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National: Advisors Need To Know About These Common Retirement Scams

Suing A Nursing Home Could Get Easier Under Proposed Federal Rules OCTOBER 19, 2015 3:30 PM ET Ina Jaffe 2010 INA JAFFE Twitter Listen to the Story All Things Considered 3:53 Embed Transcript Proponents of arbitration say the system is more efficient than going to court for both sides, but arbitration can be costly, too. And a 2009 study showed the typical awards in nursing home cases are about 35 percent lower than the plaintiff would get if the case went to court. Proponents of arbitration say the system is more efficient than going to court for both sides, but arbitration can be costly, too. And a 2009 study showed the typical awards in nursing home cases are about 35 percent lower than the plaintiff would get if the case went to court. Suing A Nursing Home Could Get Easier Under Proposed Federal Rules OCTOBER 19, 2015 3:30 PM ET Ina Jaffe 2010 INA JAFFE Twitter Listen to the Story All Things Considered 3:53 Embed Transcript Proponents of arbitration say the system is more efficient than going to court for both sides, but arbitration can be costly, too. And a 2009 study showed the typical awards in nursing home cases are about 35 percent lower than the plaintiff would get if the case went to court. Proponents of arbitration say the system is more efficient than going to court for both sides, but arbitration can be costly, too. And a 2009 study showed the typical awards in nursing home cases are about 35 percent lower than the plaintiff would get if the case went to court.

By Juliette Fairley for Financial Advisor Magazine.

While working in a nursing home as an administrator in the Dallas/Fort Worth area 11 years ago, Susan Hodges admitted three new residents who were different than others who lived there.

“They were depressed and anxious,” Hodges told Financial Advisor magazine. “Turns out they were wards of the state of Texas whose assets were under the control of a guardianship company after a Tarrant County Probate Judge deemed them incompetent.”

While working in a nursing home as an administrator in the Dallas/Fort Worth area 11 years ago, Susan Hodges admitted three new residents who were different than others who lived there.

“They were depressed and anxious,” Hodges told Financial Advisor magazine. “Turns out they were wards of the state of Texas whose assets were under the control of a guardianship company after a Tarrant County Probate Judge deemed them incompetent.”

The elderly wards were worried because they felt scammed and unsafe.

“One lady told me the Court had stolen more than a million dollars from her bank account,” said Hodges.

When Hodges, a licensed nursing facility administrator, called the resident’s daughter and the lawyer who was listed in the resident’s admittance records, they hung up on her.

Since 2006, Hodges has noticed a rising number of the elderly enduring the same fate.

“It’s devastating because there is nothing I could do to help and it seemed that the Court and the lawyers were complicit in the fraud,” said Hodges, who is no longer working at a nursing facility but is instead working as a consultant. She wrote a book called A Breach of Trust to warn the public.

“The number of scams on the elderly continues unabated,” said Joseph Borg, director of the Alabama Securities Commission. “Every time we stomp out a fraud scheme and put somebody in jail, there’s another scam that surfaces to take its place.”

According to a North American Securities Administrators Association (NASAA) study, 29 percent of those surveyed say their agencies has seen an increase in senior fraud cases and almost none have seen a decrease in complaints.

“It is imperative that we detect and prevent senior financial fraud before criminals who prey on our most vulnerable citizens steal from and devastate them,” said NASAA President and Minnesota Commissioner of Commerce Mike Rothman. “The clear message from our NASAA members, who are the securities regulators on the frontlines, is that we need everyone to step up and apply greater resources to stop financial fraud against seniors.”

Some three-fourths said they feel broker-dealers and investment advisors can do more to detect and prevent senior fraud.

“Financial advisors are in a unique position to assist,” Borg said. “By being able to flag the signs of financial exploitation that targets vulnerable seniors and implementing policies and procedures for the aging, brokers and advisors can be more aware when exploitation is occurring and contact authorities.”

Some three-fourths said they feel broker-dealers and investment advisors can do more to detect and prevent senior fraud.

“Financial advisors are in a unique position to assist,” Borg said. “By being able to flag the signs of financial exploitation that targets vulnerable seniors and implementing policies and procedures for the aging, brokers and advisors can be more aware when exploitation is occurring and contact authorities.”

Guardianship abuse like the case described by Hodges is one of several emerging schemes. Another is investment fraud through religious organizations.

For example, in Birmingham, Ala., a gentleman offered free tax work to a church whose members were largely 60 years and older.

“After he gained the trust of the congregation, he sold them shares in a fraudulent pyramid, Ponzi scheme by claiming that a portion of returns would be returned to the church,” said Borg. “He instilled fear that Social Security would be cut off and health-care costs would be too expensive for them without buying into his guaranteed and secure investment plan.”

In Gulf Coast states like Alabama, Florida, Louisiana, Mississippi and Texas, there’s often a rise in real estate scams after a hurricane or storm hits, such as Harvey or Katrina.

“Seniors in coastal and retirement areas have a particular affinity for land because it’s tangible, so when a fraudulent promoter comes along claiming he’s got damaged buildings available at rock-bottom prices that can be rehabbed, they often fall for it,” said Borg.

Too often after the retiree has invested $5,000, $10,000, or their entire savings or retirement account, it’s revealed that 46 others are on that mortgage list, which renders it worthless or in many cases the mortgage doesn’t even exist.

“With Harvey, we’re going to see that type of scam in Texas as well,” Borg said.

The U.S. Federal Trade Commission Consumer Sentinel notes that there has been a 65 percent increase in fraud complaints from military veterans over the past five years. One of those scams involves single veteran men who live in nursing homes and have no family.

“Fellow nurses marry these isolated, vulnerable veterans for their war pay and benefits,” said Hodges. “While the elderly veteran is living in the nursing home, their newlywed younger R.N. wives are eating off their pensions, living in their homes and driving their cars.”

Retired military veterans are also vulnerable to being sold unsuitable or fraudulent investment products. One in three victims of financial fraud in America are military veterans, according to an AARP study.

For example, in Alabama, an 86-year-old retired U.S. Air Force pilot and a 91-year-old retired World War II U.S. Navy veteran lost several hundred thousand dollars in a bogus investment opportunity offered by a former North Alabama attorney. “An Alabama Securities Commission investigation revealed that both veterans were offered promissory notes in exchange for their money, which was to be invested in real estate and medical technology ventures with returns to be paid at a specified time,” said Borg. “The veterans were also promised returns from 8 to 12 percent on their investments.”

The defendant pled guilty to three counts of securities fraud, was sentenced to 20 years imprisonment and ordered to pay more than $4 million in restitution to multiple victims.

On the east and west coasts, scams targeting the elderly include promises of foreign currency returns and high-yield accounts that are allegedly connected to overseas banks such as Swiss, French or English “prime” accounts.

“These prime accounts don’t exist, but victims don’t know that,” said Borg. “A prime high-yield bank account is a common term. With complicated and phony venture-type documents, it all sounds good, but one thing that folks in New York and other major urban centers know is that real estate is expensive and promising an elder that they will be in the same ball park as a multi-millionaire is a scam.”