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Increasing Awareness of Increasing Awareness of Financial Exploitation of Financial Exploitation of

At-Risk IndividualsAt-Risk Individuals

23nd ANNUAL COVA CONFERENCE23nd ANNUAL COVA CONFERENCEOctober 16-19, 2011October 16-19, 2011Keystone, ColoradoKeystone, Colorado

Presenter: Don Rudisuhle CFEPresenter: Don Rudisuhle CFE

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Presentation OutlinePresentation Outline• What is Elder Financial Abuse• Causes and consequences• The MetLife Studies• Three typical cases• Indicators that signal abuse• Is morality on the decline?• Colorado and Federal legislation• The Fraud Triangle• Perpetrators: Why do they do it?• Preparing a court case• Summary and conclusion

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Definition of Elder Financial AbuseDefinition of Elder Financial Abuse• Defined as “the unauthorized use or illegal

taking of funds or property of people aged 60 and older.”– Committee for the Prevention of Elder Abuse, and the

Center for Gerontology at Virginia Polytechnic Institute and State University, March 2009

• This definition can be extended so as to include persons who are physically or cognitively impaired as a result of injury or illness

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Roots of the ProblemRoots of the Problem• Vulnerability of the victims

• Moral decay

• Rise of impunity

• Unprecedented financial stresses

• Substance abuse

• Lack of awareness

• Denial on the part of family and friends

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Wrestling with the ProblemWrestling with the Problem• Pervasiveness of fraud

– Ubiquitous and growing– Public is unaware of severity

• Contributing factors– Bad economy– Decline in morality– Substance abuse and addiction– Aging population means more victims

• Solutions– Strong advocacy– Education of the general public– Comprehensive legislation– Effective prosecution of perpetrators

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Vulnerability to DeceitVulnerability to Deceit• Elderly victims trust the perpetrator

– Are lonely and yearning for social interaction

– May be financially unsophisticated

– Are ignoring what their instincts tell them

– People with intent to deceive are clever

– Perpetrators mix half-truths with lies

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ConsequencesConsequences• Reduces financial security• Destroys family harmony• Engenders fear• Limits access to health care• Contributes to homelessness• Degrades quality of life• Causes depression and despair• Increases costs to the state

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Elder Financial Abuse-MetLife 2009 Elder Financial Abuse-MetLife 2009 • The annual financial loss by victims of elder financial abuse in 2008

was estimated to be at least $2.6 billion dollars • Elders’ vulnerabilities and larger net worth make them a prime target

for financial abuse • The aging population and technology advances will lead to a

dramatic increase in the opportunity for a growing level of elder financial abuse

• The perpetrators of elder financial abuse are generally people who have gained the trust of the older individual, including business and service professionals and family members

• The victims of elder financial abuse come from all walks of life, and this type of abuse affects elders regardless of gender, race, or ethnicity

– Key findings of the study by the MetLife Mature Market Institute, the National Committee for the Prevention of Elder Abuse, and the Center for Gerontology at Virginia Polytechnic Institute and State University “Broken Trust: Elders, Family and Finances” March 2009

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Elder Financial Abuse-MetLife 2011Elder Financial Abuse-MetLife 2011• Annual loss by victims is 2010 is now estimated at $2.9 billion,

up 12% from 2008

• Stranger fraud accounted 51% of published articles between April-June 2010, followed by:

– Family, friends and neighbors (34%)

– Businesses (12%)

– Medicare and Medicaid fraud (4%)

• However, Medicare and Medicaid fraud had a larger financial impact than all the others put together: $38.2 million.

• The MetLife Study of Elder Financial Abuse: “Crimes of Occasion, Desperation, and Predation Against America’s Elders” June 2011

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Three Representative CasesThree Representative Cases• Dr. Robin Motz

– A prominent New York physician takes $800,000 from his elderly, infirm mother. Pleads guilty and is sentenced to community service

• An Elderly Person with Dementia– An elderly person suffering from dementia deeds

property to a friend. Court finds no undue influence

• Mary Coleman– An elderly woman falls and is left to languish and die

by her sister, who years later is charged with homicide and fraud

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Dr. Robin Motz Dr. Robin Motz • A prominent New York physician accused of stealing $832,453 from

his elderly incapacitated mother• Used a power of attorney to take control of his mother’s assets • Went on vacations to the Bahamas, Mexico and Hong Kong.• Paid $400,000 of his own credit card bills• Paid a contractor $200,000 for working on his vacation house• Gave cash gifts to his children, including $25,000 to his son• Transferred $140,000 to his wife• Depleted his mother’s assets, forcing her to survive on a small pension

and Social Security.• A social worker contacted the District Attorney's Elder Abuse Unit• Arrested and indicted on felony charges of second-degree grand

larceny and second-degree money laundering. • Pleaded guilty in exchange for a sentence of 150 hours of community

service and restitution of more than $540,000. [New York Supreme Court Docket #00009-2008]

