MARCH 12, 2012 VOLUME 19 NUMBER 10
Georgia Griffin (not her real name) moved from Kansas to Arizona in 1997. She lived in her own townhome in Sun City West, a retirement community northwest of Phoenix, until 2001, when she moved in next door to her daughter Barbara, who lived in Scottsdale.
Georgia’s story was fairly typical: she had lived at home independently until, at age 90, her physical ailments made it difficult for her to get along without help. The move to be next to her daughter was occasioned by her daughter’s concern that she was at risk living alone. One particular concern: after Georgia fell in her home, she worried that if she were to fall again she might not be able to get up, even to summon help.
After Georgia’s initial move to Arizona, daughter Barbara helped her with her banking, filling out checks and making transfers and withdrawals. She was a joint tenant with her mother on some accounts; several were changed from joint tenancy to “payable on death” (POD) to Barbara at some point. Meanwhile, Georgia’s other daughter Elizabeth was less involved — though she also lived nearby.
Shortly before Georgia’s move to be next door to Barbara, Barbara had purchased six condominium units in the complex where she lived. In fact, Georgia’s move was into one of those units. Elizabeth would later argue that the money for those purchases came from their mother’s accounts.
After Georgia’s death in 2003, Elizabeth initiated a probate proceeding and was appointed as personal representative of Georgia’s estate. She then filed an action against Barbara, alleging that Barbara had taken advantage of Georgia while she was a “vulnerable adult” — an important term under Arizona’s law protecting seniors and those with disabilities.
After a five-day trial, she convinced the judge that Georgia was vulnerable, that Barbara had held a position of trust with their mother, and that she violated that trust by using Georgia’s money to purchase her condominium units. The judge entered a judgment for $179,518.51 against Barbara, and imposed a constructive trust on five of the condominium units (ordering that they could be sold to satisfy the judgment). The judge also ruled that Barbara had forfeited any right to inherit from her mother’s estate; the judge did not impose treble damages against Barbara, which was an option available at the time (the Arizona legislature has since reduced the maximum penalty to double the amount of the basic judgment, though that would not have made any difference in this case).
The Arizona Court of Appeals upheld the judgment. The key question raised by Barbara on appeal: how could the trial court have found Georgia was “vulnerable” when the evidence indicated she was fully competent? Can vulnerability be based solely on evidence of physical limitations?
The short answer: yes. The appellate judges ruled that vulnerability for purposes of Arizona’s exploitation statute can be predicated solely on physical impairments if, as a result of the impairments, the victim is unable to protect herself from the exploiter. Mental impairment is not necessarily required. In this case, according to the court, Georgia’s “diminished vision and hearing could also have made her more susceptible to exploitation, as they could make her less aware of her surroundings and the circumstances of any transactions in which she became involved, thereby making her less able to protect herself if targeted for exploitation.”
That is not to say that every transaction Georgia might enter into would be suspect. “A vulnerable adult may still have the capacity to transfer property,” according to the judges. In fact, Georgia had transferred her original townhome to Elizabeth and the family home in Kansas to Barbara; those transfers did not necessarily amount to exploitation.
There is a second interesting holding in the appellate decision, though it is perhaps less far-reaching in its scope. After the trial was over, and while one of Barbara’s sons was packing up his belongings to move out of the condominium he lived in (and which would now be sold), he said he discovered old letters written by Georgia. Those letters related how Georgia was helping Barbara and her husband purchase several condominiums so that they would have income when they retired. Barbara moved to reopen the trial to introduce those letters, but the trial judge refused.
That refusal was not error, according to the Court of Appeals. There was insufficient evidence that the letters could have been found by diligent search before the trial. More importantly, the letters would not likely have changed the outcome. Why not? Because Barbara’s (and her husband’s) defense throughout the trial had been not that Georgia permitted the use of her money but that none of her money was involved in purchasing the condominiums. The letters would therefore have run counter to their core argument. In re Estate of Gorsik, April 12, 2012.
There are several footnotes worth mentioning in discussion of the appeal in Georgia’s case. First, the decision is a “Memorandum Decision.” That means that, though the appellate court laid out its reasoning and legal arguments, the decision is not “published” and therefore can not (at least not usually) be cited as precedent in other, similar cases. It is in the nature of lawyers and judges to make and keep records, so one irony about unpublished (memorandum) decisions is that they are published, can be read by anyone who wants to take the time to look for them, and are often cited as at least some evidence of the inclinations of appellate courts.
