Monday, March 13, 2023

In the Name of Protection, Part 1: The Profiteers: Guardians' Dark Side: Lax Rules Open the Vulnerable to Abuse

Britney Spears’ conservatorship dispute brought the guardianship system to the public eye. It’s a system that entraps thousands more Americans without a platform to fight back. Illustration: Jonathan Hurtarte/Bloomberg Law. Photographer: Minesh Bacrania/Bloomberg

The US adult guardianship industry is regulated loosely and ripe for exploitation of elderly and disabled people, Bloomberg Law found in a six-month investigation. Here is Part 1: The Profiteers.

By Ronnie Greene and Holly Barker

SANTA FE, N.M. – Lorraine Mendiola was desperate to help her adult son, an aspiring electrical engineer battling mental health demons that sent him spiraling through psychiatric hospitals. So in 2011, heeding advice from a psychiatrist, she sought to become his guardian.

When Mendiola got to court, her lawyer told her a private company, Ayudando Guardians, could oversee Matthew Mendiola’s well-being and finances. Mendiola was shocked. She had never heard of the group. But her attorney persuaded her it could handle the guardianship’s complexities, and “you can just be the mom.”

Mendiola’s shock spun to outrage after a judge assigned the company as Matthew’s guardian. Ayudando Guardians put her son in a boarding home where he was beaten in the face and swarmed by bedbugs. Later it placed him in Albuquerque, N.M., where Mendiola found her son living in an incomplete garage with exposed wiring, no shower, and no fire escape. In five years he went through four case managers and seven boarding homes.

For years, Mendiola protested Ayudando Guardians’ treatment of her son and its handling of his finances. Everywhere she went, from the company to a state guardianship office that paid Ayudando $7 million over a decade, doors slammed. In 2016, Santa Fe District Court Judge Sarah Singleton even ordered her to stop “the constant communications to the Guardian and Office of Guardianship.”

Mendiola compared fighting Ayudando, the state, and courts to battling organized crime. “I likened our situation to a guardianship cartel,” she said. “It feels like a Mafioso situation.”

A year later a Department of Justice investigation unmasked Ayudando as a fraudulent house of cards. The case secured lengthy prison sentences for the company’s directors, who stole nearly $12 million from 1,000 vulnerable clients to fuel lavish lifestyles filled with international cruises, Mercedes-Benzes, gate-protected homes, and $300,000 worth of skyboxes at college basketball games. As Ayudando’s executives globe-trotted, some of their disabled and needy clients were left homeless.

Ayudando’s collapse reveals the dark world of adult guardianships in the US. Judges, lawyers, and state officials ignored warning signs about a company the system long held in high esteem.

Lorraine Mendiola’s son Matthew spent 
years under guardianship of 
Ayudando Guardians. 
Photographer: Minesh Bacrania/Bloomberg
Nationwide, guardianships are often dogged by ripe greed, scant scrutiny, scattershot rules, and flimsy protections for the vulnerable people put under court-ordered control.

A Bloomberg Law investigation found a national network in peril:

  • Judges and other officials in some states don’t have to have law degrees before issuing adult guardianship orders. In Georgia, a former Realtor turned probate judge improperly revoked a young adult’s right to vote without first holding a hearing and restricted her rights on everything from driving to spending money. When the woman’s mother challenged the system, the judge threatened to throw her in jail.
  • Just 14 states certify guardians, and no national standards limit the caseloads they can juggle. In Indiana, one professional guardian has taken at least 420 clients since 2016, most referred by nursing homes. Experts say that signals a system lacking meaningful controls.
  • Regardless of the size of the person’s bank account, guardianships can generate substantial fees amid long-running court battles. In New York, lawyers serving as guardians and counsel for famed artist Peter Max each bill hundreds of thousands of dollars a year, with one charging $550 an hour. The more they tangle with Max’s family for control of his priceless art, the more they seek in fees.
  • The system needs more oversight. More than 1.3 million abuse claims are filed each year with local Adult Protective Services offices, but no one is counting how many involve guardians. Few states require independent attorneys to represent people facing guardianship.

