Reprinted with permission from Criminal Justice, Volume 34, Number 4, Winter 2020, at 31-37. ©2020 by the American Bar Association. All rights reserved. This information or any or portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Many would consider $34,200 a nice tidy sum of money. Even a significant amount of money. It’s also the average amount of money lost to financial exploitation by older adults, according to a recent report from the Consumer Financial Protection Bureau. (Consumer Fin. Prot. Bureau, Suspicious Activity Reports on Elder Financial Exploitation: Issues and Trends 15 (2019), [hereinafter SAR].) To compound this, the amount of loss goes up by the victim’s age according to the SAR, with those age 70–79 losing an average of $45,300 and those age 80 and older losing an average of $39,200. The SAR shows that the losses sustained by these two oldest age groups is almost $20,000 higher than that for those between ages 50–59 and 60–69. (SAR, supra, at 16.) The report notes that the likelihood of financial exploitation is greater when the victim knows the perpetrator, and in the case of fiduciaries like agents under powers of attorney, not only was there a greater likelihood of a loss, but the amount lost also was more. In the SAR, nearly 7 percent of the perpetrators fell into the fiduciary category. (SAR, supra, at 18.) So even though $34,200 is a tidy sum of money, the loss, in cases where the perpetrator is the fiduciary, is much greater, averaging $83,600. (SAR, supra, at 18.)
As noted, an agent under a power of attorney is a fiduciary. In the practice of elder law, the power of attorney is an important tool for clients who may be facing incapacity as well as the elder law attorneys who are creating plans for those clients. Durable powers of attorney in particular, that is, those that survive incapacity, provide a great amount of flexibility for the client who faces a loss of ability to manage his or her affairs or who wants to delegate the managing of his or her financial affairs to the agent. The very flexibility that comes with a durable power of attorney also comes with some risks of misuse by the agent.
This article concerns a particular type of fiduciary, the agent under a power of attorney, the agent’s improper use of the power of attorney, and how the criminal justice system responds to these cases. Since the SAR defines fiduciary more broadly to “include agents under a power of attorney, guardians of property, trustees, and government benefit fiduciaries” (SAR, supra, at 18 n.34), it’s quite possible that these SAR numbers don’t provide an accurate picture of the amount of financial exploitation committed by agents under powers of attorney; but the amount is great enough to show that financial exploitation deserves to be the focus of this article, and to be treated as a priority by the criminal justice system.
Financial Exploitation: It Is a Crime and It Is Just Plain Wrong
As defined in the Elder Justice Act (42 U.S.C. §§ 1397j–1397m-5 (2018)), financial exploitation is “the fraudulent or otherwise illegal, unauthorized, or improper act or process of an individual, including a caregiver or fiduciary, that uses the resources of an elder for monetary or personal benefit, profit, or gain, or that results in depriving an elder of rightful access to, or use of, benefits, resources, belongings, or assets.” (Id. § 1397j(8).) Within the individual states, there may be statutes that provide for adult protective services intervention, civil remedies, and criminal penalties. (See, e.g., Rebecca C. Morgan, Pamela B. Teaster & Randolph W. Thomas, A View from the Bridge: A Brief Look at the Progression of Cases of Elder Financial Exploitation Prosecutions, 25 Elder L.J. 271, 276 (2017).)
When viewing this issue from solely a criminal justice perspective, several challenges arise. First, before any action can be taken by the criminal justice system, there has to be an investigation by a law enforcement agency. Using a specific state’s criminal code, it must be determined that the facts support a prosecution. Subsequently a prosecutor must decide that the case is strong enough to file a criminal case of financial exploitation against a specific defendant. These challenges in financial exploitation cases are significant and not easily addressed by most law enforcement agencies or prosecutors. The use of a power of attorney to accomplish the exploitation presents complex issues for which most law enforcement investigators and prosecutors may lack adequate expertise. While there have been efforts to increase prosecutorial expertise (Morgan, Teaster & Thomas, supra, at 318–22), they have not always reached the majority of prosecutors, given turnover, budgets, caseloads, and the relative size of a prosecutor’s office. Training may not have been available to law enforcement, and the training that has been provided most often has been less than effective because law enforcement, like prosecutor’s offices, experiences turnover and, in some geopgraphic areas, have smaller departments.
