Ron Russell

Unholy Alliance

Cardinal Roger Mahony's secret deal with funeral giant Stewart Enterprises turned L.A.'s Roman Catholic cemeteries into a cash cow -- but it's the faithful who are getting milked

By Ron Russell

On the day in 1997 when Cardinal Roger Mahony blessed the ground upon which Our Lady of the Angels Cathedral would be built, he had special reason to be pleased. Although few outside the cardinal's inner circle knew it yet, three months earlier Mahony had struck a deal with the world's third-largest operator of mortuaries and cemeteries that would result in a bonanza of many millions of dollars for the Los Angeles archdiocese he governs. In an unprecedented arrangement that is even now shrouded in secrecy, the cardinal agreed to allow Stewart Enterprises Inc., based in New Orleans, to build commercial mortuaries at six of the 11 L.A.-area Catholic cemeteries. The deal would give the death-care giant a huge leg up in cornering a lucrative segment of the funeral market that the archdiocese, with its 4.5 million Roman Catholics, represents. In exchange, the archdiocese would be able to share the largess by leasing the ground beneath the mortuaries, five of which are now operating, to Stewart for 40 years.

Five years and -- by the time it is finished -- at least $193 million later, the lavish and lackluster cathedral complex rising among the sterile office towers and government monoliths of Bunker Hill is scheduled to finally open next Labor Day. Archdiocese officials insist that the timing of the Stewart deal is purely coincidental to the cathedral's construction. But such denials have been greeted with skepticism even among the cardinal's own clerics, some of whom have complained bitterly about his decision to use consecrated ground owned by the church for commercial purposes.

Indeed, Mahony has moved swiftly to silence those within the church who've had the temerity to question the Stewart compact. Eight parish priests, including Monsignor Juan Matas of Montebello, were forced to recant last year after initially siding with the project's opponents who boldly set back Mahony's plans by persuading Montebello officials to block construction of a sixth mortuary. The archdiocese has fueled suspicion about Stewart's link to the cathedral by providing almost no information about who some of the cathedral's donors are or how much they've contributed, including at least two corporate donors listed as "anonymous." It has similarly declined to reveal how much Western Sequoia Corporation, another firm with close business ties to the archdiocese's cemetery operations, has contributed.

Otherwise, Mahony and his subordinates have done their best to ignore the protests of those who say it is a travesty for an archdiocese with so many poor, mostly immigrant Catholics to spend such an enormous sum for a new cathedral. In 1996, members of the Los Angeles Catholic Worker, a lay group that administers to the poor, occupied the former Saint Vibiana Cathedral at Second and Main streets to protest the cardinal's unsuccessful efforts to raze the historic 19th-century Spanish Baroque church when Mahony had wanted to build Our Lady of the Angels there. In 1998, several dozen members of the group disrupted the new cathedral's official ground breaking after scaling a fence and commandeering a piece of earthmoving equipment.

But even excluding speculation about the cathedral, the Stewart deal, cobbled together during secret talks in New Orleans and Los Angeles in the spring of 1997, was bound to be controversial.

As one of the "big three" funeral chains that in recent years has shriveled competition by gobbling up independent mortuaries with the zeal of a Jurassic Park velociraptor, Stewart is widely viewed as a culprit of spiraling funeral prices. Indeed, Mahony's alliance with the company was no less shocking than if he had announced a deal with Big Oil to build service stations selling high-priced gas in parish parking lots and then tried to strong-arm Catholics to fill up there. "For the archdiocese to go into business with Stewart is sinful," says the Reverend Henry Wasielewski, 71, a Phoenix-area priest who heads the Interfaith Funeral Information Committee, a consumer group. "It's like inviting the wolf into the henhouse."

Mahony has scarcely spoken about the Stewart deal publicly. Tod Tamberg, the media relations director for the archdiocese, said that the cardinal would have nothing to say about the matter for this article. Neither did Monsignor Terrence Fleming, who oversees the archdiocese's cemetery department, respond to interview requests. But Randy Stricklin, president of Stewart's western division, confirms that the company's arrangement with the archdiocese, which he credited Mahony as having initiated, was a "triple-net" lease for a term of 40 years, after which the mortuaries that Stewart has thus far spent $22 million to build will belong to the archdiocese. While declining to offer details about the strength of the mortuaries' business so far, Stricklin says, "things are going well. Everything is on target with our projections."

He says Stewart pays property taxes on the mortuaries and ground beneath them, despite that the facilities are on archdiocese property. Knowledgeable observers say the fact that the arrangement involves a triple-net lease, as opposed to a basic land lease, suggests that the deal is structured to enable the archdiocese to share profits in accord with some undisclosed formula if Stewart prospers, as expected, from the alliance.

