By Nick Leiber
Terry Ann McIntosh’s financial nightmare began four
years ago, soon after she hired a caregiver through a family services
website. McIntosh, then 75 and in a wheelchair, had assumed that the
young woman who eventually showed up at her San Mateo, Calif., home
wouldn’t steal from her. She was wrong.
In October 2015, Meletofetofe Uhila began logging into McIntosh’s
Bank of America account, using the older woman’s credentials. The first
time, Uhila attempted to transfer $10,000 into her own account. The bank
blocked it, requesting that McIntosh call in to verify her identity.
Uhila called instead, pretending to be her.
Though Uhila failed the bank’s security questions, and McIntosh had
never made a similar transfer in all the years she held the account, the
bank allowed it to go through. Unaware, McIntosh continued to visit her
branch every week, as she had done for the past 15 years. No bank
employee ever mentioned the transaction.
Over the next nine months, Uhila made 44 additional transfers,
ultimately stealing about $245,000 from McIntosh. Though Uhila was
eventually caught and convicted, she had only $8,000 left to return to
McIntosh. So McIntosh asked Bank of America for her money back. Despite
all the seemingly bright red flags raised by Uhila’s conduct, the bank
said no.
Uphill Battle
Tales such as McIntosh’s—of being hoodwinked by a criminal only to
face an uphill battle to be made whole—are on the rise, consumer and
legal experts warn. Already targeted by phone scammers and greedy
relatives, elderly Americans have a “bull’s-eye” on their backs, one
Iowa assistant attorney general who specializes in elder abuse cases
said, adding that the problem is only getting worse.
And while financial institutions are becoming more responsive and
incorporating more safeguards to protect against elder fraud and
manipulation, America’s most vulnerable face another, more insidious
threat. Increasingly, it’s the professionals—the lawyers, insurers and
financial advisers that the elderly trust—who are the wolves in sheep’s
clothing.
In 2017, financial institutions filed 63,500 suspicious activity
reports tied to the exploitation of older adults, quadruple the amount
reported four years earlier, according to the Consumer Financial
Protection Bureau, for a total of $1.7 billion in attempted thefts and
losses. That estimate, however, is a tiny fraction of the real total.
The reports “may account for less than 2%” of actual incidents, the CFPB
says. Estimates of total losses ranged as high as $36.5 billion,
according to one financial services firm.
One in five older Americans is a victim of financial exploitation,
said Jilenne Gunther, who heads the BankSafe initiative at the AARP’s
Public Policy Institute, costing U.S. financial institutions $1 billion
in deposits annually. The vast majority of such attempts to separate the
elderly from their money, both legal and illegal, go unreported.
Shawna Reeves, director of elder-abuse prevention at the Institute on
Aging in San Francisco, says few understand that such activity can
involve professional firms and companies, including banks, financial
advisers, insurers and law firms.
“This is big business, perpetrated by actors people think are
legitimate,” said Reeves. According to social workers, prosecutors, and
other officials across the country, common stratagems involve attempts
to sell the elderly ill-advised annuities and reverse mortgages, as well
as solar panel installations and access to veterans’ benefits.
‘Nonstop’ Complaints
At the Iowa attorney general’s consumer protection division,
complaints about professionals manipulating elderly clients pour in
“nonstop,” said Chantelle Smith, an assistant attorney general in Des
Moines. They involve “any type of business you can imagine.”
When Investment News surveyed 591 financial advisers about elder
fraud in 2017, it found that 62% said they have seen or suspected
financial abuse of an older client at least once. Some 39% of them said
the perpetrator was another financial professional—but more than half
admitted they didn’t bother to report it.
It’s not just financial professionals doing the fleecing. Doug
Chalgian, an attorney with the Michigan-based elder law firm Chalgian
& Tripp, said some lawyers build a business model helping adult
children take control of their parents’ assets. Others encourage older
clients to make financial decisions that aren’t in their best interest.
“There’s a sleazy underbelly to elder law,” Chalgian said.
The consequences of such unethical behavior aren’t just financial.
