According to The True Link Report on Elder Financial Abuse 2015, seniors lose approximately $36.48 billion each year due to elder financial abuse. More specifically, losses to the tune of $16.99 billion result from deceptive but legal practices designed to take advantage of the elderly. In 2014, the Journal of General Internal Medicine reported that 1 in 20 elderly respondents in a study of New York residents reported being financially exploited at some point in the later years of their lives. Fraudsters take advantage of the elderly in the following ways:

 

  • Exploitation – pressure or misleading language is used to lead seniors into making financial mistakes.

  • Fraud – identity theft due to seniors’ lack of technical savvy.

  • Trust abuse – family, friends, or caretakers abuse their relationship with the elderly victim in order to gain access to the victim’s funds. Most elder financial fraud or abuse is committed by an individual that the victim trusts.  

In New Jersey, a quarter of all investment fraud complainants are aged 60 or older.   Almost a third of the victims in the Bureau of Securities’ enforcement actions are aged 60 or older. In 2016, as a response to the growing threat of elder abuse, New Jersey created the New Jersey Task Force on Abuse of Persons who are Elderly or Disabled and has enacted legislation specifically dealing with financial crimes against the elderly. This legislation is as follows:

 

Bill Number

Bill Summary

A.B. 309

Creates offense of financial exploitation of the elderly.

A.B. 590

Requires the Department of Human Services to ensure distribution to senior citizens of notice from Division of Consumer Affairs concerning risks and prevention of fraud.

A.B. 988

S.B. 268

Increases penalties for identity theft when victim is a senior citizen or veteran.

A.B. 990

S.B. 906

Creates new offense of theft by financial exploitation of a vulnerable person.

A.B. 1120

S.B. 157

Establishes New Jersey Task Force on Abuse of Persons who are Elderly or Disabled.

A.R. 154

S.R. 62

Urges enactment of the Repeated Objectionable Bothering of Consumers on Phones Act (ROBOCOP Act), as many telephone scammers target vulnerable consumers, particularly the elderly.

S.B. 266

Creates offense of financial exploitation of the elderly.

S.B. 1725

Requires money transmitters to provide training materials to delegates concerning financial abuse and exploitation of elder adults.

S.B. 1823

Creates crime of fiscal victimization against senior citizens or disabled persons.

 

The following are some of the more notable elder financial fraud and abuse cases that have taken place in New Jersey in recent years:

 

  • Attorney Barbara Lieberman of Northfield stole more than $3.9 million from 17 victims from 2006 through 2013. Lieberman at one time considered a “leading specialist” in elder law in Atlantic County. She managed to take control of the victims’ finances by forging a power of attorney or obtaining the document under false pretenses. She then added her name to the victims’ bank accounts, and utilized their funds for her own personal benefit. Lieberman received a sentence of ten years in prison in 2015.

  • Attorney Robert Novy, a prominent elder law attorney in the Jersey Shore area, stole more than $1.2 million from four elderly clients. He gained control of the victims’ assets through wills, power of attorney documents obtained under false pretenses, and trust documents. Authorities arrested Novy on charges of first-degree money laundering, second-degree theft by unlawful taking, and second-degree misapplication of entrusted property. His victims were either without close relatives or experiencing cognitive difficulties.

  • South Jersey lawyer Michael Kwasnik stole more than $1 million from an elderly woman in Cherry Hill who hired him to plan her estate. He should have received disbursements from the victim’s deceased relative’s estate and deposit those funds into her account. Instead, he used the funds for his own personal benefit. Kwasnik and his father, William Kwasnik, were indicted earlier this year for their role in a $13 million Ponzi scheme, which involved defrauding clients of Kwasnik’s law firm by diverting funds from their trust accounts to themselves and the business entities they controlled.

Elderly Victims – Why are They Targets?

 

There are certain factors that cause the elderly to be more susceptible to fraud than others. Some of these factors include a lack of technical knowledge or savvy, physical disabilities or other health issues, geographical separation between families, and cognitive decline. One in ten people age 65 and older has Alzheimer’s or dementia. Additionally, the elderly frequently live on a fixed income.  Many fraud perpetrators are aware of this fact and specifically target the elderly for this reason. Further, elderly victims are frequently more empathetic.  Thus making them more susceptible to believing and falling victim to e-mail or phone call scams.

