U.S. funeral home owner who sold body parts pleads guilty to fraud

FILE PHOTO: Megan Hess, owner of Donor Services, is pictured during an interview in Montrose

By John Shiffman

(Reuters) - A former Colorado funeral home owner pleaded guilty on Tuesday to a federal charge of defrauding relatives of the dead by dissecting their family members' corpses and selling the body parts without permission, a practice exposed in a 2018 Reuters investigative report https://www.reuters.com/investigates/special-report/usa-bodies-funeral.

Megan Hess, who operated a funeral home called Sunset Mesa and a human body parts business called Donor Services from the same building, entered the plea to the charge of fraud at a hearing before U.S. Magistrate Judge Gordon Gallagher in Grand Junction, Colorado. Gallagher scheduled Hess, who had previously pleaded not guilty, to be sentenced in January, with the prosecution calling for 12 to 15 years in prison.

Hess, 45, admitted on Tuesday that through her funeral home, located in the town of Montrose in the western part of the state, she defrauded at least a dozen families seeking cremation services for deceased relatives. Instead of cremating the bodies, court records show, her body broker company harvested heads, spines, arms and legs and then sold them, mostly for surgical training and other educational purposes.

Hess had been scheduled to go on trial in three weeks along with her mother, Shirley Koch, who also previously pleaded not guilty. Koch's change-of-plea hearing is set for July 12.

After Assistant U.S. Attorney Jeremy Chaffin made his sentencing recommendation, the lawyer for Hess, Dan Shaffer, urged a lighter sentence of about two years in prison. Hess has been free on bond since her arrest.

During the hearing, the judge asked Hess to describe in her own words the crimes she committed. Hess initially called the whole affair a "legal travesty." When prodded by the judge, Hess agreed with the prosecution that she defrauded her victims, though she declined to go into detail.

Two family members and one friend of deceased people whose body parts were sold without permission by Hess spoke at the hearing. They told the judge that while they were still emotionally reeling from the episode and wanted to learn more details about what occurred, they welcomed the news that Hess had decided to plead guilty.

To increase sales, Hess targeted poor and vulnerable families as they grappled with a relative's final days, according to government court filings.

"Meeting with hospice on the 4th ... opening the floodgates of donors," Hess wrote to a prospective body-part buyer in 2014. "They have four or five deaths a day. Get ready!!!! ... How about a deal on full embalmed spines ... $950?"

Selling organs such as hearts, kidneys and tendons for transplant is illegal in the United States. But the sale of cadavers and body parts for use in research or education, which is what Hess did, is not regulated by federal law.

Few state laws provide any regulation, and almost anyone, regardless of expertise, can dissect and sell human body parts. After the Reuters 2018 investigation, Colorado's legislature strengthened the state's oversight.

Hess charged families up to $1,000 for cremations that never occurred, prosecutors said, and she also offered others a free cremation in exchange for a body donation. Many families received ashes from bins mixed with the remains of different cadavers, authorities said, and one client received concrete mix instead of a relative's ashes.

FBI agents found that Hess forged dozens of body-donor consent forms. In court documents, a former employee accused Hess of earning $40,000 by extracting and selling the gold teeth of some of the deceased, an allegation first revealed in the 2018 Reuters report.

The Reuters series https://www.reuters.com/investigates/section/usa-bodies uncovered the actions of Sunset Mesa and Donor Services. Former workers told Reuters about questionable practices at the facility, including the dismembering of bodies without the knowledge or consent of families.

About a month after the Reuters stories, the FBI raided the site and state regulators shuttered the funeral home and crematory. A federal grand jury indicted Hess and Koch in 2020.

(Reporting by John Shiffman in Washington; Editing by Will Dunham)

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U.S. funeral home owner who sold body parts pleads guilty to fraud 

Former East Prairie funeral home owner charged with financial exploitation of elderly

By David Jenkins

Ricky Penrod

A former Mississippi County funeral homeowner has been charged with financial exploitation of the elderly after selling pre-need funerals without a proper license.