Another small irony: even as Georgia’s case was working its way through the courts, the Arizona legislature has been busy weakening the protections afforded to victims of abuse, neglect and exploitation. First, as noted above, was the reduction of “treble damages” awards to “double damages.” That, as it turned out, had no direct effect on Georgia’s case, since the trial judge decided that extra damages should not be awarded — but it does make such cases less attractive to lawyers with experience in exploitation cases, and it reduces the likelihood that any given case will be initiated in the future. Since then, the legislature has continued to push at the margins of abuse, neglect and exploitation cases; there is a bill pending even now that would eliminate the availability of an award of attorneys fees to the successful party in cases involving vulnerable adults.
Why would the legislature want to eliminate protections for vulnerable adult victims? Probably because some abuse, neglect and exploitation cases are filed against nursing homes, long-term care homes and medical providers, and they tend to have legislators’ attention. Vulnerable adults, by contrast, have a very poor lobbying record.
FEBRUARY 6, 2011 VOLUME 18 NUMBER 5
What can a parent do to ensure continuing care for his or her adult child with a disability? That was the dilemma facing Californian Earl Blacksher in the late 1980s. His daughter Ida McQueen lived with him in the family home in Oakland. She was developmentally disabled, and she received Supplemental Security Income (SSI) payments; she had no other resources and Mr. Blacksher’s own assets were largely limited to the home.
Mr. Blacksher signed a will. He directed that Ms. McQueen be allowed to live in the house for the rest of her life, and that the rest of his small estate be placed in trust to help her pay for the care and services that would be required to let her stay at home. He left his two brothers in charge of the estate and the testamentary trust he created.
After the brothers restructured the mortgage on the house, Ms. McQueen could live there on her SSI payments — just barely. When she became ill a decade later she moved temporarily to a nursing facility. With no resources to help pay for in-home care, and with escalating needs, she could not return to the home.
The attorney who had handled the probate in the first place had never been paid, since there was not enough money to take care of her bill. Neither had the brothers been paid for their work in handling the estate. Nor had the real property taxes on the home been kept current. It appeared that there was no choice but to sell the house, pay bills, and distribute any proceeds. The attorney assisted the trustee in listing and selling the house.
After all the bills were caught up there was $90,000 left to distribute. The attorney, apparently reasoning that Ms. McQueen had effectively abandoned her life estate interest in the home by failing to pay taxes and keep payments current, decided that nothing needed to be retained in Mr. Blacksher’s trust, and she arranged distribution of the proceeds to the remaining family members.
Almost immediately a conservatorship was begun to investigate the transaction, and a lawsuit was filed against several family members and the attorney who had arranged the sale and distribution. The lawsuit argued that the net proceeds should have been retained in trust for the benefit of Ms. McQueen. In response, the defendants insisted that it was reasonable to treat Ms. McQueen’s right to use of the house (or proceeds from its sale) as terminated, and that in any event any money she would have received would have simply interrupted her eligibility to receive SSI payments and subsidized care from California’s Medicaid program.
At trial two attorneys testified about the possibility of treating Mr. Blacksher’s trust as a “special needs” trust, which might have allowed Ms. McQueen to have the benefit of the sale proceeds without losing her eligibility for SSI and Medicaid. One expert opined that the option should have been discussed; the other pointed out that Mr. Blacksher’s trust did not qualify as written, and that California law would not have permitted a revision. Ultimately, however, the language of Mr. Blacksher’s testamentary trust was irrelevant — the trial judge precluded testimony about SSI benefits, and the jury found that most of the defendants had participated in taking money from Ms. McQueen. They were ordered to return $99,900 to Ms. McQueen.
One defendant — the attorney — was singled out by the jury for additional penalties. She was the only one the jury found liable for elder abuse, a separate claim under California law (and, incidentally, under the law of Arizona and most, if not all, other states). That did not directly increase the jury’s award against her, but it did have a significant additional effect. California law permits an award of attorneys fees against a party found liable for elder abuse. The attorney was ordered to pay Ms. McQueen’s lawyer’s fees, which totaled another $320,748.25.