The Typical Victim

 

According to a study done by MetLife in 2010, out of 244 victims, 161 were women. Women statistically live longer lives than men.  And in many relationships, women have relied on their husbands to maintain their finances. After the death of a spouse, the widow can become a prime target for a fraud perpetrator. Because so many frauds are committed by an individual who is familiar with the victim, the typical victim is generally visible to the perpetrator in the community.  Whether through frequent trips to the grocery store or bank, or maintaining a predetermined schedule, like attending church every Sunday. In addition to being visible in the community, fraudsters typically look for specific vulnerability identifiers, like a handicap tag in a vehicle.

The Perpetrators

 

The typical perpetrator of elder financial fraud or abuse is someone that the victim knows and explicitly trusts, whether that individual is a family member, friend, or caretaker. This person has easy access to the victim’s finances and is generally in a position of trust. According to a study performed by the MetLife Mature Market Institute, a survey of reported cases of elder financial abuse found that some of the major categories of perpetrators were as follows:

  • 18.0% -- Financial professionals, attorneys and fiduciary agents;

  • 16.9% -- Family members;

  • 10.9% -- Caregivers (non-agency);

  • 9.3% -- Caregivers (agency); and

  • 7.5% -- Skilled nursing facility/assisted living.

Unfortunately, it is much easier for an individual in a position of trust to take advantage of that relationship.  It is especially easy when the victim is living alone or does not have any other family in the area that can help the victim with their financial decisions.

Reasoning

 

Committing any kind of fraud is egregious, but it seems especially abhorrent to steal from the elderly. Donald Cressey’s Fraud Triangle is a model that explains the factors that are present when an individual commits fraud. The three factors are as follows:

  • Perceived unshareable financial need/pressure – this can be caused by debt, addictions, a desire for status symbols, or a need to hit earnings targets.

  • Perceived opportunity – the knowledge and ability to carry out the fraud.

  • Rationalization – justification for dishonest actions.  

It seems like it would be difficult to justify stealing from an elderly family member. However, many fraud perpetrators find ways to justify their actions.  Some might convince themselves that they are only borrowing the money.  While others feel entitled to the money due to the care they provided the victim.

Types of Frauds

 

Two broad categories exist for classification of frauds perpetrated against the elderly: (1) financial fraud by trusted individuals and (2) external solicitation and social engineering. In an elder financial fraud situation, a trusted individual gains total access to the victim’s finances, sometimes through seemingly legal methods. For example, a family member can receive power of attorney over an elderly family member’s finances; however, they may obtain that power of attorney through nefarious actions. In some cases, the fraud perpetrator abuses the victim by threatening end of care for the victim if they do not agree to power of attorney.  Other times the diminishing cognitive abilities of the victim are taken advantage of by the perpetrator, and the victim agrees to the power of attorney without fully understanding the consequences of this action.

 

In addition to financial fraud committed by family members, the elderly are susceptible to frauds committed by total strangers. Social engineering is the art of manipulating people in order to obtain confidential information. Criminals use social engineering in order to trick people in to giving them confidential information, such as social security numbers or bank account information, or direct access to your computer through the installation of malicious software.

Criminals exploit the elderly’s lack of technical savvy through social engineering attacks. A phishing attempt is a common social engineering attack, in which an e-mail that appears to be from a legitimate source is sent to the victim, usually stating that there is some kind of issue or information that needs to be “verified” by the victim. These types of e-mails typically include threats if they do not take further action. Criminals use these scams to prey on the elderly’s trusting nature and lack of technical awareness.

Red Flags and Prevention

 

It is important to be aware of the warnings signs that an elderly family member or friend may be exhibiting if they are an active victim of elder financial fraud.  First, be aware of any major changes in behavior. Many elderly victims do not report being a victim of financial fraud due to of embarrassment. Any drastic mood changes, whether negative or positive, could be a sign that your family member or friend is involved in a financial fraud scheme.

If you overhear a family member excitedly discussing an opportunity to gain access to large sums of money by simply advancing a fee first; put an end to that activity immediately. Additionally, if you notice a difference in your elderly family member’s spending patterns, this could be another warning sign that this individual is under financial duress. Atypical trips to ATM machines or talk of wire transfers raise major red flags.

Conclusion

 

As losses due to elder financial fraud continue to rise, those of us with elderly family members and friends need to take an active role in the prevention of fraud. Talk to the people you know who may be susceptible to fraud.  Be sure to make them aware of the different schemes specifically targeting the elderly. Be aware of your family member’s normal behaviors in order to identify if that behavior drastically changes. Make sure that you are aware of any legal or financial advisers that may be assisting your elderly family members. Fraudsters target elders every day, and the only way to prevent elder financial fraud and abuse is through a proactive approach.