SEC Charges Cemetery and Funeral Home Operator and Its General Partner with Disclosure Failures
Dec. 12, 2019
File No. 3- 19616
December 12, 2019 - The Securities and Exchange Commission today charged StoneMor Partners L.P. (StoneMor), a Pennsylvania-based owner and operator of cemeteries and funeral homes, and its general partner, StoneMor GP LLC (StoneMor GP), with failing adequately to disclose material liquidity problems and making misstatements in its financial statements.
According to the SEC's order, starting in late 2015, sales metrics tracked internally by StoneMor and StoneMor GP revealed significant declines in sales force performance that caused StoneMor to miss internal sales budgets by as much as 15 percent. The order finds that StoneMor's declining sales persisted for several quarters, materially and negatively impacted StoneMor's liquidity, and jeopardized its ability to operate its business, complete budgeted acquisitions, and pay cash distributions to its limited partners. However, StoneMor GP, which was responsible for the timely and accurate filing of StoneMor's periodic reports made with the Commission, did not identify these liquidity issues as material unfavorable trends and uncertainties in the Management's Discussion & Analysis (MD&A) sections of StoneMor's 2015 annual report on Form 10-K and its quarterly reports for the first and second quarter of 2016 on Forms 10-Q. As noted in the SEC's order, the MD&A is an important disclosure tool that is designed to provide investors with a perspective on a company's business as seen through the eyes of those who manage that business, on the rationale that management has a unique perspective that only it can present. The order also finds that StoneMor made misstatements in its financial statements. From 2013 to 2016, StoneMor overstated limited partners' capital by more than $10 million due to errors in the allocation of net loss between the general partner and limited partners. From 2015 to 2016, StoneMor understated revenue by approximately $30 million due to errors in its recognition of cemetery revenue.
Without admitting or denying the findings, StoneMor and StoneMor GP consented to the entry of the SEC's order, which finds that StoneMor violated, and StoneMor GP caused StoneMor's violations of, the reporting provisions of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(b) of the Securities Exchange Act of 1934 and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder, and which orders them to cease and desist from future violations of these provisions. StoneMor GP is also ordered to pay a penalty of $250,000.
The SEC's investigation was conducted by Brian R. Higgins, Matthew B. Homberger, Christine R. O'Neil, Karen Klotz, and Brendan P. McGlynn and supervised by Kelly L. Gibson and G. Jeffrey Boujoukos.