
59:9-14. No. evidence of payment of fees to outside counsel
Mr. Morisse did not believe he needed the advice of outside
counsel in understanding Missouri Statute 436, based on what
he reviewed, and his collaboration with fellow trust officer,
Richard Markow. BT Vol. II, 64:16-25, 65:9-15. He had no
discussion with Mr. Markow as to the identity of
beneficiaries under Chapter 436 or whether NPS could maintain
all the records pursuant to Chapter 436. BT Vol. II, 66:3-14.
At all times, it was Mr. Morisse's responsibility to
understand Chapter 436. BT Vol. II, 91:14-18, 22-24. He did
due diligence with respect to asking questions related to how
a trustee's administrative duties were affected by
Chapter 436 and as it related to the Trust Agreement. BT Vol.
II, 92:20-22. However, Mr. Morisse did not follow through
with following Chapter 436.
effectuate transfer of the Trusts, Mr. Morisse worked with
Mercantile Bank to take receipt of the trust assets. BT Vol.
V, 118:5-7. On August 7, 1998, Mr. Morisse sent a letter to
Christina Whitmer at Mercantile Bank with delivery
instructions. Ex. D-726.
From Mercantile, Allegiant acquired two types of unique
assets: Lincoln life insurance policies, National Life
Insurance policies, and certificates of debenture. BT Vol. V,
119:11-14. The only unique assets in Trust I were three
certificates of debenture. BT Vol. V, 119:15-18.
Mr. Morisse believed activity in Trust I would be minimal,
essentially holding the certificates of debenture. BT Vol. V,
120:5-9. Jean Maylock, NPS attorney, advised him Trust I
would eventually go out of existence after all deaths were
paid for. BT Vol. V, 120:12-15.
Mr. Morisse was identified as Trust Administrator in the
first Allegiant Bank account statement for Trust I, dated
August 31, 1998. Ex. P-101A. The statement identified
transactions for that month in the account with dates.
Id. The transactions in this statement involved
certificates of debenture issued by NPS, with expiration
Mr. Morisse created a deposit form or used an asset deposit
form associated with his work at Allegiant Bank. BT Vol. V,
121:6-9. He relied on an asset deposit form for Trust II, as
an example of an internal document in Allegiant's
operations area. BT Vol. V, 121:10-16; Ex. P-343. It was a
single page, this one dated August 27, 1998. Ex. P-343. Under
“shares/par” is the digit “1.”
Id. Under “description” it read,
“Lincoln Memorial Life Ins. Company Evidence of
Policies at Face Value.” Id. Under “Tax
Date” was written “10/2192.” Id.
Under “Tax Cost” was written “$14, 776,
022.65.” Id. The account no. was recorded as
33-0008-19. Id. The account name was “NPS
Pre-Need Trust II.” Id. Other than “H.
Morisse, ” nothing else appeared on this form.
The representation to the Court was Mr. Morisse created an
internal Allegiant Bank record to record assets deposited in
NPS Trust II. Court examination of the exhibit does not show
a list of policies, but “evidence of insurance.”
Allegiant never took physical control of any insurance
policy, but relied on NPS to provide a form with some policy
information. No. form from NPS ever represented the Lincoln
policies to be whole-life, paid-up policies. Mr. Morisse used
the term “face value” for valuation of the
policies; his stated reason being the policies were so valued
both by Mercantile during its administration “and as
confirmed and advised by NPS and Jean Maylack, NPS's
attorney.” BT Vol. V, 122:11-19.
a fax cover sheet, Mr. Morisse asked Carrie at Midwest to
book unique assets “identified in the attached Asset
Deposit Forms.” Ex. P-343, pg. 2. Mr. Morisse referred
to the evidence of insurance previously described and the
certificates of debenture. BT Vol. V, 123:16-19. Mr. Morisse
was not referencing actual insurance policies, just the
initial “evidence of insurance” which he received
in a packet from Mercantile. BT Vol. V, 123:22-24. He advised
Carrie, Allegiant Bank would maintain subsequent statements
of “evidence of insurance” on its premises. Ex.
P-343. As to debentures, he told her the Bank was in
possession of the original certificates of debenture, had
requested they be retitled or renamed from Mercantile's
name, and they would be forwarded to Midwest when they were
packet received from Mercantile included another internal
asset deposit form together with copies of certificates of
debenture and related information. Ex. D-11. It included the
same type of “Asset Deposit Form” single page
sheet previously referenced. Id. This document,
representing Allegiant Bank's record of deposit of assets
for Trust III, fills less than half a page. Id.
Description of assets listed on the Asset Deposit Form
included “Lincoln Memorial Life Ins. Company Evidence
of Policies At Face Value, Tax Date 8/12/91, Tax Cost $26,
393, 938.79.” Ex. D-11, pg. 3. The only other asset
listed on the Asset Deposit Form is “Certificate of
Debenture issued by NPS, Inc.; obligation Expires 1/1/06, Tax
Date 1/1/96, Tax Cost $14, 285, 193.00.” Included in
the packet was a copy of the referenced Certificate of
Debenture. A review of “related information”
showed a document with NPS letterhead to Mercantile, dated
January 1, 1996, called Exhibit “A.” It stated,
“All trust accounts listed in account #44316160.”
Ex. D-11, pg. 7. It was followed by four pages of material,
bearing the Mercantile Trust logo, concluding, as of April
30, 1998, Cash Equivalents were $182.00, and Certificates of
Debenture were valued at $41, 412, 016.00. Finally, there was
an Allegiant form for Securities Delivery Instructions. Ex.
D-11, pg. 19-20.
Mr. Morisse was continuing a practice done by trustees
before. BT Vol. V, 131:23-132:2. A reconciliation form, as
described by Mr. Morisse from Mercantile, dated November 25,
1997, was a reconciliation or an accounting of the life
insurance in the trust account. Ex. D-11, pg. 10. It started
with the beginning balance at the end of the prior month, in
this case, September 30, 1997, in the amount of $28, 444,
627.04. From this amount, payments for death claims and
cancellations were subtracted, a total of $197, 253.35. The
final book balance of life insurance in force as of October
31, 1967, was $28, 247.69. The practice of sending these
“reconciliation” documents continued after Mr.
Morisse took over. BT Vol. V, 133:7-10. He confirmed the $28
million “book balance of life insurance in force”
was at face value. BT Vol. V, 133:13-17.
The information on Allegiant's Initial Asset Deposit
Forms, referenced above, was the same as reported on
Mercantile's statement. The primary assets listed in
“Miscellaneous, ” were a certificate of debenture
valued at $14, 285, 193.00 and Lincoln policies with a market
value of $26, 572, 257.33. Ex. D-11, pg. 13.
The information Mr. Morisse received for Trust III was the
same information he received for the other trusts. BT Vol. V,
139:3-7. He understood Wulf, Bates & Murphy managed
investments for the Trusts at Mercantile Bank. BT Vol. V,
Trust IV was always the largest of the Trusts. BT Vol. II,
157:22-24. Unique assets for Trust IV were Lincoln life
insurance policies. BT Vol. V, 120:19-21. He booked them in
the same way Mercantile Bank booked them. BT Vol. V,
120:22-121:1. Mr. Morisse agreed all of the assets Allegiant
Bank supposedly received in August 1998 for Trust IV were in
the form of cash equivalents bonds and evidence of insurance
in Lincoln. BT Vol. II, 160:6-9. At that time, there were no
loans to Cassity entities in Trust IV, no investments in the
Caymus Fund, Mr. Wulf's hedge fund, nor any investments
in Forever Enterprises stock. BT Vol. II, 160:10-20; Ex.
P-101D, pg. 1537. In August 1998, over ninety percent of
assets in Trust IV were evidence of Lincoln life insurance
policies at face value. BT Vol. II, 160:21-25. Mr. Morisse
recognized Lincoln as the Cassitys' life insurance
company. BT Vol. II, 161:1-2.
Mr. Morisse was told Mercantile Bank's listing of
insurance policies in the monthly packet was the back-up for
the life insurance listed in the account. BT Vol. V,
129:21-24. He was also informed Mercantile Bank did not keep
account-specific deposit information per customer. BT Vol. V,
130:24-131:1. He did not maintain the back-up by microfiche,
like Mercantile, but kept every packet received from NPS. BT
Vol. V, 131:2-5. According to Mr. Morisse, the NPS
reconciliation form received by Mercantile was the same
format as what he subsequently received when he took over
trust administration for evidence of insurance in force. Ex.
D-11, pg. 10; BT Vol. V, 131:14-22.
The CSA Trust was another NPS Trust, sometimes referred to as
the Mason Securities Trust, because Forever Enterprises was
doing business as Mason Securities Organization. Ex. P-101F,
pg. 2; BT Vol. II, 187:5-23. The only asset in the CSA Trust
was $1.6 million in Lincoln life insurance. BT Vol. II,
187:24-188:3. The CSA, or Mason Securities Trust, was managed
in the same way by Allegiant Bank as all the other NPS
trusts. BT Vol. II, 188:15-19.
The April 2004 CSA/Mason Securities Trust Statement listed
evidence of insurance policies at face value as 99.7 percent
of the trust assets. BT Vol. II, 189:6-8; Ex. P-101F, pg.
445. The value of insurance doubled from $1.6 million to $3.6
million over Allegiant's tenure. BT Vol. II, 189:9-11.
There was no certification of cash value or documentary
certification the policies were paid-in-full or had premium
payments due. Ex. P-0101F, pg. 445; BT Vol. II, 189:21-25.
There was also no information on whether policy loans had
been taken on the policies. BT Vol. II, 190:1-3. Mr. Morisse
understood the premiums were being paid by Wulf, Bates &
Murphy, but he believed the policies in the CSA, or Mason
Securities Trust, were whole-life, paid-in-full policies. BT
Vol. II, 190:4-17.
The Mt. Washington NPS preneed trust was operated under the
same procedures by Allegiant Bank as the other NPS trusts. BT
Vol. II, 191:5-8. At all times, Mr. Morisse knew Mt.
Washington Forever was a Cassity-owned company. Ex. P-0101G;
BT Vol. II, 191:14-192:1.
When Allegiant Bank assumed this trust in 2000, trust assets
were all invested in cash and cash equivalents. BT Vol. II,
Mr. Morisse received a report of holdings from Mercantile
Bank, from their records, which was a copy of a selected
holdings report Mercantile Bank printed-off of its trust
accounting system and delivered to him in connection with the
transfer of assets in the NPS account. Ex. D-11, pg. 13; BT
Vol. V, 134:4-6. Mercantile Bank had no investment
discretion, which meant, to Mr. Morisse, it had no investment
management authority or responsibility. BT Vol. V, 134:10-21.
He concluded Mercantile Bank's account, like
Allegiant's NPS accounts, was a nondiscretionary account
for investments. BT Vol. V, 134:22-24. When Allegiant Bank
took over as trustee from Mercantile Bank, Wulf, Bates &
Murphy was listed as the investment advisor. BT Vol. II,
Mr. Morisse believed he received sufficient information from
Mercantile Bank to run the accounts. BT Vol. V, 136:3-17. It
was explained, assets in the accounts with respect to life
insurance and the protocol regarding receiving the monthly
packets and what was included in the packets. Id.
With respect to wire transfers into the account, it was
explained, there would be wire receipts received from the
insurance company. Id. Wulf, Bates & Murphy was
the investment advisor and they wire funds out. Id.
On a Mercantile Bank form, Mr. Wulf is written in as
Portfolio manager. Ex. D-11.