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An elderly person with dementiaAn elderly person with dementiaSummary:

– Spouse dies and surviving spouse makes a new friend

– Individual deeds the family home to this friend

– A new will is executed in favor of the new friend

– Individual is diagnosed with Alzheimer’s

– Relatives file for conservatorship

– Individual passes away

– Relatives sue claiming undue influence

– Trial court fails to find a confidential relationship

• Individual was not dependent on friend for care

• Friend did not pressure individual to convey property

• Friend persuaded individual to engage an attorney

– Higher court upholds lower court ruling

[A 2009 Wyoming Supreme Court Case]

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The Mary Coleman HorrorThe Mary Coleman Horror• Mary dedicated her life to helping her sister and troubled nephew• A widow, age 70, Mary falls down in her bedroom and can’t get up• She cries out for help. Her nephew tells her to shut up• Concluding it’s too late for a doctor, they leave Mary on the floor.• The two proceed to eat pizza and watch TV for two days.• Mary dies on the floor. Her body is moved to the garage.• Her sister withdraws $6,437 from Mary’s joint bank account• Months later, police discover Mary’s mummified body in the garage• The district attorney refuses to file charges• Judge approves paying Mary’s $66,000 life insurance policy to

sister• A new prosecutor arrives and re-opens the case• Sister and nephew are charged first-degree reckless homicide,

financial fraud, subjecting an at-risk person to abuse and hiding a corpse.

Associated Press, October 11, 2011

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Increasing AwarenessIncreasing Awareness• Training for:

– Advocates

– Health care workers

– Law enforcement

– Officers of the court

– Family caregivers

– Bankers, brokers and financial advisers

– CPAs and bookkeepers

– Attorneys

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To Prevent Financial ExploitationTo Prevent Financial Exploitation

• Know the signs• Document the abuse• Contact proper authorities• Obtain legal counsel• Search for the looted assets• Charge perpetrators in civil or criminal

court (or both)• Recover assets on behalf of the victim

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Indicators of Financial AbuseIndicators of Financial AbuseThe elderly victim:

– Has recently made a new “best friend”

– Often makes large bank or ATM withdrawals

– Sends checks or wire transfers overseas

– Is unaware of his/her financial status

– Has difficulty buying everyday necessities

– Receives mail for lotteries, prizes and contests

– Gets frequent calls from telemarketers

– Is isolating him/herself from family and friends

– Demonstrates fear or submissiveness towards caregivers

– Caregiver tends to intercede and speak on behalf of victim

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Gallup Annual Values & Beliefs Poll

Public Perceptions Regarding the Nation's MoralsMay 5-8, 2011

Positive Mixed NegativeNational All Adults 14% 18% 65%

Men 14% 19% 63%

Women 13% 16% 66%

18-34 years 22% 21% 53%

35 to 54 years 12% 18% 67%

55 and older 8% 15% 72%

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Transparency InternationalTransparency International

United States Corruption Index Rating 1995-2010

1995 - 15 1999 - 18 2003 - 18 2007 - 20

1996 - 15 2000 - 14 2004 - 17 2008 - 18

1997 - 16 2001 - 16 2005 - 17 2009 - 19

1998 - 17 2002 - 16 2006 - 20 2010 - 22

TI is a non-governmental organization based in Berlin that monitors and publicizes corporate and political corruption in international development. It is the leading global civil society organization leading the fight against corruption, bringing people together in a powerful worldwide coalition to end the devastating impact of corruption on men, women and children around the world

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Colorado Statutes – Part 1Colorado Statutes – Part 1Restrictions on Exercise of Certain Fiduciary Powers

• (1) (a) Due to the inherent conflict of interest that exists between a trustee who is a beneficiary of a trust and other beneficiaries of the trust, any of the following powers conferred upon a trustee shall not be exercised by such trustee:

• (I) To make or cause to be made discretionary distributions of either principal or income to or for the direct or indirect benefit of such trustee; except that such a power may be exercised by such trustee to the extent that it may be exercised to provide for that trustee's health, education, maintenance, or support as described under sections 2041 and 2514 of the federal "Internal Revenue Code of 1986", as amended;

