FINANCIAL EXPLOITATION OF SENIORS
This article will discuss the financial exploitation of seniors. Various types of
exploitation will be explored, using examples from the author's practice. The author will
discuss both civil and criminal remedies and will address some methods of prevention of
financial exploitation.
I. WHAT IS FINANCIAL EXPLOITATION?
The definitions for financial exploitation vary from jurisdiction to jurisdiction.1
One definition would be "the illegal or improper use of an adult's funds, property or
assets".2
Almost one half of the reported cases of financial abuse or exploitation in the
United States involve victims aged eighty or older.3 Nearly one third involve victims
between ages 75 and 79.4 While individuals over age sixty-five are about one eighth of
the U.S. population, they make up one third of the victims of reported fraud.5
It is generally accepted that only a portion of cases of abuse against the elderly,
including physical, emotional and financial abuse, are reported to authorities. The
percentage of total reported cases may be as little as sixteen percent, with the remaining
eighty-four percent unreported.6 There are many theories regarding why cases of fraud
and financial exploitation go unreported, including social isolation, diminished capacity
of the victim and the victim's embarrassment or shame at being defrauded.
1. MISUSE OF THE ASSETS OF A SENIOR
1
The classic case of misuse of the assets of a senior involves spending the senior's
money either without authorization and/or not for the benefit of the senior. This broad
category can range from the caretaker daughter accessing the mother's checking account
to pay her own bills to theft of cash or jewelry by a non-family caregiver or neighbor.
Approximately ninety percent of cases involving misuse of assets of a senior are the
result of exploitation by a family member of the senior or a friend of the senior.7
A common tool for financial abuse is the durable general power of attorney in
which the senior as principal appoints another individual as his or her agent to facilitate
assistance with financial affairs by providing the agent with authority to obtain
information and authorize transactions on behalf of the senior. The purpose is to
authorize another party to handle financial matters, without the expense, inconvenience
and lack of privacy that a court appointment creates, or the expense and formality of
creating a trust.
While the power of attorney is a widely used instrument for the purpose of
financial management, this informal and unsupervised arrangement can lead to
problems.8 These problems can vary from a misunderstanding of the role of a fiduciary
which causes the agent to commingle funds to blatant misappropriation of the senior's
funds, using the power of attorney as a tool to divest the senior of their assets.9
Sometimes the abuser intends to use the power of attorney for exploitation, and facilitates
the execution of the document, but in other instances, the agent simply discovers that no
one is monitoring their actions and realizes that they have an opportunity. In still other
situations, the agent, over time, comes to believe himself “entitled” to the senior’s assets.
2
Theft or exploitation by a fiduciary is not limited to agents under power of
attorney. The records of courts across the country are replete with cases involving theft
or misappropriation by trustees, guardians and conservators. In short, financial
exploitation of seniors is a widespread and growing issue in our society.
Sometimes the financial exploitation is accomplished by other means, including
coercing an individual into signing a deed or placing another individual's name on a bank
account as a joint owner. Another practice is accompanying a senior to the bank to make
a withdrawal for the benefit of the perpetrator. Seniors can also be victims of theft by
family, friends or service providers, and others, who remove personal property from the
senior's residence. Some exploiters will approach the senior for a loan of money, which
is never paid back.
If a senior is dependent upon another for support services in order to remain in the
community, the senor may feel that he or she has no choice but to accede to the demands
of the individual, particularly if the senior is unable to drive and requires assistance in
managing errands.10 A nonambulatory senior is particularly vulnerable to financial
exploitation.
One common phenomenon in exploitation is the appearance of the "new best
friend". This is an individual who ingratiates himself or herself with the senior, often
times claiming that the senior is like their "mother" or "grandmother". The senior, who
may have been isolated and lonely, is flattered by the attention and over time comes to
rely on this new friend, trusting him or her more and more. The plan, of course, is to gain
the confidence of the senior and control the senior's assets. Often times this individual
3
will also attempt to isolate the senior from their family and friends, increasing the senior's
dependence on the new friend.
Examples of Exploitation By Individuals The Senior Knows
The following are actual cases of financial exploitation of vulnerable adults from
the case files of the author, with necessary identifying data altered to protect privacy.
The material facts in each case are unaltered.
Mrs. A
Mrs. A. was a 75 year old widow who lived alone.11 None of her children lived
nearby, but they kept in touch by telephone. Mrs. A was befriended by a young woman
she met at a meeting of Alcoholics Anonymous. Within a few months, the young woman
was driving Mrs. A. to AA meetings and visiting her regularly. The young woman
visited Mrs. A nearly every day, and called her every day. Often, the young woman
would order flowers for Mrs. A, using a credit card which was billed to Mrs. A, and
which the young woman also used to pay many of her own bills.
Mrs. A had other new friends as well. These were her "telephone friends"' who
would call her and talk to her for hours. Mrs. A really enjoyed having friends who
regularly called for long conversations. They were such good friends! They knew the
names of her children and remembered the events going on in her life, frequently
remembering to inquire as to how various grandchildren were doing with different
endeavors. These friends all worked for "non-profit" political organizations, and they
4
really appreciated the money that Mrs. A would send to support their causes on a regular
basis.
