Doctors, Watchdogs against Elder Fraud

By now most of us have heard about Bernie Madoff and the billions of dollars he swindled from people all over the country. But we may not be aware that this type of fraud, on a much smaller scale, is happening around us all the time. And the people who are most often the victims of these crimes are the elderly.
About 7.3 million older Americans, or one out of every five people over 65 have already been swindled according to an Investor Protection Trust Survey released in June. Recent research from behavior economist David Laibson shows that people tend to make poorer financial decisions as they get older.

But some states have taken steps to help seniors avoid these scams. 23 states including California, Connecticut and Pennsylvania have enlisted Doctors and other medical professionals to be the watchdogs in the fight against elder fraud. Working through the Investment Protection Trust, state regulators are alerting medical professionals to specific red flags that help identify older Americans who may be more vulnerable to investment fraud abuse.

In routine visits with their patients these doctors are trained to ask such questions as “Who manages your money day to day” or “Do you regret any financial decisions you made recently?” Other questions include, “Is anyone pressuring you to give them money?” or ” Has anyone asked you to change your will or your power of attorney?”

More than half of the 67 doctors who were involved in a pilot study in Texas discovered that their patients had been approached with phony financial offers. Financial Planners should also become vigilant in their interactions with their older clients. When I was a practicing financial adviser I learned that one of my older retired doctor clients, in the early stages of Alzheimer’s disease, had been contacted by scam artists all over the country. They told him he had won a lottery and he needed to give them his bank account numbers so they could wire him the money. His wife had to finally get an unlisted phone humber so they would leave him alone.

Elderly parents often will not share these occurrences with their adult children because they don’t want to be viewed as incompetent or gullible. Therefore it is important that their children discuss these problems with the parents’ doctors and ask them to use the questions I have listed above.

95 Year Old Investor Beats Elder Fraud!

We are finally seeing action taken to protect elderly investors from sharks in the financial services business who prey on them.

A Financial Industry Regulatory Authority panel awarded the elderly investor, David Wolfson, $1.6 million in a case involving StockCross Financial Services Inc. of Beverley Hills, Calif. Mr. Wolfson accused StockCross, along with two of its brokers, of misconduct and self dealing. He claimed the brokers recommended and solicited unsuitable and overly risky investments that were actively traded on margin.

The claim, which was filed in March, also alleged that StockCross and the two brokers, Thomas B. Cooper and Peter L. Boorn, put Mr. Wolfson’s home at risk. According to the complaint, they “encouraged and invited Mr. Wolfson to leverage the equity in his home with a reverse-mortgage transaction to utilize as investment capital.”

According to the complaint, Mr. Wolfson was a client of Mr. Cooper for almost 20 years, when Mr. Cooper dropped the account in 2008.

A footnote to the lawsuit alleged that Mr. Cooper “quit because he had bilked nearly all of Mr. Wolfson’s assets—including the equity in his home, all his cash reserves, all his emergency/medical cash reserves and even the insurance money Mr. Wolfson received to replace his automobile—and there was nothing left to churn.”

The arbitrators awarded Mr. Wolfson $320,000 in compensatory damages and $960,000 in damages for elder abuse. They also awarded the 95-year-old $234,000 in legal fees, expert witness fees of $62,000, various costs of $21,000 and $10,000 as sanctions for failing to follow discovery orders.

Sweet justice! Unfortunately too rare in the financial services industry.

Senior Investment Fraud

There have been an increasing number of financial advisors who call themselves “Senior Specialists”. Often these titles don’t require any specific study or experience. Seniors are a very attractive audience for these “specialists”. They often have a large portion of their investment assets in cash and CD’s . As rates have continued to come down seniors are looking for attractive alternatives with higher yields. Many financial advisors have used “free meal” seminars to attract seniors  and sell them a number of CD alternative products. The Securities and Exchange Commission did a study in 2007 noting the deceptive practices used in these seminars.

If you or your parents attend one of these investment seminars, be very careful. Do not sign an application at the seminar. Be critical of the promises made at the meeting regarding guaranteed returns and safety of principal. Often if statements made sound too good to be true, they often are. If your parents have attended one of these seminars or have signed an application and given the specialist a check, do some research on the product they purchased. There is usually a grace period allowed to return your parents’ funds if they change their mind.

The SEC provides important information for senior investors including explanations of different products, asset allocation and risk. You can also get information on affinity fraud, “senior specialists” and investment advisers and what to look for to identify and steer clear of potential frauds. http://www.sec.gov/investor/seniors.shtml
o FINRA also provides important information for senior investors. Its website has such items as Broker Check – that gives you the ability to look up the history of your investment professional to see if they have prior complaints or problems.

http://www.finra.org/InvestorInformation/InvestorProtection/ChecktheBackgroun dofYourInvestmentProfessional/index.htm

FINRA’s website also has tools and resources to protect senior investors and help them make informed investment decisions, including “Investor Alerts” that provide timely information on steering clear of investment scams and problems instead of just dealing with their aftermath. Subjects of recent alerts include “Look Before You Leave: Don’t Be Misled by Early Retirement Investment Pitches That Promise Too Much,” Annuities and Senior Citizens: Senior Citizens should be Aware of Deceptive Sales Practices when Purchasing Annuities,” and “Seniors Beware: What you should know About Life Settlements.” http://www.finra.org/InvestorInformation/InvestorAlerts/index.htm

o The North American Securities Administrators Association (NASAA) also has helpful information available for seniors on its website: http://www.nasaa.org/Investor_Education/Senior_Investor_Resource_Center/
Resources include: a quick checklist of questions to ask before you invest, 10 tips to protect your nest egg and guidance on where to turn for help.
o Regulators have warned that seniors may be confused by designations that imply some expertise in helping seniors. Information regarding professional designations is available through NASAA’s Investor Alert is at www.nasaa.org the SEC’s information on professional designations at http://www.sec.gov/investor/pubs/senior-profdes.htm and NASD’s professional designation database found at http://apps.finra.org/DataDirectory/1/prodesignations.aspx.