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Cassity

James "Doug" Cassity (left), Brent Cassity (center) and Randall Sutton, former National Prearranged Services Inc. executives, outside federal court in November 2013.

ST. LOUIS • A federal appeals court on Thursday overturned a $491 million jury award involving a prearranged funeral services fraud perpetrated by a Clayton company.

After a five-week trial in 2015, a jury in U.S. District Court in St. Louis awarded the money to state life and health guarantee associations and a special receiver set up to wind down National Prearranged Services Inc., of Clayton.

They sued on behalf of NPS, consumers and funeral homes.

The jury awarded $355.5 million of compensatory damages and $35.5 million in punitive damages against PNC Bank and $100 million more against Forever Enterprises, a defunct holding company owned by the Cassity family.

But a three-judge panel of the 8th U.S. Court of Appeals on Thursday said the case should not have been tried in front of a jury because any claims should have been governed by trust law, not tort law, and only for damages allowed by trust law.

The court said those alleged damages, which they estimated about $66 million, should be limited to claims in Missouri from 1998 to 2004, when Allegiant Bank was trustee. Allegiant resigned as trustee in May 2004 after it was bought by National City Bank. PNC acquired National City in 2009.

The court’s decision will not mean a new trial, as they said U.S. District Judge E. Richard Webber, who presided over the case, could use the existing trial record supplemented by any additional evidence he needs.

The plaintiffs in the original suit can ask for a re-hearing of the case.

In an email, Diane Zappas, a PNC spokeswoman wrote, “We are gratified with the appellate court ruling and we look forward to working to resolve the matter.”

At the time of the jury’s verdict, Frederick Solomon, senior vice president of the PNC Financial Services Group, pointed out that NPS had “sufficient funds to cover every deposit” when Allegiant resigned.

“The record showed that federal and state bank examiners regularly reviewed Allegiant’s practices when it was trustee, while a monitor for a prior court case examined NPS’ practices during that time,” he said in a prepared statement.

Lawyers for the plaintiffs also did not immediately respond.

NPS promised customers across the country that money they paid for prearranged funeral contracts would be held in trust and would be available for an eventual funeral.

But company officers and others instead siphoned off millions of dollars of the money to spend on lavish lifestyles.

Liabilities began to exceed trust assets and NPS could only pay for funerals by using money from new contracts.

The fraud was discovered by insurance regulators in 2007.

By that time, more than 97,000 customers, funeral homes and financial institutions had lost money, federal officials have said.

NPS owner James “Doug” Cassity, as well as two other officers, an employee, the company lawyer and a former investment adviser were sent to federal prison in 2013 for terms ranging from 18 months to 10 years. Cassity and three others were also ordered to repay $435 million.

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