When the family realized that Mrs. A had given nearly $100,000 to her telephone
friends in one year and that the credit card charges the young woman was incurring began
to increase as she grew bolder with her charges, the family decided to act. They filed for
conservatorship to limit Mrs. A's access to funds for her "telephone friends" and for a
restraining order against the young woman, who had a history of identity theft.
Mrs. B.
Mrs. B. was 87 and recently widowed.12 She has no children and no close
relatives. Mrs. B had a family friend, whose adult children began to take a strong interest
in Mrs. B after she was widowed. They eventually convinced Mrs. B that her agent
under power of attorney was not handling her affairs properly and took her to see an
attorney, who drafted a new power of attorney appointing one of the adult children as her
agent. The power of attorney stated that the agent was not authorized to make gifts.
Mrs. B. became extremely ill after the new power of attorney was executed, and
she died three weeks later. During the last three weeks of her life, the agent wrote five
checks, which were the only actions he took as agent. Three were to the agent or his
siblings, and two were written to pay Mrs. B's bills. The last check written and cashed
before Mrs. B's death was a check by the agent to himself with the memo line indicating
it was for payment for his services as agent. His fee for writing five checks was $5,000.
After Mrs. B died, the agent wrote a check for $75,000 which also indicated it
was for services as agent under power of attorney. The bank was not yet aware of Mrs.
5
B’s death. However, the check did not clear the bank because Mrs. B did not have
sufficient funds on deposit.
Mrs. C
Mrs. C and her husband had no children.13 They lived in a condominium complex
that was heavily populated with seniors. Mrs. C's husband had nieces who lived a few
hours away, and would visit the couple on occasion. Mrs. C and her husband were
befriended by a kindly middle aged neighbor who would bring them home cooked food
and run errands for them. This neighbor was a bookkeeper and tax preparer. Eventually
she began preparing the couple's tax returns. After Mrs. C was widowed, the neighbor
called the niece who was agent under power of attorney, and told her that Mrs. C had
asked her to take over as agent, because it was such a long drive (two hours) from the
niece's home to Mrs. C's town and Mrs. C didn't want to inconvenience her.
The neighbor began paying Mrs. C's bills. Because Mrs. C and her husband had
very high income and many investments, as well as a long term care policy, there was
sufficient money to pay Mrs. C's bills for years, even as her health declined and she
required more care. One day, the niece received a call from the neighbor, informing her
that Mrs. C was "out of money" and "needed a nursing home". A review of the records
revealed that Mrs. C was nearly broke, and much of her money had disappeared in cash
withdrawals from Mrs. C's account to the neighbor's account. The neighbor had even
used Mrs. C's debit card to pay her own bills.
6
Col. D
Col. D and his wife were retired, high ranking military officers.14 They had a
beautiful home, built while they were on active duty. They eventually retired to their
dream home, and for many years while their health was good, they remained active.
They traveled regularly and filled their home with beautiful possessions. When Col. D's
wife died, he was eighty four and he began to decline. A laborer who did yard work for
Col. D befriended him. The laborer and his family began to cook meals for Col. D and
run errands, including making certain that Col. D had a supply of alcohol to drink. The
laborer took Col. D to the bank to sign a power of attorney so that the laborer could pay
the bills for him.
The laborer befriended Col. D's only close relatives, a nephew and a niece who
both lived out of state. The laborer would call the relatives regularly and assured them
that Col D. was doing well and that he was being taken care of.
After the laborer took over management of Col. D's finances, he began to deplete
his assets. Col. D had a sizable military pension and other income which was well in
excess of his needs. All of the money deposited into Col. D's bank account was
withdrawn each month, and his other accounts were liquidated. Eventually, the laborer
applied for a home equity loan on Col. D's residence, telling the banker the money was
needed to repair the home or else social services might make Col. D leave. The home
equity loan gave the laborer another $60,000. A year later, all the money was gone, other
then Col. D's monthly income. The house was in filthy disrepair, with the beautiful
landscaping overgrown.
7
Mrs. E
Mrs. E suffered from bi-polar disorder most of her adult life.15 She had no
relationship with her children for years and after she was widowed. She lived alone and
isolated. Mrs. E was befriended by her financial advisor who visited her regularly and
helped her to manage her investments, which totaled over one million dollars.
Eventually, the financial advisor took Mrs. E to see his lawyer, and a series of
amendments to Mrs. E's trust were drafted by the lawyer for Mrs. E. Mrs. E was so fond
of the financial advisor that she funded trusts for his minor children's college educations.
