 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Educational Topics: Archived Previous Articles
FRAUD, VULNERABILITY AND AGING:
FRAUD AGAINST NORTH CAROLINA'S OLDER CONSUMERS;
WHAT IS BEHIND IT?
Prepared by
Virginia H. Templeton, M.D.
MemoryCare™, Asheville
and
David N. Kirkman, Assistant Attorney General
North Carolina Department of Justice, Raleigh
INTRODUCTION
Exploiting vulnerable older adults for financial gain is an activity that has taken place for centuries. The problem has become more severe in recent years. The generation of Americans that overcame the Great Depression, won World War II and the Cold War, and made the U.S. the world's sole super power is now being preyed upon by a sophisticated fraud industry.
Linked to this article is the North Carolina Attorney General's current ten-page list entitled "Frauds, Scams and Questionable Business Practices Currently Targeting Our Seniors"(1). The list reflects that traditional one-on-one forms of financial exploitation, such as the Sweetheart Scam and the Clergyman Scam, remain with us. Newer types of fraud include cross-border sweepstakes and lottery scams, telemarketing and home repair fraud, and the Nigerian 419 money transfer scams. The newer types of fraud can be quite sophisticated and involve organized crime groups.
The federal government has found that fraudulent telemarketers alone rake in more than $40 billion each year.(2) Studies have determined that most of the money lost to telemarketing fraud is lost by seniors.(3) For other forms of elder fraud, statistics are harder to come by, as such crimes are very much under-reported.(4) In North Carolina, the statistics on home repair fraud can be considered only partial, yet they are disturbing. During the 1990's, a home repair fraud ring based in the Rocky Mount area plagued elderly consumers from the mountains to the coast, collecting as much as a quarter of a million dollars from some individual victims. It employed up to 150 workers. Each week it operated as many as five separate crews in cities like Charlotte, Raleigh and Fayetteville, with individual crews scamming seniors in dozens of other locations. According to Special Agent in Charge, Karen Nenstiel, Director of the Financial Crimes Section of the North Carolina State Bureau of Investigations, more than 400 felony convictions have been entered against members of that one home repair fraud ring since 1998. Those convictions represent only a fraction of the fraud incidents perpetrated by that one group.
The increasing life expectancies and financial resources of older adults appear to have created a burgeoning number of targets for these criminals and a substantial pool of wealth to be stolen. Other societal trends may be contributing to the problem, such as our mobile national work force and more and more older citizens spending their final years far from their children and grandchildren. In addition, the perpetrators of many of these frauds have become more organized and scientific in the ways they target and exploit vulnerable seniors. The same can be said about their techniques for collecting victims' funds and avoiding detection and prosecution.
This article and its links will expose you to the categories of repeat frauds commonly used to victimize vulnerable North Carolina seniors, such as cross-border phone fraud, home repair fraud and money transfer scams. Individual victims of these types of fraud often lose between $10,000 and $200,000 over the course of several months. It is hoped that the information will provide tools to
- Spot the telltale signs that an older client, relative or friend is being exploited or is about to be exploited;
- Understand who is behind the scams and what they are likely to attempt next;
- Understand age-related changes being experienced by the victims and exploited by the criminals, and
- Take steps to get the vulnerable older adult out of harm's way.
THE EXCITING OR ALARMING ANNOUNCEMENT
Older adults are by no means the only consumers whom fraud artists target successfully. Younger consumers fall for a wide array of scams and frauds. Fraud artists push certain emotional hot buttons to make consumers suspend their natural skepticism and buy into the questionable scheme. In doing so, they exploit feelings of personal desperation (e.g., baldness cures, fat pills, loan scams), instinctive appreciation for good deals or windfalls (e.g., "Free", "50% off" and "You have won!"), fear (certain fire or burglar alarm systems), or personal animosities (e.g., offshore investment scams touted as ways to defeat the hated tax man).
In cases wherein elderly victims are defrauded repeatedly and systematically, these same hot buttons are employed over and over, often to the point that one might wonder why the victims keep falling for it. While interviewing victims and perpetrators of home repair and telemarketing fraud during the 1990's, the staff of the Consumer Protection Division quickly learned that an exciting or alarming statement was the con artists' most important tool. The criminals stated that greatly alarming or exciting the victims knocked them off balance emotionally, making them less skeptical and more suggestible. Cultivating the affections and trust of their older victims were also important tools, as one might guess. Also important were developing and reinforcing certain images in the minds of the victims. For the phone fraud artists, the image was that of a large sum of money making its way slowly to North Carolina from an overseas sweepstakes or lottery company but encountering roadblocks and impediments along the way. The overseas money transfer scammers cultivated the same imagery. For the home repair con artists, it was the image of a home badly needing and receiving repairs so its occupant could keep living there and pass it onto his or her children. The excited or alarming statements, however, kicked off most frauds and were reintroduced again and again to keep the fraudulent schemes going.
