What Every Oklahoma Elder Lawyer Should Know About

WHAT EVERY OKLAHOMA ELDER LAWYER SHOULD KNOW ABOUT

FINANCIAL EXPLOITATION OF THE ELDERLY

By Lisa Hughes

December 1, 2003

Elder abuse is a growing problem in our country. In 2000 alone state Adult Protective Services agencies (APS) received 470,709 reports of elder abuse.[1] These numbers are up from 1986, when APS received 117,000 reports.[2] Researchers have found that six percent of the elderly population is victimized each year.[3] Other studies have estimated that 84 percent of incidents of elder abuse are never reported, with up to five million cases of abuse occurring yearly.[4]

What is elder abuse? Elder abuse has been defined differently across the country, but most definitions include the categories of physical abuse, mental abuse, and financial abuse/exploitation.[5] While physical and mental abuse are serious problems in need of attention, the focus of this paper is on financial abuse of the elderly.

Financial abuse has been defined as the “improper act or process of an individual, using the resources of an older person, without his/her consent, for someone else's benefit.”[6] Researchers estimate that 40 percent of the elder abuse reported yearly involves financial crimes.[7] These crimes include larceny, extortion, embezzlement, and fraud.[8] In 1996 alone there were 21,427 substantiated reports of financial abuse nationally.[9] Authorities approximate that in the next ten years, the elderly will control more than ten trillion dollars in assets.[10] With figures as high as these, the potential for severe financial abuse needs to be addressed.

This paper will briefly describe various types of financial abuse and then discuss the perpetrators of the abuse and the abused themselves. A description of mandatory reporting statutes and categories of reporters will follow. Finally, this paper will address the situation in Oklahoma and offer suggestions on where we can go from here.

Types of Financial Abuse

Financial exploitation as anticipated by the Oklahoma vulnerable adults act is “the unjust or improper use of the resources of a vulnerable adult for the profit or advantage, pecuniary or otherwise, of a person other than the vulnerable adult through the use of undue influence, coercion, harassment, duress, deception, false representation or false pretense.”[11]

Financial abuse can occur in many ways. The elderly, just as anyone else, may fall victim to a wide variety of criminals. Potential crimes cover a broad spectrum from common theft to elaborate confidence scams.

Larceny is a broad term that covers many types of theft. The Oklahoma criminal statutes, for example, define larceny as “the taking of personal property accomplished by fraud or stealth, and with intent to deprive another thereof.”[12] This classification therefore encompasses not only theft of property from a home or business, but also fraudulently obtained property, including property the victim handed over willingly if the victim was deceived into doing so.

Embezzlement under the Oklahoma statute is “the fraudulent appropriation of property, …to any use or purpose not intended or authorized by its owner,” under certain listed conditions.[13] These conditions include, among others, “where the property is possessed or controlled for the use of another person.”[14] Embezzlement could also fall under the broad heading of larceny; embezzlement however “does not require a distinct act of taking, but only a fraudulent appropriation, conversion, or use of property.”[15]

Financial abuse often occurs as improper use of a caregiver relationship, such as when a family member or friend has access to the elder’s money in order to assist the elder in paying monthly bills.[16] This access may have been formalized in a joint banking account, or be an informal arrangement where the elder supplies funds when told that it is necessary to pay a bill or purchase items for the elder. When the caregiver in this situation appropriates funds for their own use instead of the elder’s benefit, the caregiver has committed financial abuse.[17]

Financial abuse complaints may be filed as criminal or civil actions. Criminal complaints, which are prosecuted by state or federal government representatives, may result in the imposition of fines or jail/prison terms.[18] Civil complaints may lead to the imposition of a constructive trust, restitution,[19] or injunction.[20]

Abusers and the Abused

Financial abuse is most likely to be perpetrated by a member of the victim’s family.[21] The victim’s adult children commit an estimated sixty percent of financial abuse.[22] The other groups most likely to abuse financially include the victim’s grandchildren, friends, and neighbors.[23] When it comes to misappropriation of property, money, or other goods, access to the victim seems to be the one factor that matters most, even more than the victims wealth.[24]

