Category Archives: Elder Abuse

After years of building an investment portfolio, you’re presented with what appears to be a home-run financial opportunity. Before jumping in headfirst and betting your lifesavings, think twice.

Investment fraud is big business in an economic downturn, and can lure novice and sophisticated investors alike. In many cases, the victims are elderly.

All investments contain certain risks. Anyone who promises high returns with little or no risk is more than likely trying to scam you out of your money.

A recent article by Financial Highway offers several tips for spotting potential financial fraud schemes:

Pressure to invest immediately: Whenever someone is pressured to immediately turn over money regarding a potential investment “opportunity,” consider it a red flag. In any investment, it’s wise to research the company or investment advisor behind the investment pitch. Is the company legitimate? Are there arbitration filings or disciplinary actions against the broker? Is the person or company a member of the Financial Industry Regulatory Authority (FINRA)? To investigate the background of an investment firm or broker, check FINRA’s Broker Check Web site.

Lack of quality information about the investment:  When discussing investments, ask yourself if your questions are being answered thoroughly. Is the person offering comprehensive information about the financial product in question? Is he or she willing to provide physical documentation, such as a prospectus and other financial documents? If the answer is no, it could be a sign of a scam.

Flashy presentations that don’t hold up: According to the Financial Highway article, most fraudsters produce Web sites and marketing materials that on the surface appear professional but on closer inspection don’t add up. For instance, there may be a number of spelling and grammar mistakes or the description of the investment itself simply doesn’t make any sense.

R. Allen Stanford’s conviction for running a $7 billion Ponzi scheme is yet another reminder that investors need to keep their guard up when presented with investment opportunities that sound too good to be true.

Stanford was accused of defrauding some 30,000 investors from 113 countries over the course of 20 years with bogus certificates of deposit sold by his bank inAntigua. According to prosecutors, investors thought their funds were being invested into safe and conservative assets when in actuality their money was used to fund risky businesses, as well as Stanford’s lavish lifestyle.

Financial frauds like Stanford’s are far from a rarity. Fraud complaints to the Federal Trade Commission (FTC) have quadrupled during the past decade and are up 35% in the past three years alone, according to The Rise of Financial Fraud, from the Center for Retirement Research atBoston College. It’s likely, however, that financial fraud is much more pervasive in that it often goes unreported to authorities.

The elderly are particularly vulnerable to financial fraud. Many individuals who become victims suffer from dementia or are desperate to find ways to recoup the financial losses they suffered during the 2008 market downturn.

The Boston College report includes a list of red flags regarding potential financial fraud schemes, including investments that sound too good to be true, financial products that supposedly guarantee high rates of return but little risk, and proposals that include the “free-lunch” seminar.

A Feb. 29 article by CBS Money Watch reminds investors that when presented with a financial opportunity or proposal to be aware of the rates of return that are available with different types of investments. As of March 2, the Board of Governors of the Federal Reserve System shows these rates of return as the following:

– 0.52% for six-month CDs;
– Under 1% for Treasuries with durations of five years or less;
– Returns of 1.97% for 10-year Treasuries and 2.74% for 20-year Treasuries;
– 3.82% and 5.08% returns for corporate bonds, depending on the bond’s duration and quality; and
– Returns of 3.72% for state and local municipal bonds.

An elderly couple has been awarded $1.4 million by an arbitration panel of the Financial Industry Regulatory Authority (FINRA) in a claim involving sales of two tenant-in-common exchanges (TICs). The TICs were sold by former LPL broker David Glenn. The investors, Heinrich and Araceli Hardt, have gone on to file a separate lawsuit against the sponsor of the two TICs, Direct Invest LLC.

The award contained several allegations by the Hardts, including federal securities fraud and elder abuse.

A TIC is an investment in real estate whereby two or more parties own a fractional interest in a particular property. In 2002, TICs discovered new-found popularity after a change in an Internal Revenue Service ruling gave investors the ability to defer capital gains on real estate transactions involving an exchange of properties.

Turmoil in the economy has caused financial issues for several TICs and their sponsors in recent years. One leading TIC sponsor, DBSI Inc., filed bankruptcy protection in 2008. Since then, a number of broker/dealers involved in DBSI deals have found themselves at the center of arbitration complaints filed by investors.

In the Hardts’ case, the broker behind the TICs left LPL in 2010; he is now affiliated with United Planners’ Financial Services of America, according to a Feb. 14 article by Investment News.

“When these deals were structured, they used tricks,” stated the attorney representing the Hardts in the Investment News article. “A euphemism known as a “yield enhancement” for the TICs relied on “borrowed money” and “returning investors’ money back to them.”

