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S. HRG. 112–542 

PENSION POACHERS: PREVENTING FRAUD AND 

PROTECTING AMERICA’S VETERANS 

HEARING 

BEFORE THE

SPECIAL COMMITTEE ON AGING 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

WASHINGTON, DC 

JUNE 6, 2012 

Serial No. 112–17 

Printed for the use of the Special Committee on Aging 

( 

Available via the World Wide Web: http://www.fdsys.gov 
(II) 

SPECIAL COMMITTEE ON AGING 

HERB KOHL, Wisconsin, Chairman 

RON WYDEN, Oregon 

BILL NELSON, Florida 

BOB CASEY, Pennsylvania 

CLAIRE MCCASKILL, Missouri 

SHELDON WHITEHOUSE, Rhode Island 

MARK UDALL, Colorado 

MICHAEL BENNET, Colorado 

KRISTEN GILLIBRAND, New York 

JOE MANCHIN III, West Virginia 

RICHARD BLUMENTHAL, Connecticut 

BOB CORKER, Tennessee 

SUSAN COLLINS, Maine 

ORRIN HATCH, Utah 

MARK KIRK III, Illnois 

DEAN HELLER, Nevada 

JERRY MORAN, Kansas 

RONALD H. JOHNSON, Wisconsin 

RICHARD SHELBY, Alabama 

LINDSEY GRAHAM, South Carolina 

SAXBY CHAMBLISS, Georgia 

CHAD METZLER, Majority Staff Director 

MICHAEL BASSETT, Ranking Member Staff Director 
(III) 

C O N T E N T S 

Page 

Opening Statement of Senator Herb Kohl ............................................................. 1 

Statement of Senator Bob Corker .......................................................................... 2 

PANEL OF WITNESSES 

Statement of Hon. Richard Burr, A United States Senator from North Carolina ........................................................................................................................ 3 

Statement of Senator Wyden .................................................................................. 5 

Statement of Dan Bertoni, Director of Disability Issues, U.S. Government 

Accountability Office, Washington, DC .............................................................. 6 

Statement of Senator Tester ................................................................................... 7 

Statement of Lori Perkio, Assistant Director, MEB/PEB Coordinator, American Legion, Washington, DC .............................................................................. 8 

Statement of Kris Schaffer, Daughter of WW II Veteran, Billings, MT ............. 10 

Statement of Emily Schwarz, President, Veterans Financial, Inc., Villanova, 

PA .......................................................................................................................... 14

Statement of David McLenachen, Director, Pension and Fiduciary Service, 

Office of Disability Assistance, U.S. Department of Veterans Affairs, Washington, DC ............................................................................................................. 16 

APPENDIX 

WITNESS STATEMENTS FOR THE RECORD

The Honorable Richard Burr (R–NC), Ranking Member, U.S. Senate Veterans’ Affairs Committee ..................................................................................... 38 

Daniel Bertoni, Director of Disability Issues, U.S. Government Accountability 

Office, Washington, DC ....................................................................................... 40 

Lori Perkio, Assistant Director, MEB/PEB Coordinator, American Legion, 

Washington, DC ................................................................................................... 54 

Kristi Schaffer, daughter of WWII veteran, Billings, MT .................................... 57 

Emily Schwarz, President, Veterans Financial, Inc., Villanova, PA ................... 63 

David McLenachen, Director, Pension and Fiduciary Service, Office of Disability Assistance, U.S. Department of Veterans Affairs, Washington, DC .... 66 

RELEVANT WITNESS REPORTS

Veterans’ Pension Benefits: Improvements Needed to Ensure Only Qualified 

Veterans and Survivors Receive Benefits, U.S. Government Accountability 

Office ..................................................................................................................... 77 

ADDITIONAL STATEMENTS SUBMITTED FOR THE RECORD

The Honorable Dean Heller (R–NV), Committee Member ................................... 146 

Office of Inspector General, U.S. Department of Veterans Affairs, Washington, DC ............................................................................................................. 148 

Terry Schow, Executive Director, Utah Department of Veterans Affairs, Salt 

Lake City, UT ....................................................................................................... 152 

David J. Smith, Assistant Commissioner, Tennessee Department of Veterans 

Affairs, Nashville, TN .......................................................................................... 157 

Debbie Burak, Founder, VeteranAid.org, Virginia ............................................... 161 

(1) 

PENSION POACHERS: PREVENTING FRAUD 

AND PROTECTING AMERICA’S VETERANS 

WEDNESDAY, JUNE 6, 2012 

U.S. SENATE, SPECIAL COMMITTEE ON AGING, Washington, DC. 