The California Court of Appeal considered several arguments but ultimately upheld the judgment, including the effectively quadrupled award against the attorney. Key to the appellate court’s ruling was a finding that it was irrelevant whether Ms. McQueen received SSI or Medicaid benefits, or whether she would have lost those benefits if the terms of her father’s trust had been carried out as written. The judges were also unimpressed by an argument that the attorney acted reasonably in deciding, albeit wrongly, that failure to pay taxes or upkeep on the house effectively ended Ms. McQueen’s interest in the trust. McQueen v. Drumgoole, January 14, 2011.
The litigation involving Mr. Blacksher’s testamentary trust proves what every parent of a child with disabilities already knows: it can be very difficult to come up with a plan that adequately protects your child after your death. Mr. Blacksher’s trust may have been inadequate to the task, but it may be that the basic inadequacy was in the plan itself — there does not seem to have been enough money available to let Ms. McQueen stay in the family home after his death.
What might Mr. Blacksher have done differently? It is hard to be certain on the sparse record in the Court of Appeal, but there are a number of planning questions we might have asked Mr. Blacksher if we had a chance to speak with him before he signed his will, including:
Does the testamentary trust language in your will adequately protect your daughter’s interest in the family home if it has to be sold? It appears that Mr. Blacksher’s will may not have done so — the trust he established may not have been a “special needs” trust.
Do you have a realistic plan about how your daughter’s care can be provided? It appears from the outcome that there were not sufficient assets available to provide in-home care, even if health problems had not intervened to send Ms. McQueen to a care facility.
If a move from the home is inevitable after your death, have you given adequate consideration to alternatives now? Might it be best to look into transitioning your daughter into a suitable placement while you are still able to participate in the selection and oversight of the care home?
How involved — both in terms of time and in financial and other support — will the rest of the family be in caring for your daughter? Most parents recognize the high personal cost of providing full-time care. Did Mr. Blacksher’s family members realize that they would need to provide some of that care after he was unavailable, or did they realize it but lack the resources to do what he had done for years?
For lawyers, the key messages from the McQueen v. Drumgoole case are probably:
The “collateral source” rule, which prevents jury consideration of other payments available to the plaintiff in most civil lawsuits, applies in a case like this to prevent discussion of the SSI and Medicaid benefits a plaintiff might be entitled to receive — even if a successful verdict might eliminate those benefits.
The attorneys fees generated in complex litigation might all be chargeable against an unsuccessful defendant, even if not all of the claims (and all of the defendants) are found liable for any attorneys fee award.
For family members, though, the takeaway message is simpler:
Failure to plan realistically for your child’s care may result in a failed care plan.
SEPTEMBER 6, 2010 VOLUME 17 NUMBER 28
The question addressed in a ruling last month by the Arizona Court of Appeals seems provocative. In a lawsuit based on the Arizona law prohibiting abuse, neglect or exploitation of vulnerable adults, does the very life of the abused senior have any intrinsic value? The Court’s answer: perhaps, but the lawsuit can not recover damages for the loss of that life.
Mary Winn died about a month after being admitted to Plaza Healthcare, a Scottsdale, Arizona, nursing home, in 1999. Four years later her husband George Winn filed a lawsuit against Plaza, alleging that it had violated Mrs. Winn’s rights under Arizona’s Adult Protective Services Act. Under the APSA, a vulnerable adult who has been abused, neglected or exploited may recover damages suffered as a result of that abuse, neglect or exploitation. Mr. Winn argued (on behalf of his wife’s estate) that he should be able to recover on behalf of his late wife, and that she would have been entitled to actual damages for the loss of her life, as well as punitive damages.
Not so, argued the nursing home. Mrs. Winn obviously could never have collected damages for her own death, and her estate’s recovery was limited to what she could have recovered. In fact, the estate’s possible recovery was less than her damages, since any claim for pain and suffering she experienced at the end of her life ended with her death. With no actual damages to recover, her estate could not seek punitive damages.
Mrs. Winn’s estate argued that her life had some “intrinsic” value, and that it should be recoverable. The estate conceded that she was elderly and ill when she arrived at Plaza Healthcare, and that she could not be expected to earn a salary given her age and condition. But, insisted the estate’s lawyers, a human life has some inherent value.
The trial court agreed with the nursing home, and limited the estate’s proof to just actual damages. After an informal arbitration proceeding (the estate conceded that the remaining damages were less than $50,000, and therefore subject to mandatory arbitration rules) a judgment against was entered in favor of Plaza Healthcare.
