Michigan's economic development fund recently agreed to help finance the sale of a collection of cemeteries across the state, 28 of which, in previous years under previous owners, were involved in two major fraud schemes that swindled tens of millions of dollars from hundreds of victims.
Yet since the Michigan Strategic Fund gave its preliminary approval June 26 for a $26.5-million tax-exempt bond issue for the cemeteries' would-be buyer, unreported details have emerged that throw the legitimacy of the deal into question.
None of the 28 cemeteries, which include well-known Woodlawn in Detroit, is actually for sale, the Free Press has learned, and the owner of the cemeteries says it hasn't even been approached by the Southfield-based religious nonprofit group that is seeking state assistance to buy them.
“There’s been no contact whatsoever with these folks," said Jim Price, chairman of Midwest Memorial Group, which has owned the cemeteries since 2016 as a subsidiary of Toronto-based Park Lawn Corp.
“These cemeteries are not on the market and are not for sale,” he said.
What's more, the manager of a 29th cemetery in the strategic fund-backed deal — Knollwood Memorial Park in Canton — says the Southfield group sought to buy Knollwood three years ago, but never came up with the money.
Nevertheless, the nonprofit group, called Cathedral of St. Augustine's, listed Knollwood on its website staugustines-usa.com as one of its cemeteries. The group even formed a subsidiary nonprofit corporation last year that claims it operates, manages and maintains Knollwood for St. Augustine's.
But St. Augustine's has no involvement at all with the cemetery, said Knollwood's General Manager Dennis Herman.
“They had a proposal in 2015 and nothing has taken place since," he said. "So anybody with any common sense would say that thing is null and void.”
Herman said he has yet to meet anyone from St. Augustine's. He questioned whether the group is even real.
“It just seems like it’s some kind of phantom group," he said.
The 30th and last cemetery in the proposed deal is for "Gethsemane Crypts," located at the city-owned Gethsemane Cemetery in Detroit on Gratiot near the airport. A City of Detroit spokesman said last week he had no information about any deal involving Gethsemane.
No one from Cathedral of St. Augustine's would give an interview or answer questions for this article. The organization's attorney, Michael Norman of Southfield-based Midwest Legal Group, also didn't respond to questions or interview requests.
First stamp of approval
Woodlawn Cemetery in Detroit on Friday, June 29, 2018. (Photo: Cameron Pollack, Detroit Free Press)
The Michigan Strategic Fund can assist nonprofits by issuing tax-exempt private activity bonds on their behalf to help finance the organizations' projects.
Proceeds from the sale of bonds are then loaned by the strategic fund to the nonprofits, with the strategic fund pledging none of its own credit.
The bonds' tax-exempt status make them more desirable for investors and lowers costs for the organizations.
The June 26 vote was the first procedural step in the bond issue process.
Back in November 2015, the strategic fund approved a similar bond inducement for St. Augustine's for the same cemeteries. But the cemetery purchase never happened, so that resolution expired after two years.
Christopher Cook, a director for the Michigan Economic Development Corp., which administers programs and performs due diligence on behalf of the strategic fund, said the cemetery deal is still far from being finalized.
Still to come is the due diligence period. After that, the strategic fund could authorize or not authorize the issue of any bonds for St. Augustine's.
A Southfield building that houses offices for the Cathedral of St. Augustine's. Photo taken June 27, 2018. (Photo: JC Reindl, Detroit Free Press)
Cook emphasized that the strategic fund would simply be a conduit issuer in the deal; there is no state or strategic fund money at risk. So if St. Augustine's doesn't obtain purchase agreements for the cemeteries, the bond deal would not move forward, he said.
“There are multiple steps between inducement and authorization — safeguards that are in place," Cook said.
Darkened office, damaged church
The Cathedral of St. Augustine's lists its offices as Suite 200 in a Southfield office building at 17520 W. Twelve Mile.
A reporter who tried to visit the office last week found the listed suite occupied by an unrelated organization. St. Augustine's actual office, Suite 206, was dark and the door was locked. A nearby tenant said there is seldom anyone in the office.