Mr. Morisse described standard securities delivery
instructions Allegiant Bank used when it was acquiring assets
being transferred from another institution. Ex. D-11. A
change Mr. Morisse made to how assets or transactions would
be described, in comparison to how Mercantile described
assets, was in the reconciliation statement, where he added
life insurance was valued at face value. BT Vol. V,
141:15-25. He made this statement change after talking to Ms.
Witmer at NPS and NPS's lawyer, Jean Maylack.
Id. Although Allegiant Bank had a reputable law firm
acting as outside counsel, Mr. Morisse preferred to confer
with an NPS, Cassity-entity lawyer.
also said he added the words “Evidence of Insurance,
” but the Mercantile Bank form, described in its
entirety in the above footnote, plainly included the
language, “Evidence of Insurance.” Actually, he
added “EVIDENCE OF POLICIES.” He said the
description of certificates of debenture on Allegiant
Bank's statement was changed to show they were issued by
NPS. BT Vol. V, 142:17-21. Mr. Morisse, as noted, also added
insurance was to be valued at “face value.” BT
Vol. V, 142:9-11.
already noted, at that time in 1998, and for the rest of
Allegiant's tenure, he always, mistakenly, believed the
Lincoln policies were whole-life paid-up policies, when most
of them were policies with premium obligations running as
long as ten years, and a few at twenty years. For all of his
term, he was authorizing renewal premiums in millions of
dollars on policies; it is undisputed, he received requests
money be wired out of the Trusts to pay renewal premiums on
policies. While he should have demanded to keep the policies,
he did not once ask for a sample of any insurance policy from
NPS or Lincoln, both Cassity-owned entities, to confirm
policies were paid-in-full whole-life policies with cash
Mr. Morisse decided to describe transactions “per
investment advisor, ” rather than just indicating a
wire transfer with respect to disbursements made pursuant to
the fax sheet the Bank received. BT Vol. V, 142:22-143:4.
Obviously, his motivation in entering the language “per
investment advisor, ” was to form a sound liability
shield for Allegiant Bank. At that time, he did not recognize
consumers as beneficiaries, and his mindset was not
consideration of protection of consumers' money.
UMB, Mr. Morisse understood an account was to be administered
in accordance with the law and the trust document. BT Vol.
II, 24:11-16. He understood, when there is a conflict between
the Trust Agreement and Missouri law, in this case under the
preneed trust statute, Missouri law must be applied. BT Vol.
Although Mr. Morisse knew trusts he would be administering at
Allegiant Bank were full of unique assets, he received no
training, either at UMB or at Allegiant Bank, on valuing
unique assets. BT Vol. II, 27:10-18.
Mr. Morisse did not know what an NPS certificate of debenture
meant when the Trusts were first accepted at Allegiant. BT
Vol. II, 30:13-25. He did know a certificate of debenture was
an unsecured promise to pay. Id. Mr. Morisse
received no training at either UMB or Allegiant Bank to
evaluate the quality of debentures. BT Vol. II, 31:21-32:2.
He was not experienced in valuing debentures. BT Vol. II,
Mr. Morisse received no training regarding the Trusts. BT
Vol. II, 52:18-22. “There was no authority or
responsibility for judging investments, so no one at
Allegiant, you know, reviewed or opined with respect to
specific investments.” Mr. Morisse was not experienced
in the prudence of investing, and there was no one in the
Allegiant trust department who was tasked with looking at the
investments in the Trusts to ensure they were prudent for the
period of Allegiant's tenure. BT Vol. II, 51-52;55-57.
Mr. Morisse testified he was not in charge of judging
prudence of trust investments of any of the accounts in the
trust department. BT Vol. II, 62:11-13.
According to Mr. Morisse, “The Bank didn't have
investment management authority.” BT Vol. II, 49:5-6.
“There was no one person or entity hired specifically
for the NPS trust accounts.” BT Vol. II, 49:19-23. Mr.
Morisse had administrative duties, and none of the investment
duties. BT Vol. II, 50:7-14.
Upon taking over as trustee, industry custom and practice
required Allegiant to perform a comprehensive review of the
trust assets within 60 days after receiving the Trusts. BT
Vol. XIII, 28:22-30:10. The purpose of the 60-day review
requirement is so the trustee can ensure it understands the
nature of the trust assets and can identify any problems that
exist relating to the assets. Id. Allegiant's
internal policy manual governing the trust department
mandated a review of all new trust accounts be performed
within 60 days. Ex. 2-0126, pg. 2. This did not occur.
Allegiant's own trust statements in the first 60 days
noted Allegiant was transferring significant amounts of money
out of Trust IV to Lincoln for monthly renewal premiums. Ex.
P-101D, pgs. 5, 14. Allegiant failed to review these
transactions or evaluate the premium terms of the Trusts'
Lincoln policies. See infra. When Allegiant took
over as trustee, the Trusts were significantly underfunded.
BT Vol. XXII, 60:19-61:8. Even Defendants' actuarial
expert opined Trust IV was in the hole by over $33 million in
August 1998. BT XVII, 88:25-89:9.
Allegiant Bank had a Fiduciary Services Manual. Ex. 2-0126.
Under Section 1.01 of the manual, Allegiant Bank was to have
a trust committee at all times. Id. The section
provided: “The Trust Committee shall be the board's
representative in the operation of the trust department.
Though the Board has delegated the trust department duties,
the responsibility of the trust department remains with the
There was a trust committee at Allegiant Bank, which was in
charge of overseeing how Allegiant Bank's Trust
Department was handling trust accounts, to assure the Trust
Department was staying inside the law at all times. BT Vol.
II, 76:2-14. NCB's trust committee was comprised of bank
employees with years of trust experience, unlike
Allegiant's trust committee. BT Vol. II, 76:15-18.
Allegiant's trust committee members were investors in
Allegiant. BT Vol. II, 83:8-16; Ex. 2-100, pg. 23.
The Trust Committee, when Mr. Morisse joined Allegiant Bank,
consisted of John Pyzk, John Weiss, Sid Gueller, and Richard
Markow. BT Vol. XX, 5:3-10. Later, it consisted of John
Pyzyk, chairperson, a real estate developer; William Gisson,
a dentist; John Weiss, an auto dealer, and Kevin Farrell, a
manufacturer. BT Vol. II, 78:13-80:13.; Ex. P-2001. None of
these individuals had any experience with trust
administration. Id. Both Mr. Farrell and Mr. Weiss
were investors in the Bank. BT Vol. II, 83:8-16. None of
these members, like Mr. Morisse, received any training or
guidance with respect to serving on a trust committee.
After the Bank acquired Southside Bank, the Committee was
transformed. BT Vol. XX, 5:12-15. Mr. Morisse thought the
business ability of the members was quite reputable,
respected and diverse. BT Vol. XX, 5:16-20. Mr. Morisse was
secretary of the meetings, initially, then later joined the
Committee as a member. BT Vol. XX, 5:21-23. Minutes of the
meetings were kept. BT Vol. XX, 5:24-25.
The manual also provided the Trust Committee was not only to
review all fiduciary accounts for the appropriateness of
investments and administrative action, it was to direct the
taking of appropriate remedial action as may be required. Ex.
2-0126. The Trust Committee never asked the World Services
group term policy be removed from the books, and the
Committee was not aware of the six stock transactions, where
the Trust paid more for the stocks than fair market value
reported on the stock exchanges. BT Vol. IV, 194:16-23. Mr.
Morisse could not remember if he showed the Committee the
Letter of Direction he drafted where any employee of NPS
could direct money be sent out of the Trusts. BT Vol. IV,
194:24-195:6. Section f.1 stated “The Trust Committee
shall review each fiduciary account within 60 days of the
establishment of the account, ” and no less often than
every twelve months. Ex. 2-0126.
The Statement of Principles of Trust Department Management
also required Allegiant Bank's Trust Department maintain
records in sufficient detail to properly reflect all trust
department activities, and to have a trust committee to
oversee the Trust Department. BT Vol. IV, 185:15-21. It also
required the Trust Committee to provide for review of each
trust department account. Ex. 2-90.
There was to be a review of the NPS trust accounts addressing
account administration, at least annually. BT Vol. IV,
187:10-14. Mr. Morisse did not tell the Trust Committee, as
part of his account administration, he adopted a procedure to
not review wire transfer request forms. BT Vol. IV,
188:11-17. He did not discuss with the Trust Committee his
review of the actual monthly account statements, believing
they were familiar with that he reviewed only “as
needed of account data and information.” BT Vol. IV,
188:18-24. The Committee was not familiar with the protocol
of the faxes going straight to the operations department and
then operations booking the transaction. BT Vol. IV,
There was never an occasion, in all the years when Mr.
Morisse administered the Trusts, that he went to the Trust
Committee and said he saw a troubling transaction in any
account of the Trusts. BT Vol. IV, 196:7-16.
Mr. Morisse believed, through the administrative review
process and interaction with the Trust Committee, the
Committee understood how the trust operated, and in general,
what distributions were to be made. BT Vol. IV, 204:17-22. He
did not tell the Trust Committee he was making distributions
without doing the calculations himself. BT Vol. IV,
When he joined Allegiant Bank, Mr. Morisse knew Allegiant
adopted a written set of policies and procedures for the
Trust Department. BT Vol. IV, 181:5-11. The protocol was for
employees to familiarize themselves with the entire set of
policies in the policies and procedure manual. BT Vol. IV,
181:12-14. The bank examiners were aware of this.
Id. The policy and procedures manual applied,
according to Mr. Morisse, to trust company personnel in the
administration and management of all fiduciary accounts. BT
Vol. IV, 181:22-24.
The Statement of Principles of Trust Department Management,
revised in 1999, was adopted by Allegiant's trust
committee. Ex. 2-0090. The code of conduct adopted by
Allegiant's Board of Directors, the Statement of
Principles of Trust Department Management, and the Trust
Manual were all applicable to Mr. Morisse, as well as any
other trust department employee. BT Vol. IV, 185:10-14.
Mr. Morisse advised he and other members of the Trust
Department were involved in making revisions, and he was
responsible for completing the project for the 1999 revision
to procedural policies. Ex. 2-0126; BT Vol. V, 242:10-22.
The policies addressed investment management. BT Vol. V,
242:23-25. The policy for “Conflicts of Interest,
” provided the “Bank may not realize gain from
administration of fiduciary accounts except for fees charged
in accordance with the Trust Department's Bank fee
schedules.” Ex. 2-0126, pg. 11. The Bank received no
compensation from the Trusts other than for fees charged. BT
Vol. V, 244:5-7. As to investment directions, it was the
policy of the Bank to “receive written investment
instructions from legally authorized parties on all custodial
and self-directed accounts, co-fiduciaries or outside
investment authority have investment authority with respect
to the account or when the customer requires approval.”
Ex. 2-0126, pg. 56. Mr. Morisse said this policy applied to
NPS trust accounts. BT Vol. V, 244:22-23.
Mr. Morisse did not recall if he asked the internal audit
department of Allegiant to come in and review any aspect of
his administration of the NPS preneed trust accounts. BT Vol.
Allegiant Bank's Policy manual referenced information
related to Allegiant Bank's merger with Southside Bank
when the two banks' accounts merged into the same trust
accounting system. Ex. D-689, pg. 41. After the merger,
Allegiant Bank's back-room operations was more
extensively staffed. BT Vol. XX, 23:12-21. Investment
managers and portfolio managers were also employed, which
added members with additional past banking experience to the
Trust Committee. Id. A former FDIC examiner joined
the trust committee. Id. The merger resulted in the
resignation of Richard Markow as president of Allegiant Bank.
