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Hearing set today to finish off Kern plan

Kern Family Services' plan to repay millions missing from a trust fund and other company debts is scheduled to be back in court this morning.

A final hearing to confirm the plan is on the docket in U.S. Bankruptcy Court in Eugene.

The basics of the plan were hammered out in hearings this spring, but there are still issues to be worked out -- including the sale of the company's businesses and the transfer of property owned by the Kern family that will be used to make sure debts are repaid.

The case has drawn attention because $5.2 million is missing from a trust fund that more than 3,000 customers paid into for future funeral and burial services.

Kern Family Services operates the Perl group of businesses in Medford and similar businesses in Grants Pass that include Hull & Hull Funeral Home, Hawthorne Memorial Gardens and Southern Oregon Cremation Services.

The sale of the Grants Pass businesses appears to be imminent. Service Corp. International, which formerly owned the Perl Group, has offered $4 million for the Grants Pass businesses. Dan Isard, president of the Arizona-based management company running Kern's businesses, says the company will ask the court to approve the sale of those businesses to SCI unless a higher bidder emerges soon.

The proposed sale has drawn objections from Charles and Shirley Kern. Charles Kern, the California millionaire who purchased the funeral businesses and allowed his son David to run them, has pledged some of his personal fortune to cover the missing funds if the sale of the businesses doesn't generate enough money.

His attorney, Scott McCleary of Eugene, says Charles Kern is concerned that the Grants Pass businesses are being sold while the market for funeral service businesses is soft. McCleary says the Kern family wants to make sure that the assets are maximized.

They don't want to live their lives in poverty and they want the contracts to be served, he says.

As for the Medford businesses, Isard says the company will ask the court to allow it to secure a $1.75 million loan to keep operating them until the market improves.

Isard says the company also will ask the court to accept a $1.3 million settlement that has been reached with SCI to repay part of the trust fund. He and other Kern officials have said all along that some of the missing money was never turned over to Kern Family Services when it bought the businesses from SCI in 1996.

Under the plan, the Kern family has pledged a Hawaii condominium, a home in Apple Valley, Calif., and other assets to make sure there's enough money to repay the trust fund. It is still unclear whether that will be enough.

State officials say they are objecting to the plan until they are convinced there will be enough to repay the fund; the state has argued that the Kerns need to contribute $1.8 million more.

Questions about where the missing millions went remain unresolved. State investigators are looking into allegations that David Kern, the former head of Kern Family Services, misused the money. A state spokesman said Monday that the investigation is continuing but declined to comment beyond that.