There were plenty of reasons for Bush to wonder about the legitimacy of this potential deal, according to testimony by his former attorney, Sherry Katz-Crank. For one thing, Smart conducted no due diligence; he just wanted information about the trust funds. Then there was the elusive nature of his financing. Despite repeated requests for proof of ability to pay, Smart ducked and stalled. Once, he proposed writing a personal check for $12.5 million to finance the deal—a comical offer in the high-finance world of corporate acquisitions.

As negotiations dragged on, Smart and his cohorts kept up their appearance of wealth, in part by helping themselves to cash loaned to them by the still-trusting David Strauss. Over several months, Smart, Armstrong, and Leyton obtained loans for about $6 million from Strauss, purportedly for use in a propane-trading business. The first loans went like clockwork, but then the three men stopped repaying; ultimately, they took almost $3.7 million from Strauss.

As security on the loans, Smart had given Strauss the $12.5 million check made out to Bush—to hold but not cash—as well as paperwork on a $40 million certificate of deposit supposedly held for him at Leyton’s financial institution.

These financial documents not only bought Smart and the others time with Strauss’ money, they also won Smart something potentially even more valuable: a written statement from Partners in Funding stating it was holding $52.5 million for Smart. This flurry of paper created millions of dollars where none existed. The only person with any real money in the game was Strauss—and he didn’t know it.

Just after 3 in the afternoon on April 14, 2004, a three-page document scrolled out of a fax machine in a Lansing law firm. The papers—sent to Bush’s lawyer, Sherry Katz-Crank—were supposed to prove once and for all that Clayton Smart had the money to buy the cemeteries.

Katz-Crank studied the papers. The first page was a letter from Hillcrest Capital stating that it was liquidating a Federal Reserve note—simply a formal term for any U.S. paper currency—­ostensibly to finance Smart’s acquisition of the cemeteries.

The next page of the fax was a photocopy of a $100 million bill. Katz-Crank checked ­online and found that no such bill had ever been printed. It was obviously a forgery—and a lame one at that. It blended portions of a $1,000 bill issued in 1934 with bits of a recent $1 bill. Thousand-dollar bills are no longer in circulation, but pictures can be found on the internet. Whoever put the facsimile together was sloppy; the word dollar at the bottom appeared to have been lifted from a $1 bill, so that it read “one ­hundred million dollar.”

When Bush learned of the deception, he was furious but nevertheless agreed to meet with Smart again, according to Katz-Crank’s testimony. This time, Bush was told, solid proof of ability to pay would be presented.

The two parties gathered in a conference room of a law firm in Ann Arbor, Michigan, in May 2004. Smart and Leyton were there, but Armstrong couldn’t make it: Months before, he had been indicted for that fraud in Iowa. Leyton, sitting at the head of the table, spoke first. “We don’t have the $12 million.’’

The room went quiet until Katz-Crank asked, “Then why are we here?’’ The meeting grew increasingly acrimonious until, after more than 30 minutes, Leyton sidled up to Bush and said, “Let’s take a walk outside.’’

Katz-Crank was sure the negotiations would end up in litigation; a discussion without witnesses would haunt them later. “I don’t think it’s a good idea that you go out for a walk with Mr. Leyton by yourself,” she told Bush.

Bush thought for a moment, then ­replied, “It’ll be fine.’’

The two men left for 10 minutes. When they returned, nothing was said. Bush said his goodbyes and left. Soon it became apparent that, somehow, the deal was back on.
 
About three months later, on August 19, the deal for the sale of the Michigan cemeteries was signed. The looting of their trust funds commenced almost immediately.

The purchase price was $31 million, but Bush had agreed to accept nothing at signing. He gave Smart immediate authority to conduct the business of the cemeteries. For Smart to finalize the deal, he had to transfer millions to Bush—but the cash couldn’t be paid out directly from the trusts. Moving the money took a few steps: Some of the cash was transferred to a Smart-controlled entity called Summerfield, which then “loaned” $20 million to Quest Minerals & Exploration. In exchange, Quest provided a 5 percent note, with no interest or principal due for 10 years.

Under state law, such self-dealing was illegal, but—on paper, at least—Smart did not control Quest. Even though he had signed the most recent tax return, Smart was no longer the president of Quest; his new wife’s elderly aunt, Erma Huckstep, says she had been persuaded by Smart some time before to sign ­papers bestowing that title on her.

A few weeks after the sale, Singer moved from Deutsche Bank to Smith Barney, a unit of Citigroup, and rapidly took the final steps to pay Bush. He established accounts for Smart, Bush, Quest, and related entities. Acting under instructions from Smart, Singer transferred $11.5 million from the Quest account to Bush on September 13. An additional $500,000 followed five days later. Investigators now say that $20 million was wired to Bush’s personal ­accounts over a period of weeks. Through a lawyer, Singer ­declined an interview. Bush, in court papers, denied wrongdoing, maintaining that he was tricked by Smart and his pals. Bush’s attorney did not respond to phone calls.

Once Smart got his hands on the trust funds’ millions, investigators say, he was able to kick open the door to millions more. Singer helped him obtain a $24 million credit line from Citigroup. Money flowed from the trust funds in many directions. Financial records show that $25 million was ­invested with Fondren International, a purported investment firm run by Carter Green, whose other company, Hillcrest Capital, had faxed the bogus $100 million bill. Green did not respond to repeated calls.

By early October 2004, David Strauss, who had unwittingly put up the money Smart had apparently used to help set up the deal for the cemeteries, was frantic. He had tried cashing Smart’s $12.5 million check, but it was no good. The $40 million C.D., he was told, had been canceled. With that, Strauss finally came to the painful and embarrassing realization that he had been duped. He wrote to Michigan state officials, stating that Smart was in default on loans that might have financed the purchase of the Michigan cemeteries. He wrote to Bush about the $12.5 million check. And he wrote to Singer, informing him of Smart’s defaults.

The letters were greeted with nearly universal silence. Singer, for one, was not likely to take action against Smart. By then he had arranged for some $7 million of trust fund money to go to a hedge fund in the Cayman Islands called the Topiary Trust, an investment far riskier than any allowed under state law but one that paid handsome commissions.

Trust fund cash went everywhere. Investigators say Smart and his team even used Michigan trust fund money to help finance the acquisition of more cemeteries, this time in Tennessee. Cash quickly began to drain from those trust funds as well.

But Smart’s shenanigans were starting to attract attention. Katz-Crank, now working with Smart on his cemeteries, was summoned to a meeting in Indiana at Community Bank & Trust, which held some of the trust fund money. As she later testified, a bank auditor told her that state regulators had raised concerns about how the trust funds were being handled. The auditor was particularly puzzled by a loan to Quest that moved up and down based on whatever amount the bank told Smart’s advisers was missing. If Community Bank indicated that trust fund accounts were short $9.5 million, a document showing a $9.5 million loan to Quest arrived. If it said there had been an error, and the shortfall was $10.5 million or $11.5 million, new documents with the increased amounts showed up as proof that nothing was amiss.