• (II) To make discretionary distributions of either principal or income to satisfy any legal obligations of such trustee;

[ § 15-1-1401 C.R.S ]

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Colorado Statutes – Part 2Colorado Statutes – Part 2Definition of a Caretaker• "Caretaker" means a person who is responsible for the care of an

at-risk adult as a result of a family or legal relationship, including, but not limited to, a conservator or a guardian or a person with a fiduciary duty to an at-risk adult. [§ 26-3.1-203 (2) C.R.S ]

Definition of a an At-Risk Adult• "At-risk adult" means an individual eighteen years of age or older

who is susceptible to financial exploitation because the individual is unable to perform or obtain services necessary for the individual's health, safety, or welfare or lacks sufficient understanding or capacity to make or communicate responsible decisions concerning the individual's person or affairs. [§ 26-3.1-203 (1) C.R.S]

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Colorado Statutes – Part 3Colorado Statutes – Part 3Definition of Financial Exploitation• "Financial exploitation" means the illegal or improper use of an at-

risk adult's financial resources for another person's profit or advantage. [ § 26-3.1-203 (4) C.R.S]

Crimes Against At-Risk Adults• Any person who commits theft, and commits any element or

portion of the offense in the presence of the victim, as such crime is described in section 18-4-401 (1), and the victim is an at-risk adult or an at-risk juvenile, commits a class 5 felony if the value of the thing involved is less than five hundred dollars or a class 3 felony if the value of the thing involved is five hundred dollars or more. Theft from the person of an at-risk adult or an at-risk juvenile by means other than the use of force, threat, or intimidation is a class 4 felony without regard to the value of the thing taken. [ § 18-6.5-103 (5) C.R.S. ]

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The Elder Justice Act of 2010The Elder Justice Act of 2010Key Provisions:• Authorizes $777 million over 4 years

• Establishes an Elder Justice Coordinating Council and a 27-member Advisory Board on Elder Abuse, Neglect and Exploitation

• Provides $400 million for Adult Protective Services

• Provides $26 million for establishment and support of Elder Abuse, Neglect and Exploitation Forensic Centers

• Provides $32.5 million to support the Long-Term Care Ombudsman

• Authorizes $67.5 million to enhance long-term care staff training

• Authorizes $48 million for a National Training Institute for Surveyors

• Requires the immediate reporting to law enforcement of crimes in a long-term care facility and establishes penalties for failure to report

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The Elder Justice Act (cont’d)The Elder Justice Act (cont’d)Key Provisions:• Provides for penalties for long-term care facilities that

retaliate against an employee for filing a complaint• Authorizes a $500,000 study on establishing a national

nurse aide registry• Authorizes $15 million (over 4 years) for the Department

of Health and Human Services to improve data collection and dissemination

• Authorizes the Secretary to make grants to long-term care facilities for the purpose of assisting such entities in offsetting the costs related to purchasing, leasing, developing and implementing certified HER technology

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The Fraud TriangleThe Fraud Triangle

Rationalization

Factorscontributing

to risk of fraud

Opportunity

Motivation

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Fraud Triangle ElementsFraud Triangle Elements• Motivation

– The various factors that drive the perpetrator to commit the illegal act

• Opportunity– The conditions that exist that facilitate the

commission of the act

• Rationalization– The mindset that allows the perpetrator to justify

his or her actions

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MotivationMotivation• Economic need

– Perpetrator is financially stressed

• Greed– Perpetrator desires material things

• Retribution– Perpetrator feels victim wronged them

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RationalizationRationalization• “I am entitled to the money”

– Aunt Rose promised it to me

– It’s just an advance on my inheritance

– Dad gave my brother more than he gave me

– I have been Mom’s caregiver for years

• “Grandma doesn’t need really it”– Victim is perceived as wealthy

– Can’t use it due to physical or mental impairment

– Victim is not expected to live much longer

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OpportunityOpportunity• Perpetrator has a fiduciary role

– Is a trustee or guardian

– Has power of attorney

– Is a signatory on financial accounts

• Perpetrator has access to victim’s assets– Personal property

– Real estate and vehicles

– Credit cards

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The Financial Abuse TriangleThe Financial Abuse Triangle

Predation

Types of elderfinancial abuse

as per 2011Met Life study

Occasion

Desperation

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Abuse Triangle ElementsAbuse Triangle Elements• Occasion (Opportunity)

• Victim is an obstacle to the perpetrator’s ability to acquire the things he/she desires

