Overcoming Impediments to Effective

Protection of Elderly Victims’ Assets

25th ANNUAL COVA CONFERENCE

October 28-30, 2013

Keystone, Colorado

Presenter: Don Rudisuhle CFE

11

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Presentation Major Points

• What is Elder Financial Abuse

• Causes and consequences

• Indicators that signal abuse

• The Elder Fraud Triangle

• Ways that seniors are defrauded

• Obstacles to recovery of assets

• Organizing the investigation

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Definition of Elder Financial Abuse

• Financial Abuse or Exploitation is the unauthorized or improper use of the resources of an elder for monetary or personal benefit, profit, or gain. Examples include forgery, misuse or theft of money or possessions; use of coercion or deception to surrender finances or property; or improper use of guardianship or power of attorney. – United States Centers for Disease Control and Prevention

• Virginia Tech adds an age qualifier: “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

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It’s getting worse. Why?

• Aging Boomers increase the senior population

• Longer lifespans and attendant fragility

• Breakdown of traditional retirement vehicles

• Diminished returns on savings instruments

• Relatives are stressed by the weak economy

• Widespread moral decay in society

• Inadequate resources to pursue perpetrators

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Elder Theft Consequences

• Compromises elder’s financial security

• Degrades their quality of life

• Engenders fear and anxiety

• Limits access to health insurance and care

• Contributes to homelessness

• Causes depression and despair

• Increases costs to the state

• Destroys relationships and harmony in the family

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Mandatory Reporting in Colorado

On May 16, 2013, Governor Hickenlooper signed Senate Bill 13-111, Require Reports of Elder Abuse and Exploitation. The main provisions are:

– Persons observing abuse or exploitation of person 70 years or older must report it to law enforcement within 24 hours

– An observer who willfully fails to report the fact commits a Class 3 misdemeanor

– A person reporting in good faith enjoys immunity from civil suit or criminal action

– Members of the clergy are exempt under certain circumstances

– The Peace Officer Standards and Training (POST) Board should establish a training curriculum for law enforcement

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Medical Personnel Who Must Report

• Physicians, surgeons, physicians

assistants, osteopaths, physicians in

training, podiatrists, occupational therapists, physical

therapists, medical examiners and coroners, registered

nurses, licensed practical nurses, nurse

practitioners, psychologists, mental health

practitioners, chiropractors, dentists, pharmacists and

hospital and long-term care facility personnel

engaged in the admission, care, or treatment of

patients

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Other Professionals Who Must Report

• Social work practitioners, clergy members, law

enforcement officials and personnel, court-appointed

guardians and conservators, fire protection

personnel, community-centered board staff, personnel

of banks, savings and loan associations, credit unions

and other lending or financial institutions, a

caretaker, staff member, employee of or volunteer or

consultant for a licensed or certified care

facility, home care placement agency, home, or

governing board, including but not limited to home

health providers

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Mandatory Reporting

• The Good

– The cycle of abuse can be interrupted

– Victim will have access to professional help

– Recovery of assets can be initiated sooner

• The Bad

– Embarrassment before peer group

– Loss of personal decision making authority

– May be ostracized from family and friends

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Recognizing Elder Theft Symptoms

• Observation by third parties reveals that he or she:

– 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 paying bills and 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

– Living under squalid and unsanitary conditions

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The Fraud Triangle

Donald Cressey was a sociologist and criminologist who was a recognized expert in white-collar crime. During his research for his doctoral thesis, he proposed a framework for examining a perpetrator’s motivation to commit fraud using a concept he called The Fraud Triangle. It is comprised of three elements, which when taken together, can explain how a person is led to committing a fraudulent act. These are:

• Perceived unshareable financial need

• Perceived opportunity

• Rationalization

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Donald Crecy’s Hypothesis

• According to Donald Crecy’s Hypothesis:

– Trusted persons become trust violators when they conceive of themselves as having a financial problem which is non-shareable, are aware this problem can be secretly resolved by violation of the position of financial trust, and are able to apply to their own conduct in that situation verbalizations which enable them to adjust their conceptions of themselves as trusted persons with their conceptions of themselves as users of the entrusted funds or property.