For the home repair con artists, the initial alarming statement typically was one of two things: "Your roof is so rotten that my leg went right through it" or "Your chimney is about to come loose and collapse onto your neighbor’s property." To punctuate the statement and give the matter even more urgency, the scammers liked to add, "There is a building inspector in the neighborhood right now who might condemn the house if it is not fixed."
The initial, excited utterance employed by the cross-border phone fraud groups is "Congratulations. You have won!" As soon as the victim wires money to Canada or Jamaica or some other country (to pay required taxes on the award in accordance with the scammers' instructions), the scammers call back again and again with similar exciting comments followed by directives to wire money somewhere. The first follow-up call may be from one of the scammers posing as a U.S. Customs Officer: "I have your package containing a $250,000 check here in my warehouse, which I can release to you once you wire $25,000 to cover the customs duties..."(5) The second follow-up call might be from a phony FedEx, DHL or UPS official claiming that the package must be returned to the sweepstakes or lottery company unless additional thousands of dollars are wired immediately to cover shipping insurance charges.
With Nigerian 419 and other overseas money transfer scams, the initial exciting message is that the consumer can receive one quarter of a large sum of money, typically ten to twenty-five million dollars. They claim that the funds are trapped in another country by corrupt officials. All the consumer has to do is let the sender of the exciting email or letter utilize the consumer's bank account to get the funds into the U.S. Recent versions of these scams add alarming representations about the sender of the message being targeted for persecution by the corrupt officials because he or she is a practicing Christian or a western property owner in a country where neither is in favor.
RELOADS & RECOVERY SCAMS
While Consumer Protection Division staff members know of one elderly North Carolina consumer who tried to wire $250,000 to Canadian con artists in a single transaction, they and their law enforcement colleagues have observed that elderly victims of these frauds who lose large sums of money typically do so in a long series of transactions. The fraud artists do this through a technique they call "reloads." The follow-up phone calls described two paragraphs above are typical reloads employed by Canada's large and prosperous phone fraud industry. So are many of the other telephone scams listed in Appendix 1. It is not unusual for the Consumer Protection Division and other law enforcement officials to encounter older victims who have been defrauded through each of the telemarketing frauds listed. Each scam in the series sets up the next. In the later stages, when the victim expresses skepticism or claims to be out of funds, the criminals shift tactics and exploit the victim's desperation over having lost so much money. The ensuing series of reloads are called recovery scams. In reloading the victim for yet another round of fraud, the scammers may claim to be foreign barristers or law enforcement officials who have shut down the fraudulent operation and located the victim's money and prizes. All that the victim needs to do in order to recover his or her lost payments and undelivered prizes is to pay the taxes on the prizes, duties on the check, retainer fees for the phony barrister, insurance on the delivery, etc. It is not uncommon for desperate victims to mortgage their homes in order to make these requested payments.
In home repair fraud transactions, the reload typically involves the scammers' asking to visit another part of the house to determine whether the repairs they have just completed might have caused problems there. For instance, they might ask to visit the attic to determine whether the expensive and useless repairs they just performed on the roof are causing problems with rafters and the roof trusses. As they emerge from the attic, they lie to the home owner about the rafters and trusses needing extensive bracing. As a result, they secure permission to start another expensive and unneeded project in the attic. The home repair scammers will employ this tactic repeatedly, asking to see other parts of the house where they suggest problems might exist. Consumer Protection Staff often encountered victims who had endured each of the home repair frauds enumerated in Appendix 1. Some elderly home owners were subjected to the entire array of scams on the list more than once.
Home repair scammers, like fraudulent telemarketers, execute recovery scams. Recovery scams enable them to employ the same techniques on an elderly home owner repeatedly. Typically they are initiated via the Inspector Scam, wherein a member of the fraud group never seen by the victim arrives and says that the earlier repairs were done incorrectly and could result in the house being condemned if not redone immediately. Then other members of the group show up and offer to do the same unnecessary repairs all over again.