The Uniform Power of Attorney Act
When the Uniform Law Commissioners approved the Uniform Power of Attorney Act (UPOAA) in 2006, safeguards included in the act were designed to help reduce the potential for abuse, although that was not the primary reason for this act. According to the comments to the UPOAA, “[w]hile the Act contains safeguards for the protection of an incapacitated principal, the Act is primarily a set of default rules that preserve a principal’s freedom to choose both the extent of an agent’s authority and the principles to govern the agent’s conduct.” (Unif. Power of Attorney Act prefatory note (Unif. Law Comm’n 2006) [hereinafter UPOAA].)
The UPOAA is comprised of four sections: general provisions, authority, statutory forms, and miscellaneous provisions. The idea that the principal must specifically grant certain powers, known colloquially as “hot powers,” is certainly helpful. (UPOAA, supra, § 201(a).) In our view, this requires the principal to, hopefully, make a knowing grant of authority with the understanding of the significant power that comes with giving these powers to the agent. As the comment to section 201 explains:
Section 201(a) enumerates the acts that require an express grant of specific authority and which may not be inferred from a grant of general authority. This approach follows a growing trend among states to require express specific authority for such actions as making a gift, creating or revoking a trust, and using other non-probate estate planning devices such as survivorship interests and beneficiary designations. The rationale for requiring a grant of specific authority to perform the acts enumerated in subsection (a) is the risk those acts pose to the principal’s property and estate plan. Although risky, such authority may nevertheless be necessary to effectuate the principal’s property management and estate planning objectives. Ideally, these are matters about which the principal will seek advice before granting authority to an agent.
(Id. § 201 cmt. (citations omitted).)
The specific grant of authority is not the only safeguard built into the UPOAA. For example, in section 201(b), a nonrelative agent who has gifting authority cannot make a gift to himself or herself or his or her dependent unless the principal expressly gives that authority. In certain circumstances, section 111(d) requires coagents to disclose the bad acts of another coagent:
An agent that has actual knowledge of a breach or imminent breach of fiduciary duty by another agent shall notify the principal and, if the principal is incapacitated, take any action reasonably appropriate in the circumstances to safeguard the principal’s best interest. An agent that fails to notify the principal or take action as required by this subsection is liable for the reasonably foreseeable damages that could have been avoided if the agent had notified the principal or taken such action.
Further, the duties that agents possess as fiduciaries can help safeguard against the misuse of authority. Those fiduciary duties contained in UPOAA section 114 include mandatory and waivable duties. The mandatory duties include the duty to act in good faith, to not exceed authority, and to “act in accordance with the principal’s reasonable expectations to the extent actually known by the agent and, otherwise, in the principal’s best interest.” (UPOAA, supra, § 114(a).) The duties which can be waived by the principal in the power of attorney document include the duty of loyalty to the principal; to not act in a way that creates a conflict of interest; to serve competently, diligently and with appropriate care as a reasonable agent would; to keep appropriate financial records; to work with, not against, the health-care agent; and to make efforts to keep the principal’s estate plan intact when appropriate. (UPOAA, supra, § 114(b).) Although there may be valid reasons for the principal to waive these duties, they provide further safeguards for the principal against the agent’s bad acts.
How Does the Use of a Power of Attorney Go Wrong?
Consider the following illustration of a family member misusing the parent’s power of attorney:
An older woman has a checking account at a bank. Her daughter contacts the bank about the woman’s son [who] is the older woman’s agent under power of attorney. The daughter claims that he is financially exploiting his mother. The bank finds that there are a number of recent purchases and withdrawals using the customer’s debit and ATM cards. Some transactions have occurred at liquor stores, casinos, and other businesses that the customer has not patronized previously. In addition, a teller informs the branch manager that the customer has visited the branch several times to make cash withdrawals, accompanied by her son.