Eventually, Mrs. E came under the protection of Adult Protective Services as she
began to suffer from cognitive decline. The social worker was able to make contact with
one adult child of Mrs. E, a daughter who quickly came out from out of state to visit her
mother. The daughter stayed in town long enough to take her mother to an attorney to
draft a new will, leaving her mother's estate to her, to the exclusion of her siblings. The
daughter contacted the siblings and told them their mother was fine, but didn't want to see
either of them. The daughter did not share contact information regarding her siblings
with the social worker. Before the daughter left town, she had her mother place her
brokerage account containing all of her investments under the daughter's management,
and the funds were transferred to the daughter's broker for "management".
The transactions by the daughter were discovered, as well as contact information
for the other children. The county requested appointment of a professional guardian and
a professional conservator. The gifts to the first financial advisor's children were
discovered and the conservator filed an action to recover the funds. The financial
8
advisor's attorney entered an appearance on behalf of the advisor to defend the gifts,
despite having represented Mrs. E in drafting amendments to her trust.
Mrs. F
Mrs. F was a widow in her eighties, who had one son. He would help Mrs. F with
her financial affairs.16 When Mrs. F purchased her townhome, she didn't realize that the
title to the property was being placed in her son's name. When she sold her large home,
her son took to proceeds check to "invest" for her. Later, when Mrs. F asked her son to
place her home and the investment account in her name, he refused. He threatened to
transfer the townhome out of his name and told her that he would not pay to bury her
when she died, because of the trouble she was creating with these requests. Apparently
her son had been told that this was an effective way to shelter the money and the house if
his mother needed nursing home care. Mrs. F was afraid to take any action against her
son, because her children and grandchildren were very important to her.
Ms. G
Ms. G was an elderly single woman, who lived in an apartment in a senior
housing complex.17 Ms. G was befriended by her landlord, who convinced her to finance
his charity project. The landlord signed a promissory note obligating him to pay the
money back in one year. Ms. G also made the landlord the executor of her will. The
landlord later left the apartment complex, and failed to keep in contact with Ms. G. He
did not repay the money when it was due.
9
Ms. G was critically injured in a fire in her apartment. While Ms. G was in the
hospital, the firemen sorted through the records in the apartment, found a friend to serve
as a medical proxy and provided the promissory note and other information to adult
protective services. A special conservator was appointed immediately. When the special
conservator contacted the former landlord about the promissory note, he claimed first that
it had been forgiven and then that he had paid it back, but he was unable to provide
evidence of either. Ms. G died as a result of injuries received in the fire.
Mrs. H
Mrs. H was an elderly widow with no children.18 She was living in an assisted
living facility and her agent under power of attorney stopped communicating with the
facility. A conservator was appointed and the power of attorney revoked. The
conservator requested the records from the agent. Along with the financial records was a
will, written by the agent, which appointed the agent as executor and left Mrs. H's estate
to the agent and her husband. The agent was a legal secretary, employed by an attorney
who had represented Mrs. H. The agent "felt sorry for Mrs. H" and had befriended her.
A thorough review of the financial records did not show any improper transactions. An
attorney was appointed for Mrs. H, who assisted her in revoking the will.
Also included in the records was a promissory note from Mrs. H's former
accountant and former medical power of attorney. The borrower had been making
sporadic payments, which payments did not cover the interest on the note and had failed
to make a balloon payment three years prior. When the conservator contacted the
borrower, who lived in another state where Mrs. H used to reside, the borrower gave
10
several stories about the loan. First she said she had paid it off, but when asked to
provide documentation, then claimed it had been forgiven. Finally, she said that Mrs. H's
will left her estate to the borrower, so it didn't matter. It was finally resolved that the
borrower would resume making regular payments.
II. WHY ARE SENIORS EXPLOITED?
There are many reasons why seniors are targeted. One reason is that many
seniors have at least modest wealth. Individuals over sixty five years old are more likely
to have money invested in certificates of deposit, investment funds and the stock market
than are individuals under aged forty five.19 Individuals aged sixty five and over who are
home owners are less likely to have a mortgage than are younger individuals, and the
equity in the residence is an attractive target for fraudsters.20 To quote the notorious bank
robber, Willy Sutton, when asked why he robbed banks, "Because that's where the money
is."21 So, why steal from seniors? Because that's where the money is. Even better for
the fraudster, some seniors have conditions which make them more vulnerable to fraud,
theft and exploitation.
What do we know about the numbers of seniors being financially exploited?22
92% of victims of financial exploitation are women
Elderly white females who live alone and are socially isolated are abused at a
higher rate than are men
Seniors who are age eighty and over are abused and neglected at a rate which is
two to three times higher than their percentage in the total population
The likelihood of becoming a victim increases with age, but there is not an
increase in incidence noted with an increase in income
11
Many elderly victims of abuse are physically dependent upon a caregiver for
assistance, making them vulnerable to abusive behavior.23 The elderly person may be
reliant upon another individual for grocery shopping, banking and bill paying. The senior
may have physical limitations that make it difficult to walk, may be unable to drive or
may have vision or hearing loss. Any of these limitations could cause the senior to rely
on others for assistance. If the individual the senior relies upon is untrustworthy, there
may be little or no oversight.