Elderly people who fall victim to financial wrongdoing are more likely
to die prematurely, research shows. Losing one’s life savings, worrying
about maintaining control over assets that remain or simply being
embarrassed at having been taken all play a part, Smith said.
“Where do you go after you’ve been exploited by a professional you
thought you could trust, and you are now at perhaps your most vulnerable
state? Another ‘trusted’ professional?” Smith asked. “They die. It
kills them.”
The night before Barbara Williams died in August 2015, she and her
husband Tom decided to leave the bulk of their assets to a nonprofit
serving the homeless near their Oroville, Calif., home.
Tom Williams had relied on his wife, a former bookkeeper, to handle
their finances. Williams, then 78, called American Family Legal
Services, the firm he thought had helped them with estate planning in
the past, to update their trust.
Not long after, Victor Pantaleoni arrived at his home. An independent
insurance agent, Pantaleoni quickly went about selling Williams on
purchasing an annuity—one that, unlike the updated trust Williams
sought, would earn Pantaleoni a $9,500 commission, according to a
lawsuit Williams later filed in the Superior Court of California in
Butte County. The agent had Williams sign a blank check and blank
documents, ostensibly needed to modify the trust, according to Williams.
Instead, Pantaleoni used them to move $100,000 of Williams’ money into a
National Western Life Insurance Co. annuity, according to court
filings.
Williams, who intended to use those savings for health-care expenses
and emergencies, was left with only about $14,000 in his account. When
he tried to cancel the annuity and get his money back, National Western
didn’t respond. The company instead told Pantaleoni he had five days to
“conserve” the annuity or he would lose his commission, according to
court filings. Williams alleged that, as a result, Pantaleoni tricked
him into signing a second annuity application. National Western
subsequently reissued the annuity.
Williams tried a second time to get his money back. He called and
wrote National Western, complaining about Pantaleoni. But instead of
investigating, National Western slapped Williams with a surrender
penalty of almost $15,000 and allowed Pantaleoni to hold onto his
original commission, keeping him as an agent, according to the lawsuit.
Though the insurer refunded the rest of his money, Williams had spent
thousands of dollars on legal fees and other expenses related to his
dealings with Pantaleoni. He sued both Pantaleoni and National Western
in late 2017 for elder financial abuse, negligence and breach of
fiduciary duty.
In April, a jury found National Western and Pantaleoni liable of
elder financial abuse and negligence, and found Pantaleoni liable for
fraud. It awarded Williams $3.1 million, declaring the insurer primarily
responsible. The company appealed in September. Pantaleoni did not.
“Pantaleoni couldn’t have done what he did without the complicity of a
company willing to turn a blind eye,” said Frank Fox, the attorney
representing Williams.
This wasn’t the first time Pantaleoni was accused of improper
behavior when working with seniors. In 2015, the California Department
of Insurance filed a formal accusation against him, detailing his
violation of insurance statutes in his dealings with a 74-year-old
widow. The agency fined Pantaleoni and restricted his insurance license.
“I never did elder financial abuse and I never would,” said
Pantaleoni, 62. However, in the case of Williams, he admitted he was
negligent, in part because he didn’t have errors and omissions
insurance, a type of liability policy, at the time. But he nevertheless
disputed most of the other allegations in the lawsuit. “I did what the
client wanted,” he said.
As for National Western, in 2010 the insurer settled a class action
claiming it had misled seniors about penalties for withdrawing money
from their annuities. National Western’s settlement included an accord
with the California insurance commissioner requiring the company to make
reforms in its sales, marketing and complaint procedures. The insurer
denied any wrongdoing.
National Western, which uses thousands of independent agents to sell
its insurance, had just two employees in its compliance department
responsible for handling complaints at the time Williams tried to return
the annuity, according to court documents. “Our independent agents are
careful to ensure policyholders thoroughly understand the agreements
they enter into when they purchase our annuity or life insurance
products,” National Western’s chief legal officer, Rey Perez, said in an
emailed statement.