Charles R. “Ricky” Penrod, of East Prairie, was charged Friday with financial exploitation of an elderly person or person with a disability. He was taken into custody Monday and bonded out on a $25,000 cash or surety bond.

According to a probable cause statement, Penrod, the former owner of Shelby Funeral Home in East Prairie, was not licensed to sell pre-need contracts or provide services for pre-need contracts after Oct. 31, 2009. On April 19, 2016, Penrod’s funeral director license was revoked, and Shelby Funeral Home's ownership was assumed by new owner Lonnie Ponder on April 4, 2016.

Court documents from Mississippi County Circuit Court between the State Board of Embalmers and Funeral Directors v. Shelby Funeral Home, Inc., states Shelby Funeral Home was administratively dissolved as of Feb. 13, 2004. The court document also states Penrod engaged in pre-need services from Dec. 31, 2009, through the date of the order, which was dated July 24, 2014.

According to the probable cause statement, there was an interview with Ponder on March 26, 2020. Ponder confirmed he took possession of the funeral home in 2016 after assuming the debt incurred by Penrod.

Ponder told officers over time that he located at least 100 pre-need contracts, sold by Penrod, that had not been funded. Ponder also said there could be more unfunded contracts but would not know until he is contacted by the purchaser's family of the pre-need contract following a death.

Ponder also told officers he serviced 18 funerals in which families had provided a copy of a pre-need contract sold by Penrod. According to Ponder, he received no money from Penrod for the contracts, and he only asked the families to pay the inflationary costs of the funeral.

Ponder said he was trying to do the right thing by paying the funeral costs, stating his costs for those funerals was about $140,000.

Some of the pre-need contracts written by Penrod were after the sale of Shelby Funeral Home in April of 2016. Ponder told officers there was no money available to fund the pre-need accounts Penrod had written, providing 68 unfunded pre-need accounts.

The total dollar amount not transferred to Ponder by Penrod when taking ownership of Shelby Funeral Home was $268,040.10, with potentially more funds identified upon a death and the families coming forward.

According to the probable cause statement, Penrod stated the money from the pre-need accounts was garnished by the IRS because he didn’t put the money in the right place.

Sergeant J.S. Stoelting, a Missouri State Highway Patrol investigator, asked Penrod if he was ever licensed to sell pre-need contracts, to which Penrod replied, “yeah, at one time.”

Stoelting then asked Penrod if he continued to sell pre-need contracts after losing his license, and Penrod replied, “probably,” stating he couldn’t put the money into an account or the IRS would garnish it. Penrod told Stoelting everyone knew about the missing money, even the state.

Stoelting explained to Penrod that he sold numerous people a pre-need funeral without a proper license, to which Penrod replied, “I know.”

Stoelting also confronted Penrod that people wrote him a check that he cashed at McDonald’s Grocery Store, and the money is gone. Penrod asked, “for how much money?”

The investigator told Penrod they were still totaling it up, and Penrod replied, “They won’t cash a check that big.” Stoelting then informed Penrod he had copies of the cashed checks, with one for around $9,000.

Penrod was asked about one specific pre-need account for $9,532.25 that was purchased from him on July 7, 2014. The check was cashed by Penrod, and the family later learned of the missing pre-need money from Ponder.

A complaint was filed with the Missouri Attorney General’s Office on Jan. 19, 2020, after learning of the missing money. A letter, dated Feb. 11, 2020, was also written to the Attorney General requesting Penrod repay the money, $397 per month for two years. As of Sept. 23, 2020, there was no money returned to the family.

Stoelting asked Penrod when the last time was he sold a pre-need contract, to which he replied, “2014 or 2015.” Penrod told investigators when he received the money, he would cash the checks to keep the IRS from getting it so he could pay his bills, such as his electric and mortgage.

Penrod told officers that no one else was at fault for the mess but him, and “if the files are wrong, I’m responsible.”

Penrod will be arraigned at 10 a.m. Friday in Mississippi County.

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Former East Prairie funeral home owner charged with financial exploitation of elderly