Fraud
Keeping the Wolves from Grandma’s Door: Financial Exploitation of the Elderly
Speech
June 2006
Related links
Learn more about the AARP Global Aging Program
International Network for the Prevention of Elder Abuse
World Elder Abuse Awareness Day
United Nations
New York, New York
June 15, 2006
Sally Hurme, Coordinator, Outreach & Service, AARP Financial Protection
People today are living longer worldwide – much longer. Only 20 years ago, it was believed that population aging was primarily a phenomenon of the industrialized nations. We know now that population aging is a global phenomenon. Mortality rates in most developing nations have declined faster than expected over the past two decades, with the result that many such nations now have life expectancies approaching, or even exceeding, those of the developed nations. By the year 2050, there will be 2 billion older persons in the world -- compared with 600 million today. In 2050, the percentage of older persons will rise to 21 percent worldwide, up from 8 percent today. Today in India, there are 80 million senior citizens, more than the entire population of Britain1.
As you have already heard, there are many different types of abuse. INPEA and AARP have asked me to focus my comments on the financial exploitation aspect of elder abuse. Exact legal definitions vary depending on the jurisdiction; but, most broadly, financial exploitation is the illegal or improper use of a vulnerable adult’s funds or property for another person’s profit or advantage. AARP’s Global Aging Program is committed to serving as a respected source of information and advocacy on issues affecting aging populations worldwide. As the largest membership organization for persons over 50 in America, if not in the world, AARP aims to help people everywhere live longer, healthier, more financially secure lives. We work in collaboration with other organizations worldwide so that the risk of financial security being eroded or destroyed by exploitation is reduced.
While we can project the worldwide demographic bulge, universally we acknowledge that we don’t know exactly how much elder abuse or financial exploitation happens2. We do know that what is reported is only the tip of the iceberg3. One study has estimated that there are at least 5 million financial abuse victims in the United States each year, but officials only hear of about perhaps 1 in 25 cases4. While many people associate elder abuse with physical violence, analysis of reported abuse in the United States demonstrates that financial exploitation happens more frequently. Its emotional consequences leave as lasting scars as physical violence5.
Across the world it is imperative that we acknowledge that financial exploitation is already happening at an alarming rate and will continue to spread. To be equipped to address this inevitably growing problem, we first need to understand how elder financial abuse happens, who the victims are, and who the perpetrators are.
The victims of exploitation deserve society’s special attention and protection because they are targeted for particularly pernicious crimes directed at their financial security. Studies point to specific cracks in victims’ defenses against exploitation: trust, financial naiveté, cognitive impairments, social isolation, dependency, fear, and embarrassment6. Perhaps unique among other types of crime, there is a very real chance that the victim has no idea that she has been or is being victimized. The victim may have no awareness that anything is amiss with his finances; that a trusted person is dipping into her bank account. Or he is just not able to recognize that the person who is taking his money is a thief7.
I want to stress that it is not so much the victims’ vulnerabilities or weaknesses that “allow” these crimes to happen. Credit must be given to, or blame be placed on, the perpetrators. They are good at what they do! They are cunning, experienced, and professional. They rarely look like criminals. Think of them as wolves in sheep’s clothing. These perpetrator wolves come in two disguises: “the strangers” and “the trusts.”
The strangers – who work hard at looking like the trusts – are the con artists, telemarketers, tradesmen,8 like the plumbers who used the ruse that they were working for the water board in Edinburgh, Scotland, to get inside homes of older persons to steal money,9 tricksters who charged a partially-sighted 89-year old woman in Manchester, England, £100,000 to resurface her driveway,10 and hucksters promoting money-making opportunities based on any number of enticing schemes …the list seems endless.
The US Department of Justice recently announced 565 arrests in Operation Global Con that involved 2.8 million victims with $1 billion in losses. This international enforcement operation involved authorities in the US, Canada, Costa Rica, the Netherlands, Spain, the United Kingdom, New Zealand, and Nigeria. One case involved a fraudulent investment scheme that took $6 million from more than 13,000 foreign investors and 10,000 US investors. Another scam in Venezuela and Guatemala duped Spanish-speaking Americans to pay a fee in advance for the “La Familia Gold Card”, a credit card that did not exist. Another involved foreign-currency option contracts pitched by telephone to customers in the United States, Canada, and the United Kingdom11.