BT Vol. XX, 23:22-24.
This occurred in the 2001 time period. BT Vol. XX, 24:2-3.
Art Weiss was placed in charge of wealth management. BT Vol.
XX, 24:7-9. After the merger, Mr. Morisse reported to David
Scobee for certain matters and directly to Mr. Weiss for
other matters. BT Vol. XX, 24:18-22.
After the Allegiant Bank - Southside merger, Mr. Morisse
reported as part of the Trust Committee and continued to
administer the NPS accounts. BT Vol. XX, 24:23-25:1. The
reporting protocol activities were the same with respect to
administrative reviews and discussions related to exams or
audits, with an additional layer of different persons to
report. BT Vol. XX, 25:6-13.
From January-April 2004, the proposed acquisition of
Allegiant Bank by NCB was pending. BT Vol. II, 164:23-165:6.
December 11, 2003, of the top ten trust accounts at Allegiant
Bank, NPS accounts were more than two and one-half times the
amount of the next nine accounts, combined. Ex. P-0073; BT
Vol. II, 63:2-7.
The face value of Lincoln polices Allegiant Bank received in
August 1998, by virtue of the phrase “evidence of life
insurance” was $50, 231, 407.30. BT Vol. II, 161:5-8;
Ex. P-101D. There was less than $2 million in cash or other
assets. BT Vol. II, 161:9-11. Allegiant Bank's Trust IV
statement for April 2004, a date a few weeks before Allegiant
resigned as trustee and transferred the assets to Bremen
Bank, stated the assets were composed of $114, 852.00 in
cash, $1.3 million in cash equivalents, $42, 000.78 in bonds,
and $2, 860 in another bond. BT Vol. II, 162:2-10; Ex.
P-101D, pgs. 1537, 1539. All assets not associated with the
Cassitys totaled approximately $1, 500, 000.00. BT Vol. II,
Wire Transfer Activity in the Trusts
While Mr. Morisse would not agree the central purpose of
Chapter 436 was to protect the consumers' monies, he
testified, “The protection of assets was a part of the
responsibilities with respect to the administration of the
NPS trusts.” BT Vol. II, 96:1-5.
There were thousands upon thousands of consumers whose
deposits Mr. Morisse was to control and protect as identified
in Ex. P-2287.
Allegiant knew it could only distribute trust funds to NPS
under the specific circumstances authorized by Chapter 436
and the Trust Agreements. JSF.
Section 3.2 of the Trust Agreement described the limited
purposes for which money could come out of the trust. Ex.
P-168. It was Allegiant Bank's responsibility to
determine whether a disbursement should be made. BT Vol. III,
109:14-23. NPS was entitled to receive trust principal when a
preneed consumer died or if a preneed contract was cancelled
because the consumer was entitled to claim the amount
initially paid. BT Vol. III, 109:24-110:12. NPS could only be
paid for a death claim if it supplied appropriate death claim
paperwork. BT Vol. III, 110:13-16.
During Allegiant's period as trustee, money could not
leave the Trusts without Allegiant's participation. NPS
could only access the Trusts' preneed funds if Allegiant
agreed to transfer the trust funds to NPS. JSF.
Mr. Morisse denied Allegiant Bank administered the Trusts
with the belief NPS could deposit the consumers' money
into the Trusts and draw the money out for any purpose. BT
Vol. III, 110:17-21. Mr. Morisse believed the systems in
place, expected a trustee to perform the responsibilities, as
a trustee under Chapter 436, as an investment for which money
could go out at the “direction by the investment
manager for exercising its investment management
responsibilities.” BT Vol. III, 111:16-112:9. Money was
distributed from the Trusts in whatever amount to whatever
party was on the wire request form. BT Vol. III, 112:10-16.
Allegiant disregarded Chapter 436's requirements
governing distributions of trust principal to NPS, and
instead, routinely transferred trust funds to NPS without any
explanation or justification for the transfers. Ex. P-101D,
pgs. 52, 559, 1494. In some cases, Allegiant transferred
preneed funds out of the Trusts directly to NPS's
checking account held at Allegiant Bank without any form of
explanation. Ex. P-104, pgs. 299, 914. Allegiant repeatedly
violated its fiduciary responsibilities to consumer and
funeral home beneficiaries by the manner in which it violated
Chapter 436 in its transfer of money out of the Trusts.
order to get money out of the trust accounts at Allegiant
Bank, the Bank executed wire transfers, utilized by the
former trustee. BT Vol. II, 146:5-14. Mr. Morisse does not
recall a wire transfer request not performed. BT Vol. III,
Money was transferred from the Trusts to NPS and various
other entities through wire transfers which were requested by
NPS sending Allegiant a wire transfer request form. BT Vol.
II, 148:6-11. Allegiant Bank's protocol provided for the
wire transfer request to be routed directly to operations,
known as the “back office.” BT Vol. II,
148:12-22. If the wire transfer request was in the form as
anticipated, expected and understood to be from Wulf, Bates
& Murphy, the operations department had a standing
instruction to send the money out of the Trusts, without
additional approval or oversight from Mr. Morisse. BT Vol.
II, 148:23-149:7. For the six years it was trustee, Allegiant
Bank never scrutinized why money was being sent out of the
Trusts through thousands of wire transfers. BT Vol. II,
149:8-12. Allegiant Bank personnel only confirmed each
transfer was at the direction of the investment advisor.
Id. No. one in the operations department was told to
check the wire transfer requests against Chapter 436, nor was
anyone in the operations department schooled on the
requirements of Chapter 436. BT Vol. II, 149:13-18. The
expectation, from Randy Sutton and NPS, was the requests
would be processed immediately. BT Vol. II, 153:3-8.
Mr. Morisse dealt primarily with Angie Hall, Randy
Sutton's assistant. BT Vol. III, 71:10-18. Even though
the wire transfer request forms came from “Randy
Sutton/Angie Hall” and only cc'd Wulf, Bates &
Murphy, Mr. Morisse believed it was Wulf, Bates & Murphy
directing the money be transferred. BT Vol. III, 72:4-9.
The Trust Committee was never informed this wire transfer
protocol was adopted where any request for money out of any
of the Trusts bypassed the trust administrator and was
executed by the back office. BT Vol. II, 150:3-9.
Allegiant routinely wired funds out of Trust IV to various
other entities owned and controlled by the Cassitys, with no
explanation. Ex. P-104, pgs. 117, 435, 453, 458, 503, 638,
725, 927, 1057, 1148. These entities included Lincoln
Memorial Services, Doug Cassity's personal investment
company, and Memorial Service Life Insurance Company, which
only issued policies for Texas consumers. Ex. P-104, pgs.
the wire transfer form said to send money to Hollywood
Forever, Tyler Cassity's cemetery, the wire request would
have been processed, whether any asset was received in
return. BT Vol. II, 150:24-151:4. If a wire transfer form
said send money to Doug Cassity to buy a house, it would have
been processed. BT Vol. II, 151:10. If the wire transfer form
came from Wulf, Bates & Murphy, the money would be sent.
BT Vol. II, 151:11-15. However, the requests actually came
from Randy Sutton or Angie Hall, faxed from NPS offices, with
a “cc” to Wulf, Bates & Murphy. BT Vol. II,
There were more than one thousand wire transfer requests out
of the Trusts during the time Allegiant was trustee. BT Vol.
II, 151:23-25. The protocol was executed and Mr. Morisse, as
trust administrator, did not question a single request. BT
Vol. II, 152:1-14.
Every time a wire transfer form was executed, assets would
leave the trust. BT Vol. II, 155:25-156:2. All of the wire
request transfer forms for Trust IV, processed without Mr.
Morisse's review or involvement, are contained in Ex.
P-104. BT Vol. II, 156:13-17. Each form was received from NPS
with a “cc Wulf” listed. Ex. P-104.
The wire transfer request forms were maintained in Allegiant
Bank's trust department in a file cabinet or a box
archived someplace that could be accessed by Mr. Morisse. BT
Vol. II, 157:10-21.
the April 2000 Trust IV statement, on April 4, 2000, one wire
received from Lincoln was for $1 million and a second was for
$69, 263.00. Ex. P-101D, pg. 243. The transaction description
was based on the wire transfer form received for the deposit.
BT Vol. III, 150:19-22. All Allegiant Bank knew was money was
received from Lincoln in a specific amount on a specific
date. Ex. P-101D, pg. 243; BT Vol. III, 151:3-5. Mr. Morisse
did not state any asset was booked on Allegiant Bank's
books and offered no explanation for what purpose trust money
was expended. On April 4, 2000, the exact amount, on the same
day as the money was received, was amalgamated and wired out
of Trust IV to Jefferson Bank, per the direction of the
investment advisor. Ex. P-101D, pg. 247. The money did not
come from NPS originally, it came from Lincoln as a deposit
to Trust IV. P-101D, pg. 247; BT Vol. III, 152:9-12.
The money could not be an investment because it came from
Lincoln, and under the Trust Agreement and the law, money
from Lincoln could only be transferred for death claims and
cancellations. BT Vol. III, 152:20-23. Mr. Morisse believed
the transfer out was ordered by Wulf, Bates & Murphy but
did not know why. BT Vol. III, 153:5-8. Mr. Morisse knew the
investment advisor could only invest Trust IV funds. BT Vol.
Mr. Morisse did not recall reading this trust statement
showing a million dollars came in and went out. BT Vol. III,
154:15-18. Mr. Morisse believed there was no need to ask why
Lincoln would send a million dollars to Trust IV, then,
Allegiant would send it out for an investment the same day;
he believed the only responsibility of the trust department
was to accept deposits and make distributions per the
investment advisor. BT Vol. III, 154:20-155:1.
request for money to be transferred out of Trust IV for $248,
000.00 was approved in March 2001 for transfer to NPS for no
stated reason. Ex. P-104, pg. 281; BT Vol. III, 113:5-7. Mr.
Morisse cannot explain what purpose was intended for this
cash transfer, other than it was at the direction of Mr.
Wulf, although the form says Randy Sutton and Angie Hall with
a “cc” to Wulf, Bates & Murphy. BT Vol. III,
113:10-20. Allegiant Bank did not know the purpose of this
investment. BT Vol. III, 113:21-23.
May 15, 2001, a $50, 716.00 deposit of consumer money was
made by NPS into Trust IV. Ex. P-101D, pg. 45105.
May 18, 2001, Allegiant Bank sent $8, 945.77 to Lincoln, with
no explanation in Allegiant's records as to why it sent
the money besides “per direction of investment
advisor.” Ex. P-101D, pg. 45111; BT Vol. III,
8:25-9:10. Allegiant Bank did not know how many insurance
policies for consumers the $8, 945.77 was buying, or whether
the money was even going to buy insurance policies. BT Vol.
III, 9:11-17. The wire transfer request form for this amount
of money most likely went straight to the operations
department for execution without going through Mr. Morisse;
no steps were taken to identify what was being purchased with
the $8, 945.77 before sending the money out of Trust IV.
P-104, pg. 313; BT Vol. III, 11:7-11. The batch number listed
on this form is N8105171. Ex. P-104, pg. 313. Mr. Morisse did
not know what this number referenced and never asked NPS to
explain it. BT Vol. III, 12:2-11.
May 22, 2001, there was a $341, 879.46 wire transfer out of
Trust IV to New Life. Ex. P-101D, pg. 45111. New Life
“could well have been” a name used by
Lincoln. BT Vol. III, 18:17-18, 19:13-22. There
was no description on the trust statement as to how many
policies would be purchased or if any were purchased. BT Vol.