– Donald R. Cressey, Other People's Money 1973

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The Fraud Triangle

RationalizationOpportunity

Motivation

Factors

contributing

to risk of fraud

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Fraud 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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Motivation

• Economic need

– Perpetrator is financially stressed

• Greed

– Perpetrator desires material things

• Retribution

– Perpetrator feels victim wronged them

• Convenience

– “Just because its there”

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Rationalization

• “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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Opportunity

• 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 Elder Theft Triangle

Predation

Types

of elder

financial abuse

as per the 2011

Met Life study

Occasion

Desperation

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Elder Theft Triangle Elements

• Occasion (Opportunity)• Victim is an obstacle to the perpetrator’s ability to acquire material

things he/she desires

• Desperation– Family or friends are very desperate for money

– Will do whatever is necessary to obtain it, even if illegal

• Predation– A false trusting relationship exists or is created

– The friendship becomes the vehicle for exploitation

– Perpetrator has a sociopathic personality and does not feel guilt

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Crimes 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 Occasion

• The victim has money and property

• 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

– Less frequently by violence

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Crimes of Predation

• Involves building a trusting relationship

– Social

– 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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Motivation

• Economic need

– Perpetrator is financially stressed

• Greed

– Perpetrator desires material things

• Retribution

– Perpetrator feels victim has wronged them

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Characteristics of a Perpetrator

• Is a wheeler and dealer

• Is domineering and controlling

• Doesn't like people questioning their judgment or actions

• Has a strong desire for personal gain

• Has a “Beat the system attitude”

• Lives beyond his/her means

• Has a close relationship with the victim

• Is unable to relax

• Outwardly, appears to be very trustworthy.

• Often display some sort of drastic change in personality or behavior

• Appears incapable of feeling guilt or remorse– Adapted from The Certified Accountant, 1st Quarter 2009, Issue #37

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Addressing Elder Theft

• Know the signs

• Document the abuse

• Contact proper authorities

• Obtain legal counsel

• Search for the looted assets

• Charge perpetrators in civil or criminal court

• Recover assets on behalf of the victim

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Vehicles for Defrauding Elders

There are many ways unscrupulous individuals gain access to vulnerable individuals’ assets:

• The most common perpetrators are members of the victim’s own family

• Trusted professional sometimes stray from their fiduciary responsibilities

• Unscrupulous individuals seek vulnerable targets to deceive and defraud

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The Victim’s Family

Unlawful conversion of the victim’s assets via:

• Misuse of a Power of Attorney

• Trusteeship – abuse of fiduciary responsibility

• Quitclaim deed to real estate

• Adding themselves to a bank account

• Persuading the victim to change their will

• Forging checks and other documents

• Depositing retirement checks “less cash”

• Stealing valuable property or cash

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Trusted Professionals

• Lawyers

• Accountants and bookkeepers

• Financial and investment advisers

• Brokers and securities dealers

• Bankers

• Professional conservators and guardians

• Less frequently, judges

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Telephone and Internet Scams

• Halo, I am calling from Microsoft. You have virus…

• Good News!!! You have won the Costa Rican lottery!!!

• I am the Oil Minister of Nigeria. I have some funds…

• Grandma, I’m in jail in Hungary. Send bail money…

• I’m terminally ill. Can you help distribute my estate?

• We need you to deposit checks from our customers and wire us the money. You can keep a commission…

• This Rachel from Card Services. Your eligibility to lower your interest expires soon. This is your final…

• Our church’s roof is leaking...