Another reason may be the appearance of a recent trend among adult children
who rely on their retired parents for financial support.24 According to a study conducted
in the United Kingdom by Aviva Insurance Company, nearly 1/3 of adults questioned
state that they rely on their retired parents for financial support, while 18% of parents
polled for the study expected to have to continue to support their children.25 Half of
those parents who expected to continue to support their children said they felt worried,
concerned or angry at the prospect.26 This may be the most under-reported and
unrecognized area of financial exploitation, because the parents may feel they have to
continue to provide support or face abandonment by their adult children.
Dementia, characterized as moderate to severe memory impairment, occurs in
roughly 1 to 2 percent of adults age sixty, with the rate doubling every five years to more
than 40% in adults age eighty-five.27 Alzheimer's disease accounts for about fifty percent
of these dementia case, but there are other causes of dementia, including vascular
dementia and alcoholic dementia.28 The memory impairment of an individual with
dementia can make that individual vulnerable to exploitation and abuse.
12
Mental illness can also cause an individual to be more vulnerable to
exploitation.29 Depression can affect an individual's cognitive functioning, while anxiety
can make someone prone to manipulation by arousing fear.
These physical and mental conditions can also make a senior more vulnerable to
undue influence. One very real concern a senior may have is fear of institutionalization.
A common threat of an exploiter is that he or she will stop providing the necessary care if
the senior does not assist the exploiter by signing checks or a deed. If the senior requires
the care in order to live in the community, or believes that he or she will be forced to
move to a nursing home, they are likely to cooperate with the abuser.
It is easy to understand how an individual with diminished mental capacity can be
subject to undue influence. However, undue influence can be difficult to separate from
the acceptable kinds of influence such as kindness, compassion, thoughtfulness or
friendliness.30 In fact, the "new best friend" often appears to have a good relationship
with the senior, and any dependence the senior places in the individual may not look
troubling, until later when evidence of the exploitation comes to light.
III REMEDIES
The discovery of the financial abuse or exploitation by others can happen in
several ways. Sometimes, family discovers that the senior has funds that have been
dissipated or transferred. In other cases, a bank employee, a nursing home employee or
another individual sees questionable behavior and makes a referral to adult protective
services. In still other cases, “welfare checks” by local law enforcement discover
conditions which warrant referral to adult protective services.
13
A. Civil Remedies
Because civil remedies involve the employment of civil attorneys, such cases are
generally only pursued if there is a reasonable chance of recovery. If the case involves
the transfer of an asset to another individual and the asset can be recovered, a civil
remedy can be an appropriate choice. If the case involves a defendant against whom
there is a strong likelihood of recovery, a civil remedy may also be pursued.
If the suspicious activity or fraud was done under authority of a power of
attorney, a request for accounting by the agent should be made if such accountings are
authorized under state law. Failure to account to the principal or to someone requesting
on behalf of the principal can be used as evidence to request that a court terminate the
authority granted under the power of attorney. Any documentation provided in an
accounting can be used in a civil proceeding against the agent. In Illinois, if an agent
serving on behalf of an incapacitated individual fails to provide an accounting within
twenty one days of a request by the Department of Human Services or the state long term
care ombudsman, the department or ombudsman can petition the court for an order
requiring the agent to produce his or her records.31 If the court finds the failure to timely
account was without good cause, it may assess costs and fees against the agent.
If the senior does not have sufficient capacity to handle their financial affairs, it
may be necessary to petition for appointment of a conservator or guardian, depending on
the title in the jurisdiction. A conservator, once appointed, can obtain the necessary
financial records to pursue a case against the perpetrator.
14
In many jurisdictions, once a conservatorship case has been filed, a notice of lis
pendens can be recorded in the real property records, to place any potential purchasers or
lenders of a dispute as to title to the real property. This notice can allow the conservator
to defeat the claim of a later purchaser or lender that they are a bona fide purchaser or
lender in good faith, as the notice of lis pendens provided notice of dispute as to the
actual owner of the property.
There are several investigative tools to use when preparing a civil case:
Search grantor/grantee indexes in real property records - to view
transactions involving real property going back in time
Past tax returns - which can show income producing assets?
If no returns have been filed, the past 1099's can be ordered
Bank records
Credit card records
Medical records if there is a question regarding capacity
There are several claims which can be pled in financial exploitation cases. Most
will be tried in a civil court of general jurisdiction, but in most jurisdictions, an action for
breach of fiduciary duty against a trustee, guardian or conservator could be brought in the
probate court as well.
BREACH OF FIDUCIARY DUTY
A claim for breach of fiduciary duty is pursued against an individual who is
serving in a fiduciary capacity. Under the Uniform Probate Code, a fiduciary includes a
personal representative, guardian, conservator, and trustee.32 The plaintiff alleges that the
15
fiduciary has failed to act according to the standard of care required by a fiduciary under
relevant state statute or common law.