When it comes to con games and dishonest business people, some researchers have suggested that the elderly are more susceptible than are other segments of society.[25] This increased risk of victimization has been explained in different ways. Notably, a perception that the elderly have control of more assets than younger people has been found to be a motivation when it comes to con artists looking for a victim.[26] Also some researchers have hypothesized that because senior citizens tend to be more polite and less likely to hang-up the telephone or close the door on a “salesman” they place themselves in a position to be a fraud victim more often than younger people.[27]

Statistics on victims show that females make up a higher percentage of the financially abused than males.[28] Also, certain age groups are disproportionately represented. Researchers found that in 2001, 64.7% of the victims of financial abuse were over 66 years of age.[29] Income of victims does not seem to be a reliable method of predicting victimization; the income group that accounts for the most victims was $5,000 - $9,999 a year.[30]

Elder Abuse Prevention Statutes

The vast majority of states have elder abuse prevention statutes in place to assist authorities to identify and remedy instances of abuse.[31] Typically, these statutes list types of citizens who are required by law to report suspicions of elder abuse.[32] Some state statutes also include a general statement that citizens other than those specifically listed also have a legal obligation to report suspected abuse. Failure to report under these statutes may result in criminal misdemeanor charges being brought, and the penalties may include a fine, jail time, or both. Still other states have permissive reporting statutes in place, which allow reports to be made, but impose no legal obligation to do so.[33]

Most, but not every, state elder abuse prevention statutes include financial abuse as a form of abuse to be reported. A recent survey conducted by the National Association of Adult Protective Services Administrators found that of the 35 states that responded to the survey, only 29 states had a mandatory reporting statute that included financial abuse.[34] Of those states, eleven included financial institutions as mandatory reporters, and seventeen made reporting by financial institutions voluntary.[35]

Types of Reporters

The three most frequent categories of reporters of financial abuse are the victim’s friends/neighbors, hospitals, and family.[36] With the victim’s family ranking as the number one abuser,[37] it is surprising to find that this same group ranks third in terms of reporters, ahead of banks.[38] This is despite the fact that many researchers believe that bank employees are in the best position to detect and report financial abuse.[39] This begs the question, how much financial abuse goes unreported?

Nationally, banks have responded differently to the suggestion that bank employees should be included in the list of mandatory reporters. Some states have experienced tremendous cooperation from the banks within their boarders, while others have felt opposition.[40] One issue that banks have raised is potential civil liability that the bank might face by disclosing information protected by state and federal privacy laws. Banks also fear criminal liability for failure to report if a bank employee fails to report suspicious activity.[41] Which concern should govern - the bank’s duty to report under the statute or the bank’s obligation to protect the elderly client’s financial information from disclosure?

Concerns from banks come in several varieties. First, there is concern that a state privacy law may impede the bank from disclosing personal financial information about a client.[42] These fears are mislaid in most circumstances. All states that include banks as mandatory reporters include immunity against civil liability if the bank provides financial records to authorities and the report was made in good faith.[43] Still, even where banks are not mandatory reporters, the state’s banking and privacy laws may allow release of some information, such as the customer’s name and the suspected form of abuse, to the police or Adult Protective Services.[44] This should be enough to get an investigation started.

Federal privacy laws are also a concern. The Gramm-Leach-Bliley Act (hereafter Act) was enacted to guide financial institutions in their efforts to merge or otherwise do business with each other.[45] An important aspect of the Act concerns customer privacy issues, and the procedures for disclosing personal financial information to third parties.[46] The Act provides that the bank must inform its customers about its obligations under the Act through a notice procedure.[47] These obligations include prior notice to a customer that a bank intends to disclose information to a third party, and an opportunity for the customer to opt-out, to forbid, the disclosure of personal information to third parties.[48]

This notice and opt-out opportunity does not apply when the third party at issue is a member of law-enforcement, or an agency designated by law to be informed under a mandatory reporting statute. Disclosure of protected information without prior notice of disclosure or an opportunity to opt-out is allowed in connection with these circumstances under Section 502(e) of the Act.[49]

Finally, some banks have voiced concern over the possibility of facing criminal liability for failure to report financial exploitation.[50] Bank employees may be in a better position to detect financial exploitation sooner than others who come in contact with the elderly.[51] These employees probably see evidence of financial abuse frequently, whether or not they recognize it, so their chances of failing to report may be greater than those in other positions. Still, only a few states have actually prosecuted under their mandatory reporting law for failure to report, and those instances involved serious injury to the victim.[52] The chances that an employee will be prosecuted for failing to report are small.