Aggressive Strategies
When it comes to luring the elderly into a trap, some strategies are
more aggressive than others. Earlier this year, a federal law
enforcement officer outside Washington started to get glossy flyers at
his home, inviting him to a free meal and a “retirement strategies
workshop” at a local restaurant. “Expect to have a little fun and obtain
some meaningful information with none of the usual financial
double-talk,” one read.
By chance, the officer, who requested anonymity because he isn’t
authorized to speak publicly, noticed that the retirement planner’s
address matched that of an attorney he suspected was targeting the
elderly. So on a sticky night in July, he dropped by the dinner, also
hoping it might yield clues in a case of suspected elder fraud involving
his now-deceased father. The dinner didn’t result in a breakthrough,
but it did reveal how a business tries to persuade the elderly to invest
in financial products they don’t need.
At an Italian restaurant in Virginia, more than a dozen elderly
couples picked at their salads as the presenter asked them to fill out
forms describing their assets and then complete worksheets while he
extolled the virtues of annuities. “We can get you two to three times as
much as a bank and keep you just as safe,” he said.
To the officer, the workshop shared the same traits as so-called
trust mills, a term he used to describe schemes in which unscrupulous
individuals try to sell seniors questionable investments under the guise
of estate or retirement planning. He echoed a warning on the Minnesota
attorney general’s website about such con artists: “Once he obtains your
financial information, he will usually try to get you to buy an annuity
or other insurance product. He may have several meetings with you
before he reveals his true intentions: to sell you insurance.”
Kathryn Stebner, the lawyer for Terry Ann McIntosh, is a national
expert on elder law. Given how her client’s account was methodically
emptied, she said she can’t fathom how the bank missed what happened. “I
don’t know how much plainer it could be,” she said.
After discovering what happened, McIntosh became deeply distressed,
and not just for her own circumstances; she also needed her savings to
support her disabled adult daughter. Last year, she sued Bank of
America. As the trial approached this fall, the bank settled. Bank of
America spokesman Andy Aldridge said the institution is “working with
Ms. McIntosh to help her recover from the criminal actions of her
caregiver.”
Detection Software
Financial institutions may have gotten the hint when it comes to
making it harder to scam the elderly. According to Marti DeLiema, an
assistant professor of research at the School of Social Work at the
University of Minnesota, Twin Cities, more banks are investing in
detection software and training. Executives, she said, “have really
strong incentives, because the problem is only going to get worse.”
DeLiema, a consultant for major banks and broker-dealers, said
financial institutions “need better communication across lines of
business. For example, the brokerage side needs to talk to the banking
side if they suspect a customer is at risk.” She added that banks also
could benefit from a rule similar to what the Financial Industry
Regulatory Authority put in place last year, allowing broker-dealers to
pause a disbursement and investigate without worrying about clients
suing them.
She said banks also lack the trusted contact form that broker-dealers
are supposed to have clients fill out. “Banks need to do that,” said
DeLiema. “Banks need another tool in their toolbox to protect us from
ourselves.”
Smith, the Iowa assistant attorney general, started pursuing
financial advisers, securities brokers and insurance agents for
exploiting older people about two decades ago. She said that elder
financial abuse is more than a legal issue. It’s societal.
Financial predators aren’t being prosecuted “in any significant
number, relative to how many cases there are,” she explained. And when
it comes to lawsuits, “most of them don’t go to court.” Meanwhile,
perpetrators seek out and spend time with older people who are isolated
and lonely. They know many of their targets won’t report what’s
happening for fear of embarrassment or of having their children take
control of their finances.
“They target, they stalk,” Smith said. “I tell all the older people I talk to: ‘You have a bull’s-eye on your back.'”
Smith said the only way to stem the rising tide of elder financial
exploitation is to get family members, friends and community volunteers
more involved in their lives. “The underlying issue here is isolation
and loneliness, and a devaluing of older people in our communities,” she
said. “It’s ageism.”
Full Article & Source:
Financial, Legal Advisors Scamming Elderly Has Become Big Business