Nationwide, experts estimate there are 1.5 million active adult guardianship and conservatorship cases. It’s big business, with guardians managing an estimated $50 billion-plus in assets for those under their control. The system came to public attention amid pop star Britney Spears’ fight to escape her arrangement, but more frequently entraps thousands of Americans without the means or platform to fight back.

Few Rights, Controls

In the best sense, guardianships are intended to help adults in need, from young adults battling disabilities or mental health crises to older adults whose minds and bodies are faltering. Family members often step in and serve as legally appointed guardians, watching over the finances and health care for their loved ones.

Yet when a family member is unwilling or unable to step in, or when there is no surviving kin, a professional or lawyer often takes the role.

People are rendered to a state of non-personhood, in the name of protection.
Morgan Whitlatch, Center for Public Representation

Adults can find themselves with fewer rights than convicted felons, industry experts say, echoing a piercing quote from the late Florida Congressman Claude Pepper as he pushed for tighter standards in the late 1980s. Bloomberg Law’s examination reveals that assessment to be on point. Adults under guardianship often need permission to marry, to go to the store, to visit friends, to have their own debit cards or use their money for anything from fixing the roof to buying video games.

“People are rendered to a state of non-personhood, in the name of protection,” said lawyer Morgan Whitlatch, a director with the Center for Public Representation public interest law firm.

Whitlatch and others immersed in the system say guardianships should be a last resort and that many are simply too restrictive. Suddenly, with a judge’s order, the so-called “protected person” has lost many rights.

“That can be a person’s right to make medical decisions, financial decisions, where they want to live, who they want to marry, driving a car,” said Kayla Puga, senior team attorney with Disability Rights Texas.

One of her clients, Ruby Campos, was placed under guardianship after growing up in the foster care system. “I felt I wasn’t living my own life,” said Campos, recalling how she was denied requests to visit relatives or have her own debit card. “What about my opinion? Does it matter?”

Campos successfully petitioned in 2022 for the courts to terminate her guardianship, after she’d spent more than a decade in the system. “I actually felt like a new person,” she said. “Like I finally could live my life like I have always wanted to.”

In Indiana, Nicholas Clouse was placed under guardianship with his mother and stepfather after a 2012 car accident left him with a traumatic brain injury one month shy of his 19th birthday.

Though he’d recovered by 2016, and went on to marry, have a child, and maintain full-time work as a welder and then HVAC technician, Clouse still needed approval for purchases.

“I thought I would have a lot more freedom than I did. I had to ask for permission to really go anywhere or do anything,” Clouse said. “My stepdad would limit how much money I could even spend on my daughter for formula and diapers.”

Nicholas Clouse spent nine years under guardianship after a traumatic brain injury.Photographer: Jim Vondruska/Bloomberg

A final straw, he said, was when he couldn’t choose his own new or used car after his SUV’s engine failed. Suddenly, he was driving a 2020 Ford Fusion.

Working with Justin Schrock, a lawyer with Indiana Disability Rights, Clouse won court approval to end the guardianship in 2021, nine years after it began. One of his first acts: Selling the Ford. “It made me very angry even just to look at the car.”

Kristin Steckbeck, the former lawyer for Clouse’s guardians, said she couldn’t comment on his case. Ultimately, the parents supported ending the guardianship.

Schrock said Clouse’s case shows how guardianships can far outlive their usefulness. “If someone like Nick can remain under guardianship, a full guardianship at that, for several years beyond the time it was necessary, who isn’t at risk of potentially being placed under guardianship?”

Probate courts, he said, provide little legal protection for people facing guardianships and even less oversight once the process begins. In Indiana, guardians must file biennial reports summarizing their case but, Schrock said, those typically provide little meaningful information.

“The level of scrutiny that is applied to these filings is extremely low,” he said.