The Arizona Court of Appeals reviewed the trial court’s ruling and agreed. There is no cause of action under the vulnerable adults statute, ruled the appellate judges, for the “intrinsic or inherent value” of a deceased claimant’s life. Mrs. Winn’s estate — and her husband — recovers nothing from Plaza Healthcare. Estate of Winn v. Plaza Healthcare, Inc., August 10, 2010.
To be fair, the appellate court did not rule that there is no value to the life of an elderly, disabled and vulnerable senior. All the ruling says is that there is no right to recover under the Arizona Adult Protective Services Act for the loss of life itself.
Does that mean that Mr. Winn had no claim for his wife’s alleged mistreatment? Not necessarily — he might have been able to file his lawsuit on his own behalf if he had acted more quickly. By the time he filed it had been more than four years since his wife’s death — too late for any wrongful death action but not too late for a viable lawsuit under the Adult Protective Services Act, which had a much longer statute of limitations.
There is another interesting footnote to the Winn case. Last month’s decision from the Court of Appeals is not the first time Mrs. Winn and her estate have been before Arizona appellate judges. In fact, her case had been appealed twice before — once in 2006/2007, and again a year later. The first trip through the appellate system involved the trial judge’s dismissal — ultimately reversed by the Arizona Supreme Court — on the basis that a probate proceeding filed more than two years after the decedent’s death did not permit filing of a lawsuit in the estate’s name. A year later the Court of Appeals dismissed an attempted appeal from the trial judge’s initial refusal to allow any recovery for the inherent value of Mrs. Winn’s life. That appeal had to wait for final resolution of the entire lawsuit, which was accomplished before the current (and probably final) appeal.
Washington State resident Shirley Crawford, then age 80, had a difficult problem to deal with. She had fallen in 2001 and was hospitalized. Her only child, Anne, was severely mentally disabled and lived in Ms. Crawford’s home. Ms. Crawford needed someone to help her with management of her financial affairs and care of her daughter.
Ms. Crawford turned to a long-time friend and distant relative, Judith Thompson. With the help of a lawyer Ms. Crawford signed a power of attorney form giving Ms. Thompson wide-ranging powers over her finances.
Within three months Ms. Thompson was trying to use the power of attorney to make gifts to herself. The broker where most of Ms. Crawford’s money was held refused to honor the power of attorney for that purpose, saying it did not include gift-making authority.
In the following year Ms. Thompson and her husband secured a new power of attorney from Ms. Crawford — this one specifically allowing them to make gifts to themselves. They sold her house and used more than $300,000 of the proceeds to pay off their own debts and to buy a $200,000 boat for their Alaska fishing charter business.
It took almost three more years before the state Adult Protective Services office and, ultimately, the Washington courts to begin to undo what the Thompsons had done. While investigations and court proceedings were pending, the Thompsons apparently thought it would be helpful to their cause if they had Ms. Crawford on videotape approving of the gifts they had made.
The videotape showed Mr. Thompson telling Ms. Crawford that he had compiled a series of statements from things she had told the Thompsons. The list included such items as “I wanted [the Thompsons] to have my house.” Ms. Crawford was shown nodding and agreeing with the statements as Mr. Thompson read them.
The Thompsons’ videotape never got introduced in the guardianship matter. It did, however, get used in court — in a criminal trial in which Mr. and Ms. Thompson were accused of tampering with a witness. At that trial Ms. Thompson testified that she and her husband had transferred Ms. Crawford’s assets to their name to protect her from thieves, and that the “investment” in their fishing charter business was safer than the stock market.
A jury found the Thompsons guilty of witness tampering, and the Washington Court of Appeals upheld their conviction. The appellate court ruled that the Thompsons had reason to believe that Ms. Crawford would be called as a witness in her own guardianship proceeding, and that they were trying to induce her to give false testimony. State v. Thompson, November 23, 2009.
As often happens in exploitation cases, the Thompsons insisted vehemently that they were following Ms. Crawford’s wishes, and that they intended to take care of her developmentally disabled daughter. The facts did not bear out that assertion, however — over the course of their involvement, virtually all of Ms. Crawford’s money went to the Thompsons, and none of it went to the care of Ms. Crawford’s daughter.
The Thompsons were also charged with (and convicted of) theft. That much makes an all-too-common story of exploitation of a vulnerable elderly woman. It is even common for exploiters to try to enlist their victims in an attempt to whitewash the evidence of misbehavior. What makes the Thompsons’ case stand out is their successful prosecution for what that attempt was: tampering with a prospective witness in a contested court proceeding.