The Committee met, pursuant to notice, at 2:05 p.m., in Room 

SD–562, Dirksen Senate Office Building, Hon. Herb Kohl, chairman of the committee, presiding. 

Present: Senators Kohl [presiding], Corker, Wyden, Nelson, Tester, and McCaskill. 

OPENING STATEMENT OF SENATOR HERB KOHL, CHAIRMAN 

The CHAIRMAN. We thank you all for being here for this hearing 

to examine problems associated with the VA’s pension benefit program. Sadly, there’s a growing niche industry that profits by convincing veterans with substantial assets to hide these assets in 

trusts and annuity products in an effort to qualify for the maximum allowable pension from the aid and attendants program. 

As we will hear today, many veterans and their families are 

being hurt by this practice, because their assets are being tied up. 

They are forced to pay exorbitant fees and penalties if they need 

to access their money, and because they are sometimes affecting 

their ability to access Medicaid benefits. This activity has also increased a backlog of pending VA pensions, slowing the application 

process for veterans who truly need assistance. All this comes at 

a great cost to taxpayers who pay to process these applications and 

for the needs-based pensions to individuals who are not actually in 

need at the time of their application. 

These problems are not isolated to one state or region. They are 

a growing problem all across our country. The County Veterans 

Service Officer Association of Wisconsin has submitted a statement 

for the record that provides a variety of examples in my own home 

state. 

The CHAIRMAN. We want to thank our Veteran Affairs Committee Chairman, Patty Murray, and Ranking Member Richard 

Burr, who is here with us today, for their leadership and for sharing responsibility of overseeing the veterans’ pension benefit. We 

also thank and recognize Senator Ron Wyden for his work on this 

issue, and for providing a clear path to improvement. 

I know that we all support the efforts to correct the problems 

that we will hear about today, and we look forward to hearing from 

our witnesses. Before turning the gavel over to Senator Ron 

Wyden, who will chair this hearing today, we turn to our ranking 
2 

member, Senator Corker, for any comments and observations that 

you may have. 

STATEMENT OF SENATOR BOB CORKER 

Senator CORKER. Thank you, Mr. Chairman. I rarely make opening comments, but I will today. I want to thank you and Senator 

Wyden for calling this hearing to examine this issue affecting our 

veterans’ pension benefits. I’d also like to thank our witnesses, 

some of whom have traveled great distances to tell their stories 

and offer ideas and ways to protect these pension benefits for our 

veterans. 

I, like I know everyone here, have the greatest respect for our 

military veterans and their families. The tremendous service and 

sacrifice of our men and women in uniform, past and present, is 

invaluable. They are patriots, and we owe them a great deal of 

gratitude for what they have done to protect and secure our country. 

When Congress created the Aid and Attendance benefit, the goal 

was to assist our nation’s veterans cope with healthcare costs and 

to make sure they could retire with financial peace of mind. Sadly, 

as our panel’s members’ testimonies illustrate, some of the veterans 

are being targeted and financially misled. The consequences can be 

severe, sometimes leaving a veteran without a home or unable to 

qualify for other benefits, such as Medicaid. 

I come to this hearing today eager to hear recommendations on 

how we can improve aid and attendance overall to better serve the 

needs of veterans. With that in mind, I applaud Senator Wyden 

and Senator Burr, our first witness, on their joint work on this 

issue. I understand they plan to introduce a bill that would establish a 3-year look-back for the Aid and Attendance benefit, and prevent some of the harmful financial gaming that occurs. It is refreshing to see such bipartisanship. Thank you very much. 

This committee is in a unique position to examine this issue, as 

is the authority to take a look across many jurisdictions: Judiciary, 

in the case of enforcement; Treasury, in the case of financial misinformation; and Veterans Affairs, in the case of application discrepancies and backlog. It is often said that sunlight is the best disinfectant, and I hope that by bringing attention to this issue, this 

hearing will put an end to many of the unethical practices that are 

hurting our nation’s veterans. 

