Kicking the Cane: Intra-familial financial exploitation of the vulnerable elderly

SPECIAL TO THE WEB

Annette Simmons-Brown, CFE

On Jan. 16, Martin Thibodeaux of Arnaudville, Louisiana, was arrested and booked on the charge of "financial exploitation of the elderly." Thibodeaux, according to a Jan. 20 KLFY article by Brittany Altom, had been listed as an authorized user of his 86-year-old grandmother's bank account for the purpose of caring for her. However, within six months, he made ATM withdrawals 12 times, cashed checks and made in-person direct cash withdrawals, and visited her bank 22 times to open her safety deposit box. According to the article, Thibodeaux accessed his grandmother's account 34 times and stole more than $36,000.

Financial crimes that target the elderly are increasing. According to The Wall Street Journal, "People 60 years and older made up 26% of all fraud complaints tracked by the Federal Trade Commission in 2012, the highest of any age group. In 2008, the level was just 10%, the lowest of any adult age group." (See, Financial Scammers Increasingly Target Elderly Americans, by E.S. Browning, Dec. 23, 2013.) Investigators estimate that only 10 percent of such frauds are reported, according to the article.

This underreporting of financial crimes against the elderly makes it difficult to get reliable statistics. It's possible that the aggregated financial impact on elderly victims — and society in general — will get much worse before a comprehensive national research and intervention response is entrenched.

Much of current popular and professional discussion on financial fraud that targets the elderly focuses on perpetrators outside victims' social nexus — shady investment promoters, faux home-improvement crooks, telemarketing scammers, identity thieves — who have built actual businesses and use the elderly as a conveniently vulnerable victim pool.

However, within this matrix there's another growing class of criminals: relatives of the elderly who steal from their own vulnerable family members under the guise of assisting them in their midnight years. And it's highly prevalent. According to a Consumer Report PDF, "Steven Peck, an elder-law attorney in Van Nuys, Calif., estimates that 75 percent of elder abuse is done by someone in the immediate family. …"

This two-part article will look at intra-familial elderly financial fraud, which is highly challenging to combat. In part one, we'll look at the growing incidences of this type of fraud. We'll use The Fraud Triangle to look at the similarities of these fraudsters to traditional occupational fraudsters. In part two, we'll look at actual criminal case summaries that demonstrate this category of fraud.

The two parts will outline these fraudsters' patterns of behavior and the difficulties of identifying, investigating and prosecuting crimes within families.

ELDERLY FINANCIAL FRAUD AND THE FRAUD TRIANGLE

Family members often have to assist their aging grandparents, parents, aunts and uncles as they become less able to take care of themselves. Frequently, these helpmates need access to their assets to assist effectively. They need to pay the elderly's bills, execute decisions on the disposition of real and personal property, manage their assets, and help make or implement medical decisions.

Frequently, helpmates are placed onto the elderly's financial accounts — and real property titles — as joint owners specifically so they can manage the elderly's financial matters both small and large. And very often, a helpmate is appointed as an attorney-in-fact through a power-of-attorney instrument that gives him or her specific responsibilities and capacities regarding the elderly's assets. At this point, a helpmate often is given direct and legal access to an elderly person's property and credit, and the ability to steal is remarkably amplified. The Fraud Triangle now comes into play.

Donald Cressey's Fraud Triangle teaches us that there are three interrelated elements that enable someone to commit fraud:

• Perceived pressure to commit and conceal the dishonest act.
• Perceived opportunity to commit the crime without being caught.
• Some way to rationalize the fraud as not being consistent with one's values

(Excerpted and adapted from the 2014 ACFE Fraud Examiners Manual, 4.240, 4.247, copyright 2014.)

Though Cressey developed The Fraud Triangle within the context of occupational fraud — to represent the embezzler, the cash-register skimmer, the insurance scammer, the bid rigger — it also perfectly captures the framework of the crooked family member who now has access to the cookie jar containing the elderly's assets.

Want more? Read Annette's full article about elder fraud on Fraud-Magazine.com.

Follow the Digital Tracks to Uncover Fraud

GUEST BLOGGER

Phillip Rodokanakis, CFE, EnCE, ACE, DFCP
U.S. Data Forensics, LLC
Herndon, Va.

The adage “follow the money” is well known to seasoned fraud examiners who are tasked with investigating white-collar crimes and financial frauds. By tracking and following the money trail, examiners can usually identify fraudsters.

Before personal computers became commonplace appliances, following the money was not always possible. Access to banking information usually required a court order or subpoena authority. Even if such authority was granted, identifying the financial institutions where relevant bank accounts might exist was difficult without access to knowledgeable sources of information that were willing to open up to the examiner.

Now that just about everyone uses a computer, relevant information can usually be gleaned through a suspect’s computer, assuming one can get access to its hard drive. But in cases where the examiner works for the employer, access to employees PCs is readily available (at least in the United States).

Fraud examiners need the services of qualified forensic examiners who are trained in digital and computer forensics. Looking for digital evidence on a hard drive can be a little like looking for the proverbial needle in a haystack. There are thousands of active file objects on each drive, in addition to all the file remnants and other file and system artifacts that are left behind.

Each case is different, so the type of evidence sought will differ from examination to examination. The following examples showcase the type of evidence that can be potentially retrieved through a forensic exam.

Case study: I worked on a case that involved the embezzlement of a substantial amount of funds from an organization. There was little doubt that this was an “inside” job, but the forensic accountants had failed to identify the culprit. Several employees had the level of access necessary to compromise the accounts payable procedures and issue payments to fictitious vendors. But tracking down each payment transaction over a prolonged period of time would be difficult and time consuming.

However, once access to the employees’ computers was granted, the culprit was identified in less than 48 hours. An employee was found to have used Hotmail  to correspond by email with an accomplice who received the fictitious payments. Additional information was also retrieved that exposed the entire scheme.

Case study: In another case, a number of fictitious payments were discovered during an internal audit, but the culprit responsible for processing the checks was not identified. After examining the computers of all the employees in the accounting department and employing keyword searches, a document was found linking one employee to several of the check recipients that received the fraudulent payments. The “smoking gun” document, was actually a band roster in which the employee was a member.

These type of revealing digital files are not likely to be found during the course of an internal audit or a fraud examination. To get to such files without the benefit of employing a competent computer forensic examiner is practically nil. Getting to this type of evidence can usually provide the missing pieces needed to solve a fraud.