The second category of perpetrators includes those even more dangerous wolves I call the “trusts.” They are able to accomplish their crimes because they start with a huge advantage. The victim knows them before the crime begins. They trust their predator. They may have even given birth to them. They believe them, rely on them. Their life may even depend on them. They are their family, friends, neighbor, a new sweetheart, their caregiver, minister,12 financial advisor, attorney,13 insurance agent,14 or banker15. They may have a legal, fiduciary, or moral responsibility to take care of the person who is their victim. They violate that trust and responsibility by taking for their own purposes the resources and dignity of the person who relied on them.
How do these so-called family members, friends and advisors commit their exploitation? It can be outright stealing by walking away with valuables or jewelry. A caregiver can sneak a blank check out of a checkbook, or use an ATM card to cover personal expenses16. It can be done by coercion or duress with threats that “if you don’t give me your pension check, I’ll beat you or put you in a nursing home.” It is done by persuasion: “If you give me your house, I’ll always take care of you.” It’s done through professed affection: “I love you more than your kids who never come see you, so buy me a new car.” It’s done by professed authority: In Melbourne, Australia, a man impersonating a police officer only preyed on elderly victims. In one incident he flashed a badge saying he was from the drug squad. He appeared to be speaking into a lapel microphone while he searched the man for drugs and took his money17.
Greed may play a role when family members prevent the parent from selling a home to pay for nursing care so the property will be available for the children to inherit. It happens through dependency when a daughter won’t purchase medications for her ill mother because she needs her mother’s income to live on. An unemployed son may snatch his mother’s pension check to support an addiction.
It’s done by intentional cunning like Pren Karaqi, who complimented a recent widow on her garden and within two weeks had moved into her home, posing as a registered nurse who would take care of her. He directed her to add his name to all her accounts, wire $42,000 to a Swiss bank account, buy a $29,000 car, and change her will to leave her home to him18.
It’s done by taking advantage of social isolation or even creating isolation so the victim is shielded or separated from existing social networks. The caregiver screens calls, intercepts mail and restricts visitors to gain psychological control. It is done by locking the elder in a back room and taking control over the apartment and pension19.
Financial abuse most frequently is the result of a relationship gone wrong, or a betrayal of trust. A family member, friend or stranger may develop a trusting relationship with the older person with the expectation that they will derive financial gains from the relationship. All too often the caring person becomes an opportunist. He or she starts out actually helping to pay the bills. But as the older person declines in mental agility, the opportunity to dip into the bank account for personal needs becomes overpowering20. The use of legal—or purported legal--documents such as joint bank accounts, durable or enduring powers of attorney, deeds, and wills exponentially complicates detection and recovery because of the intended screen of legitimacy. The legally complicated issues of consent, undue influence,21 and capacity create a golden opportunity for success in accomplishing the exploitation. It looks legal; it’s hard to detect; it’s unlikely to be reported; it’s complicated to unravel; it’s unusual to be prosecuted if it is revealed. The trusted-but-not-to-be trusted wolves are grinning ear to ear.
The stranger wolves are grinning, too. One international scam that rakes in a billion dollars each year22 is the “you have won the lottery” scheme, such as the prolific El Gordo scam out of Spain or the Canadian Lottery. The telemarketers promise instant wealth, but before the money can be delivered, the winner must first wire out of the country thousands of dollars in so-called fees and taxes.23 You also should be aware of the advance check scheme. This money-making ploy involves a large check that the victim is told to deposit and then refund a smaller amount, keeping the difference. Of course, the check is counterfeit so instead of gaining a commission, the victim loses the total check amount.24 One alert Florida senior spotted these two plots in one scam when he received a phony $4,000 check as an advance on the taxes he supposedly needed to pay to collect his $49,000 lottery payout.25 And there is the ubiquitous “Nigerian” or “419” scam that uses forged documents purporting to come from nonexistent government agencies or companies in West Africa that promise large amounts of money if the recipient reveals a bank account number.