CONVERSION
Conversion is the most likely civil theft theory, based in tort. In most states, the
elements of conversion are33
1. The plaintiff either owned the property or had the right to
possess the property at the time of the conversion
2. The defendant converted the property by a wrongful act or
disposition of the plaintiff's property rights; and
3. The plaintiff suffered damages
In a conversion case, the plaintiff may seek recovery of the property or a recovery of the
value of the converted property. The plaintiff may also seek a constructive or resulting
trust over the property.
RECISSION OF CONTRACT
Often, a party is seeking to enforce a contract against a senior which appears not
to be in the senior's best interests. This may be a contract for sale of property, which the
senior was induced to sign, or for purchase of an annuity product or a service which is not
an appropriate purchase for the senior.
Capacity to contract is an important element of a recession case. The Restatement
Second of Contracts provides guidance on this issue.
§12. Capacity to Contract34
(1) No one can be bound by contract who has not legal capacity to incur at
least voidable contractual duties. Capacity to contract may be partial and
16
its existence in respect of a particular transaction may depend upon the
nature of the transaction or upon other circumstances.
(2) A natural person who manifests assent to a transaction has full legal
capacity to incur contractual duties thereby unless he is
(a) under guardianship, or
(b) an infant, or
(c) mentally ill or defective, or
(d) intoxicated.
§ 15 Mental Illness or Defect35
(1) A person incurs only voidable contractual duties by entering into a
transaction if by reason of mental illness or defect
(a) he is unable to understand in a reasonable manner the nature and
consequences of the transaction, or
(b) he is unable to act in a reasonable manner in relation to the transaction
and the other party has reason to know of his condition
Capacity can be a variable state for seniors. Capacity can be influenced by reactions to
medication and by environmental factors.36 Because all persons are presumed to be of
sound mind unless adjudicated otherwise, the plaintiff has the burden of proof regarding
lack of capacity.37
One remedy the plaintiff may seek is the voiding of the contract. The majority
rule distinguishes between void and voidable contracts. A contract entered into by a
person who was previously adjudicated as incapacitated is void, while a contract entered
into by a person alleged to be mentally ill or incompetent, but who was not adjudicated as
incapacitated prior to execution of the disputed agreement is voidable, rather than
absolutely void.38
REPLEVIN
Replevin is an action for recovery of the property, which can be brought against
the person holding the property and is usually pled as an additional remedy in another
17
action.39. In many states, after posting bond, a plaintiff can recover the property and
maintain possession until trial. The remedy can be very useful in situations involving
valuable personal property and the author has had experience with default by defendants
at trial on the merits, as a result of filing such a pleading.
FRAUD
In many cases, the questionable transaction involves fraud.40 In cases involving
fraud in the inducement, the victim is told a lie or mistruth in order to convince him or
her to enter into the contract. In cases of fraud in the execution, the victim is led to
believe that the transaction is not what it is, i.e. the document is not a deed and will not
transfer his property when the document is in fact a deed.
DURESS
Duress is similar to fraud, but does not involve a claim of deceit. In a duress case,
the plaintiff gave consent, but only because a threat of harm if he or she did not do so.
UNDUE INFLUENCE
Undue influence is a viable claim in instances where, although the victim did not
act of his or her own free will, the nature of the persuasion was not a threat. Sometimes,
the claim of undue influence is pled as part of a fraud claim, but undue influence is also
pled as part of a recession claim as well.
§ 177 When Undue Influence Makes a Contract Voidable41
(1) Undue influence is unfair persuasion of a party who is under the
domination of the person exercising the persuasion or who by virtue of the
18
relation between them is justified in assuming that the person will not act
in a manner inconsistent with his welfare.
(2) If a party's manifestation of assent is inducted by undue influence by
the other party, the contract is voidable by the victim.
(3) If a party's manifestation of assent is induced by one who is not a party
to the transaction, the contract is voidable by the victim unless the other
party to the transaction in good faith and without reason to know of the
undue influence either gives value or relies materially on the transaction.
Undue influence can be a factor in a situation where the senior has deeded
property to one of her children, in a case where she has several children. However, often
the nature of the relationship between the grantee and grantor is such situations can make
it very difficult to discern after the fact if the transaction was or was not the product of
undue influence. If the child is the care-giver child, who is providing many services to
the parent, it may not be unusual for the parent to provide more to that child than to the
rest of her children. Undue influence is a frequent claim in a will contest, when an heir is
unhappy with a testamentary plan. However, undue influence can be very difficult to
prove.
CONSTRUCTIVE TRUST
A constructive trust is a remedy pled in equity, against an individual who by actual or
constructive fraud, or by duress, or abuse of a confidential relations, or some other
unconscionable conduct, has or holds title to property which he or she should not have.42
The remedy is designed to prevent unjust enrichment.
CIVIL THEFT ACTIONS
19
Some state criminal theft statutes provide for civil actions, often including
recovery of attorney's fees for cases involving the criminal elements of theft.
PREPARING THE CIVIL CASE
In some states, an action involving a senior may receive expedited scheduling.