(SAR, supra, at 20.)
The reporter for the UPOAA, Linda Whitton, wrote that there are three potential occasions where the agent can use the power of attorney to commit financial exploitation: (1) where the agent exceeds his or her authority, (2) where the agent uses the power of attorney to self-deal, and (3) where the agent uses the power of attorney for actions that are contrary to the principal’s intent. (Linda S. Whitton, The Uniform Power of Attorney Act: Striking a Balance between Autonomy and Protection, 1 Phoenix L. Rev. 343, 354-360 (2008).) She notes one of the act’s protections, the “hot powers” mentioned above, are those powers that have a significant chance of either wiping out the principal’s assets and finances or changing the principal’s estate planning. By including the requirement of specific consent to these hot powers, Whitton says that the requirement “effectively eliminates an agent’s argument that a general grant of authority was intended to include authority for these potentially dangerous acts.” (Id. at 356.) Further, she notes that the standard definitions put everyone on the same page in understanding the meaning of the words used in the power of attorney, thus reducing the likelihood of the agent accidentally exceeding his or her scope of authority and increasing the likelihood of a third party’s acceptance of the power of attorney. (Id.)
Whitton explains that self-dealing is the most common type of abuse by the agent and offers a real-world example.
The defendant was the daughter of the abuse victims. She had moved into their home and used authority under a power of attorney to refinance their nearly mortgage-free house. The reason stated for the loan was her parents’ medical bills and the need to modify their home for wheel-chair accessibility. She did not use the money for these purposes; instead, she purchased cars, paid for vacations, and posted bail for friends arrested on drug charges.
(Id. at 357.) Whitton continues, “[t]his type of abuse is particularly difficult to prevent because the agent is using a valid power of attorney with sufficient authority for the underlying transaction. Permitting refusal of a power of attorney when there is good-faith belief that the principal may be subject to abuse is perhaps the only effective means of stopping such abuse.” (Id. at 358.) Whitton describes the third scenario, where the agent acts in contravention of the principal’s intent, as the “most insidious type of abuse.” (Id. at 359.)
According to an interview with Page Ulrey, formerly an elder abuse prosecutor with the King County Prosecutor’s Office and now an attorney at Schroeter, Goldmark & Benderm, the power of attorney is the “most common tool used by exploiters to commit financial exploitation.” (Interview with Page Ulrey, Senior Deputy Prosecuting Attorney, (Aug. 14, 2019).) A typical scenario for their cases involves “the adult child who is the agent and the principal/parent who has some degree of dementia. Once the parent is moved into a facility, the agent begins to commit financial exploitation by taking everything the parent has, draining the parent’s account rather than paying the facility.” (Id.) In Ulrey’s opinion, there are political and fiscal aspects to why elder financial exploitation cases aren’t prosecuted more frequently. “No one wants to think about aging; the cases are time-consuming and often costly to handle; and they are not as dramatic as crimes of violence that grab the headlines.” (Id.)
One study being conducted by Dr. Pamela Teaster of Virginia Tech, with her principal coinvestigator Dr. Cory Bolkan, along with investigators Dr. Ken Gerow and Dr. Holly Ramsey-Klawsnik, focuses on the abuse of vulnerable older adults by surrogate decision maker perpetrators. This pilot study is framed to help “understand the nature, extent, and impact of abuse, neglect, and exploitation (ANE) by perpetrators designated as surrogate decision makers.” (Notes from Dr. Pamela Teaster, Virginia Tech (on file with authors).) Their preliminary data (the study is ongoing) shows that financial exploitation ranked third in the types of elder abuse, and of 77 responses, 53.3 percent (or 41 cases) of the surrogate decision makers were agents under powers of attorney. (Id.) As far as the types of harm revealed in their study to date, the results are about what you would expect to see in financial exploitation cases: the loss of savings, investments, pensions, and housing. (Id.)
