Another form of pension poaching involves attorneys, financial planners and insurance agents trying to persuade veterans over 65 who have pensions to invest in insurance products so they can qualify for VA Aid and Attendance benefits that help pay for assistance with daily living tasks. Such actions prompted a stern warning last year from the Federal Trade Commission.
"What they don't reveal is that these transactions could mean that the veteran loses eligibility for Medicaid services or loses the use of their money for a long time. Adding insult to injury, the advisers are charging fees that range from hundreds to thousands of dollars for their services," the FTC warned.
Beverly Walsh was a retired schoolteacher in Lynnwood, Wash., who had served in the Navy in World War II. In 2006, an insurance agent who specialized in senior finances sold Walsh, then 81, a 10-year annuity valued at $215,000. In 2009 she bought a second annuity valued at $100,000. The agent also persuaded her to set up a trust so that she and her husband, an Army vet with Alzheimer's, could qualify for Medicaid and the Aid and Attendance benefit, in addition to obtaining a veteran's pension.
No applications for a pension, Medicaid or the Aid and Attendance benefit were ever filed, and no provisions were made for her or her husband's care.
Walsh's niece, Holly Beuthin of Renton, Wash., spent two years unraveling the details and complaining to state agencies.
The insurance agent "gained her trust over several years and then coerced her into making these financial decisions that she wasn't capable of understanding," said Beuthin, who had the pleasure of seeing the state fine the agent for financial misconduct in her aunt's case and revoke his license.
Beuthin was able to recover all of her aunt's money, but her aunt didn't live to see it. Beverly Walsh died last year at 88.
Washington Attorney General Bob Ferguson (D) proposes only a few laws every year. This year, one of the five he proposed was to protect veterans from what he calls "pension poachers."
"Aid & Attendance scams involve hucksters posing as investment 'advisers' who prey on vulnerable elderly veterans or their surviving spouses with the enticement of an untapped federal benefit," said a summary of the legislation prepared by his office.
In March, the Washington legislature passed a law, endorsed by AARP, which prohibits insurance agents from providing assistance to veterans in obtaining benefits that might lead to financial gain for the agent.
"We hope this acts as a deterrent," said Ferguson, whose father and uncles served in World War II. "We see a lot of crimes, but few are more egregious than those that try to scam our veterans."
What's being done
In the past year, officials in several other states and on Capitol Hill have begun focusing on pension poaching.
• In Vermont, state Sen. Kevin Mullin (R) worked with AARP Vermont on a bill that passed unanimously in both houses of the legislature and was signed into law by Gov. Peter Shumlin (D) in April. It requires pension lenders to abide by the same banking and consumer protection regulations as other lenders — including a requirement that they be licensed.
• In New York, Gov. Andrew Cuomo (D) ordered an investigation of pension advance companies, and the state's Department of Financial Services issued subpoenas to 10 companies.
• In Arkansas and New Mexico, state security officials have issued cease-and-desist orders against companies owned by Voyager Financial Group, which bundled military pension plans for sale to investors.
At the federal level, the Securities and Exchange Commission, Federal Trade Commission, Financial Industry Regulatory Authority and Consumer Financial Protection Bureau have issued warnings about pension and benefit scams.
"These schemes are usually very bad deals for the retirees," said Richard Cordray, head of the Consumer Financial Protection Bureau.
On Capitol Hill, the Senate Health, Education, Labor and Pensions Committee is investigating pension loans.
In the House, Rep. Matt Cartwright (D-Pa.) introduced the Annuity Safety and Security Under Reasonable Enforcement Act, known as ASSURE, last year with Rep. Gerry Connolly (D-Va.). Cartwright calls pension advance interest rates, ranging from 27 percent to 106 percent, "highway robbery." His bill would limit the interest rate on such loans to the prime rate plus 6 percent.
Thom Stoddert, 63, a Vietnam veteran in Olympia, Wash., and a writer for Veterans Voice, has devoted years to helping veterans avoid scams. "I come across these people who pretend they're advocates for veterans, but they're just making money," Stoddert said. "I didn't spend nights sleeping in the mud and cold, nor did I spend countless hours watching veterans and soldiers die, so those who never served could use us as a fountain for their greed."
Marsha Mercer is an independent journalist in Northern Virginia.
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