Two recent appellate court cases illustrate different aspects of the law’s response to abuse and exploitation of seniors. Taken together the two cases underscore that protection of vulnerable seniors can be a priority of the legal system.
The first case tested California’s law on elder abuse, which permits the courts to (among other things) disinherit a family member or devisee who exploits a senior. Laura Marie Lowrie had accumulated an estate of approximately $1 million during her 89 years. During the last ten years of her life her son Sheldon Lowrie took over more and more of the management of her finances. By the time of her death in 1999 he had gotten her to transfer two houses to him. He had also persuaded her to modify her revocable living trust so that the bulk of her estate would pass to him.
Ms. Lowrie’s granddaughter Lynelle Goodreau believe that her uncle had taken financial advantage of his mother. She brought an action to set aside changes in the living trust, and to secure return of property that should have belonged to the trust.
Ms. Goodreau alleged that her uncle had abused his mother physically and financially. According to her, he isolated his mother from contact with other family members. He taped her telephone handset so that she could not make or receive calls, he locked her security door from the outside so she could not leave her home, and he put a warning sign on the front door instructing social workers and peddlers not to bother her.
Among the choices available to the judge under California’s elder abuse statute was the possibility of ordering that Sheldon Lowrie should be treated as having died before his mother. He was the remainder beneficiary of her trust, and would receive the bulk of her assets under its terms. If he had died before his mother, however, most of the trust assets would pass to Ms. Goodreau.
After hearing testimony from most of the family members, plus neighbors, friends and acquaintances of Ms. Lowrie, the trial judge decided that Mr. Lowrie had taken advantage of his mother. The judge noted that he had stolen hundreds of thousands of dollars from her and from the family business, and that he had bought seven or eight antique automobiles, had paid off his own personal credit card bills, and had accepted “gifts” of most of her physical property.
Based on that testimony the trial judge decided that Mr. Lowrie should be treated as having predeceased his mother. It ordered that he pay Ms. Goodreau $665,623.60 to replace the money he had taken from his mother, plus $250,000 for his mother’s pain and suffering, plus another $50,000 in punitive damages. The California Court of Appeal upheld the judgment and the finding of disinheritance. Estate of Lowrie, April 30, 2004.
Arizona law is similar to the California provision on elder abuse. One alternative available to the courts in extreme cases of abuse, neglect or exploitation is to work a disinheritance of the offender. Just as in the Lowrie case, that would result in the abuser/exploiter being treated as already deceased, and the elder’s property passing to heirs or devisees other than the offender.
In the second elder abuse case reported in recent weeks, a care home operator in Hawai’i was convicted of manslaughter in the death of a resident of her home. The Hawai’i Court of Appeals upheld the conviction, despite her argument that it had not been shown that she intended any harm.
Chiyeko Tanouye was eighty years old at the time of her death. She had lived in an adult care home operated by Raquel Bermisa for only a few months, but her condition had worsened dramatically and quickly.
Ms. Bermisa took Ms. Tanouye to her doctor’s office on June 30, 1999, for treatment for a urinary tract infection. During that visit the doctor noted that Ms. Tanouye had a decubitus ulcer (a bedsore) which, at about five centimeters in size, required attention. He instructed Ms. Bermisa to wash the ulcer with Betadine cleaning solution and to apply Intrasite gel daily, and to bring her back a week later for a follow-up visit.
When Ms. Bermisa returned with Ms. Tanouye on July 7, the decubitus ulcer had not cleared up. The doctor referred her to a specialist for further treatment.
Ms. Tanouye was seen by the specialist just two days later, but her condition had worsened markedly. He saw two decubitus ulcers rather than one, and both had areas of dead tissue. He cleaned the ulcers, applied sterile gauze moistened with saline solution, and instructed Ms. Bermisa to change the dressing two or three times each day. He scheduled another follow-up visit for a week later, but Ms. Bermisa and Ms. Tanouye did not return.
Instead, Ms. Bermisa arrived at the Pali Momi emergency room a month later with Ms. Tanouye in the front seat of her car. She told nurses at the emergency room that she had been out shopping with Ms. Tanouye and the other residents of her care home, and that something was wrong with Ms. Tanouye.
Something was indeed wrong. Ms. Tanouye’s decubitus ulcers had grown much larger, and they showed no signs of treatment. The smell from the ulcers was overpowering to the nurses, and they noted that one of Ms. Tanouye’s heels was also ulcerated. They tried their best to treat Ms. Tanouye but she died the next day.