Unsuspecting investors, intent on making sure their money will last their life span, are tricked into investment scams that leave them destitute in their final years. It could be the long familiar Ponzi scheme with promises of high returns that are financed only by bringing in new investors to the ruse.26 Fraudulent investment opportunities in coins and stamps also target older investors around the world. In Spain, more than 350,000 pensioners of modest means lost €3.5 billion in a stamp dealing scam. They were told the investment was guaranteed and the stamps would appreciate by six per cent a year.27 When the pyramid scam crumbled, police were called to control hundreds gathering in protest outside the company’s headquarters.
Our task is to become even more committed through international cooperation to shutting down the wolves, expanding our knowledge about the wolves’ ways, and sharpening our skills to blunt their claws. Their lairs may be in Spain, Canada, Nigeria, or the United States. They could be anywhere in the world on the Internet hiding behind a pseudo URL.28 They are at their best in the bedroom or living room behind closed doors so no one becomes suspicious. Their tools are kind words, wonderful promises, and fancy pieces of paper. They don’t need masks because the victims know exactly who they are because they are sons and daughters. They don’t need guns or leave bruises because they talk their victims into handing over the money. They don’t create fear; they build on trust.
Even though there are no broken bones, the effect is devastating financially and emotionally. Not only are life savings wiped out with little time to recover financial stability, there is an enormous psychological toll. Loss of assets means loss of independence and security, resulting in being dependent on family or pubic assistance. Financial abuse isn’t just about loss of money. Its ramifications go far beyond the dollars. It causes fearfulness, loss of confidence, depression, hopelessness, and suicide.29 That list is too long.
That’s why we are here--to raise international awareness of elder financial exploitation and to reinforce our commitment to keeping the wolves away from our parents and grandparents wherever in the world they may live.
Footnotes
1. Lola Nayar, Celebrating Old Age by Making a Difference in Society, April 18, 2006, INDO-ASIAN NEWS SERVICE, www.rxpgnews.com/medicalnews/health/aging/printer_4058.shtml.
2. A GfK NOP poll, taken in conjunction with World Elder Abuse Day, found that more than half of all respondent believed that there was a great deal of neglect and mistreatment of the elderly in Britain. Elderly Abuse ‘Becoming Common’, BBC NEWS, June 5, 2006, newsvote.bbc.uk/mpapps/pagetools/print/news.bbc.co.uk/1/hi/uk/5043896.stm. One in Five Israeli Elderly are Abused, Jerusalem Post, Feb. 19, 2006, www.jpost.com.
3. One invaluable source of current information about fraud, exploitation and abuse in the United States and other countries are media scans by The American Society of Adult Abuse Professionals and Survivors (ASAAPS) at www.asaaps.org/news/fraud.php. The US Federal Trade Commission complies reports of fraud in its Consumer Sentinel database. For an analysis of fraud and identity theft complaints from consumers over 50 to the FTC in 2004 see senate.gov/public/index.cfm?Fuseaction=Hearings.Detail&HearingID=71. In 2004 reported fraud cost people 50 and older $15 million out of the $565 million total fraud losses reported nationwide.
4. John Wasik, The Fleecing of America’s Elderly, CONSUMERS DIGEST (Mar./April 2000).
5. Reports of financial exploitation investigated by US Adult Protective Services were 20.8% of all reports, compared to 12.5% for physical violence. Pamela B. Teaster et al., ABUSE OF ADULTS AGE 60+: THE 2004 SURVEY OF ADULT PROTECTIVE SERVICES (2006).
6. Thomas L. Hafemeister, Financial Abuse of the Elderly in Domestic Settings, in National Research Council, ELDER MISTREATMENT: ABUSE, NEGLECT, AND EXPLOITATION IN AN AGING AMERICA, 391-393 (2004).