So, Mr. Chairman, thank you very, very much for convening this 

hearing. 

The CHAIRMAN. Thanks, Senator Corker. 

Senator Wyden. 

Senator WYDEN. Thank you, Mr. Chairman. Mr. Chairman, I’m 

going to defer my opening statement until after Senator Burr has 

spoken, because I know he’s under a tight schedule, and he has 

just been an extraordinary bulldog on this issue. And it has really 

been a pleasure to work with him, and, of course, he’s teamed up 

with Senator Murray, who is a tireless fighter for veterans on the 

Veterans Affairs Committee, and Senator Corker, as well. 

I just wanted to say a word, Mr. Chairman, with respect to your 

tenure as chairman of this committee. Under your leadership, this 

committee has gone after a whole host of abuses of our senior citi-
3 

zens, from essentially selling fake financial products to what 

amounts to literally physical abuse, what we know as elder abuse. 

And I just want you to know how much we have appreciated your 

leadership. 

You and I have talked often. I was co-director of the Grey Panthers back in the days when I had a full head of hair and rugged 

good looks, and we used to always hope that there was a chair of 

the Senate Aging Committee like you, Senator Kohl. So, I just want 

you to know how much we appreciate your leadership. 

I’ll have more to say about these issues after we’ve heard from 

Senator Burr. But, it’s pretty hard to get agreement in one committee here in the United States Senate, and we have been so fortunate to have Senator Corker, who also tries to tackle these issues 

in a bipartisan way. So, the combination of you, Senator Kohl, and 

Senator Corker here, and Senator Murray, and Senator Burr, for 

those who may be listening on C–Span, it doesn’t exactly happen 

every single day here in the United States Senate. So, I am really 

thrilled to have been able to be a part of it, and look forward to 

working with you, Mr. Chairman, in the months we have with you 

still here as our chair. 

STATEMENT OF HON. RICHARD BURR, A U.S. SENATOR FROM 

THE STATE OF NORTH CAROLINA 

Senator BURR. Good afternoon, Chairman Kohl, Ranking Member 

Corker, Senator Wyden. I’ve learned something new already, that 

Senator Wyden used to have hair and was good looking. 

[Laughter.] 

I want to thank you for inviting me, and more importantly, as 

the ranking member of the Veterans’ Affairs Committee, I appreciate the opportunity to discuss some of the serious issues involving 

VA’s pension program, and how they may be affecting elderly disabled veterans. 

This program is one way our nation expresses gratitude to those 

who have answered the call to duty in a time of war. It offers a 

basic level of economic security to wartime veterans who have been 

disabled unrelated to their military service and limited means to 

provide for their own support. The intent is to ensure that the disabled veterans who honorably fought for our nation will never live 

in poverty. 

Given that noble but limited purpose, it has long been recognized 

that these benefits should be available only to those who are truly 

in need. But, last year it came to the attention of the Veterans’ 

Committee that some organizations were marketing financial products to veterans, generally elderly veterans, so they could move assets around in order to artificially qualify for pension benefits. 

That’s why our committee asked the Government Accounting Office 

to look into this issue, and we were pleased to be joined in the request by you, Chairman Kohl and Senator Wyden. That GAO investigation, along with the efforts of the Aging Committee, shed 

light on an entire industry aimed at convincing veterans to manipulate their assets, by using products like trusts and annuities, so 

they can become eligible for VA pension benefits. 

This GAO report reflects this practice can end up having a negative impact on some veterans. For example, it appears that these 
4 

companies sometimes convince elderly veterans to buy financial 

products that would not provide any income during their expected 

lifetimes. Also, some are using misleading marketing techniques to 

gain the trust of veterans, providing them with inaccurate information about VA benefits, or breaking their promise to help veterans 

apply for VA pensions. 

On top of that, it appears that these companies often target veterans like those with dementia, who are particularly vulnerable, 

and who may charge them as much as $10,000 in fees. All of this 

raises concerns that elderly veterans may be pressured into situations that leave them without adequate resources in their greatest 

time of need. 

The GAO report also confirms that some individuals receiving 

VA pension actually had substantial wealth. In fact, GAO highlighted an individual who had put over $1 million into a trust 

shortly before being granted VA pension. It should go without saying that a program meant to provide a safety net for low-income 

veterans should not be sending checks to millionaires. But, regardless of the amounts involved, it undermines the integrity of a needbased program if assets are being hidden in order to qualify. 

