Scammers prey on elder finances

by Alicia Williams

Editor’s note: The names in this story have been changed to protect identity.

“They’ve cleaned out my checking account for the last three months in a row,” 74-year-old Lilly said. “It’s a scam. Instead of depositing the money; they’ve stolen my Social Security.”

Lilly throughly reads each piece of her mail.

We’ve heard the heartbreaking stories far too often. Elderly theft occurs all over the United States to a variety of people in vastly different ways. But all the victims have one vulnerable commonality, trust. And that’s exactly what today’s thieves are banking on when they target the elderly.

Lilly said she received a fax from a business developer in Switzerland. He wanted her to invest his $22.5 million into small businesses in the United States. She had to pay the money back, in six years, but he would give her 50 percent of the profits. Con artists may create new, unique lies, but their techniques are always the same. Gain their trust, and then steal their money.

In an effort to expose the true magnitude of the problem, the MetLife Mature Market Institute published the results of their March 2009 study “Broken Trust: Elders, Family, and Finances.’’ The authors estimate elderly victims in 2008 lost $2.6 billion.

The MMMI study reports several tips to help prevent financial abuse of older adults. It’s important to keep all mail and records organized to avoid easy access to financial information. It suggests keeping informed of new scams and fraud tactics to watch out for, and most importantly, stay alert to possible situations where financial abuse can occur.

The study also that showed financial abuse is most frequently committed by a family member, friend, caretaker or someone in close contact with the victim. However, the highest theft profits came from business and industry crimes, which accounted for more than half of elderly financial losses.
Commercial organizations exude trustworthiness. Most elderly have a very trusting nature, and they often believe it must be legitimate if it’s a business. Unfortunately, dishonest businesses only operate to steal money, and the thefts are often applied in cunning, unique ways. The following true stories are good examples of the more common approaches people should be aware of.
The MMMI study shows information is a powerful defensive tool that elderly people can use to protect themselves from fraud. Taking the time to intricately explain common fraud tactics to your elderly loved ones could potentially save them from 21st Century crooks.

Dishonest Lending Institutions
Alma, 72, and her husband, Sione, live on a fixed income of $1,540 a month derived from Social Security and a small retirement pension. Alma is soft-spoken and extremely polite. She said their financial problems began in 2008 after she phoned a loan company advertising “fast money.” She’d promised her grandson some funds for his wedding.
Unfamiliar with mortgage loan intricacies, Alma and Sione signed for a high-risk second mortgage loan that has jeopardized her family’s financial security and their home.

“I needed the money, and they were nice. They handled everything over the phone, and they came to my home so we could sign the papers,” Alma said.

The company didn’t require any pre-qualifications for income, credit, or debt to ratio. The last monthly statement provided the principal balance of the first mortgage, and a tax notice established the value of their home. After confirming there was substantial equity, the lender approved the loan and closed it within 48 hours.

Alma said she didn’t know the 30-year loan for $10,000 has an interest rate of 29 percent. “Is that bad?” she asks. In fact, she doesn’t remember much about the transaction, other than the title people told her a monthly payment amount she said “sounded right.”
The new payment is $349 a month, but when you add it to their existing first mortgage payment of $1,065, they’re now paying $1,414 a month. That leaves them exactly $126 a month to live on.

They can’t afford the payments Alma said, and the lender has started foreclosure proceedings. Alma said she’s very afraid her family will find out. She’s too embarrassed to ask her brother for help, she said, and she doesn’t want to financially burden her children.
“My husband is very ashamed. He doesn’t like me to talk about it,” Alma said. “Sometimes at night, I can’t sleep. I know it was a mistake, but we needed the money.”

Alma said she still doesn’t know if the lending company did anything wrong. Despite all of her current financial problems she said she would do the loan again, she really needed the money.

Miracle Cures and Consumer Scams

A few of the products Lilly takes each day to keep herself healthy.

Some elderly are desperate for age-defying products. Lilly’s intense energy is barely contained as she describes the wondrous product that’s changed her life, water. The multi-level marketing company’s Web site reports the alkaline ionized water to be “rich in minerals, purged of free radicals and free of contamination.”

Currently, Lilly buys the water by the gallon from a local distributor; she had 30 of them in the back of her mini van, a month’s supply. But, she said she’s saving money so she can buy her own machine. She quickly explains how the $4,000 machine pays for itself. Once she’s a distributor, she only needs to get eight people to buy one, and then she’s made all her money back, plus she’ll get to drink the water for free.

There’s a problem though, Lilly can’t seem to save any money. Recently divorced, her only source of income is an $868 monthly Social Security check. She’s rented a place with her twin sister, Diane, after losing her home to foreclosure in July. They’re two months behind, and they were served a three-day eviction recently, but Lilly said it’s not her fault.
Investment scammers drained her checking account. The bank has assured her the money stolen last month will be returned Lilly said, because they convinced her to keep the account open. She said she’ll pay her rent, when she gets her money back.

Within a few minutes, Lilly switches the conversation back to health products. “You wanna know why I’m so healthy?” she asks with a broad smile. “I drink Alaska’s wild blueberries. They keep me young.”

Confidence Scams
Not all elderly fraud victims are poorly informed or easily deceived. Bill, 83, is a retired structural ironworker. He considers himself very business savvy as the owner of several rental properties in Utah and Pennsylvania. He said his wife of 51 years, who passed away in March 2008, was a licensed realtor and investor.

In 2007, the couple contacted a title company to obtain information about a potential investment. The friendly title officer paid special attention to them, eventually creating a personal relationship. Bill said that’s when she extended an invitation to invest in her private real estate venture.

Actually, the first investment was very good, Bill said. In late December of 2007, the couple loaned the title officer $15,000 as a second mortgage on her fixer-up property. She paid the loan back with interest by July 2008. One month later, Bill, now without his wife’s expertise, loaned her $50,000, on the same property. Only this time, the loan wasn’t put on the property as a second mortgage; Bill was placed in a very risky, forth position.

“Trustful. I really trusted her,” Bill said. “Why wouldn’t I?”

The title officer made two mortgage payments, before she stopped paying altogether. Bill said she periodically contacted him, during the foreclosure process. Then one week before the property went to auction, she requested an additional $15,000 loan from him. She said she really wanted to try saving it. Bill said he politely declined.

Because the home didn’t sell at the November foreclosure auction, the title reverted to the first mortgage lender. The second, third and fourth lenders all lost their investments. Bill said the experience has made him more aware. He’ll definitely speak with an attorney in the future to avoid being taken advantage of again, especially by someone he thought he could trust.

“As far as I know, it’s (the $50,000) a complete loss,” Bill said. “But, she keeps promising me that she’s gonna pay me back, even though they’re going bankrupt.”