St. Augustine's also has a church — albeit an empty one.
The former Guardian Angels Catholic Church in Detroit, now owned by Cathedral of St. Augustine's. Photo taken July 1, 2018. (Photo: JC Reindl, Detroit Free Press)
Since 2013, the group has owned the former Guardian Angels Catholic Church, 12545 Kelly Road on Detroit's east side. Land records show the Archdiocese of Detroit sold the property for $365,000 to a real estate trust affiliated with St. Augustine's.
But the church does not appear to be in usable condition. A visit on Sunday found the front sidewalk choked with weeds and the doors chained shut. There was broken glass, severe water damage and filthy debris visible in the lobby.
On its website, St. Augustine's says the church experienced more than $400,000 in damage from August 2014 storms and flooding.
National Foundation
Cathedral of St. Augustine's is an affiliate of the nonprofit St. Augustine's National Foundation.
The foundation lists two addresses on its Internal Revenue Service financial statement: the same Southfield office as the Cathedral, and a K Street address in Washington, D.C., that is a leasable conference room also used by various unrelated businesses and law firms.
According to the financial statement, St. Augustine's National Foundation ranks among the largest nonprofits in metro Detroit with $126.4 million in 2016 net assets. Annual revenues, however, nosedived that year to $13.7 million from $114.2 million in 2015. The IRS statement offers few details about the foundation's income sources.
The statement says that St. Augustine's mission, among other things, involves establishing a new historically black college and university to be called "University St. Augustine's & Institutes of Medicine."
The foundation says it has 100 volunteers and no employees. It identifies three foundation trustees and one officer. The top trustee, "A. Worthy," is reported to work, on average, 100 hours per week without any financial compensation.
The foundation's president, Durry Nkanga, signed off on the accuracy of the IRS statement under penalties of perjury.
History of scandal
The 28 Michigan cemeteries from Albion to the Upper Peninsula that are at the center of the proposed deal have twice been embroiled in scandals.
In 2007, a previous owner of the cemeteries, Clayton Smart of Oklahoma, was arrested and pleaded guilty in Michigan to 39 felony counts for embezzling more than $60 million from the cemeteries' trust funds. That fraud also involved cemeteries in several other states.
The money from the pilfered trust funds included prepayments for cemetery plots from individuals and families.
Smart's financial adviser worked for a unit of Citigroup, which was later sanctioned $1.5 million by the Financial Industry Regulatory Authority for not stopping the embezzlement.
Now-defunct Portfolio magazine published a detailed account of the fraud, which it called "history's first large-scale white-collar grave robbery."
Smart, now 78, was sentenced to up to 20 years in prison and ordered to pay $48 million in restitution. He was released in June 2015. A clerk for the 3rd Circuit Court in Detroit said Tuesday that, so far, no restitution has been paid.
Following Smart's arrest, the 28 cemeteries were put into conservatorship.
Second fraud
Later, a Cincinnati businessman named Mark Morrow launched a plan to buy some of the cemeteries.
Morrow formed a limited liability corporation called Detroit Memorial Partners to own 49 percent of the collection of 28. He convinced a wealthy businessman to buy the remaining 51 percent, according to documents in a subsequent lawsuit against Morrow filed by the Securities and Exchange Commission.
In an attempt to stop the sales, St. Augustine's National Foundation filed a lawsuit in 2008 in U.S. District Court against the conservator of the cemeteries, claiming the foundation's bid for the lands had been unfairly treated. Judge Denise Page Hood ultimately sided with the conservator and dismissed St. Augustine's case.
But the story didn't end there.
Between 2007 and 2012, Morrow and his newly formed corporation sold millions of dollars in promissory notes that were supposed to be fully secured by the cemeteries, yet investors weren't told the ownership stake was only 49 percent, according to the U.S. Attorney's Office in Georgia.
Woodlawn Cemetery in Detroit on Friday, June 29, 2018. (Photo: Cameron Pollack, Detroit Free Press)
Some of those millions was improperly diverted to an Atlanta-based investment firm run by Morrow's business associate. The entire scheme involved more than 300 people who lost more than $24 million.
