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Thursday, Nov 26, 2009
With a growing market share and high-level political connections, Service Corporation International is fighting off lawsuits and government regulators.
Sep 29, 1999 | In 1993, funeral baron Robert Waltrip told the New York Times that people who don't buy his company's stock "just don't like money." For a time, Waltrip, the founder and CEO of the world's largest funeral company, Service Corporation International, was right.
SCI was the darling of Wall Street. Analysts praised it as a recession-resistant company with a great financial outlook and huge profit margins. After all, just as baby boomers shook the culture with every developmental milestone, soon they'll be dying in record numbers, and the titan of "death care," as SCI describes its business, seemed poised to profit from that long goodbye.
But over the past eight months, SCI's fortunes have faltered. In January, the company's stock price tumbled 44 percent in one day after it announced it wouldn't meet its quarterly revenue projections. A year ago, SCI's stock was trading at about $45 per share. On Tuesday, it closed at $11.25 and Wall Street analysts are decidedly bearish.
In recent months, SCI stumbled into the national media spotlight thanks to the presidential race. In March, Waltrip and SCI were named as defendants in a whistleblower lawsuit in Texas that involves allegations that presidential front-runner George W. Bush intervened on SCI's behalf to help stop an investigation by the state's regulatory agency. Waltrip and SCI are big financial contributors to Bush, and Waltrip is also a personal friend of former President Bush, endowing the Bush library with $100,000.
SCI has powerful friends in both political parties. Former Rep. Tony Coelho, chairman of Al Gore's presidential campaign, sits on SCI's board of directors. It's a lucrative job. According to the company's proxy statement, SCI pays Coelho $21,000 per year just to sit on the board and an additional $6,000 for each meeting he attends. Coelho also owns more than $450,000 worth of SCI stock.
Despite those influential friends, a number of troubling specters are creeping up on the company. Tort lawyers, consumer advocates and regulators are all taking aim at the Houston-based death care giant. Plaintiff's lawyers in Florida are suing SCI, claiming the company sold an exorbitantly expensive funeral to an elderly, mentally incompetent widow. In Washington state and Texas, lawyers are suing the firm, maintaining it has mishandled corpses. Company shareholders have filed a class-action lawsuit, alleging SCI officials withheld troubling earnings data that caused the stock price to dip.
Consumer advocates are constantly taking swipes at the company. Karen Leonard, the head of the Sebastopol, Calif.-based Redwood Funeral Society, who worked as the late Jessica Mitford's research assistant on her last book, "The American Way of Death Revisited," has become one of the country's leading critics of SCI. She claims SCI has "made price gouging state of the art.
"They've been able to take the emotions that make people spend more -- guilt and fear of death -- and have played those like an orchestra and have made tremendous amounts of money. They are taking advantage of consumers on all fronts, by secrecy, by their ability to control regulations and their ability to give money to politicians."
Lamar Hankins, the president of the Funeral & Memorial Societies of America, says the company routinely engages in "price gouging." Pierson Ralph, the president and director of the Memorial Society of the Southwest says "SCI's prices, generally, are obscene. They are clustered at the very top of the comparative prices. They are exorbitant everywhere you look."
SCI may be a target because it is the biggest funeral provider on earth, and it owns many of the most prestigious funeral homes in the world. In Washington, it owns Gawler's, the firm that buried John F. Kennedy. In London, it owns Kenyon's, the funeral home that handled Winston Churchill's funeral. Over the years, it has buried other famous people including John Lennon, Howard Hughes and Jacqueline Kennedy Onassis.
When I interviewed Waltrip for a magazine feature three years ago in his gigantic 12th floor office on the outskirts of downtown Houston, he expressed pride in the company he has built, and disdain for people who express too much interest in it. The reason for their morbid fascination with SCI, he said, is that "death has an aura about it." Sitting behind a massive desk, in a black suit and shiny black tassel loafers, Waltrip said he didn't care whether he got noticed by the press.
"Notoriety's not my bag," he said. "Getting a story written about me don't mean shit to me."
