Montgomery, Ala. ? The state Insurance Department has taken over operation of 15 funeral homes and cemeteries from Mike Graham and Associates, contending the businesses failed to put $2 million of customers’ payments into a trust.

The takeover – the largest in state history involving the funeral home industry – affects about 2,000 consumers who had purchased pre-need funerals and burials, state Insurance Commissioner Walter A. Bell said Monday.

Officials at the state headquarters for Mike Graham and Associates in Albertville declined comment. At its corporate headquarters in Houston, Texas, spokeswoman Cindy Davis said the company had no response.

Alabama is not the first state to take action against the Texas company. Attorneys general in Kansas and Missouri brought court cases earlier this year.

The 15 funeral homes affected by the takeover are mostly in North Alabama.

A 2002 state law provides for the state Insurance Department to regulate the pre-sale of funeral and cemetery services. Customers pay for the services in advance, and their money is placed in trust until they need the service. Since the law passed, the department has put three funeral homes and six cemeteries into receivership.

On Friday, the department got a Jefferson County judge to issue a temporary restraining order to allow the department to begin taking possession of the funeral homes and cemeteries pending a hearing later this month. In the court case, the department contended the funeral homes and cemeteries are $2 million behind in payments to a trust that holds consumers’ funds.

The funeral homes and cemeteries will continue to operate, but will not be allowed to sell any pre-need services for the time being, Bell said.

The department’s receiver will attempt to rehabilitate the businesses if possible and liquidate if necessary.

In May, Kansas Atty. Gen. Phill Kline sued the company over the operation of some cemeteries, including Memorial Park Cemetery in Lawrence.

In August, Missouri Atty. Gen. Jay Nixon obtained a preliminary injunction in a case alleging that the company took money for grave markers that were not delivered.