In executing their reload and recovery scams, the overseas money transfer fraud artists continuously conjure up stories about one more corrupt banker or government official needing to be bribed before the money can be transferred to the victim's bank in North Carolina. Their reloads might include tales of European customs officials impounding the transfers until duties and taxes are paid.
SIR, YOU FORGOT TO PAY ME
Another technique common to these three types of fraud involves a false claim that the older victim promised to wire money or write a check but failed to do so. Such victims never promised or agreed to make such payments in the first place, yet they will write a check promptly to the criminals or wire money to them. Sometimes the victims are simply frightened into doing this, such as when a large, angry man is standing at the front door complaining that he was not paid for repair work. This may be the first time the man has set a foot on the property, yet he walks away with a check. On other occasions, victims will wire the money or write the check without being confronted in an angry or intimidating manner. They know they are having trouble with failing memories. Often they assume that the pending request for payment represents another embarrassing episode of forgetfulness.
TARGETING TECHNIQUES OF THE CRIMINALS
The perpetrators of these three types of fraud employ an assortment of techniques to locate vulnerable older adults. Most sophisticated are those employed by the overseas phone fraud artists. They obtain lists of potential targets from US-based list brokers who have compiled the names, phone numbers and addresses of seniors who responded to sweepstakes or contest entries sent to them in the mail (PowerPoint Slides 12-15). Mass-mail facilities, many of which are owned by the list brokers themselves, send millions of these mailings to seniors here and abroad each month. If an older adult responds to the contest or sweepstakes mailing by sending in the claim form attached at the bottom, he or she will be contacted by a phone fraud artist who claims to be with that contest or sweepstakes company. The call may be placed as quickly as three days after the older adult mails in the response.
Less efficient yet quite effective is the overseas money transfer con artists' main technique for locating vulnerable older adults. Many of those adults now have email accounts. The scammers purchase CD's containing thousands upon thousands of random email addresses, load them into their computers, and blast out their Request for Assistance emails to strangers around the globe (PowerPoint Slide 11). To most people, these email messages are an annoyance. Vulnerable older adults, however, often provide the one response out of 50,000 email messages that makes the fraud scheme so lucrative.
Home repair fraud rings physically prowl for victims the old-fashioned way. They look for older homes in established neighborhoods where elderly persons might live. Aluminum awnings over windows and Astroturf on the steps are considered good indicators that a very elderly person resides in a particular home. Members of the Rocky Mount-based home repair fraud ring mentioned in the Introduction above did not eschew other forms of research. They often were found with city directories in their trucks. These were reverse look-up phone directories that allowed them to know the names of each telephone subscriber at a specific address on a given street, together with the number of years an occupant had subscribed to telephone service using that phone number. They would knock on the doors of addresses listed with names that people age seventy or younger seldom possessed. They would knock on certain doors if the city directory reflected telephone service at that number for several decades. And, of course, if they spotted an elderly home owner in the yard, they would approach.
VICTIM BEHAVIORS NOTICED BY LAW ENFORCEMENT
North Carolina's state, local and federal law enforcement agencies have been among the most aggressive in the country in pursuing above-mentioned criminals. North Carolina easily leads the U.S. in the prosecution of home repair con artists who target the elderly. Law enforcement officials in the state also have been national leaders in addressing phone fraud groups that target seniors. In the course of investigating and prosecuting these cases, these North Carolina officials have encountered certain patterns of behavior among the repeat victims. Those patterns include the following:
- Victims tend to be bright, accomplished and capable of conducting their day-to-day affairs without assistance;
- Victims tend to be in their late seventies or older;
- Victims usually live alone;
- Victims are familiar with warnings about con artists who might prey upon them;
- Victims might acknowledge being scammed in earlier incidents, but they can fall for a similar fraud later that same day;
- Victims may promise to call law enforcement officials if the scammers contact them again, yet they fail to do so;
- Many victims neglect their family, church or community activities as they await another call or visit from the con artists;
- Most repeat home repair fraud victims are quite fond of their victimizers and are resistant to suggestions that they have been cheated by them;
- In the middle and latter stages of a series of scams, many victims respond as if by rote when directed to wire more money to Canada or to pay for another home repair;
- Most victims are worried about the adequacy of their savings or their abilities to remain in their own homes;
- Repeat victims of phone fraud or home repair fraud often are victims of the other forms of "elder fraud;"
- Victims worry about their adult children's reactions to the scams and seem primed to believe that warnings about their victimizers from children or from law enforcement are motivated by the latter's greed or officiousness;
- Victims seldom complain to law enforcement about being defrauded; reports often are submitted by others who spot the signs of fraud.