Plaintiffs may wish to avail themselves of this, unless the particular case involves a
number of financial records for which ample discovery time may be needed. Counsel
may wish to take depositions of elderly clients and witnesses, in order to preserve
testimony in the event a key witness is not available for trial.
B. CRIMINAL
Criminal codes in many jurisdictions have criminal statutes that are age specific.
It may be that there is a specific charge for theft against a person who is a disabled adult
or an adult over a certain age, or that the age or disability of victim causes the penalty for
the theft to increase.43
Criminal cases against abusers are less likely to receive attention from law
enforcement for many reasons, including:.44
A belief that financial crime is less devastating than other types of
crime
A belief that misappropriation by a family member, particularly
under power of attorney, is not theft, but rather is a civil matter.
Victims may not be viable witnesses, making cases harder to
prove.
Many financial abuse and exploitation cases are document
intensive, requiring many hours of investigation.
20
Few police officers and prosecutors have sufficient training to
understand all of the issues present in a financial exploitation case
(contract law, real estate law, and mental capacity)
Statutes of limitations are not always long enough
The result of these factors is that many cases of financial abuse are never
prosecuted. One problem that criminal prosecutors have is proving intent, particularly for
agents serving under powers of attorney.45 Some states have actually criminalized
misuse of powers of attorney.46 An Arizona statute creates a specific criminal charge of
theft for an individual who takes advantage of his agency under a power of attorney.47
IV PREVENTION
BY THE SENIOR
Some of the tools used for prevention are the same tools used by perpetrators,
including the power of attorney and the revocable trust. Both are useful alternatives for
management of property that can be set in place by the senior in the event assistance is
needed in the future. The keys for effective use are:
Appropriate choice of agent or successor trustee
Standards for the agent or trustee, particularly with respect to
gifting of the principal's assets
Requiring regular accountings from the agent or trustee and
designating someone trustworthy to review them on behalf of the
principal
Daily money management programs can provide seniors with supervision of
routine financial matters, including bill paying, checking account management,
budgeting, and verifying bills for payment (including medical bills).48 Fees for daily
21
money managers can range from between $25 per hour to $100. The Association of
Daily Money Managers can provide details and referrals.49
A senior can appoint a representative payee to receive his or her Social Security
income if they need help in managing the funds.50 The Social Security Administration
will appoint a payee upon receipt of an affidavit from a physician.51 The Social Security
regulations provide a priority list for appointment as payee:52
(1) A legal guardian, spouse (or other relative) who has custody of the
beneficiary or who demonstrates strong concern for the personal welfare
of the beneficiary;
(2) A friend who has custody of the beneficiary or demonstrates strong
concern for the personal welfare of the beneficiary;
(3) A public or nonprofit agency or institution having custody of the
beneficiary;
(4) A private institution operated for profit and licensed under State law,
which has custody of the beneficiary; and
(5) Persons other than above who are qualified to carry out the
responsibilities of a payee and who are able and willing to serve as a payee
for a beneficiary; e.g., members of community groups or organizations
who volunteer to serve as payee for a beneficiary.
Despite the priority list, the Social Security Administration will deviate from those
criteria, as they also consider the following:53
(a) The relationship of the person to the beneficiary;
(b) The amount of interest that the person shows in the beneficiary;
(c) Any legal authority the person, agency, organization or institution has
to act on behalf of the beneficiary;
(d) Whether the potential payee has custody of the beneficiary; and
22
(e) Whether the potential payee is in a position to know of and look after
the needs of the beneficiary.
The payee must use the funds only for the beneficiary and only for food, shelter,
clothing, medical care and personal items.54
Attorneys drafting powers of attorney and revocable living trusts bear significant
responsibility in counseling the client concerning the serious question of who they
appoint as agent or trustee. Too often, attorneys give little emphasis to the importance of
this question.
BY THE COURTS
In guardianship and conservatorship, fiduciaries should be required to bond. For
higher asset cases, the majority of assets can be held in restricted accounts, which require
court orders for withdrawal, with a certain number of months of operating expenses held
in accounts under bond. The combination can keep bonding costs down, while protecting
assets. Orders for guardians and conservators should contain restrictions on sale and/or
encumbrance of real property and courts should require recording of letters with
restrictions noted in the real property records.
BY THIRD PARTIES
Mandatory reporting of suspected abuse is the law in 42 states and the District of
Columbia, while eight states authorize voluntary reporting, including Colorado, Illinois,
New Jersey, New York, North Dakota, Pennsylvania, South Dakota and Wisconsin.55 In
states with mandatory reporting, mandatory reporters are usually immune from liability
23
for reporting suspected abuse. Reporting generally triggers a mandatory investigation by
a state agency. Mandated reporters are generally doctors, nurses, psychologists and
social workers. In some states, including California, financial institutions are among the
mandated reporters.
