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David Kern taken off company payroll Bankruptcy court appoints lawyer for funeral home customers By DAVID PRESZLER David Kern's salary from troubled Kern Family Services came to an end Wednesday as efforts were formalized to protect owners of prepaid burial plans. The U.S. Bankruptcy Court in Eugene approved a request from the state attorney general's office to end compensation for Kern, the company's former vice president. The move to stop paying Kern was not opposed by the company founded by his father, Chuck Kern. Dan Isard, president of a management company hired to run Kern Family Services, said David Kern was helping with paperwork and records surrounding the pending sale of the company's death-services businesses in Medford (the Perl group) and Grants Pass. "We felt the work he has performed has been completed," Isard said. Wilson Muhlheim, the company's attorney in bankruptcy proceedings, said Kern had been receiving about $1,100 every two weeks for his work. His wife, Ingrid, who handled advertising for Kern Family Services, was dropped from the payroll in October. State officials have accused David Kern of misusing more than $5 million that was supposed to go into a trust fund for prepaid funeral and burial services. No criminal charges have been filed against him, but the state attorney general's office is looking into the matter. A mediator's initial report has placed the amount missing from the trust fund at $4 million to $5 million. The company is reviewing that estimate for accuracy. The estimated 3,600 customers who put money into the trust fund will be represented in bankruptcy proceedings by Eugene attorney Douglas Schultz. The court appointed Schultz on Wednesday as the attorney for a committee of customers. Four customers applied to represent the group and were accepted by the court and the U.S. Bankruptcy Trustee's office. Schultz said other prepaid customers will be added to the committee. Customers with questions should write to Schultz in care of Gleaves, Swearingen, Larsen, Potter, Scott & Smith, P.O. Box 1147, Eugene, OR 97440. Schultz said he is working to get a complete list of customers from Kern Family Services. He has received a copy of the company's Chapter 11 reorganization plan, which goes before the court Jan. 13. Isard, who has acted as the spokesman for Kern Family Services since the missing funds were made public, has said that prepaid contracts will be honored. Isard and Muhlheim both said there are enough company and personal assets involved in the case to make up the missing funds. The sale of the company's businesses in Medford and Grants Pass is awaiting court approval. "The consumers are not in any jeopardy at all," Muhlheim said. The court took another step to ensure that Wednesday, granting a request from the state attorney general's office to use assets held by Chuck Kern, David Kern and Ingrid Kern to replenish the fund if necessary. "Our goal has been to restore consumers to where they were before the trust fund was abused," said Pete Shephard of the state attorney general's office. Isard said Chuck Kern and his wife, Shirley, have pledged in a previous state agreement to use their assets to repay the fund, something the court further opened the door to Wednesday. The court's action brings the total company and personal assets available to more than $10 million, Muhlheim said. That total includes the businesses; two condominiums in Hawaii; a vacation home in La Mirage, Calif.; the elder Kerns' home in Apple Valley, Calif.; and David and Ingrid Kern's home here. "Nothing's being held back," Isard said. "There are substantial capital assets," Muhlheim said. "The money's all there; we've just got to figure out how it's going to be put in." Schultz said he hasn't had a chance to review the reorganization plan completely, so he can't yet say whether he shares Muhlheim's optimism. Shephard said his office is committed to reimbursing the fund and serving the customers. "Between the agreement (with Chuck Kern) and the bankruptcy, we are hopeful there's enough in that whole mix," he said. "But we don't know for sure." Today's Business Index Mail Tribune Copyright � The Mail Tribune 1998, Medford, Oregon USA