Ms. Bermisa was charged with manslaughter for her apparent failure to provide adequate care. At her trial testimony was offered from an adult protective services worker, the nurses who provided care to Ms. Tanouye during her final hospitalization, the doctors who had treated her and directed Ms. Bermisa how to care for her, and the trainer who had given Ms. Bermisa instruction leading to her certification as a Certified Nurse’s Aide (CNA). The jury convicted her, and she appealed.
The Hawai’i Court of Appeals affirmed Ms. Bermisa’s conviction. Although she argued that the prosecutor had not shown that she had any intention to harm Ms. Tanouye, the court found that she had acted recklessly, and that she had a duty to provide adequate care. The court also noted that Ms. Bermisa was properly trained to recognize the problems Ms. Tanouye was suffering, and she should have recognized the importance of maintaining the treatment regimen directed by Ms. Tanouye’s physicians. When she failed to follow through with proper treatment, and apparently failed to appreciate the significance of her resident’s condition, she violated her duties as a caretaker. State v. Bermisa, May 7, 2004.
Financial exploitation of vulnerable seniors is widespread. The problem even arises in controlled settings like adult care homes and nursing homes. That is why the State of Missouri took some extraordinary steps to try to curb financial abuses in institutional settings.
The Missouri Department of Health and Senior Services maintains a list of facility employees who are known to have taken money from residents, and circulates the list among state agencies and institutions. Nursing facilities are prohibited from hiring any individuals on the Department’s list, so placement on the “employee disqualification list” can effectively end the career of a care provider.
Though maintenance of the list is clearly intended to help reduce the epidemic of exploitation of institutionalized seniors, a Missouri court recently decided that the Department’s interpretation was too broad. The challenge arose from the listing of Beverly Ann Wells, the admissions coordinator of social services at The Williamsburg extended care facility in Columbia, Missouri.
In 1999 Williamsburg resident Chester Riggins, then 91 years old, signed a series of small checks made out to Williamsburg employees. One of those checks, for $100, was to Ms. Wells. Though no one knew of the check to Ms. Wells at the time, it came to light a year later when Mr. Riggins applied for Medicaid.
When confronted, Ms. Wells first denied that she had received any money from Mr. Riggins. She soon acknowledged that she had gotten the check, signed it and deposited it in her own bank account, but she insisted that Mr. Riggins had simply been repaying her for numerous small expenditures she had made for him, and for errands she had run on his behalf.
When the check came to light Ms. Wells was fired from her position at The Williamsburg. The State then decided to put her name on the employee disqualification list, not for misappropriating Mr. Riggins’ money but for failing to report the payment, in writing, as required by state law. Ms. Wells appealed the decision to put her name on the disqualification list.
The Missouri Court of Appeals ruled that the list was supposed to include only individuals who had actually misappropriated residents’ money. The Court refused to permit her inclusion for failure to file a written report of the payment. The Department had not found that Ms. Wells actually misappropriated Mr. Riggins’ funds, so inclusion of her name on the employee disqualification list was not justifiable. Wells v. Dunn, May 20, 2003.
Arizona does not maintain a list like Missouri’s employee disqualification list. Arizona law does require the Attorney General to maintain a public list of individuals who have been sued for elder abuse, but that list is not readily available.
Financial exploitation of vulnerable seniors is hardly a new problem, but both the frequency and the severity of abuse have increased dramatically in recent years. Many seniors (or their concerned friends and family members) turn to the legal system for help and protection. Sometimes protectors become abusers themselves. That was the case with New York attorney Charles Butin.
Mr. Butin was ultimately disbarred by the New York Supreme Court, Appellate Division—but not until he had taken tens of thousands of dollars belonging to at least three women he had been hired to help protect.
Martha Reifforth hired Mr. Butin to initiate guardianship proceedings with regard to her close friend Marie Edelman in 1996. Ms. Edelman had become unable to handle her own affairs, but not before she had signed powers of attorney giving Ms. Reifforth authority to take care of her financial affairs. Mr. Butin told her that she needed to sign a number of blank account withdrawal forms, and then began transferring Ms. Edelman’s money into his own office bank account.
