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Jo Ann Howard and Associates, P.C. v. Cassity

United States District Court, E.D. Missouri, Eastern Division

July 3, 2019

JO ANN HOWARD & ASSOCIATES, P.C. et al., Plaintiffs,
J. DOUGLAS CASSITY, et al., Defendants.



         This 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'[1] 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 damages.

         Both 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.

         The 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 concluded:

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 appropriate.

Id. at 651-652.

         Having 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.


         1. Jo 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. 2745.

         2. The 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.

         3. 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.

         4. 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.

         5. PNC 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[2] as a result of various mergers. JSF.

         6. 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.

         7. 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.

         8. NPS started in 1979 and was owned and controlled by the Cassity family, whose members were Doug, Rhonda, Tyler, and Brent Cassity. JSF.

         9. NPS 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 prearrangement. JSF.

         10. NPS 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.

         11. 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. Sutton. JSF.

         12. The 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 Lincoln. JSF.

         13. 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 Lincoln. JSF.

         14. NPS 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.

         15. 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.

         16. 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, 102:16-20.

         A. Background of Allegiant, Herbert Morisse, and the Trusts

         17. 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.

         18. 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.

         19. At 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.

         20. In 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, 8:19-24.

         21. Mr. 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.

         22. By 1995, Mr. Morisse's private practice was 60 to 70 percent probate, trust or fiduciary work. BT Vol. V, 9:15-19.

         23. For 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.

         24. In 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, 10:22-11:14.

         25. Mr. 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, 11:11-14.

         26. As 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.

         27. Mr. 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.

         28. A 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, 13:16-19.

         29. In 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.

         30. Mr. 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.

         31. The 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.

         32. Mr. 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.

         33. 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, 19:25-20:4.

         34. 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.

         V, 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.

         35. 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.

         36. At 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.

         37. 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.

         38. 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 33:25-34:9.

         39. On or about October 1, 1997, a date preceding Herbert Morisse's[3] 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. Id.

         40. 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, 47:15-48:11, 54:14-16.

         41. Mr. 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.

         42. Mr. 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. V, 18:17-19.

         43. 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.

         44. 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.

         45. 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.

         46. In 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.

         47. 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.

         48. 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.

         49. 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.

         50. Mr. 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.

         51. In 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.

         52. 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.[4] 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, 51:20-25.

         53. The 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.

         54. Mr. 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. Id.

         55. Mr. 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.

         56. His 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.

         57. 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.

         58. Mr. 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.

         59. Mr. 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.

         60. 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.

         61. 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.

         62. Mr. 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, 37:13-15.

         63. Mr. Morisse asked Mercantile Bank[5] 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.

         64. Mr. 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.

         65. His 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.

         66. Mr. 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[6] to deliberate on whether the accounts should be accepted. BT Vol. V, 41:21-24.

         67. The 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, 43:13-17.

         68. Mr. 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. V, 46:19-21.

         69. 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.

         70. On 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, 48:23-49:2.

         71. 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. V, 50:21-25.

         72. Mr. 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.

         73. Mr. 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.

         74. Mr. 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 booked.

         75. The 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.

         76. The 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.

         77. The 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.

         78. 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.

         79. 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.

         80. Mr. 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.

         81. 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.

         82. The 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.

         83. Mr. 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.

         84. 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.

         85. 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.

         86. Mr. 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.

         87. From the time Mr. Morisse started at Allegiant Bank in August, 1998, [7] 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.

         88. The 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.

         89. 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.

         90. In 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.

         91. Of 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.

         92. 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.

         93. In 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][8]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.

         94. In 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. V, 74:11-14.

         95. 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.

         96. Mr. 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.

         97. 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.

         98. Mr. 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, 76:25-77:3.

         99. 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.

         100. 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.

         101. Section 2.3 stated, “[n]o owner[9] 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.

         102. Section 2.4 stated, “With each deposit, Seller will provide a breakdown of how much of said deposit is to be created[10] 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.”

         103. 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.

         104. 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, 81:24-82:1.

         105. 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.

         106. 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.

         107. 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.

         108. 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.” Ex. P-168.

         109. 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.”[11] 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.

         110. 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.

         111. 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.”[12] 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.

         112. 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.

         113. At 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.

         114. 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.

         115. 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.

         116. 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.

         117. 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.

         118. To 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 mistaken.

         119. 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.

         120. 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.

         121. Mr. Morisse said he was not aware of an obligation requiring Allegiant Bank to maintain specific records by customer of specific amounts on deposit.[13] 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 mistaken.

         122. 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.

         123. Mr. Morisse did maintain records related to the transition from Mercantile. BT Vol. V, 113:13-15.

         124. 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, 116:6-14.

         125. 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 each consumer.

         126. By 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, 87:6-9.

         127. 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 was presented.

         128. 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.

         129. To 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.

         130. 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.

         131. 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.

         132. 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 dates. Id.

         133. 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. Id.

         134. 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.

         135. In 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 received. Id.

         136. A 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.

         137. 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.

         138. 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.

         139. 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, 139:23-25.

         140. 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.

         141. 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[14]; BT Vol. V, 131:14-22.

         142. 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.

         143. 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.

         144. 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.