The two TICs in question apparently produced distributions for only a couple of years. By the end of 2009, the Hardts say they stopped receiving payments on both of their TIC investments.

According to the lawsuit, documents for the private-placement offerings by the sponsor, Direct Invest, “contain multiple false and misleading statements regarding the strength and experience of the manager and property manager, the stability of the cash flows, the potential for appreciation, the superiority of the location, the nature and strength of current projected conditions for the greater Boston office market, the strength of the leases and their corresponding projections, the building fundamentals, the use of proceeds, and the purchase price in relation to the replacement cost.”

Seniors are often an easy target for investment fraud – so much so that the Financial Industry Regulatory Authority (FINRA) is warning some broker/dealers about the use of designations that may imply special expertise in working with elderly investors.

In a regulatory notice issued earlier this month, FINRA reminded firms of their supervisory obligations regarding how they use certifications or designations that imply expertise, training or specialty in advising senior investors. The notice also outlines findings from a survey FINRA conducted with broker/dealers and their use of senior designations.

Among other things, findings from the survey showed that some supervisory procedures were not discerning enough when it came to the quality of the designations. And, in some cases, the senior designations approved by various broker/dealers did not require rigorous qualification standards.

As reported Nov. 15 by Investment News, regulators have been concerned for some time now regarding the use of senior designations, as well as the marketing practices used by many broker/dealers to sell products to elderly investors. One of those practices is the “free-lunch seminar,” which has often been used to lure people – especially the elderly – into investing in unsuitable or even fraudulent products.

According to the Securities and Exchange Commission (SEC), these types of lunches are typically held at upscale hotels, restaurants, retirement communities and golf courses. In addition to providing a free meal, the firms and individuals conducting the gatherings often use other incentives such as door prizes, free books, and vacation deals to encourage attendance. The real purpose of the meetings, however, is often to entice attendees’ to open new accounts with the sponsoring firm and, ultimately, in buy into the investment product being touted.

The most commonly discussed products at the sales seminars include private placements, variable annuities, real estate investment trusts, equity indexed annuities, mutual funds, private placements of speculative securities (such as oil and gas interests) and reverse mortgages, the SEC says.

Elder financial abuse is a growing crime, with one in four seniors in the United States becoming a victim. In most cases, elderly victims are taken advantage of by someone them know – a family member, caregiver, neighbor, or financial advisor or broker.

A June 2011 study from MetLife Mature Market Institute shows that elderly financial abuse costs its victims nearly $3 billion a year. Women are twice as likely as men to become victims of elder financial abuse, according to the MetLife study, with most individuals between the ages of 80 and 89, living alone, and requiring some level of help with either health care or home maintenance.

Some of the warning signs of potential elder financial fraud and abuse include:

• Unexplained bank withdrawals.
• Unauthorized use of a credit or ATM card.
• Stolen or misplaced credit cards or a checkbook.
• Unexplained withdrawals from brokerage accounts.
• Checks written as “cash,” “loan” or “gift.”
• Abrupt changes in a will or other documents.
• Unexplained transfer of assets to a family member or someone outside the family.
• Disappearance of valuables.
• Sudden appearance of a previously uninvolved relative claiming a right to an elder’s affairs or possessions.
• New signers on accounts.

The bottom line: If you, a loved one or an elderly neighbor or friend has become a victim of financial abuse, it’s important to contact the authorities. Financial abusers count on silence of their victims to continue their crime.

Elder abuse is on the rise – something Donna LeBoeuf, a Pittsburg resident in the early stages of dementia, knows only too well. Playing a “game” with her caregiver, LeBoeuf unknowingly signed her name several times on pieces of paper, unaware that the innocent act would put her financial future in jeopardy.

As reported Sept. 25 by the Contra Costa Times, LeBoeuf initially was grateful that her caregiver, Mary Genai, helped her with life’s daily tasks. That included watching over LeBoeuf’s finances. LeBoeuf never suspected that her gratefulness might come back to haunt her.

LeBoeuf’s son later discovered that his mother had signed away control of her money and medical decisions, and that Genai, the caregiver, had got away with stealing “thousands of dollars” from LeBoeuf.

Specifically, Genai gained LeBoeuf’s power of attorney, deposited her Social Security checks into her own checking account, named herself the beneficiary of a $100,000 life insurance policy and got control of LeBoeuf’s medical decisions in the event she became incapacitated, according to the Contra Costa article.

Today, Genai faces six felony counts of financial elder abuse. She has pleaded not guilty and is free on $402,000 bail pending an Oct. 4 court date.

The retirement years should be golden years. Unfortunately, in a growing number of cases, many people are spending this time as victims of elder financial fraud abuse.

