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Former Perl operator gets 1½ years for racketeering

The former operator of Perl Funeral Home, who misappropriated millions earmarked for pre-paid funeral arrangements, will go to prison for one and a half years.

David A. Kern, 38, of Ashland, drained the largest amount of money from any funeral home trust fund in Oregon and perhaps in the country, prosecutors and witnesses said. Kern never held a license to operate funeral homes in Oregon or to sell pre-paid funeral contracts.

Approximately &

36;5.4 million turned up missing in 1998 from trust accounts involving Kern's 11 funeral homes in Medford and Grants Pass. Kern spent the money buying more funeral homes, remodeling others and on his own personal needs, prosecutors said. Kern filed for bankruptcy when state investigators started looking into his business practices.

Kern pleaded guilty Monday in Jackson County Circuit Court to one count of racketeering under an agreement with the Oregon Department of Justice. The charge carries a maximum 20-year prison term under Oregon law, but the state agreed to the shorter sentence.

Now it's evident that this kind of behavior won't be tolerated in the state of Oregon, said Diane Bassett-Pohl, a former Medford resident who testified on behalf of the Oregon Mortuary and Cemetery Board.

Circuit Court Judge Ray White told Kern that he was fortunate the state agreed to a prison sentence of just a year and six months, in addition to three years post-prison supervision. Kern, who had no previous criminal history, also must repay the state &

36;87,022.58 for investigating and prosecuting the case.

Kern, who apologized in court for his actions, could not be reached for comment.

Kern's attorney, Carl Caplan, argued that his client never intended to steal the money, assuming that his business would honor contracts with clients who had paid for funeral arrangements in advance. Moreover, Kern is mentally impaired, Caplan said, adding that Kern has been diagnosed with adult attention deficit disorder.

Kern has been free on his own recognizance since he was indicted in September 2000. Although Kern asked White to delay his sentence until after the holidays so he could spend time with his two children, White ordered him to report to jail on Monday.

White could have ordered Kern to serve five years of probation instead of prison time under the plea agreement. But Andrejs Eglitis, the state's assistant attorney general, argued for prison time in light of the amount of money stolen and the number of victims involved, he said. With the trust funds depleted, about 4,500 clients initially were left wondering whether their burial arrangements would be honored, Eglitis said.

It's important that this delicate trust between the funeral home industry and the public is held as dear as possible, Bassett-Pohl said.

Everyone who pre-paid for funeral services with Kern should receive them, said David Koach, executive director of the Oregon Mortuary and Cemetery Board. Although there's no replacement fund containing &

36;5.4 million, the Kern family has promised to fulfill their obligations, he said.

In 1999, a federal bankruptcy judge endorsed a Chapter 11 reorganization plan for Kern Family Services Inc. to protect the funeral homes' clients. The plan called for the sale of Kern's Medford and Grants Pass properties. In 1997, Kern had purchased Hull & Hull Funeral Homes in Grants Pass with &

36;1.3 million that he had taken from the corporation's trust accounts.

Kern's millionaire father, Charles Kern, a mortician from Southern California, had offered his personal fortune in a federal hearing to repay the trust accounts if selling the family's Oregon funeral homes didn't generate enough money. The Kern family pledged a condominium in Hawaii, a home in Apple Valley, Calif., and benefits from Charles Kern's life insurance policies.

Your family's a victim of this, too, White told David Kern.

Charles Kern could not be reached for comment.

Shortly after David Kern was indicted in 2000, a Utah company purchased the Kern family's funeral homes in Medford, which includes Perl Funeral Home and Siskiyou Memorial Park. Mike Leavitt, owner of Leavitt's Mortuary and Aultorest Memorial Park in Ogden, Utah, did not disclose how much he paid for the Perl group.

Under Leavitt's ownership, Perl is honoring prior contracts purchased through Kern, Koach said.

Kern Family Services bought the Perl group from Houston-based Service Corp. International in 1996. The Federal Trade Commission ordered the sale to break up a near-monopoly of funeral homes in Medford.

Reach reporter Sarah Lemon at 776-4487, or e-mail .