The bottom line is that we need to take steps to strengthen the 

VA’s pensions programs so that it will be there for the wartime veterans who truly need it and will discourage companies from preying on veterans who do not. That’s why Senator Wyden and I are 

planning to introduce a bill that will require VA, in determining 

who’s eligible for pensions, to look at whether assets have been 

moved around in order for that veteran to qualify. 

In general, the bill would create a look-back period, running for 

3 years before an individual applies for a VA pension. If the applicant repositioned assets during that window, VA could deny pensions for up to 3 years, depending on the value of the assets that 

were moved. As a safeguard, VA would have the authority to disregard asset transfers during the look-back period and allow a pension to be paid, if it would avoid an undue hardship. 

These new protections should help to discourage abuses, while 

making sure that the benefits will be available to those who genuinely are in need. This approach is consistent with the GAO’s recommendations; is similar to the rules already in place for other 

need-based programs, like Medicaid; and is in line with the 

changes VA has acknowledged are needed. 

Mr. Chairman, I think this bill would be a common-sense step 

in the right direction to deal with many of the issues your committee will be discussing at today’s hearing. I look forward to working with the ranking member, the chairman, and all members of 

your committee, as well as Senator Wyden, in hopes that this bill 

will become law and will become law soon. 

Again, I thank you for the invitation to be here and for the attention of this committee on what I think is a very grave issue. 

The CHAIRMAN. Thank you very much. 

Senator WYDEN [presiding]. Mr. Chairman, I just want to say I 

think Senator Burr has laid this out very, very well. We’re going 

to work on this in a bipartisan kind of fashion, and the bottom line, 

it seems to me, is to preserve this program for those who need it, 

rather than those who fleece it. And we’ve got a lot of heavy lifting 
5 

to do, and Senator Burr and I have had a chance to work together 

often over the years, going back to our days in the house. And I 

just feel I’ve got a really good partner in this. I want to thank Senator Burr. I didn’t have any questions. Perhaps, colleagues do. 

Senator CORKER. Thank you. I think it’s disrespectful to ask a 

Senator questions. 

Senator WYDEN. Is it? All right. Fair enough. 

Senator CORKER. Thanks for coming. 

The CHAIRMAN. Do you want to call the next panel? 

Senator WYDEN. Would you like me to? 

The CHAIRMAN. Go ahead. It’s your hearing. 

Senator WYDEN. Our next panel is Mr. Daniel Bertoni and Mr. 

David McLenachen, if I’m pronouncing that right. 

Mr. Chairman, would it be okay if I gave a brief opening statement as our witnesses come up? 

The CHAIRMAN. Go right ahead. 

STATEMENT OF SENATOR RON WYDEN 

Senator WYDEN. Senator Burr summed this up very well, it 

seems to me, and I just wanted to take a couple of minutes and 

outline what I think are the essential steps, in terms of fixing this 

program, and, in effect, draining the swamp. It’s pretty clear that 

pension poachers and bad actors have to be eliminated from the 

program. And second, it’s got to be clear that veterans can almost 

always secure their pensions and their needed services for free 

from county veterans’ services officers and congressionally chartered service organizations. Going to a lawyer or a financial planner, based on what we have determined, should not be the norm, 

and I think there are several steps that ought to be part of the solution. 

The first is education, making sure that veterans and their families know about their rights and responsibilities, and in that regard, Chairman Kohl and Senator Corker are moving us forward 

with today’s session. 

Second, the nursing home and retirement industry has to be part 

of the solution. The Assisted Living Federation has submitted a 

statement for today’s hearings, and I think that that’s very constructive. The industry is going to have to work with the VA and 

veterans organizations to develop best practices for their facilities. 

And in my home State, the Oregon Healthcare Association has just 

sent an alert out to all of their members to educate them about 

pension poachers, and I hope that other groups follow suit. 

And the third part of the solution is the legislation to require the 

Veterans Administration to look back at pension applicant finances 

the way that Medicare and SSI do. This closes the loophole that 

the pension poachers have exploited. 

So, in effect, you have education, begun here under the leadership of Chairman Kohl and Senator Corker, in terms of making 

sure that vets and their families understand their rights. Then, we 

mobilize the private sector, and the long-term care facilities, and 

others to step up along the lines of what the Oregon Healthcare Association has done. And the third piece is the legislation. 