Lawyer Justin Schrock won court approval to end Nicholas Clouse’s guardianship.Photographer: Jim Vondruska/Bloomberg

Oversight is essential to ensure the industry’s focus doesn’t stray from those it is supposed to protect, said Anthony Palmieri, former president of the National Guardianship Association.

“A guardianship is supposed to be a benevolent act to protect someone when all else has failed,” Palmieri said. “It’s not supposed to be a business.”

High Living

With Ayudando, the truth didn’t fully emerge for more than a decade.

In 2004, Susan Harris, a onetime nurse and daughter of a World War II veteran, formed Ayudando Guardians, and would serve as its president, CEO, and 95% owner. Based in Albuquerque, it became a nonprofit corporation providing guardianship, conservatorship, and financial management to adults needing help managing their affairs. Ayudando received payments on behalf of its clients, oftentimes from the Department of Veterans Affairs and Social Security Administration, and was supposed to put that money toward their living expenses.

Ayudando landed its first state contract with the Office of Guardianship at New Mexico’s Developmental Disabilities Planning Council for fiscal year 2006. Those contracts continued, typically for around $650,000 or $750,000 a year. Under its state pact, Ayudando was paid about $325 per month for each client it supervised, including veterans and adults with disabilities and mental illness. Its state contracts totaled $7 million by the time the feds shuttered the business in 2017. Ayudando also had private clients, typically with greater financial means, which it charged $950 a month.

Winning the state contract was “everything” for a company new to the world of guardianships, said former Ayudando Chief Financial Officer Sharon Moore, who is serving a 20-year sentence in a federal prison camp in Texas.

“That’s where our biggest clientele was going to come from,” she said in a phone interview from prison.

She admitted to Bloomberg Law that she fabricated records.

“I have to pay for the part I did, I know,” Moore said.

Ayudando’s fraud began in November 2006 and lasted until the feds swooped in 11 years later, according to the Justice Department. In that time, Harris, CFO Moore, and Harris’ husband and son, both company guardians and directors, diverted nearly $12 million of client money.

They easily fooled the VA and state Office of Guardianship, federal authorities found. Moore submitted fraudulent statements to the VA showing thousands of dollars in their clients’ accounts when many, in fact, were nearly empty or overdrawn. When the VA required bank statements, Moore created phony ones–and photocopied a banker’s signature to give the documents an air of authenticity.

To keep expanding its client list, Harris submitted fraudulent proposals to the New Mexico Office of Guardianship, court records show. The state contract spigot continued. Ayudando had 166 clients under its New Mexico contract when its fraud was exposed, making it one of the state’s largest guardianship vendors.

Publicly, the company maintained an image as a community pillar, becoming a funding partner in 2011 for a project run by the University of New Mexico’s Health Sciences Center and later giving at least $80,000 to the university's foundation.

In 2013, Ayudando Guardians was part of a legislative working group in New Mexico examining elder and disability rights issues.

The Harrises did little to hide their lavish living.

In 2013, Susan Harris bankrolled a luxury box at the University of New Mexico basketball arena, an extravagance that lasted until the company’s fall. Federal probation officials say the defendants spent more than $300,000 on the “party suite,” running up catering tabs as high as $5,000 a night. Harris became the arena's second-largest customer by dollar amount and its largest food buyer–paid from stolen funds, court records show.

In response to a Freedom of Information Act request seeking guest lists for the suite, the university said it had no relevant records. UNM spokeswoman Cinnamon Blair did not return three calls seeking comment about Ayudando.

Then there were the cruises and far-flung journeys. Clients, including veterans battling post-traumatic stress, bankrolled those, too.

Four of their luxury cruises and a couple of family vacations between 2013 and 2017 totaled more than $108,000. There was a $50,950 check to Mercedes-Benz of Albuquerque and homes in gated communities.

Moore said founder Susan Harris lost sight of the company’s mission.

“I think she just got greedy.”

Victims Bereft

Some victims said the contrast was clear between their struggles and the company’s high-flying ways. At least 60 clients filed statements with the court describing the financial harm and personal trauma suffered at the company’s hands.