Ultimately Ms. Reifforth fired Mr. Butin and hired a new lawyer to try to recover funds still in his control. Although he had transferred at least $144,300 into his own accounts by the time of Ms. Edelman’s death in July, 2000, Mr. Butin only had $38,036.60 left in his office account—and he had made no distributions for Ms. Edelman’s benefit. He estimated that his fees for work done on her behalf totaled between $25,000 and $75,000, though he had never submitted a bill.
In two other cases Mr. Butin represented guardians of elderly, incapacitated women, and took charge of handling their accounts. In both cases he paid himself substantial fees without getting approval from his clients or the court, and failed to pay the women’s bills on time. In one case his client was held in contempt and sentenced to five days imprisonment, though the judge later set that sentence aside when it became apparent that Mr. Butin’s client was unaware that he was in serious trouble with the courts—because Mr. Butin did not tell him about the contempt proceeding.
Mr. Butin asked for a lesser punishment, pointing out that he had been active in bar association activities, had donated many hours of free legal time, and had emotional and family problems that contributed to his admittedly wrongful behavior. In ordering his disbarment the court noted that he “targeted clients who were likely to be vulnerable to his manipulation, including the elderly or the incapacitated.” In the Matter of Butin, November 18, 2002, as amended March 12, 2003.
Virginia Detlefs, 81, was living in her own home in Cedar Rapids, Iowa, when she first met Mark Olsen. In September, 1996, Mr. Olsen contacted Ms. Detlefs and offered to evaluate her home to see if it needed any repairs.
With the help of his live-in girlfriend Jennifer Wagner, Mr. Olsen ran a home improvement business. He also had a substantial cocaine habit to support. Ms. Detlefs was exactly the kind of “client” Mr. Olsen preferred—she was, as the Iowa Supreme Court later noted, “susceptible to suggestion and influence.”
Mr. Olsen’s initial appraisal of Ms. Detlefs’ home was that it needed finishing work on the wood trim and floors, carpet cleaning and window washing. He estimated that the job would cost $6,000 and Ms. Detlefs authorized him to begin the work.
That contract was just Mr. Olsen’s way of getting his foot in the door. Over the next nineteen months he and his girlfriend persuaded Ms. Detlefs to pay them more than $200,000 for various home improvement jobs. In fact, however, the couple performed almost no actual work on Ms. Detlefs’ home.
Iowa, as it happens, was the first and only state (so far) to adopt a version of the Model Ongoing Criminal Conduct Act initially proposed in 1993 by the national President’s Commission on Model State Drug Laws. The Act is similar to laws in a number of states (including Arizona) which prohibit racketeering, but the new law is more comprehensive.
Mr. Olsen was convicted and sentenced to a term of incarceration not to exceed twenty-five years, and ordered to make restitution to Ms. Detlefs. He appealed his conviction and sentence.
Mr. Olsen’s argument on appeal was not that he was innocent of any wrongdoing. Instead he argued that just operating a two-person scam did not amount to “ongoing criminal conduct.” The Iowa Supreme Court disagreed, and his conviction and sentence were upheld. State v. Olsen, October 11, 2000.
Perhaps more interesting than the result in Mr. Olsen’s case is how his activities came to the attention of the authorities in the first place. One of the persistent problems in dealing with financial exploitation of the elderly is that abuse usually takes place in secret. Frequently there is no one involved enough in the victim’s life to be aware of the exploitation.
In Ms. Detlefs’ case an alert neighbor saved her from further losses. Noticing that Mr. Olsen and Ms. Wagner visited Ms. Detlefs’ home regularly for short periods, and that no repair work seemed to be undertaken, the neighbor asked Ms. Detlefs to show him her check register. When the neighbor saw the pattern of payments to Mr. Olsen and Ms. Wagner, he called police. Once investigators were involved Mr. Olsen’s conviction was assured.
Nancy Bracken, an 82-year-old widow living in Tennessee, thought she had found an excellent investment for her life savings. Richard Earl, managing director of something called Financial Services Company, convinced her that she could make good money by helping to finance a treasure-hunting operation in Florida.
Between July and October of 1993, Ms. Bracken delivered a total of $110,000 to Mr. Earl for investment in FSC’s treasure-hunting venture. She received promissory notes, and they carried a 10% interest rate. She even received payments during the first year, including seven payments of $400 and one payment of $13,200. When no further payments were forthcoming after October, 1994, she contacted a lawyer and, ultimately, brought a lawsuit.