III, 19:23-20:2. Allegiant Bank's protocol was to ask no
questions. BT Vol. III, 21:24-22:4. The wire transfer request
form, asking $341, 879.46 be transferred from Trust IV, went
to the operations department. BT Vol. III, 22:5-10. All the
information the trust department had for this transfer of
money was contained on the wire transfer request form. BT
Vol. III, 22:11-14. This included a box, titled
“Monthly renewals, ” checked, and a batch number.
Ex. P-104, pg. 315.
Mr. Morisse did not know, if he would have been alerted he
was buying multi-pay policies with premiums due, when he saw
“monthly premiums” checked. BT Vol. III,
May 24, 2001, Allegiant wired an additional $9, 609.18 out of
Trust IV “per direction of investment advisor.”
Ex. P-101D, pg. 451-11. Mr. Morisse believed “Allegiant
was not authorized to disregard the direction of the
investment advisor.” BT Vol. III, 28:16-19. Even if
trust money was disbursed to NPS directly, not to Lincoln,
Mr. Morisse would have still followed the direction of Mr.
Wulf, even though Chapter 436 says there are limited reasons
why money can come out of the trust. BT Vol. III, 30:22-31:8.
He had no idea why the $9, 609.18 was leaving Trust IV,
“[o]ther than it was at the direction of the investment
advisor.” BT Vol. III, 31:17-20.
The amount of money that can be distributed from an NPS trust
by Allegiant Bank is “an amount equal to all deposits
made into the trust for the contract.” BT Vol. II,
208:7-11. Mr. Morisse recognized it was Allegiant Bank's
responsibility to know how much it could lawfully distribute
under Chapter 436, irrespective of whether there was an
outside investor. BT Vol. II, 208:12-17. Allegiant relied on
NPS to determine whether the amount of “withdrawals
from the trust” was proper under Chapter 436 and never
verified the accuracy of the information provided by NPS. BT
Vol. IX, 210:4-211:4; Ex. D-132, pg. 7.
The wire transfer request form asked for the $9, 609.18 to be
sent to an account at Allegiant Bank owned by NPS. Ex. P-104,
pg. 316. This was Allegiant Bank's own records showing
the money was being sent directly to an NPS account. BT Vol.
III, 31:25-32:17. Mr. Morisse's only concern was whether
it was at the direction of the investment advisor.
December 2001, there was a wire transfer of money from Trust
IV for $694, 299.52. Ex. P-104, pg. 451. Mr. Morisse did not
know why his initials were by Pat Buchanan's signature on
the wire transfer form. BT Vol. III, 132:15-18. The wire
transfer form was checked “monthly renewals.” Ex.
P-0104, pg. 451.
This was at the same time Allegiant learned Lincoln lost $8
million the previous year. An internal e-mail discussed a
loan application to Allegiant Bank from another Cassity
entity. Ex. P-573. Allegiant employees discussed
how “money flows from a private entity to a public
entity through an insurance company, ” and “none
are profitable on a consistent basis.” Id. The
e-mail chain continued: “I'm told their insurance
company lost $8 million last year.” Id. Mr.
Morisse knew the insurance company was considered the
strength behind the Cassity companies and the insurance
company was losing millions. BT Vol. III, 121:6-9. The e-mail
chain also revealed information about the officers of
Allegiant Bank. Ex. P-573. Art Weiss, who had never been a
trust administer or worked in a trust department, was head of
Wealth Management of Allegiant Bank. BT Vol. III, 121:10-25.
Within a few days, Mr. Morisse replied in the e-mail chain,
stating, “The NPS Forever Enterprises relationship
began I believe with Sean'sbackground and Mr.
Cassity, the owner of NPS, principal owner. Forever
Enterprises was initially also privately held, but went
public a year or more ago.” Ex. P-573. With this
information Mr. Morisse did nothing to change the procedures
of how the trust department would view requests for money to
go to any Cassity entity. BT Vol. III, 124:17-24.
January 7, 2002, there was a request for a wire transfer for
$112, 000 out of Trust IV to Forever Enterprises'
corporate account. Ex. P-104, pg. 458. There was no
description listed for the wire transfer, other than the fax
was received as a direction by Wulf, Bates & Murphy. Ex.
P-0104, pg. 458; BT Vol. III, 127:13-16. This wire transfer
was sent a day after Mr. Morisse learned none of the Cassity
companies were profitable and Lincoln was losing money on a
consistent basis. BT Vol. III, 128:23-129:3. Mr. Morisse
“followed the direction of Wulf, Bates &
Murphy.” BT Vol. III, 129:3. Mr. Morisse did nothing to
change the procedure to send money, in any amount requested,
to a Cassity-owned company if Wulf, Bates & Murphy was
copied on the form from NPS saying “please send
money.” BT Vol. III, 129:4-14. Allegiant
“accepted direction from Wulf, Bates & Murphy as
set out in the letter of direction that existed with Wulf,
Bates & Murphy.” Id.
Allegiant Bank was wiring money from the Trusts to Lincoln
multiple times each month. BT Vol. III, 43:19-21. On June 6,
2002, Allegiant wired $5, 326.34 from Trust IV to Lincoln.
Ex. P-101D, pg. 1071.
wire transfer request form asked $6, 258.36 be sent from
Trust IV to Lincoln with a request “deliver immediately
to Allegiant trust/Herbert Morisse.” Ex. P-104, pg.
1073. It was delivered to the back office for immediate
processing. BT Vol. III, 44:15-21. On the bottom of the form,
under “office use only, ” it stated this was for
monthly rentals or policy loans. Ex. P-104, pg. 1073. Mr.
Morisse did not see or read the form. BT Vol. III,
January 2, 2004, Allegiant wired $1.1 million to Lincoln. Ex.
P-101D, pg. 1494. No. description was included besides
“per direction of investment advisor.”
Id.; BT Vol. III, 58:15-16. A wire transfer request
form dated January 2, 2004, was in the amount of $1.1
million. Ex. P-0104, pg. 1062. There was an “X”
on the form next to “monthly renewals.”
Id. It also listed “(BAL DUE: $731,
953.28.” Id. Mr. Morisse testified he did not
know to what the “X” and “BAL DUE”
referred. BT Vol. III, 60:12-23.
Mr. Morisse was first asked if he was forbidden from reading
the form which said “for office use only.” BT
Vol. XX, 209:1-10. He said he did not recall having seen the
exhibit and did not know if that was a part and parcel of
what a bank is supposed to do with respect to the amount to
be wired to the name of the bank, the routing number and the
account number. Id. He was then asked if he needed
to know what he was doing as a bank, when a wire transfer for
$1.1 million was entered to go out of Trust IV. BT Vol. XX,
209:11-210:1. He said he believed he knew what he we were
doing, which was following the direction of the investment
Mr. Morisse believed the $1.1 million transaction was for the
purchase of new life insurance policies, but there was no
language in the statement stating it was to purchase new
policies. BT Vol. III, 62:3-9. Mr. Morisse believed
“the Bank didn't have the obligation to track
transactions related to the direction of the investment
advisor.” BT Vol. III, 63:16-19. The $1.1 million sent
to Lincoln to buy new policies should have been in
Allegiant's records. BT Vol. III, 64:5-9. The wire
transfer activity report for this amount was signed by Char
Dupent, an operations manager. Ex. P-104, pg. 1066. She was
not trained in trust department obligations under Chapter
436. BT Vol. III, 64:15-17. She, or one of her employees,
would write in the amount requested to be wired on this form.
BT Vol. III, 64:18-21. Mr. Morisse believed, since this was
an internal operations form, it did not need to be routed
through him. BT Vol. III, 65:1-3.
When asked if it could not have been done for the purpose of
purchasing life insurance policies, Mr. Morisse stuck with an
indefensible position, saying “It was for the purchase
of life insurance policies.” BT Vol. XX, 211:11-17. The
form was clearly checked with an “X, ” by
“MONTHLY RENEWALS.” Ex. P-104, pg. 1067. Whether
he even saw this document, originally, when he clearly had an
opportunity to do so, when presented with this adverse
evidence, under oath, he refused to acknowledge reality,
continuing to diminish his credibility. When asked if it was
for the purchase of $1.1 million in new insurance, he could
have gone to the netting form to see if NPS just sold $1.1
million in life insurance policies. BT Vol. XX, 211:18-23.
Mr. Morisse said, “I'm going to answer, I've
said before, I don't recall this document.” BT Vol.
XX, 211:22-23. He then testified he did not recall seeing any
of the 173 wire requests listed in Ex. P-2301. BT Vol. XX,
211:24-25. Those 173 wire entries on Ex. P-2301 were all for
monthly renewal premiums.
January 6, 2004, Allegiant wired $1, 230, 000.00 to NPS. Ex.
P-101D, pg. 1494. There was no description for the transfer
besides “per direction of investment advisor.”
The third wire transfer out of Trust IV was for $731, 953.28
to Lincoln. Ex. P-101D, pg. 1494. On the wire transfer
request form, there was an “X” next to
“Monthly renewals.” Ex. P-104, pg. 1071. Mr.
Morisse did not know if the money was being wired out for a
purpose other than new policies. BT Vol. III, 65:17-22. Mr.
Morisse signed the Wire Transfer Activity Report for this
wire transfer request. Ex. P-104, pg. 1070. Mr. Morisse
refused to admit the form indicated the money would not be
for new policies. BT Vol. III, 66:5-8. Someone else wrote
$731, 953.00 on the form; it was not he. BT Vol. III,
looking at the Statement of Transactions, Mr. Morisse should
have been able to find out where the $10 million of new
policies was being purchased, but he refused to agree or
disagree with this proposition. BT Vol. III, 67:24-68:9.
Irrespective of the absence of any description identifying an
investment, if a direction came from Wulf, Bates &
Murphy, Mr. Morisse, and consequently, Allegiant Bank
presumed it was an investment, as in the case of a wire
transfer request form in the amount of $1, 230, 000.00 to
Jefferson Bank and Trust to an account owned by NPS. BT Vol.
III, 114:18-25; Ex. P-104, pg. 1069. Even though Mr. Morisse
did not know what specific investment there was for $1, 230,
000, he believed “the transaction [was] permissible
under the law because it's the direction of the outside
investment advisor.” BT Vol. III, 115:3-4. If a fax
came in from NPS, Allegiant Bank accepted the fax as the
direction of Wulf, Bates & Murphy to transfer funds. BT
Vol. III, 116:14-18.
There were no protocols adopted at Allegiant Bank requiring
Mr. Morisse to know about wires $100, 000.00 and above, $1,
000, 000.00 and above, or $2, 000, 000.00 and above. BT Vol.
XX, 161:19-162:1. Mr. Morisse actually wrote the Delegation
Letter where any employee of NPS could give Allegiant Bank
direction and the direction will be accepted, on behalf of
the outside investment advisor. BT Vol. XX, 162:6-15. He knew
all of the faxed wire transfers came from NPS offices. BT
Vol. XX, 162:16-18.
Individuals in the Operations Department were made aware, by
him, the wire transfer request faxes were to be immediately
processed. BT Vol. XX, 163:6-9. While Mr. Morisse cannot
recall a single instance where the Operations Department
halted a wire transfer or said, we have to do some
verification before we send out this money, he believed there
may have been occasions when they had to contact Mr. Wulf or
NPS. BT Vol. XX, 163:24-164:4.
