Elder Financial Fraud: Part I
Elder financial fraud does not discriminate. It targets potential victims anywhere in the U.S., in metropolitan cities and small towns. Sometimes the scam is a Ponzi scheme. Sometimes it’s an investment deal involving high-yield securities. The end result is the same: Money that has been saved and invested for decades by elderly individuals is now gone forever.
Elder financial fraud and abuse is on the rise, with more investors 65 years of age and older finding themselves financially fleeced by financial products they don’t understand. Elder investors are prime targets for financial scammers, many of whom are family members, caregivers or friends.
A June 2011 study from MetLife Mature Market Institute revealed that elderly financial abuse costs its victims nearly $3 billion a year.
The victims themselves are often vulnerable, trusting and isolated from family. Many also are mentally impaired. When they receive an invitation for a free-lunch seminar by a financial broker, they’re likely to attend and, in many instances, invest in the products being touted even though they do not need them.
According to a 2012 study by the Center for Retirement Research, elder financial abuse is fueled by the Internet, which allows scammers to contact thousands, or even millions, of potential victims with a single keystroke. One of the most common cyber schemes is phishing, whereby the scammer sends a mass email proposing a sham investment.
In 2011, more than 1.5 million complaints were filed with the Federal Trade Commission (FTC) about financial and other fraud – up 62% in just three years.
An FTC survey found that 13.5% of Americans – more than 30 million adults – admitted to being taken by financial fraud in 2004. The public, however, is often unaware of the pervasiveness of financial fraud, because news outlets typically focus on major scams such as Bernie Madoff’s Ponzi scheme. The hundreds of small and medium-sized cases filed each year by state securities commissioners never make front-page headlines or the local evening news.
Commissioners, whose investigators are pursuing fraud cases inside state lines, say financial elder abuse is increasing every year. Alabama, for example, had an unprecedented 31-case backlog of criminal trials involving financial fraud in September 2011, says the study by the Center for Retirement Research. In addition, the Securities and Exchange Commission (SEC) filed a record 146 enforcement actions against investment advisers and companies in 2011.
In addition to state backlogs, the SEC admitted in April 2010 that it had never examined some 3,000 registered U.S. investment advisers, according to the Center for Research’s study.
(Our next blog, Elder Financial Fraud: Part II, will discuss various tactics used by scammers to persuade their victims to purchase investments or financial products.)