So how do things go so wrong with the agent’s exercise of authority under the power of attorney? There really is no one reason for it, but it is fact specific, affected by family dynamics and the agent’s relationship to the principal. From a law enforcement perspective, the use of the power of attorney to exploit a family member can vary and often focuses on the agent’s greed, desire to conserve what the agent feels should be his or hers after the death of the principal, substance abuse, financial need, pressure from a spouse or other family member, or lack of the agent’s own financial resources when matched to his or her spending habits. While all of these “facts” are really case specific, and not based upon a rigorous academic study, they reflect the experiences of those law enforcement professionals who have the opportunity to work these cases. While the implementation of the safeguards in the UPOAA would assist in providing a clearer statement of the agent’s duties, its application in a criminal case relies upon the law enforcement investigator’s knowledge of the applicable power of attorney statute, and how to document the facts in a manner that establishes a criminal act.
Power of Attorney Misuse: It’s Not Just a Civil Matter
Financial exploitation is not just a civil matter, but in fact is a crime, even if the perpetrator held the elder’s power of attorney. Consider this example where the daughter, who was the agent, used the parent’s money for her own expenses:
Helen was 85 and ailing when she made a [durable power of attorney (DPOA)] naming her daughter Susan as her agent. Two weeks later Susan used this [DPOA] to sell Helen’s home. Susan placed the sale proceeds into bank accounts that were in Helen’s name. Within a year Susan had used her authority under Helen’s [DPOA] to withdraw all the money from Helen’s accounts. Susan used the money to support her lavish lifestyle and her failing business. When Helen discovered her money was gone, she contacted the local law enforcement agency and was told by a detective that her only option was the civil justice system.
(Lori A. Stiegel, Durable Power of Attorney Abuse: It’s a Crime Too (2008).)
Consider Florida Statutes section 825.103 as it illustrates how the crime of financial exploitation by a fiduciary may occur in several ways, including the fiduciary’s breach of duty to the principal that
results in an unauthorized appropriation, sale, or transfer of property. An unauthorized appropriation under this paragraph occurs when the elderly person or disabled adult does not receive the reasonably equivalent financial value in goods or services, or when the [agent] violates any of these duties: . . . fraud in obtaining their appointments; [abuse of] their powers [as agent]; [w]asting, embezzling, or intentionally mismanaging the assets of the principal or beneficiary; or [a]cting contrary to the principal’s sole benefit or best interest . . . .
When a case such as the one above comes to the attention of law enforcement, first, and most importantly, can the investigator gather sufficient facts to meet the elements of the crime as enumerated in the statute? The primary one under the Florida statute above is establishing “unauthorized appropriation” and the subsequent list of how that might have transpired. This would require the gathering of what could be an extensive collection of financial records for both the victim and the agent. This is not always an easy task. Then it would require enough expertise in analyzing these records to show that there is a clear and demonstrable “unauthorized appropriation” that most likely only benefited the agent. These issues, along with others such as the principal’s capacity, access to previous powers of attorney, medical records, financial transactions over time, and possible witnesses to the principal’s capacity or wishes, would need to be explored. (U.S. Dep’t of Justice Elder Justice Initiative, Law Enforcement Investigation of Financial Exploitation (Aug. 9, 2017), [hereinafter EJI Webinar].)
The myth that these are “civil” cases is just that, a myth. While many financial exploitation cases can benefit from a civil process that conserves assets and replaces an agent, it does not remove the ability to utilize the criminal statutes to proceed with an investigation and possible prosecution. Sad to say, very often the statement that “this is civil” is primarily a lack of training or awareness or an unwillingness to undertake what is often a complex and time-consuming investigation.