So, I appreciate the chance to mention that, Chairman Kohl. And 

why don’t we just hear from the witnesses, all of the witnesses on 
6 

this panel. I guess we also have Kris Schaffer, Emily Schwarz, and 

Lori Perkio, and I believe that Senator Tester will be coming to introduce Ms. Schaffer and Ms. Perkio. 

The CHAIRMAN. Do you want to describe who they are? 

Senator WYDEN. Yes. Mr. Bertoni is Director of Disability Issues 

of the Government Accountability Office, here in Washington. Lori 

Perkio is the Assistant Director of the MEB/PEB program at the 

American Legion. Kris Schaffer is the daughter of a World War II 

veteran in Billings, Montana. And Mr. McLenachen is Director of 

Pension and Fiduciary Services, the Office of Disability Assistance, 

at the U.S. Department of Veterans Affairs, in Washington, D.C. 

So, why don’t you proceed, Mr. Bertoni. 

Mr. BERTONI. Certainly. 

STATEMENT OF DAN BERTONI, DIRECTOR OF DISABILITY 

ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE, 

WASHINGTON, DC 

Mr. BERTONI. Chairman Kohl, Ranking Member Corker, members of the committee, good afternoon. I’m pleased to discuss the 

Department of Veterans Affairs pension program, which provides 

benefits to aged or disabled veterans with limited income and assets. Last year, VA paid over $4 billion in benefits to over 500,000 

recipients. Although the program was means tested, concerns have 

been raised that some organizations are marketing financial products and services to help veterans shelter valuable assets to qualify 

for pension benefits. 

In our full report, released today, we identify numerous weaknesses in VA’s processes for assessing veterans’ financial eligibility. 

We also note that currently there is no prohibition in transferring 

assets prior to applying for benefits. 

My testimony is based on our report and focuses on what is 

known about organizations that are marketing financial services 

and products to veterans. In summary, we identified over 200 organizations located throughout the country that help veterans and 

their survivors transfer or preserve excess assets that could otherwise disqualify them for benefits. 

These organizations consist primarily of attorneys and financial 

planners who provide services and products, such as annuities and 

trusts, in order to reduce veterans’ income and assets below program eligibility thresholds. Under current law, pension claimants 

can transfer assets and reduce their net worth prior to applying for 

benefits. And some provider web sites openly note that they specialize in helping those with hundreds of thousands of dollars qualify for benefits. 

Others we contacted acknowledged helping millionaires acquire 

these benefits. In contrast, for Medicaid and other means-tested 

programs, Federal law explicitly restricts eligibility for long-term 

care benefits in the event of certain asset transfers, and requires 

a look-back period to identify such transfers within 60 months of 

application. 

During our investigative calls, all 19 organizations we contacted 

noted that pension claimants can legally transfer assets to skirt 

program rules, and almost all provided examples of how to do this. 

It’s noted in excerpts of the following recorded conversations, where 
7 

a GAO investigator posing as a son of an 86-year-old veteran, inquired about the services and products offered. 

[Tape recording played.] 

I know I’m a bit over, so I’ll break. As indicated by these conversations, various strategies can be used to help claimants stay 

below income and asset thresholds, including transferring assets 

that VA would normally count when determining eligibility to family members via trusts or purchasing some type of annuity to reduce monthly income to acceptable levels. Despite the advantages 

of these transactions to applicants, some products, such as deferred 

annuities, may not be suitable for aged veterans, because they 

often cannot access all needed funds within their expected lifetime 

without incurring substantial penalties or fees. Such transactions 

could also cause some pensions to run afoul of Medicaid asset 

transfer rules, and risk an eligibility for long-term care benefits. 

And finally, we found that the majority of the 19 organizations 

charged fees, ranging from a few hundred dollars for benefits counseling, to $10,000 to establish a trust. While Federal law prohibits 

charging fees for completing VA benefit applications, veterans 

groups and others we interviewed are concerned that some organizations are finding ways around this prohibition, such as charging 

veterans fees for benefits counseling. One organization we spoke 

with charged $850 for an attorney to work on processing a case, a 

$225 analysis fee, and $1,600 for establishing a trust. 