And those profits are potentially enormous. A general rule in the funeral industry is that within five years mortuaries built at cemeteries usually end up providing services for half the burials that take place there. With the imprimatur of the church behind it, industry sources say, Stewart could easily exceed the norm. "To me the interesting question is how [the archdiocese] can get away with a deal like that and not jeopardize its tax-exempt status as a religious institution," says Richard Gutierrez, an attorney and L.A. mortuary owner who is also a past chairman of the defunct state Cemetery Board. "I'd love to get the chance to depose them on that issue."

Tamberg of the archdiocese portrays the Stewart arrangement as an extension of its pastoral mission, saying that it is a means to provide L.A.'s Roman Catholics with quality funeral services at reasonable prices and with the convenience of having mortuary, chapel and grave at a single location. He offers a similar view of the archdiocese's relationship with Western Sequoia, a commercial cemetery-sales company with headquarters in Inglewood. Since 1987, Western Sequoia has enjoyed an exclusive role in selling graves, crypts and niches at archdiocese cemeteries, a function that was handled in-house by archdiocese employees until after Mahony became archbishop in 1985. (Pope John Paul II elevated him to cardinal in 1991.)

"It's part of our ministry. It's an opportunity for us to help people who are grieving see the love and comfort of Jesus Christ," Tamberg says of the church's role with its cemeteries.

But when questioned about the Stewart deal, his tone changes.

"That's a business thing. We're not going to talk about that stuff. We don't discuss our business and financial relationships in public. But if you're trying to draw a link between Stewart and the cathedral, you're on the wrong track. There's no causal relationship there."

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Beyond the secrecy surrounding the deal's specifics, the misleading way in which the archdiocese and Stewart have teamed up to promote their partnership has drawn a barrage of criticism from rival mortuaries and consumer advocates. For instance, to market its funeral homes at the Catholic cemeteries, Stewart -- with the archdiocese's blessing -- created a subsidiary called Catholic Mortuary Services.

Critics say it is an explicit attempt to disguise the commercial nature of the mortuaries while making them sound more "Catholic." In fact, Catholic Mortuary Services uses the official seal of the archdiocese as its logo, and in promotional literature published by the archdiocese's cemetery department -- and personally endorsed by Mahony -- the fine print must be scrutinized to discover that Catholic Mortuary Services is, indeed, a Stewart company.

Nowhere is the displeasure with the Stewart alliance more pronounced than among L.A.'s independent mortuary owners, some of them Catholics, who view the pact as a slap in the face. After providing funeral services to Catholic families in some cases for generations, the independents have accused the cardinal of trying to drive them out of business, now that the archdiocese and Stewart share a financial interest.

Not only has the archdiocese helped Stewart poach their customers by unethically making available parish donor lists, but it also exerts pressure on priests to steer parishioners to Stewart's mortuaries at the Catholic cemeteries, despite costs that are often substantially more than those of the independents. Stricklin, the Stewart regional president, defends his mortuaries' prices as "reasonable," adding that they are "neither the most expensive nor the least expensive." But a New Times comparison of price lists from Stewart's Catholic Mortuary Services with those of several randomly selected independent funeral homes reveals that Stewart charges considerably more.

Although each Stewart mortuary offers an array of products with different prices, even its discounted "complete" funeral packages compare unfavorably in price with those of independent funeral homes. For instance, Calvary Mortuary, the Stewart facility at the archdiocese's Calvary Cemetery, offers one such package for $2,585. That compares to a price of $1,795 -- or about 30 percent less -- for an almost identical package at the independently owned Hollywood Forever Mortuary. (Such prices for a mortuary's services do not reflect the cost of caskets and other products that may be bought separately and can drive up the price of a typical funeral and burial by several thousand dollars.)

In fact, an internal memo prepared for its sales staff encourages Stewart's Catholic Mortuary Services' personnel to avoid, whenever possible, making available the company's lowest-cost funeral offering, known as its "special option," except in "areas where pricing by other funeral homes or casket stores is a concern." The memo further exhorts managers and counselors, "DO NOT abuse the use of this special option. It is only to be used to assist you when prices are a significant issue." Says Gutierrez, the mortuary owner, "When you stop and think about it, that's essentially the church by proxy saying "squeeze every buck you can from these people.'"

Since linking up with the archdiocese, the company's sales tactics have also drawn the ire of rivals as well as consumer groups.