Employees of financial institutions are often among the first individuals to notice
suspicious activity, as in the cases of Mrs. B and Col. D above. Mandatory reporting
statutes and training of bank employees can vent further exploitation of an individual
after the matter comes to the attention of bank employees.56 Under Colorado law, an
individual over age sixty may request that their bank provide them with an informed
consent form waiving confidentiality to allow the bank to make the individual's banking
records available to the county department of human services for the purpose of
investigating a potential or known case of financial exploitation.57
BY STATE LEGISLATURES
Some of the examples of financial abuse and exploitation discussed are gifts and
loans to professionals who provide services to the senior. If professional organizations
are unable to police their membership to prevent exploitation, state legislatures should
enact legislation revoking professional licenses and criminalizing this conduct.
State legislatures should also be prepared to provide adequate funding to adult
protective service departments, to allow proper training and timely investigation.
CONCLUSION
The cases above have some common themes:
24
Isolated seniors make better targets, particularly seniors who have
been recently widowed
Sometimes the exploitation is not discovered until the money is
gone
Even when confronted with a promissory note, an exploiter may
deny that the debt exists or will claim it was paid or forgiven
The preventative measures listed above will not prevent all cases of financial
exploitation. However, some of them can reduce the vulnerability of a senior.
There is a misconception that the only individual harmed is the senior, but that is
false. In many instances, when the senior lacks sufficient funds to pay for their care
needs, he or she ends up living in a skilled nursing facility with Medicaid assistance.
When the perpetrator is not pursued because a local prosecutor does not believe that they
can prevail in a criminal action and there are not sufficient resources to pursue a civil
case, the perpetrator is able to benefit from their actions and the cost is shifted to the
state. The lesson the perpetrator learns is to exploit the elderly because it is profitable
and there are no repercussions.
1
Rose Mary Bailly, Elizabeth Loewy, Margaret Bomba and James J. Lynch; Financial Exploitation of the
Elderly; Civil Research Center, Inc.; Kingston, New Jersey 08528 (2007), § 1-1
2
National Center on Elder Abuse, The National Elder Abuse Incidence Study (September 1998)
http://aoa.gov/eldfam/Elder_Rights/Elder_Abuse/ABuseReport_Full.pdf
3
Supra, Note 2, Page 4-14
4
Id.
5
Richard A. Starnes, Consumer Fraud and the Elderly: The Need for a Uniform System of Enforcement
and Increased Civil and Criminal Penalties, 4 Elder L. J. 201(Fall, 2007).
6
Supra, Note 21, Page 5-1
7
Supra Note 2, Page 4-29
25
8
Lisa Nerenberg, Forgotten Victims of Elder Financial Crime and Abuse, The National Center on Elder
Abuse (August, 1999) http://www.ncea.aoa.gov/NCEAroot/Main_Site/pdf/publication/fvefca.pdf
9
Russ v. Russ, 734 N.W. 2d 874 (Wis. 2007); In Re Mueller, 853 N.Y.S. 2d 245 (N.Y. Sur. 2008).
In Russ, the son and mother had established a joint checking account six years before the execution of the
power of attorney. The power of attorney was procured and executed without the assistance of legal
counsel. The principal did not authorize the agent to be compensated for his services or to make gifts of the
principal's property. Years later, a guardian was appointed and the power of attorney was terminated. The
guardian filed suit against the agent, seeking to recover funds deposited by the principal in the joint
checking account and withdrawn by the agent for the agent's use. The court found that the agent did not
breach his fiduciary duty as the presumption of donative intent created by the establishment of the joint
account overcame the presumption of fraud created by the transfer of funds into the joint account.
The court in Mueller found that "Respondent's use of the POA is a classic example of how such an
instrument may be abused by an attorney-in-fact for his own benefit. At his deposition respondent admitted
that he had transferred to himself or his mother virtually all of the decedent's liquid assets and secured a life
tenancy in the real property. He used the decedent's assets to pay off his personal credit card debts, to
purchase a computer, clothes, CD's, DVDs, whisky and fund his Pay Pal accounts. According to the
respondents he does not have any records because after his review of decedent's bank statement he got rid
of them." Mueller, 853 N.Y.S.2d at 249.
10
Lawrence C. Frolik and Richard L. Kaplan, Elder Law in a Nutshell, Thomson West, 2006
11
The author represented the adult children as petitioners and conservators. A limited conservatorship was
granted, and Mrs. A continued to maintain a modest (by her standards) checking account.
12
The author served as administrator of the estate, and in that capacity, was able to recover a portion of the
funds "gifted" to the agent and his family.
13
The author served as conservator for Mrs. C and was able to locate sufficient funds in accounts that had
been overlooked by the agent to pay for skilled nursing care for the months remaining in Mrs. C's life. The
U S attorney declined to prosecute, despite the evidence of interstate wire transfers. Because Mrs. C died,
it is unlikely that the current local district attorney will prosecute.
14
The author was Col. D's conservator. She determined that the laborer appeared to be an unlikely source
for recovery of the missing funds and declined to file a civil suit. The bank released the mortgage debt.
The local district attorney did successfully prosecute the laborer.
15
The author represented one of the adult children. The funds were eventually placed under the
management of the conservator. The financial advisor repaid the funds, but refused to pay the additional
fees incurred for terminating the 529 plans.