         145. When Allegiant Bank assumed this trust in 2000, trust assets were all invested in cash and cash equivalents. BT Vol. II, 194:22-195:2.

         146. 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, 98:2-4.

         147. 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.

         148. 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.

         149. He 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.

         150. As 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 surrender values.

         151. 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.

         152. At 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. II, 24:24-25:5.

         153. 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.

         154. 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, 32:7.

         155. 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.

         156. 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.

         157. 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.

         158. 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.

         159. 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 Board.” Id.

         160. 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.

         161. 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.

         162. 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.

         163. 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.

         164. 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.

         165. 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, 188:25-189:6.

         166. 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.

         167. 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, 204:23-25.

         168. 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.

         169. 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.

         170. 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.

         171. 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.

         172. 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. IV, 192:2-7.

         173. 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.

         174. 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.

         175. 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.

         176. From January-April 2004, the proposed acquisition of Allegiant Bank by NCB was pending. BT Vol. II, 164:23-165:6.

         177. On 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.

         178. 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, 162:11-14.

         B. Wire Transfer Activity in the Trusts

         179. 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.

         180. There were thousands upon thousands of consumers whose deposits Mr. Morisse was to control and protect as identified in Ex. P-2287.

         181. Allegiant knew it could only distribute trust funds to NPS under the specific circumstances authorized by Chapter 436 and the Trust Agreements. JSF.

         182. 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.

         183. 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.

         184. 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.

         185. 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.

         186. In 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, 188:18-20.

         187. 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.

         188. 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.

         189. 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.

         190. 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. 117, 1087.

         191. If 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, 151:16-18.

         192. 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.

         193. 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.

         194. 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.

         195. On 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.

         196. 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. III, 153:9-14.

         197. 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.

         198. A 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.

         199. On May 15, 2001, a $50, 716.00 deposit of consumer money was made by NPS into Trust IV. Ex. P-101D, pg. 45105.

         200. On 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.

         201. On 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.[15] 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.

         202. 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, 24:15-20.

         203. On 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.

         204. 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.

         205. 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.

         206. In 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.

         207. 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.[16] 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's[17]background 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.

         208. On 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.

         209. 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.

         210. A 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, 45:25-46:5.

         211. On 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.

         212. 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 advisor. Id.

         213. 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.

         214. 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.

         215. On 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.” Id.

         216. 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, 66:19-22.

         217. By 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.

         218. 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.

         219. 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.

         220. 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.

         221. 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, 42:1-25.

         C. Policy Mismatching and Premiums Payments

         222. 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.

         223. “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.

         224. The Trusts owed monthly renewal premiums on the policies, primarily because of the mismatching policy. BT Vol. VI, 94:21-23.

         225. 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.

         226. 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. III, 17:12-17.

         227. 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, 108:12-109:23.

         228. 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.

         229. In 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.

         230. 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, 98:22-25.

         231. The monthly packets never claimed the policies were paid-in-full and never showed premiums were not owed. BT Vol. III, 99:1-6.

         232. 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.

         233. 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.

         234. A 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.

         235. In 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.

         236. 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.

         237. An 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.

         238. 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.

         239. 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.

         240. 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. III, 93:19-24.

         241. On 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.

         242. On 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.

         243. 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, 75:3-6.

         244. 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.

         245. 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.

         246. On 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.

         247. 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.

         248. 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.

         249. 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. XX, 201:12-17.

         250. 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.

         251. 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, 220:9-12.

         252. 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.

         253. A 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. XX, 223:2-12.

         254. 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. XX, 243:25-244:4.

         255. 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, 245:22-25.

         256. 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.

         257. At 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.

         258. If 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.

         259. 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.

         260. 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, 512:15-513:2.

         D. Failure to Track Investment Activity in the Trusts

         261. 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.

         262. 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.

         263. 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.

         264. 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, 154:13-15.

         265. 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.

         266. 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.

         267. 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.

         268. 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.

         269. 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.

         270. As 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.

         271. 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.

         272. It 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.

         273. 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.

         274. As 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.

         275. 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.

         276. 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.

         277. 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.

         278. 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.

         279. 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, 214:15-24.

         E. Receipt of Netting Forms from NPS

         280. 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.

         281. 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, 170:25-171:12, 172:18-173:12.

         282. Netting forms[18] 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.

         283. 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.

         284. 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.

         285. 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.

         286. 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. VIII, 170:1-172:16.

         287. A 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.

         288. 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.

         289. No 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.

         290. 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. Id.

         291. 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 statute. Id.

         292. In 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.

         293. On 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.

         294. 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.

         295. 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. XIII, 115:4-118:6.

         296. 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.

         F. Receipt of Reconciliation Statements from NPS

         297. Each reconciliation statement[19] 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.

         298. 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.

         299. 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.

         300. 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.

         301. 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, 146:1.

         302. 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, 47:2-48:2.

         303. In 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.

         304. 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. VIII, 66:19-68:5.

         305. 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.

         G. The World Service Group Term Policy

         306. In 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.

         307. On 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.

         308. In 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, 175:19-176:3.

         309. 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. 1598.

         310. 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.

         311. 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.

         312. 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.

         313. 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.

         314. 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. VI, 124:12-15.

         315. 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, 242:5-8.

         316. 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. IV, 42:15-19.

         317. 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.

         318. 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. ...

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