A case in point is Stewart's controversial use of a subsidiary, Simplicity Plan of California Inc., to sell caskets and other merchandise outside the purview of the state's funeral and cemetery regulators. Stewart discontinued the practice last year, although company officials say the decision was unrelated to complaints about Simplicity, or the fact that its Simplicity operation in Florida ran afoul of regulators there. Enoch Hancock, who owns Abbot & Hast Mortuary in Silver Lake and who is a competitor and vociferous critic of Stewart, lays the blame at the archdiocese's door. "I would say that the archdiocese has screwed a lot of Catholic families," he says. "It has been extremely heavy-handed, disingenuous and disloyal."

Others are outraged that Mahony has used his lofty position to shill for Stewart and Western Sequoia.

They point to his having exempted the Stewart mortuary chapels from a long-held rule prohibiting priests from celebrating funeral mass at commercial chapels. (Archdiocese officials offer the rationale that since the Stewart chapels are on consecrated ground within the cemeteries, it is appropriate for priests to conduct masses there.) "That means he's saying 'If you want the mass outside of church, the only place you can get it is at Stewart,'" says Carlos Guerra, who, with Gutierrez, owns three Guerra-Gutierrez Funeral Homes on L.A.'s east side.

Other mortuary owners say that to accommodate the wishes of poor Catholic families who cannot afford Stewart's prices but who want the funeral mass, some sympathetic priests agree to conduct the mass at commercial chapels other than Stewart's without the cardinal's knowledge. "We have a short list [of priests] on call, more or less, who will come over if they're needed," says an official with a Hollywood mortuary, who asked not to be identified.

The archdiocese has even allowed Stewart to appropriate the mass itself as a marketing tool. Mahony's exemption sanctioning mass at the Stewart mortuaries clearly has given the company a competitive advantage it doesn't hesitate to exploit. In a Stewart sales brochure outlining in menu format what the customer gets when buying its various funeral options, each begins with a basic: "Mass and rosary/prayer service followed by burial or entombment in the Catholic cemetery of your choice."

In hindsight, Mahony's deal with Stewart seems all the more curious considering the cardinal's rationale for it in the first place.

Careful to proclaim that they were not entering the funeral business, archdiocese officials suggested early on that their Stewart initiative grew out of a directive from the church-affiliated National Catholic Cemetery Conference.

In 1997, the group issued a document seeking to address some key death-care issues that many within the church saw as troublesome. With the big three funeral giants (Stewart, Service Corporation International of Houston and Canada's Loewen Group) on an acquisition binge, Catholic-owned cemeteries across the country were being squeezed by the trend of the big chains to consolidate their mortuary and burial services at single cemetery locations. As a result, Catholic cemeteries were losing out to secular competition in the burying of their dead.

In Los Angeles, where the cemetery department has long been the biggest money-maker within the archdiocese, Catholic cemeteries had already suffered bruising losses, having gone from handling 85 percent of Catholic burials in 1965 to just 35 percent two decades later.The challenge was both financial and spiritual. Not only was the trend costing the church money, but as more and more Catholics resorted to secular funerals in commercial mortuaries without the benefit of the mass, the church was losing one of the few ceremonial opportunities available to it to reinforce spiritual bonds to generations of increasingly nominal Catholics.

"There are only so many occasions where you have the potential for a Catholic audience in the church and one of them is a funeral," says Matt Lamb, who heads Stewart rival SCI's Christian Funeral Services division. As a remedy, the conference suggested that Catholic cemeteries might want to consider operating their own funeral homes, and, in essence, imitate the model of the big three by enabling parishioners to access the services of a priest, a mortuary and a cemetery all at one location. In a document titled "The Catholic Cemetery: A Vision for the Millennium," the group endorsed the idea of "providing access to competitively priced funeral services without the pressure to select items and services inappropriate or beyond the means of the family."

But the document didn't say anything about alliances such as the one Mahony struck with Stewart.

In fact, some L.A. parish priests tell New Times privately that they cringed upon learning that Mahony had decided to cast his lot with the kind of conglomerate they were under the impression he had wanted to protect parishioners against. These priests cite fear of banishment by Mahony for their reluctance to speak out publicly. "As for the archdiocese's claim that it isn't in the funeral business, I'm not buying it," says Wasielewski, the Arizona cleric and industry watchdog, who, unlike some of his L.A. colleagues, hasn't held back from criticizing Mahony. "Can a cardinal lease space to a [commercial] business, allow masses there, share the profit and truthfully say, "I'm not responsible'?"

The deal has elicited similar reaction in industry quarters.

"The whole idea had been to protect Catholics from the wolf at the door. Instead, [Mahony] decided to invite the wolf in," says Ron Hast, publisher of Mortuary Management Magazine, an industry trade journal. Not surprisingly, the deal has taken its share of hits within Hast's publication. "The powers that be among the church seem to be forgetting the historic lesson that God and mammon truly do not mix," proclaims one editorial.