By Stephen F. Adler and Barbara A. West
"Court invalidates young man's scam to inherit widow's millions."
"Financial adviser indicted in phony investment scheme."
"Couple's house robbed during fake pesticide treatment."
Newspaper headlines around the world more often report a new kind of crime - financial abuse of seniors. From Concord, New Hampshire to Christchurch, Auckland, New Zealand, seniors are being exploited, defrauded and deceived by their caregivers, family and friends, often the persons in whom they had placed their greatest trust.
There are now about 36 million persons over 65 years old in the United States alone. About half of these seniors have mental or physical impairments and depend on someone else to manage their daily care, their finances and their property. By 2030, more than 45 million Americans will be over the age of 65. As the number of seniors requiring care rises, so will the opportunities for scamming them.
Many of today's seniors grew up in the 1930s, the era of the Great Depression. They were taught to live frugally, to save for a "rainy day," to pay off the mortgage, shun credit purchases and live within their means. Now they hold title to a disproportionate percentage of the nation's wealth because they spent a lifetime working and saving. Not all are wealthy, but many own appreciated real property; they have good credit, some have retirement accounts and most get regular Social Security payments.
But many also are dependent on others and susceptible to scammers. They face physical, mental and physiological changes that make them unable to function effectively in our fast-paced computer-driven world. Illness, injury, fatigue and other normal conditions of aging affect their mobility as well, and this leads to greater dependence. Many experience loss of vision or hearing. Neurological illnesses and various types of dementia affect the ability of the brain to process information and learn new tasks. It has been suggested that, as the brain ages, it develops "filters" that can screen out negative messages and tends to focus on "big picture" ideas rather than details.
Sadly, the most frequent abusers of a senior's trust are grown children or "surrogates," siblings, neighbors, friends (new or old) and professional advisors. Predators develop the trust relationship with an eye on the prize - the senior's savings, income or assets. They set themselves up as "the one person" the senior can trust, and isolate the senior from other family, friends and advisors. Once the senior is convinced that the predator is the only person on whom he can depend, the predator is ready to strike.
When money beckons, even the most upstanding person may be tempted to "advance" an inheritance or raise the pay a caregiver needs in order to stay working for the senior. What starts out as "Mom's money" quickly morphs into "my inheritance" and then, without warning, it becomes "my money" that Mom is wasting on her care. One attorney reported about a child, frustrated at the idea of spending $6,000 a month on a parent's care, who blurted out, "Why are we wasting all of this money on Dad's care? Can't we just put a bag over his head and be done with it?"
Consider the story of the financial advisor who yielded to temptation and "sold" worthless stock to a client because the senior trusted and never doubted that the advice to buy was genuine. This story illustrates the most serious type of case - abuse by someone who holds a long-standing position of trust.
"Keith L." had managed the portfolio of Sheldon Jones, an urbane, educated professional, for close to five years. Then Keith proposed buying small amounts of a new venture stock to get Jones in on the "ground floor" of new technology. These purchases were mixed with sales of normal mutual fund shares, and the unusual stock purchases seemed acceptable. Jones bought more shares of other new venture companies, always on the promise of significant growth in value and superb returns.
Over the next few years, while the mutual funds performed, the special stocks had problems getting registered on any major stock exchange. After more excuses regarding the sub-par performance, Jones tried to sell the stocks. Keith repeatedly promised he had a buyer and then there was always a reason why the sale had not occurred. Keith even played on Jones's sympathy with a tale that he was dealing with a rare and aggressive form of cancer.
Finally, after more than three years of trying to sell the stocks, Jones learned the worst; Keith had been arrested and charged with mail fraud. Jones's exposure was about $100,000. Some of Keith's other clients, all of them seniors, had invested between $1 million and $20 million with this scam artist. Jones managed to get his money back; the ending of this story is usually different and unhappy. Keith faces a trial and likely a long prison term.
So, what is the answer? How is the alert senior or his genuine friend or family member to guard against being defrauded? To paraphrase President Ronald Reagan, "investigate, trust but verify." In other words, investigate each caregiver, attorney and supposed friend thoroughly. Make sure their motives are genuine. Having made sure they can be trusted, watch what is happening.
If you are the senior, be wary of a child or a new friend who is making regular or unusual financial demands on you. Be leery of a supposed friend who expects gifts of money or who lavishes gifts on you. Real friends, decent grown children and genuine professionals don't demand money or gifts from you nor do they lavish gifts on you.
If you are the grown child or the true friend of the senior, be alert to changes in behavior. Watch for periods of absence during which the new "friend" appears to have taken charge. Try to monitor the senior's physical condition; watch for bruising or other physical injury. Watch for signs of dementia, a growing dependence of the senior on others, but in particular the "friend" or professional who seems determined to gain control of the senior's life.
Abuse of a senior's trust to gain access to his or her assets is a major crime. As with all other crimes, we have to be prepared to report our suspicions to the police, commissions on aging, senior ombudsmen, commissioners of insurance or state attorneys general. Those who prey on our senior citizens can be stopped by an alert senior citizenry and a caring cadre of grown children and true friends working with all the law enforcement agencies in our cities, counties and the states.
Stephen F. Adler and Barbara West are with the Seattle firm of Reed, Longyear, Malnati, Ahrens & West, PLLC.