In his defense, Mr. Earl claimed that he was not personally liable. He was only an employee of Financial Services Company, he insisted, and not its owner. He pointed to the documents indicating that Financial Services Company was actually an Arizona trust, established by John Michael Crim and Robert H. Kilgore in 1992. The trust named two other individuals, Dana T. Houtz and Steven E. Duke, as trustees, and Mr. Earl claimed he was hired by them to be the managing director.
The lawyer for Ms. Bracken disagreed. He introduced evidence that the trust was really Mr. Earl’s alter ego, apparently constructed for the express purpose of insulating Mr. Earl from claims like Ms. Bracken’s. In fact, Mr. Earl had absolute control over the trust, was its only employee, answered to no one else, and could not even name the “trustees”.
The Tennessee trial judge found Mr. Earl personally responsible for repayment of the money to Nancy Bracken. On appeal, the Tennessee Court of Appeals agreed. The appellate judges found “no substance to this so-called trust, beyond a means for defendant to attempt to protect himself from liability when investing other people’s money in risky ventures.” Bracken v. Earl, 8/7/2000.
Mr. Earl illustrates several things frequently seen in cases of exploitation of the elderly. First, of course, is the attempt to assure the elderly victim that the investment is reasonable, but that returns will be uncommonly high. Another common element is the use of multi-state entities; in this case, the “trust” was created in Arizona, the “investment” collected in Tennessee, and the “treasure hunting” alleged to be in Florida.
Another element involved in the Bracken case is the use of a so-called “common law trust.” Unscrupulous individuals claim that the trusts are somehow protected by common law principles, and therefore immunize participants from civil liability and even federal income taxes. Ms. Bracken’s case is proof that they are wrong.
“Common law” trusts are sometimes also known as “Constitutional” or “Pure” trusts. They are heavily promoted (including on the internet) as tax avoidance devices, and sometimes also as a way of insulating assets from liability. They are not only ineffective, but also high-priority targets by the Internal Revenue Service, which views them (correctly) as abusive arrangements. The IRS has a perfect record of defeating claims that such trusts are somehow insulated from tax liability.
Physical, sexual, mental and emotional abuse of elderly and vulnerable adults is a growing problem not only in Arizona, but around the world. Such abuse is also a crime. Even the failure to report elder abuse may be a crime in some circumstances.
Arizona law particularly protects “vulnerable” adults. An adult is deemed vulnerable when he (or she) “is unable to protect himself from abuse, neglect or exploitation by others because of a physical or mental impairment.” [Arizona Revised Statutes section 46-451(A)(10)]
Adult Protective Services, the Arizona state agency charged with responding to allegations of abuse, neglect and exploitation, reports that actual abuse appears to be less common than either neglect (including “self-neglect”) or financial exploitation. Still, the incidence of abuse is high and growing.
Who is abusing seniors? The classic profile of an abuser, according to experts, includes the following elements:
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The abuser is usually a son of the victim. Abuse by strangers is relatively rare, and when it does occur is almost always committed by a caregiver.
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The abuser is also usually unemployed and financially dependent on the victim. In fact, the most common term used to describe the individuals who become abusers is “lazy.”
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In addition, the abuser frequently has a drug and/or alcohol problem, and may also be addicted to gambling.
Some professionals are required by Arizona law to report even suspicions about abuse, neglect and exploitation. Physicians, psychologists, dentists, social workers and police officers are all required to file reports whenever they have a “reasonable basis” to believe that abuse, neglect or exploitation has occurred. Failure to make a report is itself a misdemeanor, and could lead to loss of licensure or other penalties.
Reports of abuse (like reports of neglect and exploitation) can be filed with Adult Protective Services or the local police or sheriff’s department. The law requires those reports to be filed immediately by telephone or in person, and the initial report must be followed up with a written report within two working days.
In order to make reporting abuse, neglect and exploitation simpler Adult Protective Services has established a statewide toll-free telephone number. Initial telephone reports can be filed by calling APS at 1-877-767-2385. Those with hearing impairments can call a special toll-free number at 1-877-815-8390.
Arizona is not the only state with a toll-free, centralized reporting number for elder abuse. Contact information for other states can be located at the National Center on Elder Abuse website at www.gwjapan.com/NCEA/report/index.html.
Abuse is often difficult to detect. Symptoms of an abusive relationship often (but not always) include dependence on the abuser, “hovering” by the abuser, isolation of the victim from friends and family, recent changes in behavior and/or spending patterns, and general anxiety on the part of the victim.
