Categorized | Finance & Work

Combatting financial fraud

finance, money, couple, meeting, retirement, savings

By Brian Goslow and Sondra Shapiro

BOSTON —

Josephine L. Veglia, an elder law attorney with Durbin & Veglia in Oxford, has had experience with clients who have been targeted for fraud. “Sometimes they have received communications in the mail or phone calls that promise a great return on investment, or receive a check in the mail or are offered business opportunities that are too good to be true … and indeed they are.” Veglia said she has also found that clients sometimes are under pressure to “help” with friend or family finances.

Financial abuse is experienced by 20 percent of older Americans, according to a recent survey done by the Investor Protection Trust (IPT).

To combat the crime, IPT has teamed up with The American Bar Association (ABA) Commission on Law and Aging, Investor Protection Institute (IPI), state securities regulators’ offices and state bar associations to create a pilot program in up to five states. The collaboration is aimed at educating lawyers on how to recognize when an elder client — especially those with mild cognitive impairment — is being financially exploited. The states involved in the pilot should be announced shortly, according to a spokesperson for the program, called the Elder Investment Fraud and Financial Exploitation Prevention Program Legal (EIFFE).

EIFFE will develop, test and implement a national model to teach lawyers to recognize clients’ possible vulnerability to or identify probable exploitation of fraud and financial abuse and report suspected instances of exploitation to appropriate authorities.

In 2009, the Met Life Mature Market Institute estimated that annual losses suffered by older victims totaled $2.6 billion dollars. A 2011 update found an increase in losses to $2.9 billion. “This problem is expected to get a lot worse as the U.S. population ages,” said Investor Protection Trust president and CEO Don Blandin.

A 2008 Duke University study found that some form of cognitive impairment affects one-third of U.S. residents over age 71. “Cognitive impairment makes people more likely to make financial errors and less able to evaluate risk,” Blandin said. “As a result, they become easier targets for exploitation by family members, caregivers, friends, acquaintances or strangers. And that’s why we need to get more lawyers involved in spotting and reporting such cases.”

Attorney Tracey Ingle, who practices elder law in Southborough, said those in her field tend to have a broad knowledge with regard to the senior population. They are able to see the signs of cognitive impairment and financial exploitation. “If we do have a client who is being exploited, there are approaches to take, such as being in contact with the named attorney-in-fact (the person with power of attorney), or in more serious situations the Elder Protective Services Program through the Executive Office of Elder Affairs.”

Ingle warned that the biggest challenge is that an elder who has the capacity to make informed decisions can refuse assistance from Protective Services. “Determining a lack of capacity is extraordinarily difficult to do without the elder’s cooperation,” she said.

Dr. Robert Roush, director of the Texas Consortium Geriatric Education Center of the Huffington Center on Aging at Baylor College of Medicine in Houston, said research has shown that normal age-related changes in financial-decision making can be exasperated by neuro-degenerative conditions ranging from mild cognitive impairment to some forms of Parkinson’s disease.

“This is why all professions with fiduciary responsibilities to older people need to know that these conditions and many others can place their patients or clients at greater risk of financial exploitation than might otherwise be the case,” he said.

According to Ingle, whether the elder has any degree of cognitive impairment, requires, at least in Massachusetts, a medical doctor to certify there is impairment in order take away the elder’s decision-making authority. “Just because the elder’s decision seems bad, doesn’t make it (the financial proposal) wrong or exploitative. I do work with many families where the parent wants to do A, which makes no sense to some of the children — usually because it’s not the most financially feasible or costs more — but is supported by others. Rather than recognize a difference of opinion (costly as it may be), the children rush to judgment that the others are exploiting the parent,” Ingle said.

The extent of elder financial exploitation — and the variety of people carrying out the act — gained greater attention thanks to three celebrity-based cases that involved actor Mickey Rooney (exploited by his stepchildren), New York City multi-millionaire and recluse Huguette Clark (exploited by her attorney and accountant) and Brooke Aster (whose son was convicted of financially exploiting her after she was diagnosed as having diminished capacity).

Lori Stiegel, senior attorney for the ABA’s Commission on Law and Aging and the EIFFE Prevention Program Legal project director, said these examples illustrate the various roles lawyers may play in these cases.

“Those roles include preventing, detecting or remedying the exploitation, and remedying may include protecting the victim, recovering assets, seeking damages or even prosecuting the perpetrator,” she said.

“Other roles may be failing to prevent, to detect, to remedy the problem or facilitating and actually committing financial exploitation,” Stiegel warned,

She said it is not uncommon for a person’s attorney to be doing the exploiting. “It can really be difficult if that situation is occurring, and unfortunately, I’ve seen more cases recently of lawyers who are committing financial exploitation,” said Stiegel.

EIFFE Legal is intended to educate civil lawyers about those roles and the possibility that they may be held accountable through professional discipline, civil liability or criminal penalties if they do not act ethically or lawfully.

Charles Sabatino, director of the ABA’s Commission on Law and Aging, said his office has been working on law-related issues on aging for some 35 years. The commission is comprised of 15 experts in aging from multiple disciplines, including law, medicine, social sciences, academia and ABA legal staff, which has decades of experience in this field.

“Our mission is to strengthen and secure the legal rights, dignity, autonomy and quality of life of elders and we carry out this mission through research, policy development, technical assistance, advocacy education and training,” Sabatino said.

EIFFE Program Legal was officially launched at the American Bar Association’s annual meeting last August in Boston. Results of a poll released prior to the event found that nine out of 10 practicing attorneys were willing to take part in the campaign.

Other findings of the IPT/IPI/ABA survey are:

•More than nine out of 10 attorneys (91.4 percent) said that elder investment fraud and financial exploitation is a “very serious” or “somewhat serious” problem.

•More than one out of three attorneys (34.4 percent) said they are aware that they “are or may be dealing with the victims of elder investment fraud and financial exploitation.”

•Nearly all attorneys (96 percent) said that “diminished decision-making capacity makes seniors” very often or somewhat often “more vulnerable to investment fraud and financial exploitation.”

•More than a quarter of attorneys (27.3 percent) said that they deal on a weekly or monthly basis “with the children of older victims of investment fraud and financial exploitation who are either concerned parties seeking legal help for their parents or who are individuals accused of financial exploitation of their elders.”

•More than nine out of 10 attorneys (92.4 percent) said they were “very willing” or “somewhat willing” to get involved when asked:  “Assuming it was ethically permissible to do so, how willing would you be to contact a law enforcement agency or securities regulator for help when working with an older client with diminished capacity who is or may be the victim of investment fraud and financial exploitation?”

EIFFE Program Legal is modeled on a similar program for medical professionals that was launched in 2012 by Investor Protection Trust and the National Adult Protective Services Association (NAPSA), in cooperation with the American Academy of Family Physicians, the National Area Health Education Center Organization and the National Association of Geriatric Education Centers. That program has already trained more than 7,800 doctors and other health care professionals in 32 states and the District of Columbia.

“The more information that is out there and the more we know about the scientific and medical causes of how we process information and make decisions, the better we can adjust and adapt our explanations to clients as to what decisions they are making, and assist them through that process,” Veglia, the Oxford elder law attorney, said.

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