Prosecuting Financial Exploitation Cases: Crimes and Punishments
In many prosecutions of financial exploitation, financial records may be critical evidence. Consider the following example that details a number of financial transactions as part of the exploitation:
Leonard and Joanne, his wife of 34 years, had three grown children. They worked blue collar jobs and Joanne handled their finances because Leonard was “no good at numbers.” About a year after Joanne’s tragic death from a drunk driver, 43-year-old Lisa approached Leonard at a bar, introduced herself, and after a few drinks asked him to come home with her. She continued her attention of Leonard and after a few weeks, and not disclosing the existence of her long-term boyfriend, she invited Leonard to move in with her. When Leonard asked her father for permission to marry Lisa, instead her father suggested Leonard pay off the loan on her truck—which Leonard did from one of his investments, and thus the exploitation began. His bank statements showed significant and unusually large withdrawals, and when his children tried to intervene, a shouting match ensued, the police were called, and the responding officer advised this was a civil matter. Lisa, who had taken over the management of his money, helped him move his accounts to another bank, where she systematically would transfer deposits from his account into hers. As his health declined and Lisa isolated him more, she began to abuse him, he lost his house to foreclosure, and “[o]ver approximately two-year period, [Lisa] drained Leonard of literally every asset he had.”
(Based on an actual case described in Page Ulrey, The Case for Specialized Elder Abuse Prosecutors, 24 Experience, no. 1, 2014, at 7.)
In Ulrey’s view, there are two big issues for prosecutors in these financial exploitation cases, especially those involving powers of attorney. The first is the capacity of the victim and the second is the need to analyze the financial documents. If the prosecutors don’t have access to or a relationship with a forensic accountant or other expert, it becomes harder for them to find the exploitation. If the victim shows signs of lacking capacity, the prosecutors need to have contacts with professionals who can perform an assessment of the victim. (Id.)
A centralized process, such as an elder abuse unit within law enforcement and the prosecutor’s office, can produce more efficient results in handling these cases, as the prosecutor develops necessary expertise. The unit can be involved in education as well, whether for the public, the judges, law enforcement, or adult protective investigators. Ulrey has written about the need for specialized elder abuse prosecutors. (See id.)
There are many resources available to help law enforcement and prosecutors in investigating a case of financial exploitation. For example, one of our favorites is the Department of Justice Elder Justice Initiative’s “Law Enforcement Investigation of Financial Exploitation” webinar. (EJI Webinar, supra.) This training resource provides an easily understandable guide to conducting a financial exploitation case from a law enforcement and prosecutor perspective.
However, there still must be a clear understanding of the issues facing law enforcement as it pertains to these often-complex investigations. There are over 15,000 general purpose law enforcement agencies, employing over 701,000 officers. (Shelley Hyland, Bureau of Justice Statistics, Full-Time Employees in Law Enforcement Agencies, 1997–2016 (2018).) Over half these agencies employ less than 10 officers. (Brian A. Reaves, Bureau of Justice Statistics, Local Police Departments, 2013: Personnel, Policies, and Practices (2015).) It is a simple fact that most law enforcement agencies lack both the resources and expertise to conduct an exploitation case, particularly if the case is complex. The access to training in conducting these investigations is limited, and often the department does not even have a dedicated investigator. Therefore, while it is valuable to point out the need for specialized units and more training in addressing this area, in reality it may be more difficult to implement.
Keep in mind that a charge of financial exploitation may not be the only charge available to a prosecutor. There are other charges that might be brought, including theft, fraud, embezzlement, forgery, or larceny. (See Stiegel, supra.) For example, in the case of Law v. State, the defendant was charged with “100 counts of criminal conduct related to his financial oversight of his elderly mother’s affairs” and ultimately convicted on 12 counts, including one count of financial exploitation and “nine counts of theft by taking.” (824 S.E.2d 778, 781 (Ga. Ct. App. 2019).)
