John Heath is part of a boom industry. Financial exploitation of the elderly.
Heath, 45, an Edina financial adviser, is scheduled to be sentenced in December by a Hennepin County judge after pleading guilty this fall to swindling an 88-year-old man out of $220,000. Heath, who also was accused of bilking thousands of dollars from an elderly woman, had that case dropped in return for pleading guilty to identity theft against the client who had been incapacitated by a stroke and diagnosed with Alzheimer’s.
The Hennepin County attorney’s office and Minnesota Department of Commerce, which investigated the case, had an assist from Wings Financial, the credit union where Heath used the victim’s identification to set up an account that Heath controlled. Wings suspected suspicious activity and alerted police and Commerce investigators.
However, most financial fraud against elders goes undetected. It’s a growth industry of greedy family members, illicit telemarketers, third-party caregivers, financial advisers and others. Prosecutors, with limited resources, pursue only the strongest cases brought to police and state investigators.
“Seniors are a growing population,’’ said Minnesota Commerce Commissioner Mike Rothman. “They have the greatest amount of wealth of any generation. Criminals know that. Seniors are living longer and many become susceptible to diminished capacity.”
And the incidence of elder financial abuse may be worse than previously thought, according to a 2016 independent survey commissioned by Allianz Life Insurance of North America that was released a few days ago. About 37 percent of family and friends who hold caregiving roles said the elder they care for has experienced financial abuse or exploitation that resulted in a financial loss because of a family member, acquaintance, telephone or computer scam, financial adviser or other source.
Allianz CEO Walter White said the results surprised him, coming two years after a similar study that put the figure at closer to 20 percent in 2014.
“It’s clear that elder financial abuse is becoming more commonplace, and unfortunately, it also appears to be greater than we thought in scope and impact,” White said. “We believe the financial services industry, government and the general public need to join forces to bring greater awareness to this issue and help reverse this troubling trend.”
The perpetrator most often is a relative or acquaintance. Much of this goes unreported because of internal family strife or embarrassment.
“It’s tough to track down phone [and online] perpetrators,” White said. “When caregivers are involved, the victim often is reluctant to pursue prosecution. Third parties, like financial advisers and attorneys do get pursued. We recommend that families and caregivers get involved and have multiple eyes seeing things, in addition to attorneys and financial advisers. Awareness is most critical.”
Nearly three-quarters of the 1,000 respondents to the Allianz survey reported the person they care for has modest to severe cognitive decline.
Allianz, which makes and distributes annuities through independent financial advisers, advises customers to plan ahead to protect assets; consult qualified financial professionals or attorneys before signing anything; to not leave cash lying around and use checks and credit cards to create a paper trail; share plans with family and trusted advisers; learn to say “no”; and to consult others if feeling uncomfortable or pressured.
Awareness and prevention
Rothman and White agree that the best way to reduce elder fraud is through awareness and prevention.
For two years, Rothman has urged the Legislature to pass model legislation developed by the North American Securities Administrators Association, essentially state commerce regulators.
It would step up mandated reporting by licensed professionals, and require banks to delay disbursement of funds and notify authorities if they suspect something is amiss. The proposed state law would provide a financial institution or other licensed professional with legal immunity from a lawsuit or administrative action if they act in good faith to protect a senior.
Bankers generally have viewed this as another layer of unwanted regulation. Talks between Commerce and industry and legislators are ongoing.
White said his company generally supports laws that will protect more seniors and nab more elder-abuse criminals.
Commerce has worked with AARP in Minnesota on public-information campaigns, and conducted training sessions for hundreds of financial advisers and professionals on the law and how to spot problems in cooperation with the Financial Planning Association of Minnesota and other industry groups.
Rothman tells a story about a financial adviser who contacted Commerce this year after an elderly client insisted on cashing a $250,000 annuity to pay taxes to a suspected telephone scammer who convinced her she had won $4 million in a Costa Rican lottery. Commerce contacted the bank to freeze the money and stop transfer of the money to Costa Rica. The elderly client eventually called Commerce to thank the agent who worked on the case.
“Senior financial exploitation … requires an ‘all hands on deck’ response,” Rothman said.
Anyone who suspects elder abuse should contact the Department of Human Services at 844-880-1574, or at mn.gov/dhs/people-we-serve/adults/services/adult-protection. Or contact Commerce with concerns firstname.lastname@example.org, or 651-539-1600.
Neal St. Anthony can be contacted at email@example.com.