Morrow pleaded guilty last year to one count of conspiracy to commit wire fraud. He is currently imprisoned in a low-security federal facility in Kentucky with a 2022 release date.
Once the fraud was exposed, the U.S. District Court in Georgia appointed a receiver for the 49 percent stake in the collection of cemeteries.
St. Augustine's tries to buy
In December 2015, Cathedral of St. Augustine's made an attempt to buy that ownership stake. The nonprofit's attorney showed the court how the Michigan Strategic Fund had just backed their plan with a bond inducement resolution.
But the cemeteries' receiver, citing numerous "red flags" in St. Augustine's bid, including possibly "fraudulent" financial statements, wanted to sell the stake instead to Park Lawn Corp. in Toronto.
"The publicly available information about (St. Augustine's) organization, its leadership, and its activities seems dubious at best," the Atlanta-based receiver wrote in court documents.
"More significantly, (St. Augustine's) is not even in the cemetery business ... so it does not have the infrastructure and staffing currently in place to run the (28) cemeteries," the receiver said.
St. Augustine's denounced that criticism, calling the claims false and slanderous. The group suggested that racism was a factor, noting how St. Augustine's organizers are minorities.
The judge ultimately decided against St. Augustine's. Park Lawn went on to become 100-percent owner of 26 of the cemeteries through the subsidiary Midwest Memorial Group. It serves as receiver and operator of the remaining two.
One more try
Last week, St. Augustine's again petitioned the U.S. District Court in Georgia to purchase the 28 scandal-plagued cemeteries, this time for $21.5 million.
The same receiver called the request "frivolous" because the cemeteries were already sold. In a phone interview, the receiver, Atlanta attorney Jason Alloy, said that he finds the situation bizarre.
"Surely, they know this was sold over two years ago," he said of St. Augustine's. “It can’t be news to them because they had the same lawyer back then that they do now.”
Alloy also recalled his past difficulty in obtaining information about St. Augustine's earlier bid for the cemeteries.
"We couldn't figure out who they were or whether it was a real organization," he said.
Cemeteries going well
The chairman of Midwest Memorial Group said last week that operations at the 28 cemeteries are going well. The group is considering buying additional Michigan cemeteries in the future, he said.
"We’ve made significant improvement to the properties," Price said. “There was a lot of deferred maintenance that needed to be taken care of.”
Cemeteries Cathedral St. Augustine's wants to buy
Albion Memorial Gardens Inc., Albion
- Acacia Park Cemetery, Beverly Hills
- Cadillac Memorial Gardens East, Mt. Clemens
- Cadillac Memorial Gardens West, Westland
- Eastlawn Memorial Gardens, Saginaw
- Elm Lawn Cemetery, Bay City
- Floral View Memorial Gardens, Grandville
- Forest Lawn Memorial Gardens, Dimondale
- Forest Lawn Memorial Park, Detroit
- Garden of Rest, Wells
- "Gethsemane Crypts" at Gethsemane Cemetery, Detroit
- Graceland Memorial Park, Grand Rapids
- Grand Lawn Cemetery, Detroit
- Hillcrest Memorial Park, Inc., Jackson
- Kent Memorial Gardens, Grand Rapids
- Knollwood Memorial Park, Canton
- Midland Memorial Gardens, Midland
- Mt. Hope Memorial Gardens, Livonia
- Northland Chapel Gardens, Negaunee
- Oakland Hills Memorial Gardens, Novi
- Oaklawn Chapel Gardens, Sault Ste. Marie
- Oakview Cemetery, Royal Oak
- Oakwood Mausoleum, Saginaw
- Restlawn Memorial Gardens, Holland
- Roseland Park Cemetery, Berkley
- Roselawn Memorial Gardens, Saginaw
- United Memorial Gardens, Plymouth
- Washtenong Memorial Park, Ann Arbor
- Woodlawn Cemetery, Detroit
- Woodmere Cemetery, Detroit
Contact JC Reindl: 313-222-6631 or jcreindl@freepress.com. Follow him on Twitter @JCReindl.
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