Allegiant's system of automatically processing all of
NPS's wire transfer requests during its tenure as trustee
without performing any form of scrutiny or review was a
deviation from the industry standard of care. BT Vol. XIII,
Policy Mismatching and Premiums Payments
Policy “mismatching” was a term supported in the
record, describing the practice of funding paid-in-full
consumer preneed contracts with insurance policies requiring
ongoing premium payments. BT Vol. VI, 82:12-20. Mismatching
was prevalent through Allegiant's period as trustee. BT
Vol. VI, 81:21-24. The vast majority of the Lincoln policies
purchased by the Trusts were multi-pay policies which
required monthly premiums to be paid for a period of years.
BT Vol. VI, 59:25-60:24.
“Monthly renewals” were renewal premiums owed
monthly on life insurance policies that are multi-pay
policies rather than paid-in-full policies. BT Vol. VI,
94:10-20. During its tenure as trustee, Allegiant wired tens
of millions of dollars out of the Trusts to Lincoln for
monthly renewal premiums. Ex. P-2301.
The Trusts owed monthly renewal premiums on the policies,
primarily because of the mismatching policy. BT Vol. VI,
Premiums were being paid to Lincoln. BT Vol. II, 141:13.
There is a difference between a premium to purchase a policy
and a renewal premium. BT Vol. II, 141:19-21. A renewal
premium should not exist for a paid-in-full policy. BT Vol.
II, 141:22-24. Mr. Morisse claimed he did not see any
evidence of renewal premiums being paid out of the Trusts
until this litigation. BT Vol. II, 142:9-15. Mr. Morisse
would have inquired with respect to what renewal premiums
were if he had seen evidence of them in the monthly packets.
BT Vol. II, 144:3-7. Mr. Morisse had no experience with
paid-in-full policies that had renewal premiums. BT Vol. II,
145:5-11. In these packets, NPS never certified premiums were
not owed on the policies. BT Vol. II, 145:21-23. Nor did
Lincoln ever certify these policies were paid-in-full. BT
Vol. II, 145:12-14.
Mr. Morisse believed the policies being purchased were all
paid-in-full policies. BT Vol. III, 17:4-6. He admitted
Allegiant Bank had no idea how many policies were being
purchased with premium terms of five or ten years. BT Vol.
This mismatching practice allowed the Trusts to pay a small
amount of initial premiums to Lincoln to purchase a large
face amount of coverage. BT Vol. VI, 66:7-22, 72:8-19.
However, the mismatched policies required premium payments
over the life of the policy that greatly exceeded the amount
of funds deposited into the Trusts from the consumer.
Id. at 87:13-20. As a result, new money coming into
the Trusts was being used to pay premiums on existing Lincoln
policies for other consumers. BT Vol. XXII, 61:21-25; Ex.
P-2398, 502:19-23. The mismatching practice freed up funds in
the Trusts because the Trusts only had to pay a small initial
premium to purchase the mismatched policies. BT Vol. VIII,
During Allegiant's trusteeship, roughly 21, 000 Missouri
consumers paid-in-full for their preneed contracts, and 81
percent of these contracts were backed with multi-pay
policies which required premiums to be paid over a period of
years. Ex. P-2321; BT Vol. VI, 83:22-86:1; JSF.
September 1998, the statement for Trust IV listed $51, 536,
545.74 in evidence of insurance. Ex. P-101D, pg. 9. Mr.
Morisse believed these to be paid-in-full policies. BT Vol.
III, 94:17-19. He believed Allegiant Bank had the obligation
to keep adequate records of the insurance assets. BT Vol.
III, 94:23-25. According to Allegiant Bank's records, on
September 25, 1998, it wired $393, 396.12 out of Trust IV to
Lincoln with the description “per investment advisor,
monthly renewals.” Ex. P-101D, pg. 14.
Allegiant Bank had the obligation to accurately record
transactions. BT Vol. III, 95:6-13, 97:7-12. If Mr. Morisse
had looked at a policy he should have been keeping under
Chapter 436, at the very beginning of Allegiant's tenure,
he could have seen the policies were not paid-in-full
policies, because Allegiant was paying monthly premiums. BT
Vol. III, 96:17-23. Mr. Morisse stated this would have
suggested further inquiry by him. BT Vol. III, 98:2-10. He
may have called Wulf, Bates & Murphy. BT Vol. III,
98:14-17. He would have made an effort to reconcile the
transaction description with records that the Bank had
received with respect to the monthly packets. BT Vol. III,
The monthly packets never claimed the policies were
paid-in-full and never showed premiums were not owed. BT Vol.
Allegiant Bank listed $54.6 million in evidence of Lincoln
policies in October 1998. Ex. P-101D, pg. 19. On October 30,
1998, there was a wire transfer to Lincoln, transferring
money out of Trust IV “per investment advisor - monthly
renewals.” Id. at pg. 24. Mr. Morisse did not
routinely look at the monthly trust statements he signed. BT
Vol. III, 101:9-13.
The November 1998 statement was an Allegiant Bank record. BT
Vol. III, 101:14-18. There was a wire transfer of $444,
658.22 cash to Lincoln “per investment advisor -
monthly renewals.” Ex. P-101D, pg. 32. If Mr. Morisse
had ever seen these “monthly renewal” notes on
Allegiant's own records, he may have inquired into it. BT
Vol. III, 103:1-5.
wire transfer form from January 1999 showed the monthly
renewals were increasing to $494, 000.00. Ex. P-104, pg.
1189. The Trust IV statement for March 1999 transferred $511,
000.00 in cash to Lincoln, again marked “monthly
renewals.” Ex. P-101D, pg. 63. In five months, $2
million was transferred from Trust IV to Lincoln for monthly
renewals. BT Vol. III, 107:4-7.
early 2004, NCB performed a sample of 60 life insurance
policies assisted by Mr. Morisse. BT Vol. III, 80:13-15. It
was at this time Mr. Morisse first learned there were not
actual paper policies supporting each insurance policy. BT
Vol. III, 81:7-19.
The sampling of 60 insurance policies included an application
for life insurance from Lincoln for consumer Dorothy
Littleton. Ex. P-685. According to the prearranged funeral
agreement, included in the application, Ms. Littleton paid,
in full, $9, 427.00, with $7, 540.00 (80%) going into the
trust. Ex. P-685. There was a check mark by the words
“paid in full.” Id. The data page,
included in every application, summarized the policy of
insurance purchased for the consumer; here, Ms. Littleton. BT
Vol. III, 85:17-86:1. Mr. Morisse first discovered there were
data pages, either at the time of the NCB due diligence, or
during the course of this litigation. Id. Ms.
Littleton's whole-life insurance policy contract should
have shown annual premiums of zero, but instead, it showed
annual premiums of $1, 592.00 for ten years. Ex. P-685; BT
Vol. III, 86:19-23.
Allegiant record summarized insurance purchased from Lincoln
for Ms. Littleton and showed premiums payable over ten years.
Ex. P-669, pg. 4. This information was available to Mr.
Morisse if it had been requested. BT Vol. XX, 231:22-25.
Even though Mr. Morisse did not believe Ms. Littleton was a
beneficiary in the trust, he knew Allegiant Bank was to
protect the assets of the trust for the benefit of anyone
with a legal interest in the trust, including preneed
contract owners and purchasers. BT Vol. III, 87:6-16.
According to the data page, the trust owed premiums to keep
this whole-life policy in force. BT Vol. III, 91:16-19. If a
premium was not paid, the policy could become worthless. BT
Vol. III, 92:1-4. Even though the trust would be required to
continue making premium payments, no further payments would
be due by the preneed contract owner to NPS. BT Vol. III,
92:7-18. Mr. Morisse understood this. Id.
Because the money would not come from Ms. Littleton, it would
have to come from the trust estate in some fashion, at the
direction of Wulf, Bates & Murphy. BT Vol. III, 93:3-10.
Mr. Morisse believed “any records with respect to
investment management would be with Wulf, Bates & Murphy,
not the Bank.” BT Vol. III, 93:11-18. He did not
believe Allegiant would have records showing money being
transferred to Lincoln to pay for renewal premiums. BT Vol.
January 6, 2004, there was a wire transfer of funds to
Lincoln for $6, 258.36, and on January 7, 2004, there was a
transfer in the amount of $2, 091.49 to Lincoln. Ex. P-101D,
pg. 1494. Mr. Morisse stated “It doesn't seem
likely, but I would not have any way of knowing, ” when
asked if common sense would have told him a combined sum of a
little more than $8, 000.00 was not being used to purchase
approximately $10 million in paid-in-full policies. BT Vol.
III, 69:2-7. The next wire transfer, dated January 8, 2004,
is for $25, 000.00 to Hollywood Forever, a California
Cassity-owned cemetery. Ex. P-101D, pg. 1494. This amount was
obviously not to purchase new life insurance policies. BT
Vol. III, 69:21-23. Mr. Morisse believed there were times
when the trust department loaned money to the Hollywood
Forever cemetery. BT Vol. III, 69:18-20.
January 8, 2004, Allegiant wired $854, 589.72 to Lincoln. Ex.
P-101D, pg. 1494. The wire transfer request form, kept by
Allegiant, listed “Policy Loans” at the bottom.
Ex. No. P-104, pg.1081. Mr. Morisse testified he was unaware
of any policy loans. BT Vol. III, 70:24-71:9. He believed he
would have expected it to be an investment advisor decision.
Id. Mr. Morisse admitted if he had received this
form, he could have read it and seen all the information on
the form. BT Vol. III, 71:19-24.
The January 2004 trust statement listed $2 million wired to
Lincoln on January 8, 2004. P-101D, pg. 1494. However, the
wire transfer request form for that date stated the amount
was wired to Lincoln Memorial Services, Inc., not Lincoln,
the life insurance company. Ex. P-104, pg. 1079. Mr. Morisse
confirmed the amount went to Lincoln Memorial, not Lincoln;
thus, it could not be used to purchase new life insurance
policies. BT Vol. III, 74:14-16. The trust loaned money to
Lincoln Memorial Services, Inc., but a bank examiner, looking
at Allegiant's records, would not understand the $2
million was not going to buy new policies. BT Vol. III,
According to the January 2004 trust statement, on January 15,
2004, $2.6 million was disbursed to Lincoln. P-101D, pg.
1495. The wire transfer request form, again, stated the money
was disbursed to Lincoln Memorial Services, Inc., not Lincoln
for new life insurance policies. Ex. P-0104, pg. 1087; BT
Vol. III, 76:11-22.
The transactions to NPS and Hollywood Forever did not fit
with buying $10 million of paid-up whole life policies from
Lincoln. BT Vol. III, 76:23-77:11. The pattern displayed with
this example, a monthly packet saying we are buying millions
of policies, with wire transfer request forms indicating new
policies were not purchased with the money, was followed
every month throughout Allegiant's tenure. BT Vol. III,
77:25-78:6. Transactions were not tracked and, at no time,
was there a reconciliation by Allegiant to see if the moneys
leaving the trust were actually being used to purchase new
paid-in-full whole-life policies. BT Vol. III, 78:7-12.
Allegiant only kept track of distributions for promissory
notes and mortgages. BT Vol. III, 79:8-13.
May 17, 2004, near the end of Allegiant Bank's tenure,
there was a wire transfer request from the investment advisor
for $200, 000.00. Ex. P-104, pg. 1189. Not only was
“monthly renewals” checked, the form stated there
was a “balance due of $454, 000.00.” Id.
This was just before Trust IV was to be transferred to
Bremen. BT Vol. III, 107:23-25.