Why obligate bank employees? Bank employees, including tellers, customer service representatives, loan officers, and data input specialists, are in a unique position. They have access to, and contact with, a client’s bank records, statements, and personal information. Especially in a small community, but applicable in large communities as well, these people are likely the first ones who will have reason to believe that an elderly person is being financially exploited.

Oklahoma

In Oklahoma the reports of elder abuse to Adult Protective services increased 133 percent between 1992 and 2002.[53] Although the available Oklahoma statistics do not break down the increase in reports by type of abuse, the national figures show that financial abuse accounts for about 40 percent of the reports taken.[54]

The State of Oklahoma does have an elder abuse reporting statute in place. The Protective Services for Vulnerable Adults Act is codified as Oklahoma Statutes, Title 43A, Sections 10-101 through 10-110. The Oklahoma code defines a “vulnerable adult” as someone who “because of, …incapacity, or other disability, is substantially impaired in the ability, …to protect self from abuse, neglect, or exploitation without assistance from others.”[55] Oklahoma Statutes Title 43A Section 10-103 defines “exploitation” or “exploit” as “an unjust or improper use of the resources of a vulnerable adult for the profit or advantage, pecuniary or otherwise, of a person other than the vulnerable adult through the use of undue influence, coercion, harassment, duress, deception, false representation or false pretense.”

The Oklahoma statute is a mandatory reporting statute. It provides that “[a]ny person having reasonable cause to believe that a vulnerable adult is suffering from abuse, neglect, or exploitation shall make a report as soon as the person is aware of the situation,…”[56] The statute goes on to list specific types of people as mandatory reporters, such as doctors, social workers, and police officers, but clearly states that the list is not exhaustive.[57]

The Oklahoma statute makes failure to report an instance of abuse as required, a misdemeanor, punishable by up to one year in jail, a fine of up to one thousand dollars, or a combination of the two.[58] Oklahoma also provides a reporter of abuse immunity from civil or criminal liability that may result from the report, if the report was made in good faith and with due care.[59] If a false report is willfully or recklessly made, however, the statute imposes civil liability on the reporter for any actual damages suffered by the person being reported, and allows punitive damages to be imposed by the court as it sees fit.[60]

Under Oklahoma law, financial exploitation is a form of elder abuse that can be prosecuted. Oklahoma’s Vulnerable Adults Act does not list banks as mandatory reporters, but the statutes does state “Any person having reasonable cause…shall report…”[61] This clearly means that bank employees as individual citizens are required to report. The question is whether “person” as used in the statute applies only to natural persons, or to entities such as a bank or other financial institutions. This is a question that has not been addressed by the courts in Oklahoma.

It is interesting to note that prior to the 1998 amendment to Oklahoma’s Vulnerable Adult Statute the types of the reporters listed included a seventh category. Section 10-104 (A) included paragraph 7, which listed representatives of financial institutions.[62] According to at least one expert in the field, the change in the statute was made at the request of financial institutions that did not want to be listed as mandatory reporters.[63]

Suggestions

What can lawyers do to help? Some have suggested that lawyers can work with members of the financial community to educate employees and develop protocols that would identify financial abuse before it grows larger.[64] Another suggestion is to encourage the legislature to amend the reporting statutes to specifically list employees of banks and other financial institutions as mandatory reporters. At the same time, legislation specifically addressing banks and giving them immunity from any liability that may result from a report to authorities would help to alleviate some of the fears about reporting.