The Grave Robbers

The nefarious narrative of a gang of three accused of stealing money from the dead and nearly taking it to the bank

By Norman Sinclair

(page 1 of 4)

Photograph by Scott stewart

The story of the looting of $70 million from a group of 28 Michigan cemeteries is a tale of modern-day grave robbers who found buried treasure — not in the ground — but in lucrative funeral trust accounts that thousands of hard-working families had pre-paid decades ago.

It is a study of brazen greed: A trio of con men duping state regulators into approving the purchase of the cemeteries, despite telltale clues that pointed to potential fraud against the dead. The alleged theft prompted a shake-up in the state’s regulatory oversight of public cemeteries. In December 2006, state officials obtained an Ingham County Circuit Court order to seize the properties and appoint a conservator to run them. Previously, they’d removed the state’s top cemetery regulator. In late May, a deal was finally closed to sell the properties for $32 million to a New Jersey operator who owns cemeteries and funeral homes in Indiana.

Also in May, Stephen Gobbo, a lawyer and senior manager at the Michigan Department of Labor & Economic Growth, was appointed to the post of cemetery commissioner to oversee the industry. In addition, legislation to protect cemetery trusts and to strengthen state law covering public cemeteries is making its way through the Michigan House and Senate.

Meanwhile, Clayton Ray Smart, the man at the center of what some officials say is one of the most callous consumer frauds in state history, will soon face trial and a possible conviction that could put him behind bars for the rest of his life.

In the fall of 2003, the balding, portly, church-going Smart, a 63-year-old oil-and-gas speculator, blew into metro Detroit from tiny Okmulgee, Okla. A 30-year career National Guardsman who preferred to be addressed as “Colonel,” the rank at which he retired, Smart bragged of his oil fortune and his willingness to make a deal. Even though he had no experience in the industry, Smart offered to buy the state’s largest consortium of 28 cemeteries, resolve chronic complaints from customers, and relieve state regulators of headaches caused by more than a decade of problems with the previous owners of the cemetery group.

The regulators should have looked more closely at the Colonel.

In April 2007, less than three years after Smart bought the cemeteries from companies controlled by Bloomfield Hills attorney Craig Bush, state Attorney General Mike Cox announced an arrest warrant and 39 felony counts against Smart. The attorney general accused Smart of stealing $70 million from merchandise and perpetual-care trust funds that each cemetery must maintain.

State law requires that a portion of every purchase of a cemetery plot be held in a perpetual-care fund. The money can be prudently invested to generate a return to pay for maintaining the grounds and buildings in the future after the cemetery space is sold out. Similarly, as consumers prepay for burials — as well as for opening and closing of graves, or for headstones, vaults, and other funeral items — a portion of the money must be held in a trust by the cemetery to provide those items when they’re needed in the future. Some of the trusts at the oldest cemeteries were established nearly 100 years ago and have accrued millions of dollars. Cemetery operators are allowed to profit from sound, safe investments, but are prohibited by law from touching the principal.

“This was a disgusting theft from the dead of Michigan,” Cox said in announcing the charges against Smart. “He stole money from the dead. The scope of the thefts is staggering; it is absolutely despicable.” Included in the 28 cemeteries are some of the largest and most historic burial properties in metro Detroit. Among them is Woodlawn Cemetery near Woodward and Eight Mile, where many notable Michiganians have been laid to rest: auto magnates Edsel and Benson Ford, and John and Horace Dodge; former Detroit Mayor Albert E. Cobo; and civil rights icon Rosa Parks.

In legal papers filed with Ingham County Circuit Court Judge James Giddings, who is supervising the cemetery case, Cox alleged that immediately after Smart took control of the cemeteries — and the lucrative trust funds — he routed $22 million to Bush to cover the sale price. Records show Bush and Smart signed the sale documents on Aug. 19, 2004. Smart never put up a dime.

While no charges have been brought against Bush, Smart sits today in the Shelby County jail in Memphis, Tenn., where he’s awaiting trial on charges similar to those brought against him by Cox. Tennessee authorities allege that Smart stole more than $20 million from three cemeteries and affiliated funeral homes he purchased in Nashville in 2004. Two associates, Smart’s longtime Oklahoma lawyer Stephen W. Smith, 60, and 41-year-old Mark Singer, a former broker for Smith Barney who has ties to Bush, were also charged in that case.

Smith claims he merely performed legal work, such as drawing up paperwork for Smart. He’s free on a $20,000 bond and is not named in the Michigan case. Singer is free on $1.25 million bail in the Tennessee case. Smart remains in jail and claims he can’t afford a lawyer or his $500,000 bail because Tennessee authorities have frozen his assets. All have denied any wrongdoing and pleaded not guilty in initial court appearances in Tennessee. One of the 39 Michigan felony counts against Smart alleges that he used $4.3 million from the Michigan cemeteries to buy the properties in Tennessee.

Tennessee authorities, who have been more aggressive than their Michigan counterparts in their investigation of Smart, returned their indictments two days before Cox announced the Michigan charges. Smart has yet to be arraigned in 36th District Court in Detroit. Cox said Smart will answer the Michigan charges after the criminal case is concluded in Tennessee.