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Crematorium owner sentenced to up to to 3 years for tax evasion

By James A. Kimble
Staff writer
Published: February 29, 2008

BRENTWOOD — The founder of Bayview Crematorium began spending 11/2 to 3 years behind bars yesterday on charges he kept hundreds of thousands of dollars by not paying business-profits taxes between 2000 and 2002.

But when Derek Wallace, 37, of Salisbury, Mass., was taken into custody after his sentencing in Superior Court, a debate lingered over whether his business practices led to customers receiving the incorrect remains of loved ones.

A soft-spoken Wallace turned from the defense table to a half-dozen of his former customers seated in court, saying he could understand their agony but they have nothing to worry about.

"There is no evidence or speculation that you haven't received the proper remains," Wallace said.

His wife, Kristin, also spoke to the family members, saying there is no question about the remains and that the investigation of Wallace is politically motivated. She defended Wallace as a loving husband who has done nothing but try to provide relief to grieving families over the years.

Deputy County Attorney Tom Reid disputed claims that the prosecution was politically motivated. He said state police detectives found instances where metal tags used to identify remains had been inadvertently paired with the wrong death records.

"Is there evidence some people don't have the right ashes? Absolutely," Reid said.

Wallace pleaded guilty in September to four felony tax-evasion charges but had to wait until yesterday to find out whether his plea deal would allow him to escape jail time like his mother and stepfather months earlier.

Linda and Larry Stokes, also of Salisbury, paid $247,818 in restitution after pleading guilty in May to felony tax charges.

In exchange for Wallace's guilty plea, prosecutors dropped theft and fraud charges that alleged he duped customers into believing he was operating a state-sanctioned crematorium.

Defense lawyer Scott Gleason said unproven claims that Bayview had mishandled remains played no role in deciding Wallace's sentence. He said his client has suffered greatly as a result of prosecutors' claims of mismatched remains.

"There's not been a day in these last three years where Derek Wallace hasn't been hurt by this," Gleason said. "He understands deeply the horror of that thought. That's a wild, unsubstantiated representation, which is unsupported by any facts."

George Blatsos, commissioner of the state Department of Revenue Administration, encouraged Judge Tina Nadeau to send Wallace to jail as a way of delivering a strong message to other business owners across New Hampshire.

"Derek Wallace can't leave this courtroom thinking that he won," Blatsos said. "Too many people like Wallace believe getting caught committing tax evasion is the cost of doing business. I can tell you we certainly didn't find everything."

State police began reviewing Wallace's business records after they raided and shut down his Seabrook crematorium in February 2005.

Reid said police found shoddy paperwork and deplorable conditions, including unlabeled urns and a decomposing body in a broken freezer. Wallace used several businesses, including one to transport bodies from funeral homes in Massachusetts to the Seabrook crematorium, as a "shell game" to hide income, Reid said.

Carol Guyer, an auditor for the state, found one account in which Wallace funneled approximately $1 million over his five years of overseeing Bayview. That total wasn't in the account all at once, Reid said, but highlighted the significant amount of money being moved from the business to his personal bank account.

Reid said yesterday that Wallace took in a tremendous amount of money even before opening Bayview in 2000 that neither his personal accountants nor state auditors could account for.

When Wallace bought his first funeral home in Lawrence, Mass., in 1995, he paid off a $460,000 note within 13 months, Reid said. Two weeks later, Wallace bought a Salisbury funeral home for $320,000 in cash, Reid said.

Guyer said an audit of Bayview's business profits could not account for the vast sums of money being deposited in Wallace's accounts. County Attorney James Reams estimated that "millions of dollars" flowed through the accounts over the years.

Wallace reported to police in 2001 that someone stole $47,000 in cash from his home. Reid said the money was stored inside a hole in a bathroom wall. Wallace's former accountant, Maria Leighton, decided to drop the former funeral director as a client in 1998 after he refused to answer where money was coming from.

"The final episode involved a $200,000 cash deposit, and Wallace explained he had found the money under his mattress, which was saved from birthdays and Christmases," court documents said.

State police said they still have about 50 sets of remains from Wallace's former funeral homes in Lawrence and Salisbury that they would like to return to families if possible. Some of them date back to 1974, long before Wallace bought the businesses.

Former Bayview customers remain angry over what they believe was the mismanagement of ashes.

Diana Smith said that when her father, John Eaton of Amesbury, died three years ago, she was relieved when arrangements had been made in advance to cremate him. That feeling of relief quickly faded two weeks later when she saw a television news report that police raided Bayview.

Smith said that when she voiced concerns to Wallace about the cremation process, he told her not to worry.

"I even asked the question, 'How do I know that I got my dad back?' I was scoffed at and told that, 'We follow all the state laws,'" Smith said.

Wallace was ordered to pay the state $240,000 in restitution by Aug. 28 to avoid a suspended state prison sentence that could keep him behind bars for an additional three to six years. He pleaded guilty to three counts of attempting to evade taxes and one count of filing a false tax return.

Gleason negotiated an extension for Wallace to pay the state because his client did not have the money on hand. Wallace is the last of five people convicted on charges involving the now-defunct business.

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