Elder financial fraud is on the rise. In 2009, MetLife Mature Market Institute released a report, Broken Trust: Elders, Family and Finances, showing that up to one million older Americans are victims of financial fraud each year. The abuse can occur anywhere – in the elderly person’s own home, in nursing homes, or other institutions. Perpetrators include family members, strangers, caregivers, even an investment advisor or financial institution.

“Elder financial abuse is becoming the crime of the 21^st century,” says Denise Voigt Crawford, past president of the North American Securities Administrators Association. The group estimates that one of out every five citizens over the age of 65 has been a victim of some type of financial scam.

In the coming years, elder financial abuse may become an even bigger problem. The number of people 65 and older in the U.S. will double by 2030 to 71 million, according to federal statistics.

Elder financial fraud involves the improper use of an elderly person’s funds or assets. Signs that abuse may be occurring include unexplained large bank or ATM withdrawals by an elderly person; check signatures that appear “off”; large checks written to cash and/or negotiated by the elder’s caregiver; checks that are signed by an elder but completed by someone else; new activity in accounts that previously have been inactive; expensive gifts from an elder to a caregiver; cashing an elderly person’s checks without his or her authorization; forging an elder’s signature; or misusing or stealing an older person’s money or possessions.

Elder financial fraud is a hidden but growing crime in the United States. Each year, victims are financially abused by family members, friends, strangers and businesses to the tune of $2.9 billion, according to a new study by MetLife Inc. Experts says the figure actually may be much higher, because some 80% of the cases are never reported to authorities.

According to the MetLife study, women are twice as likely as men to be victims of elder financial abuse. Most victims are between the ages of 80 and 89, living alone, and require some level of help with either health care or home maintenance. Nearly 60% of the perpetrators of elder financial fraud are men, mainly between the ages of 30 and 59.

During the holidays the number of news articles increase and the character of elder financial abuse changes, according to the study. Of the 1,128 articles on elder abuse identified through the newsfeeds between November 2010 through January 2011, 354 (31%) concerned elder financial abuse. At least one-quarter (27%) of the cases reported were random, predominantly single-event crimes accounting for relatively small monetary rewards and characterized by a high level of brutality and disregard for human life. Reports of elder financial abuse perpetrated by strangers and by friends and families showed similar results (47% vs. 45%, respectively).

As reported July 17 by Investment News, financial advisers play a key role in detecting potential elder financial fraud because they are the ones who should be regularly reviewing the financial accounts of their elderly clients. Older clients also might be more willing to open up to their adviser about financial scams for which they have become victims — even when they’re unwilling to tell their own family members.

Advisers also have the financial knowledge to review investment opportunities for older clients who might not understand the risk of certain products, according to the Investment News article.

Senior citizens are especially vulnerable to financial fraud because they may be cognitively impaired or simply confused by complex financial products. Research from behavioral economist David Laibson shows that as people age they tend to make poorer financial decisions. In other instances, older people are often lonely and therefore more willing to talk to strangers.

Signs that an elderly person is being targeted for financial fraud include efforts to hide recent financial losses, a boost in transactions, or requests to change the names on accounts, says Sandra Timmermann, director of the MetLife Mature Market Institute, which conducted the MetLife study.

“These could indicate a “sweetheart scam’ or the financial demands of a neighbor or caregiver,” she says.

Over a period of six years, Li Ching Lu isolated, abused and stole millions from a 74-year-old stroke victim for whom Lu served as a “caretaker.” Last month, Lu was convicted of financial abuse fraud and received four years in a California state prison.

Lu’s crime brings to light, once again, the subject of elder abuse fraud and what can and should be done to make sure this doesn’t happen to you or a loved one.

As reported June 7 by Forbes, the first question concerning Lu’s case is why didn’t anyone notice that she began to isolate her victim from her friends, family, financial advisors? Was no one checking on the victim regularly? And where were the investment advisors? Why didn’t they become alarmed – or at the very least, interested – that the victim herself was no longer in contact with them?

Lu’s crime occurred in California, where banks are mandated by state law to report suspicious activity to adult protective services or law enforcement.  That alone begs another question as the Forbes article points out: How could the caregiver manage to launder $4 million through six different banks, using 63 different accounts? If your bank were monitoring activity on all your accounts, it’s a reasonable assumption to expect that someone might notice the 74 year old’s tremendous and unusual withdrawals.

As for Lu, she used her victim’s money to buy a Porsche SUV, a home, a BMW, pay the tuition at her son’s private university, support her gambling habit and make large jewelry purchases.

Elder abuse fraud is growing crime. Every year, the elderly suffer $2.6 billion in financial losses.