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Tradesmen and Contractors

• Prey on those who appear to vulnerable

• Go door-to-door soliciting business

• Most often are unlicensed

• No references

• Perform unnecessary home repairs

• Shoddy or incomplete in work

• Create trust with victims, steal their property

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Obstacles to Pursuing Recovery

• Human – Can be psychological or sociological

• Financial– Incapable of funding costly litigation

• Legal– Law enforcement and prosecutors uninterested

• Logistical– Travel time and expense for all parties

• Reality– Perpetrator may already have dissipated the assets

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Human Obstacles

• Lack of cooperation from the victim

• Interference from the perpetrator

• Lack of information about what to do

• Reluctance to accuse anyone of wrongdoing

• Fear of abandonment by the family member

• Victim may be dependent upon the abuser

• Unwillingness to harm the perpetrator

• Victim with dementia can’t articulate facts

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Financial Obstacles

• High cost of litigation

• Unwilling to commit scarce retirement funds

• Uncertainty as to potential for recovery

• Perpetrator may have depleted available cash

• Can’t take time off work to pursue the case

• Threat of retaliation by the accused in the form

of a countersuit that could be costly to defend

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Legal Obstacles

• Statute of limitations

– 3 years in Colorado

– Can be tolled in some instances

• Multistate jurisdictions

• Law enforcement doesn’t see it as priority

• Prosecutor is not sympathetic

• Prosecutor is busy with more serious crimes

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Logistical Obstacles

• Plaintiff, victim and perpetrator all live in

different states or countries

• Depositions might require expensive travel

• One or more parties are disabled and travel to

attorney’s office and court is problematic

• Victim is housebound

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Reality Obstacles

• Cash most likely has been dissipated

• Perpetrator has left the state or the country

• Assets have been transferred to a third party

• Assets have put in a trust or corporation

• Real estate has been retitled to someone else

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Asset Recovery Steps

The Goal: Stop the hemorrhage and recover stolen assets– Collect as much documentation as possible

– Confront the perpetrator, request voluntary restitution

– Try to remove perpetrator from custody of the assets

– If that fails, retain legal counsel

– Initiate discovery - Request for Production of Documents

– Retain the services of a forensic accountant, if appropriate

– Analyze documentation

– Prepare interrogatories and deposition questions for counsel

– Analyze the products of discovery

– Conduct deep web searches or concealed property

– Prepare courtroom exhibits

– Ask counsel if a pursuing criminal action is appropriate

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Transmittal of Documents

Security must be observed when paper or electronic

documents are exchanged between parties.

• They often contain active bank account and credit

card information.

• Data should not be transmitted in emails as email

attachments

• Consider using a secure cloud platform.

– Dropbox – uses server-side encryption

– Spideroak– uses client-side encryption (better)

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Preparing Courtroom Exhibits

Your courtroom exhibits are instrumental in

persuading the judge or jury to rule in favor of

your client

• Each exhibit should be concise and to the point

• Layer backup exhibits for each primary one

• Use charts and graphs where appropriate

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Obtaining Data Using Discovery

• Discovery is a process used prior to trial

whereby litigants request information from

each other using vehicles such as:

– Requests for production of documents

– Interrogatories are written questions submitted to

the opposing party regarding facts of the case

– Depositions are interviews of a litigant conducted

by a lawyer in an out-of court-venue

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Which Recovery Approach to Use?

• Egregious, destructive fraud

– Use the scorched earth, steam roller method

– Initiate concurrent civil and criminal actions

• Low grade fraud with minor harm to the victim

– Negotiate, persuade perpetrator to return funds

• Somewhere in between

– Consider arbitration

– Appointment of a guardian or conservator

– Nominate a trustee to manage the assets

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Increasing Awareness

• Training for:

– Advocates

– Health care workers

– Sworn law enforcement officials

– Officers of the court

– Family caregivers

– Bankers, brokers and financial advisers

– CPAs and bookkeepers

– Attorneys

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Ongoing Elder Theft Study

Elder Financial Exploitation via Power of

Attorney Abuse: What Family Members’

Experiences Reveal about this Problem, Its

Causes, and Consequences"

• We are still seeking multiple participants from

families with– 1) successful family member POA agent experiences

– 2) families with allegedly exploitive POA experiences