As a physician who specializes in treating the elderly, Lisa Heikoff keeps her eyes and ears attuned to signs that one of her patients may be the unsuspecting victim of financial fraud.
Such was the case last year when a health aide reported that a man in his early 80s was planning to invest in an “opportunity” that he thought would make him “filthy rich.” The patient, who suffered from early-stage dementia but still lived alone, couldn't describe what he was investing in or with whom, but said that he had been contacted over the telephone about the investment and that someone had come to his home to discuss it further.
Her suspicion aroused, Dr. Heikoff immediately alerted her patient's family to the possibility that a financial fraud was under way, and they intervened.
“We see cases like this very frequently,” said Dr. Heikoff, chief of continuing-care services for the Kaiser Permanente Medical Group of San Diego. In this economy, the instances of con artists preying on the elderly have increased, she said.
Dr. Heikoff and other medical professionals have emerged as the latest foot soldiers as state securities regulators battle to protect seniors from fraud.
About 7.3 million older Americans — or one of every five people over 65 — already have been swindled, according to an Investor Protection Trust survey released in June. Elder financial abuse costs about $2.6 billion a year, according to a recent
MetLife Mature Market Institute report.
“As people age, their ability to make sound judgments of risk — despite what may be a healthy physical state — is compromised,” said Pennsylvania Securities Commissioner Steven Irwin.
Indeed, recent research from behavioral economist David Laibson shows that people tend to make poorer financial decisions as they get older. Tracking age and the quality of financial decisions made in debt markets, he showed that people paid the lowest fees and secured the lowest interest rates at 53, on average.
The amount that they paid in interest increased as they got older, said Mr. Laibson, a professor with the Harvard University Department of Economics.
Robert Elder, spokesman for the Texas State Securities Board, said that the medical research about seniors “bears out in our practical experience here.”
“After a lifetime of working and thriftiness, they accumulate a significant nest egg that makes them a natural target for fraud,” he said.
California, Connecticut and Pennsylvania are some of the 23 states enlisting doctors and other medical professionals in the fight against elder fraud.
Working through the Investment Protection Trust, state regulators are alerting medical professionals to “red flags” to help identify older Americans who may be most vulnerable to investment fraud abuse.
Those professionals, armed with a Clinician's Pocket Guide, will add to their routine health questions for seniors such queries as: “Who manages your money day to day?” or “Do you regret any financial decisions made recently?” Other questions being asked are: “Is anyone pressuring you to give them money?” and “Has anyone asked you to change your will or power of attorney?”
Doctors will have a list of referral resources if their patient seems to need help with finances, or they need further medical evaluation for cognitive and other conditions, or whether the case needs to be reported to adult protective services.
“Having professionals who have the most regular and continual contact with these potential victims on alert, is an efficient way to evaluate whether these people are vulnerable,” Mr. Irwin said.
In a similar pilot program in Texas in 2008 and 2009, more than half the 67 doctors who agreed to be contacted six months after they enrolled in the pilot had used the guide to identify older patients who were vulnerable and employed the referral routes, said Robert Roush, director of the Texas Geriatric Education Center at the Baylor College of Medicine.
“Almost every clinician we talked to has seen this in their practice, but they thought there wasn't anything they could do about it,” he said.
Mr. Roush meets regularly with financial advisers to discuss what they can do if they see an older client struggling to make financial decisions.
Financial adviser Bill Carter of Carter Advisory Services Inc. knows that all too well. Over the years, he has found himself in the position of having to confiscate the checkbooks of a couple of clients after they were taken advantage of by financial predators.
The first step is usually to contact the client's children and ask if they have noticed changes.
“In every case, the children had noticed the different behavior, but didn't think anything of it,” said Mr. Carter, whose firm manages $800 million in assets.
About 200 medical professionals in each of the participating states will be included in the program, which is paid for out of each state's allotment of the $80 million Investor Protection Trust. The
trust was set up in 1993 as part of a settlement between securities regulators and the nation's 10 largest investment firms over conflicts of interest between firms' research and investment banking operations.
Don Blandin, chief executive of the
trust, said that seniors who make bad financial decisions “could erode their life's savings and investments,” and because of their age, they don't have time to make up the losses.
Texas spent about $200,000 in IPT money to fund the pilot project. But it isn't joining the program, because training 200 medical professionals would be “a drop in the bucket” for a state that large, Mr. Elder said.
Regulators are still trying to warn seniors.
The state securities board held a tele-town hall conversation in November coordinated with AARP that drew 8,000 callers. About a quarter of the participants said that they had been personally affected by a financial scam or fraud.
Last year, a state district court jury in Texas sentenced a man to 99 years in prison for defrauding mostly elderly people out of $10 million in an investment scheme involving the lease of credit card and debit card terminals.
Edward S. Digges Jr. promised investors that they could reap a 12% annual return and recoup their initial investment after five years, the state said. He marketed the Millennium Terminal Investment Program in newspapers aimed at senior citizens.
The North American Securities Administrators Association Inc. supports higher penalties for those who target older Americans with abusive sales practices. Legislation introduced in the last Congress, but not enacted, would have imposed additional penalties of up to $50,000 per violation when directed against those 62 and older.
Andrew Mayoras, a probate litigation attorney near Detroit, said that he has seen a rise in the exploitation of seniors since the economic downturn.
In some cases, it is the stranger selling fake investments over the Internet. But the “exploiter” is just as likely to be a friend or family member who tricks the senior into changing their will or
trust, he said.
Mr. Mayoras supports directing doctors to look for vulnerable seniors and said he wishes that banks were doing the same thing.
“The more that can be done to raise awareness, the better,” he said.
E-mail Liz Skinner at [email protected].