In conclusion, the VA pension program provides a critical benefit 

to veterans with limited resources. However, as currently designed, 

claimants with significant assets can easily qualify for benefits. 

This arrangement clearly circumvents the intent of the program 

and wastes taxpayer dollars. Thus, we believe a look-back and penalty period is needed, and have asked the Congress to consider 

this. 

Mr. Chairman, this concludes my statement. I am happy to answer any questions you have. Thank you. 

Senator WYDEN. Thank you very much, Mr. Bertoni. And you’ve 

certainly, at your agency, have gone after this issue aggressively, 

and one of the questions we’re going to be asking is why, particularly, the VA IG’s office, they didn’t do some of the work that 

you’ve been doing. So, I really appreciate it. 

We have a very strong advocate for veterans with us now. Senator Tester. He’s my neighbor, and he can often be out back at 

night, and then he tells me, ‘‘We better get on these veterans’ 

issues.’’ He said, ‘‘We’ve got to do something about these rip-offs.’’ 

And he’s here to introduce two Montanans, our next witnesses. I 

hope I’m pronouncing it right. Lori Perkio and Ms. Kris Schaffer. 

And we’re happy to welcome Senator Tester for your remarks. 

STATEMENT OF SENATOR JON TESTER 

Senator TESTER. Yes. Thank you, Senator Wyden, and I want to 

thank Senator Kohl, Ranking Member Corker. It’s always a pleasure to be with you two gentlemen on the committee dais. 

Look, we all know what America’s veterans have done for this 

country. This country would not be the place it is today without the 

sacrifice of our service members. Make no mistake about it. You 

compound that with the deplorability of folks who want to go after 
8 

our elderly disabled veterans, I can tell you that, well, it will make 

the enamel on your teeth chip. Let’s just put it that way. 

I appreciate Mr. Bertoni’s testimony and the video. And I think 

that the look-back is definitely something that we should be considering in doing, probably sooner rather than later, but after we get 

done getting to the bottom of all of this. 

I’m going to introduce Lori and Kris before you speak, and I will 

just tell, Lori is here on behalf of the American Legion. She is a 

Montanan who worked for the Legion in Montana for 15 years as 

a veteran service officer, and eventually made her way to D.C. I 

don’t know if that’s a step up or not for you, Lori, but it is very, 

very good to have you here advocating for veterans on a national 

level. 

And then if I may, Senator Wyden, Kris Schaffer is a small business owner from Billings, Montana, a proud daughter of a veteran. 

Kris’s father served in the Navy during World War II. She is here 

to tell us about the problems that he faced when he was scammed 

by an organization that submitted his VA claim. And after moving 

into a retirement home, Kris’s father, a navy veteran, found out 

that he was not eligible for the VA benefits promised to him by this 

organization, and now he may be forced to move, because he cannot 

afford to remain in the facility. She can tell you more about the financial impacts of all this. 

But, bottom line is this, folks who are trying to mislead the VA, 

on behalf of people who serve this country, is unacceptable, and 

leaving them out in the cold makes it doubly unacceptable. 

So, thank you all for being here, and I’ll turn it back to you, Senator Wyden. 

Senator WYDEN. Thank you, Senator Tester, and particularly for 

your advocacy of veterans. And I think now it’s going to be Montana’s turn. We’re going to start with you, Ms. Perkio, and then 

you, Ms. Schaffer, and we’ll make your prepared remarks a part of 

the record in their entirety. And just go ahead with your comments. 

STATEMENT OF LORI PERKIO, ASSISTANT DIRECTOR, MEB/ 

PEB COORDINATOR, AMERICAN LEGION, WASHINGTON, DC 

Ms. PERKIO. Thank you, Mr. Chairman. Thank you for the opportunity for the American Legion to provide the views on Department 

of Veterans Affairs Aid and Attendance Program. The American 

Legion is deeply concerned regarding the poaching of our wartime 

veterans and their widows who apply for Veterans Administration 

pensions with aid and attendance benefits. 

Our permanently disabled wartime veterans and their widows 

have become the victims of individuals, law firms, and in some 

cases, assisted living facilities through misrepresentation of the VA 

Aid and Attendance program. One law firm on the internet advertises recession proof your law practice with VA pension planning. 