7. AARP, TELEMARKETING FRAUD VICTIMIZATION OF OLDER AMERICANS (1996).
8. George Gregg was indicted in Maricopa County, AZ, for taking $50,000 from an elderly woman for roof repair. He never did any work but collected payment several times from the 77-year Scottsdale resident. Handyman Scams Targeting Elderly, KPHO PHOENIX, May 10, 2005, www.kpho.com/global/story.asp?s=3326567&ClientType=Printable. The president of a Japanese home repair company was arrested for possibly defrauding 800 older homeowners into doing 1 billion yen in uncessary home repairs. 7 Home Repair Staffers Arrested, YORMIURI SHIMBUN, June 13, 2006, www.yomiuri.co.jp/dy/national/20060613TDY02009.htm.
9. Plumbers, who claimed they needed access to the home to check taps and pipes, preyed on at least 14 elderly and vulnerable victims stealing thousands of pounds. Alan Roden, Bogus Callers Swoop on OAPs, The Trail of the Con Men, May 16, 2006, EDINBURGH EVENING NEWS, news.scotsman.com/Edinburgh.cfm?id=728912006&format=print.
10. Emily Miller, Conned OAP Loses £100,000, May 5, 2006, MIRROR.CO.UK, www.mirror.co.uk/printable_version.cfm?objectid=17034626&siteid=94762.
11. U.S. Department of Justice, Hundreds Arrested in Operation Global Con, May 23, 2006, www.usdoj.gov/opa/pr/2006/May/06_crm_321.html.
12. Bradley Guy Miller knocked on the doors of elderly residents asking for money to help the homeless and victims of domestic violence, telling the people that he was a worker for a non-profit religious group. He altered $5 donation checks for the needy into $50 checks for himself, making $70 to $100 per day. Senta Scarborough, Police: Mesa Man Bilked Seniors in Charity Scam, ARIZONA REPUBLIC, June 1, 2005.
13. A New Jersey attorney admitted bilking a 90-year-old client out of her home and life savings by drafting a power of attorney for her two “new friends” and helping them sell her home. Michelangelo Conte, Slap on the Wrist for Scam Attorney, JERSEY JOURNAL, July 9, 2005, www.nj.com/news/jjournal/index.ssf?/base/news-0/1120900446277650.xml&coll=3. Christchurch, New Zealand, solicitor stole $700,000 from elderly client using an enduring power of attorney. Dean Calcott, Four years jail for breach of trust, April 6, 2006, www.stuff.co.nz/stuff/print/0,1478,3628767a12855,00.html.
14. An insurance salesman made cash withdrawals and took out loans against life insurance policies he had sold to elderly clients. He also diverted premium payments for his own use. Former KC man gets one year for fraud, KANSAS CITY BUSINESS JOURNAL, May 17, 2006, kansascity.bizjournals.com/kansascity/stories/2006/05/15/daily25.html?t=printable.
15. Owens v. Mazzei, 1743 EDA 2003, 2004 Pa. Super. 106 (April 7, 2004) www.superior.court.state.pa.us/opinions/A42031_03.pdf (bank employees and bank civilly liable for using undue influence to persuade 82-year-old customer to name branch manager and assistant manager as beneficiaries of a pay on death account and consolidate all other accounts and deposits totaling over $600,000).
16. Travis Lau, Caregiver Allegedly Stole Woman’s Credit Cards, EVENING SUN, April 9, 2005, nl.newsbank.com/nl-search/we/Archives?p_product=HESB&p_theme=hesb&p_action=search&p_maxdocs=200&s_dispstring=allfields(Sarah%20Seibel)%20AND%20date(all)&p_field_advanced-0=&p_text_advanced-0=("Sarah%20Seibel")&p_perpage=10&p_sort=YMD_date:D&xcal_useweights=no" target="blank.
17. Shelley Hodgson, Fake Cop Sent to Jail, HERALD SUN NEWS, May 13, 2006, www.heraldsun.news.com.au/printpage/0,5481,19116936,00.html.
18. Man Accused of Stealing $200,000 from Elderly Woman, CLICKONDETROIT.COM, July 1, 2005, www.clickondetroit.com/news/4676448/detail.html?rss=det&psp=news. In Connecticut Lynda Gardner befriended 77-year old women and began running errands for her. Gardner drained the victim’s savings, checking and life insurance accounts, forged 65 checks and used the woman’s PIN to access accounts at least 76 times, totaling $236,000. Tracy Kennedy, Mother and Son Plead Not Guilty to Fraud Charges, REGISTERCITIZEN.COM, April 27, 2005, www.registercitizen.com/site/news.cfm?newsid=14421418&BRD=1652&PAG=461&dept_id=12530&rfi=8.