The Trusts became unable to meet their monthly renewal
premium obligations in a timely manner and were often many
months behind on paying the premiums owed. BT Vol. VI,
95:10-96:12, 99:21-100:4; Ex. P-2301, pgs. 12-20. Many of the
wire request forms sent to Allegiant showed “balances
due” on the monthly renewal premium batches. Ex. P-104,
pgs. 710, 716, 736, 742, 773, 775, 777, 783, 803, 806, 821,
823, 827, 831, 833, 838, 840, 857, 876, 894, 899, 903, 909,
941, 942, 962, 967, 975, 996, 1025, 1029, 1035, 1039, 1067,
1105, 1111, 1115, 1117, 1131, 1142, 1149, 1157, 1159, 1166,
1182, 1183, 1186, 1189. The balances due reflected on the
wire transfer forms showed the Trusts were only able to make
partial payments in installments of the total balance of
renewal premiums due. BT Vol. VI, 96:13-97:14.
The delinquent premiums owed by the Trusts resulted in
Lincoln commonly paying less than the policies' face
values to the Trusts at the time of the consumers'
deaths. BT Vol. VI, 117:22-118:19.
Mr. Morisse did not look at several more million-dollar
transfers during the period January through May 2004; he did
not recall tracking, once again, each wire transfer wire
transaction. BT Vol. XX, 213:25-214:4. He admitted, 173 times
wire transfer forms said money was for monthly renewals but
did not recall seeing the forms. BT Vol. XX, 214:12-14. Mr.
Morisse was unaware and had no understanding insurance
policies were coming due and needed to be renewed. BT Vol.
The description on Allegiant's records showed renewal
premiums were being paid. BT Vol. XX, 202:1-4. Mr. Morisse
did not routinely receive monthly statements. BT Vol. XX,
204:13-18. He explained he did review information, data, and
transaction descriptions included in information that could
be pulled up on a computer screen at his desk, and he did not
recall seeing those transactions. Id. He did not use
his computer to look at the statements in electronic form and
see renewal premiums were being paid from Trust IV to Lincoln
for policy renewals. BT Vol. XX, 204:19-24.
Mr. Morisse understood, as trust administrator, it was
Allegiant's job to accurately value the assets in the
Trusts, whether or not there was an outside investor. This
included the Lincoln life insurance policies. BT Vol. XX,
When Mr. Morisse inherited Trust IV from the former trustee,
he did not inquire of the former trustee the identity of the
existing consumers for whom money was held. BT Vol. XX,
221:17-20. While he did not ask NPS that specific question,
he was in possession of the monthly packets, which included
the listing of policies for preneed contract purchasers and
owners. BT Vol. XX, 221:21-222:1. Mr. Morisse admitted, at
this time, he did not recognize these people as traditional
trust beneficiaries. BT Vol. XX, 222:2-4.
binder of all Trust IV contracts was presented to Mr.
Morisse. Ex. P-2287A. The first person on the list was Joseph
Bailey. Id. When Allegiant Bank took over the Trusts
from Mercantile Bank, Allegiant did not specifically request
information about what was on deposit for Mr. Bailey. BT Vol.
NPS made no representation, in writing, it was taking money
deposited by each consumer and buying a paid-in-full policy.
BT Vol. XX, 243:20-24. Nowhere in the monthly packets did
Lincoln state the value of the policies or that no premiums
were owed on these policies. See Ex. D-36; BT Vol.
The only information Lincoln provided in the list of policies
in force in the monthly packets was client number, policy
number, name, face amount of policy, and date, regarding new
policies. Ex. D-36, pg. 6. There was no information regarding
premiums or anything related to a cash value. BT Vol. XX,
There was no specific information about how much Trust IV
paid for the policies listed in the monthly packet. BT Vol.
XX, 246:1-3. Attached to the monthly packet was 747 pages of
life insurance policies, in force. Ex. D-36. There was no
information supplied by NPS identifying how much cash was
deposited into Trust IV for each consumer, other than face
value of the policy. BT Vol. XX, 246:13-16. There was no
information identifying the premium terms of the life
insurance policies Trust IV was buying, or how much money the
Trust paid for any of the policies listed in the monthly
packet. BT Vol. XX, 246:17-23.
no time did Allegiant, as trustee, ever ask for even a sample
of the Lincoln policies, so it could say we have picked some
from this list to show us the terms of the policy and what
premiums are due. BT Vol. XX, 246:24-247:5. Mr. Morisse
believed payment of premiums was outside the scope of the
authority and responsibility of the Bank. Id.
Mr. Morisse had kept copies, without repeatedly relying on
representations from NPS, he could have easily determined
almost all of the Lincoln life insurance policies were not
whole-life policies, but were burdened with premiums payable
for many years.
Policy mismatching was imprudent and presented
“considerable financial risk” to the Trusts. BT
Vol. X, 25:13-27:25. Lincoln's Chief Operating Officer
expressed concerns at the time, between 1998 and 2004, about
the “huge scale” of the mismatching practice
taking place. BT Vol. VI, 87:9-88:1. Mr. Lumpkin understood
the imprudent nature of the mismatching practice at the time,
as it was apparent “the trust would not have the
resources to continue to make their premium payments, ”
because the premiums owed on the mismatching policies would
exceed the amounts deposited in trust for the consumers.
Id. at 87:13-20.
Defendants' actuarial expert confirmed the mismatching
practice was “creating long-term problems for the
trusts.” BT Vol. XVIII, 112:24-113:2, 149:7-150:5,
158:2-5. A third party hired by NCB also agreed the insurance
policies, whose premium terms far exceed the policies'
face values, were imprudent and “ridiculous”
investments. Ex. P-2354, 52:20-53:22. Even David Wulf
testified the imprudent nature of the mismatching policies
put the Trusts “behind the 8-ball.” Ex. P-2398,
Failure to Track Investment Activity in the Trusts
Although, “[t]he Bank had ownership and control of the
assets” there was no system to check and see if an
investment was coming back for money going out; each wire
transfer request was not tracked. BT Vol. II, 155:1-20.
Allegiant relied on the actions of Wulf, Bates & Murphy
as the investment advisor. BT Vol. II, 155:15-17. Whether
there is an independent investment advisor, Allegiant Bank
understood its responsibilities under Chapter 436 were to
protect the assets of the Trusts. BT Vol. II, 155:21-24.
Irrespective of Mr. Morisse's equivocal testimony, there
was no tracking system at Allegiant Bank to see if money
going out of trust was for an investment, Mr. Morisse
believed reasonable safeguards were put in place so NPS could
not inappropriately take money from Trust IV. BT Vol. XX,
194:4-10. He previously testified he believed reasonable
safeguards were in place, and none of the safeguards
included, when money goes out, we need to find out what
investment the Trusts received in return. BT Vol. XX,
195:3-9. Mr. Morisse never wanted to track the wires out and
see what Allegiant got as an asset back for the trust. BT
Vol. XX, 195:20-24. Neither did he assign anyone to do that,
and no one was trained to do that. BT Vol. XX, 195:25-196:3.
Mr. Morisse did not recall millions of dollars going out of
the Trusts and no asset coming back. BT Vol. II, 185:1-5. He
did not believe it was his job to look, when millions of
dollars went out, to see if an asset came back. BT Vol. II,
185:6-9. He said, that would have been the job of the
investment manager. Id. Reliance was placed on the
investment manager. BT Vol. II, 185:10. There was no
experience that he recalled with respect to a default or an
issue with the investments. BT Vol. II, 185:10-12.
When asked if he just presumed if money went out, someday,
something would come back, Mr. Morisse said the Bank was
relying on the responsibilities of the investment manager. BT
Vol. II, 154:11-15. Mr. Morisse believed the investment
manager also had an obligation to the Trusts. BT Vol. II,
Allegiant Bank was depending on Wulf, Bates & Murphy to
inform the Bank of any investments it was purchasing. BT Vol.
III, 38:15-17. If Wulf, Bates & Murphy did not send
anything to the Bank, the Bank could not book anything on the
trust statement, because the Bank did not chart investments.
BT Vol. III, 38:18-21.
Mr. Morisse did not compare each wire transfer out during the
course of a month, line by line, with information received in
a monthly packet for an accounting period that would have
matched that summary of wire transfers, but he acknowledged
the information was there. BT Vol. XX, 213:17-21.
When asked if he could have attempted to reconcile the batch
amounts listed in the monthly packet with wire transfers
listed on Allegiant's trust statement for that month, Mr.
Morisse stated “there could have been a tracking or
matching. I think I said before I did not track wire
transfers out.” See D-36, pg. 4; BT Vol. XX,
242:1-5. When asked if he reviewed at the end of every month,
on his computer, to make sure every time money went out an
investment came back, he could only repeat what he said
previously, he did not track every wire transfer in and out.
BT Vol. XX, 160:16-19.
When asked if a prudent trust administrator overseeing
NPS-specific trusts, governed by Missouri law, did not need
to be assured when money is wired out as a supposed
investment, the trust gets anything in return, Mr. Morisse
replied “I think I've said I did no track wire out
and wire in.” BT Vol. XX, 161:2-6.
Mr. Morisse disagreed, as a prudent trust administrator, it
was Allegiant's job to track whether an asset came back
in return for the wires to the Cassity-owned entities. BT
Vol. XX, 177:24-178:3. He, instead, testified the Bank relied
on the investment advisor for that. Id. He was not
aware of a system capability for the Operations Department to
check when money was wired out, if the Trust Department got
anything back. BT Vol. XX, 178:7-15.
to whether Allegiant had the capability to track money going
out of the Trusts, Mr. Morisse testified he did not know
exactly what the capacities and capabilities of the trust
accounting system were beyond any understanding of the
ticklers for interest payments. BT Vol. XX, 178:16-21. Mr.
Morisse did not know how it could be done for the trust
department to track if an asset was received in return for
money wired out of the trust. BT Vol. XX, 178:22-25. Mr.
Morisse spent a lot of time drafting documents for NPS which
allowed NPS to raid the Trusts, but he could not opine an
accounting method to assure the Trusts he administered were
getting assets in return for money spent. This lack of
fiduciary care, for the benefit and protection of the
beneficiaries, demonstrates a striking lack of knowledge and
reckless conduct in administering these Trusts.
Mr. Morisse, at all times, worked on the assumption whatever
needed to be deposited had been fully deposited by NPS, and
that 100 percent of what had been deposited was used to buy a
life insurance policy on the individual and each policy was a
paid-in-full policy. BT Vol. XX, 153:25-154:9. The assumption
all policies being purchased were paid-in-full policies was
not correct. Mr. Morisse actually created a document saying
any employee at NPS could direct an investment on behalf of
Wulf, Bates & Murphy, and every direction from NPS, as to
what to do with money, must be obeyed by Allegiant Bank. BT
Vol. XX, 154:10-16.
was understood a direction from Mr. Wulf automatically made
the transfer request an investment. BT Vol. XX, 154:17-24.
Mr. Morisse would take any direction from NPS that said
“carbon copy David Wulf, ” as if it was an
investment direction. Id. When asked if Mr. Morisse
ever believed there was a reason, as fiduciary at Allegiant,
to check to see if money going out as an alleged investment
really brought an asset back to the Trusts, he answered, he
never encountered a circumstance where he believed that. BT
Vol. XX, 154:25-155:12. As to each specific wire
transmission, Mr. Morisse believed there was no duty on the
part of the fiduciary to check to see when money was wired
out, and did an investment come back. BT Vol. XX, 155:13-16.
He did not believe, as trust administrator, he needed to see
the wire transfer forms for scrutiny. BT Vol. XX, 155:21-25.