One, Emily Montaño, said she turned to Ayudando on her lawyer’s suggestion after winning a $93,000 settlement from a car accident that left her severely injured.

When she called Sharon Moore, “she said she was too busy to provide me a balance that was accurate,” Montaño told the federal judge. So, Montaño showed up at the company’s office.

“I remember you as flamboyant,” she said during Susan Harris’ sentencing. “Boy, you would walk in there like you owned the whole world with your hair done up … while you were having banquet food being brought in.” Meanwhile, clients outside their office would be begging for money. “And you guys are all dressed up like you have no problems in the world.”

In December 2017, Montaño’s daughter died at 25. After Ayudando drained her account, she said in court, she couldn’t afford a proper burial.

Another victim told the court Ayudando stole $17,400 from her account, leaving her just $40. She was forced to live on Albuquerque’s streets for months. One man said after Ayudando stole his money, he couldn’t pay rent and electricity and was homeless for a year. Another, a mother with a 2-month-old at the time, fell into addiction and homelessness.

Seeking Answers

And then there’s Lorraine Mendiola’s quest for answers. She said her son can be “oppositional” and over the years has fluctuated between wanting his parents to be his guardian and then not. “It’s been a rollercoaster,” she said.

Lorraine Mendiola was told by her attorney that Ayudando Guardians could handle her son’s guardianship, and “you can just be the mom.
Photographer: Minesh Bacrania/Bloomberg

On Nov. 12, 2014, Mendiola wrote John Block III, then executive director of the state guardianship office, concerned about her son being returned to the boarding home where he had been punched in the face and offered heroin. She said no drug counseling was provided and asked, not for the first time, for her son’s financial records. She never got them.

A state office attorney sent Susan Harris a letter sharing the mother’s unaddressed concerns. The state rebuked Harris, saying the assault and bedbug incidents showed Ayudando failed to ensure Mendiola’s son was “treated humanely.” It directed Ayudando to develop a correction plan. Mendiola continued to press but got nowhere.

Behind the scenes, Ayudando attorney Corbin Hildebrandt was portraying Mendiola as an alarmist.

“I think we are headed for a hearing someday with Judge Singleton and we have to stay civil with [the] mother so that she can hang herself with overreacting,” he wrote in a Dec. 1, 2014, email that landed in Mendiola’s inbox, likely by mistake.

Hildebrandt had earlier helped facilitate a settlement agreement with the company’s accountant, who wrote that executives treated Ayudando’s accounts “like a personal ATM.” Harris paid the accountant a fee settlement in return for his silence.

Lorraine Mendiola shows papers in her home. 
Photographer: Minesh Bacrania/Bloomberg
Hildebrandt did not return three calls or an email seeking comment. The lawyer who initially suggested Mendiola use Ayudando, Jeanine Steffy, did not answer two calls or an email. Singleton died in 2019 after a battle with cancer.

Ultimately Singleton sided with Hildebrandt and said the nonprofit no longer needed to file monthly conservator reports about the case, only annual reports.

I guess I was an idealist. I thought the judge was going to listen to me and weigh the evidence and be fair.
Lorraine Mendiola

Separately, the state guardianship office had relaxed its oversight of Ayudando Guardians, removing a contract provision that required monitoring of client financial information, according to a whistleblower lawsuit filed by former office legal counsel Marina Tapia Cansino.

In January 2017, Cansino sent Mendiola a cease-and-desist letter, citing Singleton’s order that she stop her “constant communications.” From now on Mendiola should only contact her. “If you persist,” she wrote, “I will request an injunction and award of sanctions.”

Now in private practice, Cansino said her letter was a just response to what she called “a barrage of harassment.”

Two days after her letter, a state guardian official asked Ayudando to share “success stories” the state could cite as evidence of its good work, according to an email Bloomberg Law obtained through a public records request. In May 2017, with the DOJ investigation two months from coming to light, Ayudando’s CFO was testifying before a state Supreme Court commission on guardianship reform.