• Desperation– Family or friends are very desperate for money

– Will do whatever is necessary to obtain it

• Predation– A false trusting relationship is created

– The friendship then becomes the vehicle for exploitation

– Sociopathic personalities

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Crimes of DesperationCrimes of Desperation• Generally involves family or friends• Need for money can be a result of:

– Loss of employment– Health crisis or medical bankruptcy– Addiction to drugs or alcohol– A gambling habit– Compulsive shopping– A need to “Keep up with the Jones’”– Being in trouble with the law

• Perpetrator believes that he/she is entitled to compensation for caregiving services

• Men are typically the perpetrators

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Crimes of OccasionCrimes of Occasion• The victim has money and other assets

• The assets are accessible

• Victim is careless or unaware– Door unlocked

– Money or valuables left in plain sight

• The perpetrator takes what is available– Generally by stealth

– Sometimes using violence

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Crimes of PredationCrimes of Predation• Involves building a trusting relationship

– Romantic

– Professional

• Assets stolen by stealth or subterfuge– Younger woman approaches lonely, elderly man

– Dishonest broker deceives victim on investments

– Contractor provides unneeded, shoddy or overpriced home repairs

– Health care provider marries incapacitated person

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Vehicles for Financial FraudVehicles for Financial Fraud• Withdraw cash “for Mom”• Ask victim to sign a check• Forge the victim’s signature• Use the victim’s credit cards• Divert victim’s income checks• Deposit checks “less cash received”• Persuade the victim to sign quitclaim deeds• Persuade the victim to guarantee a loan• Victim pays to employ perpetrator’s family• True destination of funds concealed by obtaining a

cashier’s check

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Trusted PerpetratorsTrusted Perpetrators• Family, Relatives and Neighbors

– Siblings, children, cousins, neighbors

• Trusted Advisors– Brokers, accountants, lawyers

• Caretakers– Guardians, conservators, trustees, nurses

• Strangers– Contractors, mechanics, telemarketers, door-to-door

solicitors, new romantic interests

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When Does Incapacity Occur?When Does Incapacity Occur?• Family, caregivers and advocates need to

recognize the signs of diminishing mental capacity in a person

• At what point should there be an intervention to request the court to declare the person incompetent?

• Complication: Momentary instances of lucidity can be misleading

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ConservatorshipsConservatorships• Conservator is appointed by the court• Authority limited by the court• Considerable paperwork is involved• Sometimes the court must approve decisions• All records become public• Conservators often must be bonded• They can charge reasonable fees• Professional conservators can be abusive• Avoid a conservatorship by preparing a Durable

Power of Attorney– (but these can be subject to abuse)

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Undisclosed LiabilitiesUndisclosed Liabilities• Obtain the victim’s credit report

– Look for unrecognized credit cards and loans• (Proper authorization required)

• Search the county recorder’s website– Look for contracts, mortgages, deeds, liens etc.

• Search the county assessor’s website– Look for real estate in the perpetrator’s name

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Making Your Case AttractiveMaking Your Case AttractiveFor both civil and criminal cases:

• Ease the burden for investigators– Law enforcement and prosecutors are very busy

– Offices are underfunded and understaffed

– Higher profile crimes get priority

– A well-documented case will attract their attention

• Help the attorney build the civil case– Prepare financial exhibits, graphs and genograms

– Help draft questions for depositions/interrogatories

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Presenting a Persuasive CasePresenting a Persuasive Case• Thorough investigation of the facts

– Checks, bank statements, contracts, dates etc.

• Accurate compelling documentation– Simple exhibits easily understood by judge/jury– Increasingly detailed layers of supporting documents

that can brought out as required

• Flash cards for the victim’s attorney– Make a list of opposing counsel’s likely defenses– Prepare color-coded two-sided cards with countering

arguments to disarm the defense

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Potential PitfallsPotential Pitfalls• Statute of Limitations can kill a case

– A civil case can be filed by a lawyer in a relatively short period of time

– Criminal allegations could take a busy district attorney’s months to investigate before an indictment can be filed

• Avoid charges of extortion– Do not threaten the perpetrator with filing a criminal

complaint if he/she fails to comply with requests to cease the abusive behavior

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SummarySummary1. The problem is getting worse

2. There are laws on the books

3. Municipalities lack resources to enforce

4. Victims’ families can’t afford civil litigation

5. Congress has not funded the Elder Justice Act

6. Perpetrators routinely escape punishment

7. It is necessary to raise public consciousness

8. Advocates need to be proactive