In reality, the wire transfer forms coming in requesting
money be paid from Trusts were sometimes approved by a bank
teller at Allegiant Bank.
David Wulf, as principal in Wulf, Bates & Murphy, was the
investment advisor who made investments in primarily
insurance policies in Trust IV. BT Vol. XX, 63:9-15. Mr.
Morisse believed it was appropriate to wire money from Trust
IV back to Lincoln to purchase insurance at Mr. Wulf's
direction. BT Vol. XX, 64:6-12. When Mr. Morisse wired money
out to Lincoln, he stated he would receive back, and book
into the trust, assets in exchange for that money. BT Vol.
XX, 64:13-16. Mr. Morisse never touched or saw one Lincoln
policy in all of his six years as Allegiant Bank trust
administrator. Mr. Morisse testified he received evidence of
life insurance in exchange for the wire transfers to Lincoln.
BT Vol. XX, 64:20-22. Once again, Mr. Morisse tried to lead
the Court away from his acknowledged responsibility to keep
the policies in Allegiant Bank, not possession of a
substituted piece of paper, indicating the policies exist
somewhere in the custody of some other entity, in clear
violation or Chapter 436.031.2. Although Mr. Morisse did not
say he saw any insurance policy, he believed he was getting
assets back for the wire transfers to Lincoln. BT Vol. XX,
64:23-65:2. Mr. Morisse's explanation for booking assets
was to go through the adjusting entry transaction description
he prepared, and the operations department entered into the
trust accounting system, so the face value of life insurance
as of the end of each monthly accounting period was adjusted
accordingly. BT Vol. XX, 65:21-25. This was Mr. Morisse's
definition of booking assets, not that he actually received
the assets and not that entries were made for each consumer
with the amount attributable to that consumer.
an example of him “booking” an asset received in
exchange for a wire transfer, Mr. Morisse identified a form
which accounts for changes in the face value of life
insurance policies in the monthly packet, due to new policies
being purchased. Ex. P-101D, pg. 700; BT Vol. XX, 66:7-13.
Obviously, when he referenced booking, he was not saying he
received possession of a physical asset. He admitted he was
not aware “of this whole multipay issue” at the
time he was trustee. BT Vol. XX, 66:18-20. In fact, Mr.
Morisse believed the policies he was purchasing, which he
never saw or examined, were whole-life paid-up policies. The
majority of policies he was buying actually required monthly
premium payments and he approved hundreds of wire transfer
forms sending money out of Trust IV to pay those monthly
renewal premiums. This information was readily reviewable if
he had examined the forms. He testified he never gave consent
to purchase anything other than fully paid-up policies. BT
Vol. XX, 66:21-23.
There was a separate summary of assets from a portfolio
review, at the end of each accounting period, which listed
all of the investments held in in the account. BT Vol. XX,
67:16-21. Life insurance policies were valued at face value.
BT Vol. XX, 67:22-24. An annual statement of transactions
showed receipts of wire transfers. Ex. P-101D, pg. 606. He
believed there was nothing wrong with money going out of
Trust IV to Lincoln. BT Vol. XX, 68:21-25.
Mr. Morisse believed, for the hundreds of wire transfers
going out to Lincoln, he was getting assets back. BT Vol. XX,
68:1-6. If he had been keeping the insurance policies in the
Bank, as required by Chapter 436.031.2, he could have seen
whether he was getting policies back. If he looked at the
policies, he could have seen he was actually buying, contrary
to his belief, not whole-life paid-up policies, but instead,
multi-pay policies, for which there was no accumulation of
cash surrender value and which required Trust IV to pay
monthly renewal premiums for up to ten years, and a few for
up to twenty years. His continual obvious substitution of
lack of knowledge, compounded with knowingly violating
Chapter 436.031.2 tears away Mr. Morisse's credibility.
Mr. Morisse believed when money went out of Trust IV, assets
were coming back, but there is no dispute, the largest valued
assets of the Trusts were insurance policies, which Mr.
Morisse never saw, irrespective of his sworn testimony he
“booked” the assets. This is false and
intentionally misleading testimony. What he actually did was
book what he called “evidence of insurance” of
multi-pay policies held by someone other than Allegiant Bank.
He, nor anyone at Allegiant Bank, ever touched one of the
life insurance policies. The misleading testimony continued,
when he confirmed the “assets came back, ”
resulting in cash to the Trusts. BT Vol. XX, 69:6-8. He
testified he believed from 1998 until 2004, the system with
Lincoln worked. BT Vol. XX, 69:9-11. He does not acknowledge
the “system, ” which he orchestrated, resulted in
many millions of dollars of losses to the Trusts.
NCB's auditors concluded, in early 2004, Allegiant had
“no tracking system unless [Allegiant went] to
NPS.” Ex. P-43, pg. 1; Ex. P-2358, 90:21-91:6.
Allegiant's failure to maintain a tracking system of its
own for the trust activity was a violation of the industry
standard of care. BT Vol. VIII, 70:12-15.
Mr. Coster, Plaintiff's expert, testified Allegiant, as a
trustee, was “not required to track each transaction,
but they were responsible for assuring themselves that the
assets were appropriate to the trust.” BT Vol. XIII,
Receipt of Netting Forms from NPS
Chapter 436 and the Trust Agreement both prescribed upon
death or cancellation, Allegiant was only permitted to
distribute funds to NPS in an amount equal to what had been
previously deposited into trust for that individual
consumer's contract. Mo. Rev. Stat. § 436.045; Ex.
P-168, pgs. 4-5; JSF.
All of the death claim distributions made by Allegiant during
its trusteeship were done through the “netting
form” transactions. BT Vol. VIII, 165:6-9, 170:1-12;
Ex. P-105. Through these netting form transactions, Allegiant
permitted NPS to offset the amounts NPS claimed it was owed
for death claims from the 80% new business deposits NPS was
required to make into the Trusts. BT Vol. VIII,
Netting forms were documents NPS sent, monthly, to
Allegiant Bank that reported new consumer deposits into the
Trusts. These forms were sometimes referred to as
reconciliation forms. BT Vol. II, 209:11-13. The netting form
would be accompanied by a copy of the original check. Ex.
P-105; BT Vol. II, 210:13-19.
The last sentence of Chapter 436.045 stated, “Upon
delivery to the trustee of the provider's [funeral home]
receipt for such payment, the trustee shall distribute to the
seller from the trust an amount equal to all deposits made
into the trust for the contract.” Ex. D-5; BT Vol. II,
206:25-207:4. Paying too much money out to any funeral home
beyond the amount on deposit was forbidden by the statute.
Ex. D-5, pg. 12; BT Vol. II, 207:16-18; JSF.
Every netting form Mr. Morisse signed, although he did not
sign every form, stated “Based on the information
contained in this reconciliation statement, this deposit and
distribution pursuant to Chapter 436 Revised Statutes of
Missouri is hereby evidenced and accepted this date and
time.” Ex. P-105, pg. 15; BT Vol. II, 216:10-20.
Allegiant never understood what the netting forms meant and
never performed any reconciliation or inquiry into the forms,
but nonetheless signed the forms certifying they were
prepared pursuant to Chapter 436. JSF.
The netting forms Allegiant received showed only a gross
deposit amount for a group of preneed consumers without
providing any detail regarding how many consumers were
covered by the deposit being made into trust or how much
money was being deposited by NPS for each consumer. BT Vol.
netting form for October 29, 1998, listed $97, 366.09 and
$132, 307.83 to total $229, 673.92. Ex. P-105, pg. 15. Mr.
Morisse had no idea what the subsidiary numbers of $97,
366.09 and $132, 307.83 were, and he never asked anyone at
NPS for an explanation of the numbers. BT Vol. II, 217:5-19.
According to Mr. Morisse, only the bottom portion of the
netting form, which stated the net check amount, was kept by
Allegiant Bank. BT Vol. II, 215:3-216:6. The top portion,
which was signed by an Allegiant Bank employee certifying the
deposit was accepted, was not kept, even though the form came
to Allegiant Bank as a single page. Id. There were
no backup documents submitted to Allegiant supporting the
single page form. BT Vol. II. 216:7-9.
information was included on the forms, nor on any other form,
that told Allegiant Bank which customers were covered by this
deposit or how much was being deposited for each consumer. BT
Vol. II, 217:23-25. There was no reference on these forms, or
any other forms, to allow Allegiant Bank to determine whether
the preneed contracts were paid in full or payable over time.
BT Vol. II, 218:6-9.
The netting form for October 29, 1998, also included a line
titled “Less Death Cancel Contributions” with the
number, $97, 418.46. Ex. P-105, pg. 15. Mr. Morisse did not
know what amount of that figure was for death claims and what
amount was for policy cancellations. BT Vol. II, 218:12-17.
The numbers on the forms were placed there by NPS.
Allegiant allowed a series of low-level employees with no
experience or training in Chapter 436 to sign the netting
forms. For example, Pam Buchanan, an administrative assistant
within the Allegiant trust department, routinely signed the
netting forms on Allegiant's behalf. Her responsibilities
at Allegiant included answering phones, typing letters, and
taking care of the mail. Ms. Buchanan had no knowledge or
training concerning preneed trusts or Chapter 436. Ex.
P-2371, 17:3-14, 48:25-49:16, 57:2-58:20. Although Ms.
Buchanan signed these netting forms confirming the death
claim distributions were being made “pursuant to
Chapter 436, ” Ms. Buchanan had no familiarity with the
addition to low-level trust department employees, Allegiant
routinely allowed bank tellers, who were not employees of the
Trust Department, to execute and process the netting form
transactions, through which millions of dollars in death
claim distributions were made to NPS. Ex. P-105, pgs. 35, 77,
100, 133, 302.
May 15, 2001, a deposit was made into Trust IV, from NPS, for
$50, 716.15. Ex. P-101D, pg. 451-5. The netting form, signed
by Pam Rice, contained the Chapter 436 reconciliation
language. Ex. P-105, pg. 151. The statement, after being
signed, was sent back to NPS. BT Vol. III, 39:12-20. Mr.
Morisse did not ever review this reconciliation statement or
any of the others. BT Vol. III, 41:5-9. The form stated the
total deposit of new consumer money was $362, 447.83. Ex.
P-105, pg. 151. Subtracted from this was $311, 731.68.
Id. However, Mr. Morisse never had an understanding
as to what the form and numbers meant. BT Vol. III, 41:15-
23. Allegiant Bank would receive from NPS receipt forms with
the checks and check stubs. BT Vol. III pg. 42:4-12. When
Allegiant Bank was signing the form, authorizing $311, 731.38
in death claims, the Bank did not have any of the death
certificates or information of any kind to account for the
amount. BT Vol. III, 43:7-18.
Allegiant's process of paying death claims through the
netting forms, without obtaining supporting records or
understanding the numbers depicted on the forms, was a
violation of the industry standard of care for professional
trustees. BT Vol. XIII, 21:1-18, 22:2-23:12, 110:9-111:4.
Allegiant violated its duties of prudence to control,
protect, and keep proper records relating to the trust
transactions by accepting the netting forms without
requesting the consumer-level information for the deposits or
death claim distributions referenced on the forms. BT Vol.
Allegiant's conduct in distributing death claims to NPS
through the netting form transactions without ensuring the
distribution amounts complied with Chapter 436 and without
obtaining the necessary backup detail improperly ceded
control to NPS. BT Vol. 118:15-119:23.