Along those same lines, the Florida statewide prosecutor, Nicholas B. Cox, noted that sometimes the exploitation statutes “have more elements than a crime of theft, and thus may be more difficult to prove. Prosecutors need to realize sometimes it is good to stick with simple theft charges or an organized scheme to defraud.” (Interview with Nicholas B. Cox, Fla. Statewide Prosecutor (Aug. 12, 2019).) The financial exploitation statutes often have heightened the crime or the sentence available, making them more attractive to prosecutors, who may be able to charge the perpetrator with a more serious crime or a crime that carries a longer sentence.
Act Proactively, Not Reactively
In some cases, financial exploitation is not a “one and done” event but, as illustrated by this hypothetical, a series of actions occurring over time.
Bree, Charlene’s home health aide, convinced Charlene to hire Samuel, a CPA, to help her with her finances. Charlene signed a durable power of attorney, naming Samuel as her agent. Unbeknownst to Charlene, Samuel is Bree’s boyfriend and is not a CPA. Bree smuggled Charlene’s checkbook out of her purse and gave it to Samuel. Samuel signed a number of checks, payable to cash, Bree, or himself. He also changed title of Charlene’s accounts to himself and Bree as joint tenants with the right of survivorship and applied for and received a credit card in Charlene’s and his names.
See the handwriting on this wall for Charlene? Assuming this is financial exploitation and it is happening now, there are ways in many states for families, adult protective services, and others to be proactive, to stem the losses and preserve the status quo until an investigation can be completed, and protective measures put in place. For example, Florida’s criminal statute for elder abuse allows the court to enter an injunction for protection in cases of financial exploitation of vulnerable adults. (Fla. Stat. § 825.1035 (2019).) Similarly, California has a process for a restraining order for elder or dependent adult abuse. (See Browsing Form Files on California Courts: Elder or Dependent Adult Abuse Prevention, CAL. CTS. (Sept. 1, 2019).)
The effectiveness of these injunctions or restraining orders is noticeable, and the sooner one is sought and entered, the better. In financial exploitation cases, an early and timely protective order can prevent the perpetrator from depleting all of the assets of the victim. In cases of financial exploitation, the impact on the victim is devastating and the victim may be left impoverished. Further, in cases of convictions, the perpetrator may no longer have the property and have no way to make restitution to the victim.
Ulrey has thought long and hard about the increase in financial exploitation cases and how we might respond. With her years of experience, she believes some exploitation can be stopped before it occurs. If given a fact pattern, she can predict pretty accurately if financial exploitation will occur. Ulrey believes that prosecution as a response alone is not the solution to the problem. She notes that in some cases, loneliness of the victim may play a role, as well as lack of engagement by the victim’s adult children in the victim’s life. She urges more training, especially for law enforcement, and sees a supporting role for prosecutors as law enforcement investigate these cases. She advises, “The success for elder abuse prosecutors is in relationships within the community, law enforcement, adult protective services, and social services, the prosecutor’s knowledge as well as the prosecutor’s working with detectives to help them with search warrants, building a case, and determining if a case is viable.”
Through the efforts of many in the field, significant progress has been made. (See Morgan, Teaster & Thomas, supra.) States have enacted statutes, the federal system has provided some statutory support and funding, and the criminal justice system has made an effort to increase training to law enforcement and prosecutors. The federal government has provided resources to address consumer frauds and scams, and the same effort is needed to address the type of financial exploitation that is done through the misuse of powers of attorney. The American Bar Association has produced a significant number of products that provide guidance to attorneys and others involved in this issue. However, in the end it is a commitment to protecting the public, including those who are most vulnerable, that needs to be addressed. The impact of politics and public awareness significantly changed attitudes, policies, and practices in the areas of child abuse and domestic violence. The same effort must take place for elder abuse. Elder abuse is not just wrong, it is a crime. Whether $34,200 or $83,600 or another sum, it’s still a lot of money to the victim, and it’s still a crime.
Originally published in Criminal Justice, Volume 34, Number 4, Winter 2020, at 31-37; reprinted in GPSolo eReport, Volume 9, Number 11, June 2020. © 2020 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association Section of Criminal Justice or the Solo, Small Firm and General Practice Division.