16
Mrs. F is still unwilling to pursue her son. The letter she sent, requesting transfer of her assets back into
her name was met with such anger and hostility that she is reluctant to go any further.
17
The landlord actually tried to obtain appointment as executor, but the court appointed the conservator
instead. The district attorney declined to prosecute the landlord, because of lack of evidence. The author,
who was both conservator and administrator of the estate, determined that the landlord was not worth
pursuing civilly, as the cost of suit would have taken a large portion of the funds devised to a charity, and
an investigation of his assets established that the likelihood of recovery of funds was not high, even if a
judgment was obtained.
26
18
The author was both conservator and executor. The most alarming part of this case was the absolute
assertion on the part of the agent who drafted the will and the accountant who borrowed money from her
client that they did nothing wrong.
19
Table 1140 Financial Assets Held by Families by Type of Asset: 2001 and 2004, 2008 Statistical
Abstract, U.S. Census Bureau, http://www.census.gov/compendia/statab/tables/08s1140.pdf
20
Table 961 Mortgage Characteristics - Owner-Occupied Units: 2005, 2008 Statistical Abstract, U.S.
Census Bureau http://www.census.gov/compendia/statab/tables/08s0961.pdf
21
There is no evidence that Willy Sutton actually said this, but the quote is widely attributed to him.
22
Supra, Note 2
23
Supra, Note 1, Page 1-4.
DailyFinanceUK “Third Rely on Retired Parents”, http://moneynews.dailyfinance.co.uk/article/2010/08/24/third_rely_on_retired_parents
24
25
Id.
26
Id.
27
Richard M. Friedenberg, MD, Dementia: One of the Greatest Fears of Aging, 229 Radiology 632 (2003)
28
Id.
29
Supra, Note 1, Page 10-14
30
Lawrence A. Frolik, The Strange Interplay of Testamentary Capacity and the Doctrine of Undue
Influence: Are We Protecting Older Testators or Overriding Individual Preferences? 24 Int'l J. of L and
Psych 253 (2001)
31
Helen Gunnarsson, POA Amendments Help Protect Incapacitated Individuals, 94 Ill. B.J. 462
(September, 2006), citing amendments to the Illinois Power of Attorney Act.
32
Uniform Probate Code, National Conference of Commissioners on Uniform State Laws (1969), § 1-201
33
Supra, Note 1, Page 5-7
34
Restatement (Second) of Contracts, § 12
35
Id., § 15(1)
36
Lawrence A. Frolik, Science, Common Sense and the Determination of Mental Capacity, 5 Psychol. Pub.
Pol'y & L. 41 (March, 1999)
37
Ann C. Kiley, Setting Aside the Grantor's Deed on Ground of Incapacity and Undue Influence, 36 Colo.
Law. 57 (May 2007)
38
Hanks v. McNeill Coal Corporation, 168 P.2d 256 (Colo. 1946); Bragdon v. Drew, 658 A. 2d 666 (Me
1995); Cameron v. State Teachers Retirement Board, 2000 WL 1753116 (Ohio App. 10 Dist.); Apfelblat v.
National Bank Wynadotte-Taylor, 404 N.W. 2d 725 (Mich. App. 1987).
27
39
C.J.S , Replevin, § 2
40
Supra, Note 1, Page 5-9
41
Supra, Note 31 § 177
42
Mancuso v. United Bank of Pueblo, 818 P.2d 732 (Colo. 1991; see also, 79 AM JUR Proof of Facts 3d
269
43
See, Colo. Rev. Stat. § 18-16.5-103 - Crimes against at-risk adults and at-risk juveniles-classifications;
Cal. Penal Code § 368 - Crimes Against Elder or Dependent Adults. These statutes provides penalty
enhancements for crimes against disabled or elderly adults.
44
Supra, Note 8, Page 3.
45
Ken Ransford, Financial Abuse of Elderly Adults, 23 Colo. Law. 1077 (May, 1994)
46
Jane A. Black, The Not-So-Golden Years: Power of Attorney, Elder Abuse, and Why our Laws are
Failing a Vulnerable Population, 82 St. John's L. Rev. 289 (Winter, 2008)
47
Ariz. Rev. Stat. § 13-1815
48
Supra, Note 1, Page 11-4
49
www.aadmm.com
50
20 C.F.R. § 404.2001(a)
51
20 C.F. R. § 404.2015(b)
52
20 C.F.R. § 404.2021
53
20 C.F.R. § 404.2020
54
20 C.F.R. § 404.2042
55
Seymour Moskowitz, New Remedies for Elder Abuse and Neglect 12 Prob. & Prop. 52 (Jan. 1998).
56
Julie A. Lemke, Protecting the Gold in the Golden Years: Practical Guidance for Professionals on
Financial Exploitation, 7 Marq. Elder's Advisor 1 (Fall, 2005).
57
Colo. Rev. Stat. § 26-3.1-206
Author – Catherine Anne Seal
28