It goes into detail on how lawyers charge fees for services. Some 

of those services that were listed were analysis of options available 

concerning the income, gift, and estate tax consequences, new legal 

documents, administrative trusts, review of investments, and specifically stating, ‘‘If trust is needed for qualifications, fees are generally two to four times the average planning fee.’’ The fees result 
9 

in thousands of dollars from the responses we are seeing from our 

field offices. 

Upon this issue being brought to my attention here in Washington, D.C., I sent out a request to all of our field offices across 

the United States asking for their input. Most of the responses 

were identical, in that these law firms, the American Legion department services officers were aware, but they didn’t know how to 

stop them. So your participation in creating assistance to protect 

our veterans is greatly appreciated. 

On the internet, also, it talked about one lawyer advertised a kit for sale for $99 to hide assets. Another web site, how to hide assets 

to receive pension. And there’s many, many more web sites that 

are out there like that, you know, to advertise their—to take advantage of our veterans. 

One scenario is a poacher set up an elaborate presentation intentionally to lure veterans and the widows of veterans to the probability of being eligible for up to $24,000 a year to pay for assisted 

living. The victims were told they qualified for VA aid and attendance benefits, and until the benefit was actually paid, they could 

go ahead and sign a one-year contract at the assisted-living facility 

at the reduced rate until the VA benefit was actually received. 

The VA received a less than complete application, which required 

written correspondence from the VA to the veteran to obtain all relevant information, resulting in discovered unclaimed assets. The 

veteran reported he was told, his lawyer told him not to claim 

these assets on the application. The VA determined the assets exceeded the maximum annual pension rate and benefits were denied. 

The assisted-living facility then charged the veteran the full rate 

of fees, to include penalty fees if the 1-year lease had been broken. 

The veteran no longer owned his home. His assets were put into 

a trust he could not access, and was charged over $80,000 by the 

attorney who created the trust for him. 

The pension claims being submitted by these poachers often omit 

actual amounts of assets, and the victims are constantly told, ‘‘You 

don’t need to claim that.’’ One veteran whose assets exceeded 

$655,000 was told he only needed to claim $25,000 of those on the 

application itself. A widow of a veteran submitted a claim through 

one of these law firms for pension, with aid and attendance, while 

in possession of $1.1 million in land assets. These were not listed 

on the original claim form. When the VA had submitted correspondence to this widow, then it was discovered that she had 

these assets and did not qualify. 

An 80-year-old veteran applied for pension with aid and attendance through an attorney. During the VA exam it was determined 

that due to his severe Alzheimer’s that he was incompetent to handle his own VA monetary benefits. A VA field examiner contacted 

the veteran to appoint a fiduciary. During the interview, the field 

examiner discovered the attorney had created a 12-year annuity. 

As part of my investigation of this poaching issue, a request was 

sent to all of our department service officers and department adjutants requesting information. The unanimous response was poachers submitted the VA claim form for pension, and when VA requested more information, the attorney directed that veteran to a 
10 

service organization, and would no longer be able to assist that veteran at that point. 

The American Legion conducts service officer training twice a 

year. At each training session, we have a beginner course in pension training. This class is conducted by a national American Legion staff who work at our three pension maintenance centers. The 

importance of submitting a claim the first time is stressed. A complete claim is stressed to expedite that VA claim process. In addition, all assets are to be counted to determine the net worth, and 

the VA will determine which are counted and which are exempt. 

The American Legion is also creating an information pamphlet 

specific to VA pension benefits. The pamphlet will be distributed to 

our 2,000 accredited service officers to get information into the 

hands of our wartime veterans and their widows, and we’re going 

to, as much as we can, to make sure that the claims processes are 

being done correctly to support our veterans. 

The American Legion greatly appreciates your attention to this 

issue to protect our veterans and their widows. 

Senator WYDEN. Ms. Perkio, thank you. And I think what the Legion has uncovered here, in terms of these practices, is exceptionally important. It’s shameful what you have described. There is no 

other way to describe it, and I really appreciate your perseverance 

and the professionalism that the Legion brings to these veterans’ 

issues. 

We’ve been joined by Senator Nelson. He’s from Florida. He represents a great many elderly persons, many elderly veterans, and 

he and I have worked together on senior issues since our House 

days, a very strong advocate for seniors and veterans. 

And Senator Nelson, we are, in effect, in the middle of hearing 

from Montana. If it would be acceptable to you, let’s hear from Ms. 