Receipt of Reconciliation Statements from NPS
Each reconciliation statement of evidence of insurance
policies required a signature from Allegiant which would be
returned to NPS. Ex. P-107, pg.4; BT Vol. III, 53:9-17. The
statement stated, “Based on the information contained
in this reconciliation statement, the deposits and
distributions pursuant to Chapter 436 Revised Statutes of
Missouri are hereby evidenced and accepted this date and
time.” Ex. P-107, pg. 4. The reconciliation statement
for September 1998, listed distributions of $252, 355.97 for
death claims and $26, 903.22 for cancellations of policies.
Ex. P-107, pg. 4. Mr. Morisse, nor anyone else at Allegiant
Bank, knew how much money Trust IV paid to purchase the
policies in September 1998. BT Vol. III, 56:9-12.
During its entire tenure, Allegiant Bank adopted the process:
death claims would be paid out during the month, followed a
month later by a reconciliation form, with copies of death
certificates or proof of funerals. BT Vol. IV, 163:23-164:5.
At no time did Allegiant Bank consider what it disbursed for
death claims to NPS to see if the number of death claims
balanced with the check written by Allegiant Bank. BT Vol.
IV, 164:6-10. Instead, Allegiant relied on the affidavit from
NPS. Id. Allegiant Bank allowed NPS to take as much
money out for death claims as NPS claimed it was entitled to
receive. BT Vol. IV, 164:11-13.
The monthly packet for October 3, 2003, for Trust IV included
a reconciliation statement showing eight batches of evidence
of insurance being received. Ex. P-106, beginning on pg. 575.
Mr. Morisse depended on the reconciliation statement for
information on insurance. BT Vol. III, 51:25-52:2. The total
face value of these new policies was $2.4 million. Ex. P-106,
pg. 574; BT Vol. III, 52:23-25. No. other information on the
policies, such as cash surrender value or premium terms, was
included. BT Vol. III, 53:1-5.
The January 2004 reconciliation statement for Trust IV would
have been received in February 2004, as part of the monthly
packet. Ex. P-107, pg. 67; BT Vol. III, 56:18-25. In this
month, Trust IV purchased over $10 million in insurance
policies from Lincoln. Ex. P-107, pg. 67. The January 2004
Trust IV statement of transactions listed the outgoing
transfers from Trust IV to Lincoln to purchase the $10
million in new policies referenced on the reconciliation
form. Ex. P-101D, pg. 1494; BT Vol. III, 58:7-11.
Reconciliation was not done with the monthly packets, because
Allegiant Bank's records showed money moving in and out
of the trust account was grossly in excess of deaths and
cancellations. BT Vol. III, 144:10-15. On December 29, 1998,
according to a Trust IV statement, Allegiant Bank received a
$580, 280.55 wire transfer into Trust IV. Ex. P-101D, pg. 39.
The only reason Trust IV should have been receiving money
from Lincoln was to pay death claims or cancellations, and if
it was for death claims or cancellations, the money should
have then been sent to NPS to be paid to funeral homes. BT
Vol. III, 144:25-145:5. There is no explanation why Lincoln
was sending $580, 000 into Trust IV. BT Vol. III, 145:6-8. On
December 30, 1998, $580, 000.00 left the Trust. Ex. P-101D,
pg. 35. The money was sent to Nations Bank. Id. This
was not for death claims or cancellations, so the $580,
000.00 should not have been sent out. BT Vol. III, 145:16-18.
This was a confusing transaction to Mr. Morisse. Id.
Death claim funds should have gone to NPS. BT Vol. III,
Allegiant violated the industry standard of care by not
maintaining consumer-level deposit records, because, as here,
where there are multiple beneficiaries of a trust, the
trustee must keep records of the individual deposits made for
each consumer. BT Vol. XIII, 76:2-9, 77:3-8; BT Vol. VIII,
early 2004, NCB's auditors performed due diligence into
Allegiant's administration of the Trusts and concluded
“[t]here was no reconciliation performed by Allegiant
to the support provided by NPS.” Ex. P-42, pg. 2. The
auditors also concluded “NPS provides Allegiant with
monthly directions to make adjustments to the trust accounts.
This information only includes the net increase/decrease
adjustments to make to the trust account. There was no
specific information included at the policy level for
Allegiant to review.” Id.
Allegiant's failure to reconcile the information received
from NPS “to verify the activity that was going on in
the trusts” and acceptance of direction from NPS to
adjust the trust accounts, while only receiving limited
information, violated the industry standard of care. BT Vol.
Allegiant also violated the industry standard of care by
failing to perform a reconciliation of the monthly trust
activity showing the purposes for the wire transfers and the
amounts paid for each Lincoln policy during that month. BT
Vol. VIII, 48:14-22.
The World Service Group Term Policy
early 2000, Allegiant began wiring money out of Trust IV to
pay premiums on a group term life insurance policy issued by
World Service Life Insurance Company. BT Vol. VIII,
212:12-213:3; Ex. P-104, pgs. 157, 162. World Service Life
Insurance Company was a Cassity-owned company and an
affiliate of Lincoln. BT Vol. VI, 124:16-21.
April 27, 2000, Allegiant Bank booked, on the Trust IV trust
statement, the group policy as an asset in Trust IV for a
purported cost basis of $13, 522, 337.35. Ex. P-101D, pg.
249. Cost basis meant what was paid for the asset. BT Vol.
IV, 24:23-25:1. The World Service group term policy was
issued to cover an existing $13.5 million trust liability
relating to policy loans previously taken. BT Vol. VIII,
212:23-214:4; BT Vol. VI, 122:16-21. It was the result of a
consent judgment between NPS and the state of Missouri and
the subsequent monitoring of the Trusts by court-appointed
monitor, Robert Lock. BT Vol. IX, 72:22-73:24, 174:8-12; Exs.
D-19, pg. 1, D-20, pg. 2.
April 2004, evidence of insurance in Cassity-owned insurance
companies was 94 percent of the entire trust. BT Vol. II,
175:15-18. The World Service Policy was more than eight
percent of the total value of Trust IV; not a single other
investment was as large as the World Service policy, other
than the Lincoln life insurance policies. BT Vol. II,
Allegiant valued the World Service group term policy at its
face value, which was $13, 522, 337.35. Allegiant never
updated or changed the value of the group term policy, and
instead carried the policy on its books as an asset of Trust
IV with a purported value of $13.5 million through May 2004,
when the asset was transferred to Bremen. Ex. P-101D, pg.
Allegiant would accept a whole-life policy with payments due
over ten years as if it were a whole-life policy
paid-in-full. BT Vol. IV, 35:2-5. Whatever the face of the
term policy was, Allegiant added it to its books as if it
were the same as a whole life policy paid-in-full. BT Vol.
IV, 35:14-18. Allegiant never considered the quality of the
asset. BT Vol. IV, 35:23-25.
Allegiant Bank never investigated to determine if $13.5
million was ever actually paid by Trust IV for the policy. BT
Vol. IV, 26:6-8. Mr. Morisse knew enough about insurance to
know a term policy has no cash accumulation value. BT Vol.
IV, 26:23-25. Mr. Morisse knew a term policy became worthless
when premiums were not paid beyond the grace period. BT Vol.
IV, 27:1-3. However, he took no steps to ask for the policy
to know when it could become worthless. BT Vol. IV, 27:6-10.
Because it was booked as a trust asset, there should have
been evidence of the policy to support the deposit to the
account. Id. Mr. Morisse did not believe
Allegiant's trust department needed to acquire a copy of
the policy, because “evidence of the policy”
satisfied the trust's requirements. BT Vol. IV,
27:21-28:17. He did not remember if evidence of the policy
was used by Allegiant's trust department in place of
actually looking at the policy. Id.
The policy represented a high percent of Trust IV when it was
booked into Trust IV in 2000. BT Vol. IV, 28:18-22. Mr.
Morisse would not admit this was a material amount of the
trust, stating material is a relative and subjective term. BT
Vol. IV, 28:22-29:1. “The Bank was not determining the
prudence of any specific investment action or deposit”
no matter the size of the asset. BT Vol. IV, 29:9-14.
Allegiant did not track to see if payments were being made on
the $13.5 million policy. BT Vol. IV, 30:4-7. Mr.
Morisse's conclusion Allegiant was not determining the
prudence of any specific investment is alarming and suggests
abdication of responsibility of fiduciary duty to consumer
and funeral home beneficiaries.
Mr. Morisse did not remember asking why a $13.5 million
policy was booked to Trust IV in 2000. BT Vol. IV, 37:11-16.
He did not remember seeing the form that should have alerted
him consumers' money was flowing out of Trust IV to pay
renewal premiums for this policy that was going to lapse. BT
Vol. IV, 37:17-21. He had a general understanding of
insurance and that premiums must be paid to maintain a term
policy in force. BT Vol. IV, 37:22-38:5. When it was placed
in the trust, Mr. Morisse did not know the policy was created
to cover policy loans made in other trusts. BT Vol. IV,
38:6-9. He did not ask why Allegiant suddenly received an
insurance policy like no other policy seen in any other
trust. BT Vol. IV, 38:22-25. He could have asked, but did
not. BT Vol. IV, 39:1-2. If Mr. Morisse had learned the
policy was created to cover policy loans made in other NPS
trusts, he believed he would have inquired of Wulf, Bates
& Murphy. BT Vol. IV, 39:19-40:2.
Mr. Morisse did not know of the World Service Insurance
Company. BT Vol. IV, 36:3-5. Allegiant's wire transfer
request form showed money was to be paid to Lincoln for a
renewal premium. Ex. P-104, pg. 162. The policy required a
monthly premium to be paid by the trust in order to keep the
policy in force. BT Vol. VI, 124:1-11, 254:9-19; Ex. D-19,
pg. 7. If Trust IV failed to pay the monthly premium on the
group term policy, the policy would cease to exist. BT Vol.
Shortly after Allegiant booked the group term policy as an
asset of Trust IV, the policy lapsed and ceased to exist. BT
Vol. VI, 125:12-16; BT Vol. IX, 185:25-186:6; BT Vol. XII,
Allegiant Bank's records indicated loans were being taken
out covered by the group term policy. Ex. P-104, pg. 162. The
wire transfer request form on February 2, 2000, stated
“Group Term (Loan Coverage) Monthly Premium.”
P-104, pg. 162. He did not recall seeing this form, and did
not know to what it referred. BT Vol. IV, 41:8-10. “It
was the protocol that these faxes went to the operations area
for execution.” BT Vol. IV, 41:11-14. There was no
inquiry by Allegiant into what loan coverage meant. BT Vol.
Mr. Morisse was familiar with the World Service issue, at the
time of his testimony. Evidence was previously presented
concerning a Boone County, Missouri proceeding, and a letter
dated May 4, 2000, to Judge Gene Hamilton. Ex. D-165. Mr.
Morisse never received copies of the Boone County proceeding,
and no one from the State of Missouri Attorney General's
Office or the Department of Insurance talked to him about the
proceeding. BT Vol. XX, 26:4-12. Mr. Wittner said nothing to
him about this. BT Vol. XX, 26:13-14. At no time during
Allegiant's tenure, did he recall seeing any document
relating to the proceeding, prior to litigation in this case.
BT Vol. XX, 26:15-19.
Included in the letter to Judge Hamilton was the comment,
“People don't buy automobile liability policies for
their cash surrender value, and people don't buy funeral
policies for their cash surrender value. The death benefit is
the value of the bargain.” Ex. D-165. This is a curious
stray reference consistent with the approach Mr. Morisse took
while he administered the Trusts. Mr. Morisse always
believed, throughout his tenure, the policies were whole-life
policies with cash surrender values. ...