CHARLES CITY -- The Insurance Division of the Iowa Department of Commerce on Tuesday was granted control over a Charles City funeral home and cemetery and will continue to audit the firm's finances.

Judge Bryan McKinley executed the order in Floyd County District Court in front of about a dozen people. Three of the people were prepared to testify about alleged mishandling of their pre-need accounts, said Pam Griebel, assistant Iowa attorney general.

The owner of Sunnyside Memory Gardens and Funeral Home, Albert Fenzloff, 67, and his wife, Mitzi, 42, are named in the order and were present at the hearing.

Under the judge's order, the Fenzloffs will operate the funeral home but will not have access to any of the business' finances. They may not even open the mail.

The state initiated an audit in December after it received more than 30 consumer complaints. The investigation allegedly uncovered empty trust accounts and customer checks deposited in the Fenzloffs' personal accounts. Evidence also exists, the state alleges, the couple tried to hide or destroy files.

Griebel said the division would hire someone to manage the funeral homes' finances and that a complete audit could take a year to complete.

"It is … becoming increasingly apparent that there were unfunded trust obligations by prior owners as well," Griebel said.

The Fenzloffs were ordered to turn over any trust funds, trust assets and records regarding pre-need contracts. The couple may provide services only on an at-need basis. Those include opening and closing burial plots or providing services already paid for, said Dennis Britson, director of the Regulated Industries Unit of the Iowa Securities Bureau.

The Fenzloffs will be paid by the state for services rendered.

Britson said the state will use a company accounting of contracts sold and begin to contact patrons to determine "what was sold, but not delivered," he said after the hearing.

The state will use that information, as well as business records, to determine the problem's scope. Charges could be filed in the future, Britson said.

"Our goal right now is that no further harm happens," he said.

The Fenzloffs maintain they are innocent of the allegations.

Mitzi Fenzloff said her husband paid for services, some of which were promised by previous owners.

"Albert Fenzloff, a 67-year-old citizen of the United States, has spent over $434,000 out of his pocket," Mitzi Fenzloff said.

In a written response to the application for receivership, Mitzi Fenzloff said a former employee whom she described as a "con artist" was responsible for many of the home's problems. The Fenzloffs also claim fund discrepancies were in place when they purchased the business in November 2003.

Mitzi Fenzloff has since removed herself as one an owner. The judge's order, however, said she remained active in the business.

Mitzi and Albert Fenzloff both face felony charges in other cases.

In Cerro Gordo County, Mitzi Fenzloff is accused of violating probation that was granted in 1999 following a second-degree theft conviction. She allegedly violated her probation when convicted of another theft charge in 2003. A court date on the matter is pending March 7.

Albert Fenzloff faces charges of felony theft. Both cases involve bad checks. One of the checks was allegedly written for $13,000 to a casket dealer.

Reach Deb Nicklay at (641) 421-0531 or deb.nicklay@globegazette.com.