19. Hurme, Perspectives on Elder Abuse (2002), www.aarp.org/research/legal/elderabuse/a2002-08-02-elderabuse.html.
20. Ronald Block was once a true friend, who spent years keeping Norman Roussey’s accounts straight and his house clean until, tempted by Roussey’s impaired mental state and bulging bank account, he finally gave in and plundered his friend’s finances. Jason Dearen, Friendly Fraud: The Closest Person in His Life Took almost Everything He Had, INSIDE BAY AREA, April 11, 2005, www.insidebayarea.com/searchresults/ci_2642050.
21. San Diego prosecution team was successful in overcoming the defense that the victim willingly gave away by proving that the victim’s consent had been stripped away by undue influence. Judy Campbell, Elder-abuse Prosecution Guru Sheds Light on Crimes, INSIDE BAY AREA, April 11, 2005, www.insidebayarea.com/searchresults/ci_2642050.
22. Binational Working Group on Cross-Boarder Mass-Marketing Fraud, Mass-Marketing Fraud ; Report to the Attorney General of the United States and the Solicitor General of Canada (May 2003).
23. An older woman was told that to win the “International Lotto” she had to wire $2,448 to cover “insurance fees.” When she resisted she was threaten with legal action if she did not forward the money to claim her prize. Bryce Mursch, Elderly Graniteville Woman Victim of Lottery Scam, WISTV, Columbia SC, May 17, 2006 www.wistv.com/global/story.asp?s4918318&ClientType=Printable.
24. Caroline Mayer, Banks Honor Bogus Checks and Scam Victims Pay, Washington Post, June 1, 2006, www.washingtonpost.com/wp-dyn/content/article/2006/05/31/AR2006053102004.html.
25. Senior Citizen, Son Hunt Down Scammers, WPBFNEWS.COM, June 23, 2005, wpbfnews.com/print/4645823/detail.html.
26. South Florida insurance agents were arrested for convincing clients to liquidate annuities to invest in a bogus company that would buy and sell distressed real estate with returns of up to 9 percent. No real estate was purchased, but phony investor statements were sent until the scheme collapsed. DFS Arrests Two S. Fla. Agents in $1.2 M Ponzi Scheme, INSURANCE JOURNAL, May 17, 2005, www.insurancejournal.com/news/southeast/2005/05/17/55078.htm. Gladys Meija, a 70-year-old restaurateur who would prefer to be retired, gave a frequent customer $50,000 to invest because he guaranteed 5 to 6 percent return so she could retire. The scheme collapsed and she now works two jobs to pay her bills. Penne Usher, Local Senior Victimized in Investment Fraud, AUBURN JOURNAL, July 8, 2005, www.auburnjournal.com/articles/2005/06/27/news/top_stories/04fraud27.prt.
27. Elizabeth Nash, Pensioners Fight to Recover Savings After Scam, THE INDEPENDENT, May 11, 2006, news.independent.co.uk/Europe/article363628.ece. Fourteen older New York investors lost more than $1 million to a confidence scheme to sell rare coins that – they were promised -- would be repurchased at a 20 percent premium in a year. Robert E. Kessler, Three Charged in Rare Coin Scheme, Newsday, January 21, 2005, pqasb.pqarchiver.com/newsday/781837691.html?did=781837691&FMT=ABS&FMTS=FT&date=Jan+21%2C+2005&author=ROBERT+E.+KESSLER.+STAFF+WRITER&pub=Newsday&desc=Three+charged+in+rare+coin+scheme.
28. More than 1 million consumers have been tricked into divulging their personal information to senders of phishing emails, with industry losses totaling nearly $1 billion. Bob Sullivan, ID Theft Concerns Grow, Tools Lacking, MSNBC.COM, June 23, 2005, www.msnbc.msn.com/id/8322300/print/1/displaymode/1098/.
29. Hafemeister, supra note 5, at 391-392.