That June, the state approved a fresh contract with Ayudando for $651,700. A month later the FBI and other agents made arrests, and the scandal became big local news.

Block said in a recent interview that he was “shocked” by the fraud and said the state could have done more audits of those under guardianship. But he said the courts also share blame. “A lot of the monitoring of the guardianship is supposed to be done with the judges,” Block said. “And I don’t know if the courts really kept ahead of that.”

Mendiola felt the scales of justice weighted against her. “I guess I was an idealist,” she said from her Santa Fe home. “I thought the judge was going to listen to me and weigh the evidence and be fair.”

Her travails are “the norm” in guardianship cases, with families outgunned by lawyers and their big-pocket clients, said guardian reformer Black, executive director of the Center for Estate Administration Reform. “Those systems are so incestuous and have so many attorneys that benefit by making sure they get what they want.”

Judgment Days

There were two judgment days for Susan Harris and her husband, William Harris, Sharon Moore, and Craig Young, Susan’s son.

Two, because the Harrises had fled to Oklahoma before the first sentencing in 2020, using the aliases Marvin and Cheryl Valdez, with William landing work at a grocery store. The Western Oklahoma Metro Fugitive Task Force found them a month later thanks in part to their Chihuahua, and they were sentenced in 2021.

The defendants pleaded guilty to crimes covering 2010-2017: Susan Harris to conspiracy, mail fraud, aggravated identity theft, and money laundering charges, and William Harris to conspiracy and money laundering. He admitted he knew Moore was siphoning VA and Social Security money and using it to enrich others, including himself.

Young pleaded guilty to conspiracy and money laundering charges. Moore, the company’s 5% owner and day-to-day manager, pleaded guilty to conspiracy, mail fraud, aggravated identity theft, and money laundering.

Young received the shortest sentence at just under six years, Susan Harris the longest at 47 years.

Photos: US Attorney’s Office for the District of New Mexico

“Mrs. Harris, I'm almost without words. What you have done is just astounding to me,” US District Court Judge Martha A. Vázquez said at sentencing. “And what you should have said to all of these good people that trusted you, was you should have said to them, ‘I am so sorry that I stole your money. I am so sorry that I took your children's money, because I knew I could get away with it because they were so sick and they would never know.’”

In court, prosecutor Jeremy Peña described Harris as “the architect of this hideous scheme,” and her husband “the picture of moral cowardice.”

Peña told Bloomberg Law the crime was particularly egregious because the company seized on vulnerable veterans.

“It just was unthinkable that an entire organization that performed such a significant role in the community could be at the same time extracting so much money from its clients,” Peña said.

New Day in New Mexico?

The state developmental disabilities council is now headed by a former disability rights lawyer, Alice Liu McCoy, who had been representing people put under guardianship. She said she’s on a mission to revamp the agency’s culture.

Alice Liu McCoy wants to revamp the culture of the New Mexico Developmental Disabilities Council.
Photographer: Adria Malcolm/Bloomberg

“There wasn’t a whole lot of oversight being done by the agency,” McCoy, who became executive director in 2019, said in an interview in Albuquerque. “Leaders of the agency believed their role was to put the guardianship in place and then step away.”

She is committed to thorough vetting of companies seeking to become guardians under state contract, and to adding more layers of punishment should they stray. She wants more screening, more audits, and a mandate to view guardianship as a last resort, not the first.

“We are now a trusted resource,” McCoy said. “Before there was a real question of whether the Office of Guardianship was run in the way to help a protected person.”

Mendiola supports some of McCoy’s ideas. She said Ayudando Guardians’ abuse of power and disregard for its clients’ well-being had affected her son Matthew, now 41. She said he wouldn’t want to discuss his experience, fearing it would resurrect the trauma.

“He changed,” she said. “He was hopeful. Before he had a goal or a vision of doing something with his life. They took away his dignity, his hopes, his dreams.”

Full Article & Source:
Guardians' Dark Side: Lax Rules Open the Vulnerable to Abuse

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