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Jim Flynn: Financial exploitation a growing problem

By: Jim Flynn
March 11, 2018
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Telephone fraud. Vector flat cartoon illustration

The financial exploitation of at-risk individuals is on the rise, in part because the elderly population is on the rise. According to an article on Wells Fargo's website, the elderly lose $12.8 billion a year due to financial crimes. (To the dismay of many AARP members, one Colorado statute takes the position that anyone over 60 is at risk of financial exploitation.)

Although professional scammers get credit for much of this problem, another significant source of financial exploitation is abuse by someone in a position of trust. This includes caregivers, family members and others who provide assistance to a vulnerable individual.

As an example, a few years ago, I was involved in a case where a caregiver stole several hundred thousand dollars from an elderly lawyer by using his credit card to make large purchases and then paying the credit card bills with telephonic transfers from his checking account.

And, in a case reported in this column a few years back, a man stole $300,000 (proceeds from the sale of a home) from an elderly woman using a financial power of attorney he had her sign. He put the money in a joint account at a credit union, immediately withdrew $200,000 and deposited it in an account in his name only, used the remaining $100,000 to buy a certificate of deposit in joint tenancy and then used the certificate of deposit as collateral for a loan on which he defaulted, resulting in a loss of those funds.

Readers also might remember a case where a daughter tricked her 82-year-old, fast-fading father into deeding her his home, leaving no inheritance for her brother. And then there was the caregiver who pocketed $100,000 by having herself named as the pay-on-death beneficiary on three bank accounts owned by the man paying her to help him.

In addition to the elderly, many individuals are at risk of financial exploitation because of mental or physical illness.

On that front, a case decided by the Colorado Court of Appeals in January involved a brother having himself appointed as conservator for his mentally ill sister. He then used his position as conservator to divert to himself and his children $1 million left to his sister by their mother. This was particularly troubling to those of us in the legal community since the brother is a tenured professor at a prestigious brand-name law school.

These insider exploitations are especially problematic because they usually aren't discovered until the victim is dead, allowing the wrongdoer to claim he or she was the recipient of a bona fide gift made in appreciation for kindness, companionship, grocery shopping, etc. This tees up a messy legal dispute about "undue influence," which, under Colorado law, occurs when someone's words or conduct have deprived a person of his or her free choice and caused the person to act "differently than he or she otherwise would have." Undue influence can't be inferred merely because someone had a "motive or opportunity to influence;" influence gained by reason of "love, affection or kindness" is not to be considered undue influence; and the alleged victim is no longer around to comment.

Although Colorado has a statute requiring individuals involved in health care, law enforcement, fire protection, social work, banking and government services, among others, to report financial exploitation of an "at-risk elder" (the at-risk age here gets bumped up to a more respectable 70), family and friends are in a better position to watch out for such exploitation (unless, of course, they are the ones doing the exploiting).

In Colorado, financial exploitation of an at-risk adult (again the at-risk age is 70) is a felony. However, prosecutions are rare. In my opinion, that's because prosecutors don't like to deal with the "he/she wanted me to have the money" defense and find it convenient to consider these situations a civil matter.

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Jim Flynn is with the Colorado Springs firm of Flynn & Wright LLC. Contact him at moneylaw@jtflynn.com. "Best of Jim Flynn's Money & the Law" is now available at amazon.com - paperback or e-book.

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