MEMORY, AGING AND DEMENTIA
With normal aging, the rate of processing information slows but the overall mechanism is intact. Each step involved in creating and using memories takes a little longer to accomplish. Putting information into the brain, storing it into long term memory, and recalling it requires more focus than in younger years. Older adults are more easily distracted, which can also lengthen the memory-making process, but with concentration they continue to learn new information and grow in intelligence until they die. With dementia, this is not the case.
Dementia is defined as progressive memory loss significant enough to impair functional skills such as managing finances, organizing a meal, grocery shopping, driving, or other usual activities. At later stages, ability to dress, bathe, and toilet independently may be challenged. The impact and pace of decline varies greatly from person to person and can be quite difficult to diagnose at early, more subtle stages. Alzheimer's disease is one of many different types of dementia; it is the most common (~60%) and well known of the disorders but there is also vascular dementia, Lewy Body disease, fronto-temporal disease, and many others. Dementia is NOT an inevitable part of aging but advanced age is among its greatest risk factors. It is thought that 50% of those over 85 years old will have signs of early dementia;(6) in North Carolina, the Alzheimer's Association estimates that 132,329 residents have Alzheimer's disease(7) which understates the total number of dementia cases in the state.
Memory loss is a cardinal feature of dementia, but judgment, decision-making skills, ability to learn new information, reasoning abilities, and orientation are also affected. At early stages, people are particularly vulnerable in part because of the subtlety of cognitive changes and the difficulty in knowing when it is time to intervene. Older adults may not only be susceptible to techniques of fraudsters but to their own poor judgment in buying products they don't need from reputable businesses. Families may hesitate to become involved in an elder's financial affairs out of deference to the person, respect for their privacy and independence, reluctance to take on the responsibility, or ignorance of the problem. Stepping in means acknowledging cognitive changes (or the potential) and may be resented by the person. For some families, it is repeat victimization to scams that makes the necessity of intervention clear; for others, stepping in to prevent such acts is a priority long before anything happens.
Assessing someone's capacity for decision-making presents many challenges. In early dementia, the person may give inaccurate self-report about their own abilities; this may happen because their independence is at stake or because they truly do not recognize their impairment. Cognitive testing is also limited in its ability to determine deficits at early stages and is most sensitive in those of average intelligence. Having an "informant" who knows the person and can corroborate their abilities may help but if the informant has interest in the elder's estate, their contribution may be suspect. Determinations of incapacity may create the dilemma of pitting a person's independence and happiness against their safety and well-being.
End Notes and References
- This list is updated regularly and made available at http://www.ncdoj.com/seniors/ifs_senior_scams.jps
- See Public Law 103-297, August 16, 1994; Congressional findings in creating Telemarketing Consumer Fraud and Abuse Prevention Act of 1994, 15 U.S. C 6101 et seq.
- Elder Fraud and Abuse: New Challenges in the Digital Economy: Hearing before the Senate Special Committee on Aging, 106th Congress (2000); Lewis, T., Fifty Ways to Exploit Your Grandmother; The Status of Financial Abuse of the Elderly in Minnesota, 28:2 William Mitchell Law Review 927 (2001)
- Johnson, K.D., Financial Crimes Against the Elderly, Center For Problem Oriented Policing, U.S. Department of Justice, p. 4, (2003), available at http://www.popcenter.org/Problems/problem-financial_crimes.htm
- A recording of such a call from a Canadian phone fraud artist posing as a U.S. Customs officer in New York and urging a North Carolina man to wire money to a Montreal customs agent to cover duties on the award can be heard by calling the North Carolina Attorney General's consumer information line, 919-716-6001 and selecting option #3. The recording lasts approximately 18 minutes.
- Evans, DA; Funkenstein, HH; Albert, MS; et al. Prevalence of Alzheimer’s Disease in a Community Population of Older Persons: Higher than Previously Reported JAMA 1989;262 (18):2552-2556.
- Alzheimer's Association information sheet, Estimated Incidence of Alzheimer's Disease Using 2000 Census Figures. based on US Census Bureau's PPL-47 Report projections using East Boston Studies percentages.
Contact Us:
MemoryCare™
100 Far Horizons Lane
Asheville, North Carolina 28803
828.771.2219
office@memorycare.org
Home ~ Appointments ~ Our
Staff ~ Map & Directions ~ Educational
Topics
Announcements & Events ~ Local
Support ~ The Eldercare Resource Center
Links & Resources ~ How
You Can Help ~ Privacy Policy