Schaffer, and we so appreciate having you here. And then at that 

point, we’ll recognize Senator Nelson, if that’s all right, for his 

opening statement. 

Ms. Schaffer. 

STATEMENT OF KRIS SCHAFFER, DAUGHTER OF WWII 

VETERAN, BILLINGS, MT 

Ms. SCHAFFER. Thank you. I thank you very much for the opportunity to be addressing you today. My name is Kris Schaffer. I am 

the owner of a small print shop, Accent Print Shop, in Billings, 

Montana. I am a wife and a mother. I have been asked to come 

here today to provide testimony as to my experience with the VA 

Aid and Attendance pension program. 

During the spring of 2011, only one short year ago, I was growing increasingly concerned about my mother’s health. Both of my 

parents were still living, but her health seemed to be deteriorating 

rapidly, and providing her care was more than my father could 

manage, and more than I could, too. 

My father served in the Navy in World War II in the South Pacific. I heard about the VA Aid and Attendance pension program, 

and it seemed that it might be the answer to our prayers. But I’m 

always a person who wants to get the particulars. This tendency 

of mine serves me well in my business and in my personal life. I 

am not a person who tends to be duped by a fast talker. I attended 
11 

a seminar on the VA Aid and Attendance pension program, along 

with my father, put on by an independent living facility, which I 

had understood was well thought of in our community, Aspen View. 

My understanding was that it was a separate facility from the 

nearby nursing home facilities, but the nursing home services could 

be provided when and if they were needed. Providing information 

on the VA Aid and Attendance pension program was the sole purpose of the seminar my father and I attended. The speaker was an 

attorney, Douglas F. Ocker, who said he was an attorney and counselor-at-law in an elder caring law firm in Corpus Christi, Texas. 

He had been brought in by the independent living facility. The 

speaker represented himself as being accredited by the Veterans 

Affairs. His web site even was www.seniorveteransusa.com. 

Each attendee was given a very official looking presentation folder with information and requirements on the VA Aid and Attendance pension program. The first question the attorney put forth 

was something he wanted to clarify. Why should I use a VA-credited attorney when some people fill out my applications for free? 

We then received 11 reasons why, such as insurance agents disguise themselves as veterans officers, attorneys are licensed to 

draft legal documents for assets and income restructuring. Medicaid is a time bomb. The attorney is licensed to represent clients 

in VA court, and so forth. 

We were told that if we decided to use the VA Aid and Attendance pension program we needed to use an attorney to fill out this 

complicated paperwork. We were also advised not to use the local 

VA Department, because they were not familiar with this particular program. I feel very stupid now for believing him, but I did. 

It all seemed so very much on the up and up, a program of our 

government showing us appreciation at the end of their lives for 

the dedication of our veterans in preserving our freedoms. 

At the end of the seminar, all attendees were invited to visit with 

the attorney to see if they would qualify for the VA Aid and Attendance pension program. My father and I set an appointment 

and visited with Mr. Ocker himself. When we came, we had all my 

father’s paperwork and necessary information. 

As the attorney reviewed the paperwork, he guaranteed us that 

my father would qualify. Then he told us that we needed to have 

$4,000 to fill out the paperwork. That was the first that we had 

heard of that requirement, and my father informed him that he did 

not have the $4,000 to pay for the service, and that we did not realize that there was a charge for filling out VA paperwork. 

The attorney told us that he would do us a favor by calling in 

the manager of the independent living facility and explaining our 

situation. The manager came into the meeting and the attorney 

told him that my father did not have the funds to pay him to fill 

out the VA paperwork. The manager asked the attorney if my father would qualify for the VA Aid and Attendance pension program. The attorney responded, ‘‘Most certainly.’’ 

With that being said, the manager of the facility told my father 

that he and my mother could move into Aspen View in Billings. 

They told me that I should fill out the paperwork, since we already 

knew from the attorney that they qualified and would not be 

turned down. We were told the amount of the monthly rent. We 
12 

were told that the VA Aid and Attendance pension program would 

pay $1,949, the amount for a married couple, and that my parents 

would pay the remaining monthly balance which was $1,638, a 

very large financial commitment to my parents. 

In order for my parents to afford even their portion of the independent living facility rent, they needed to sell their home, which 

was their primary asset. They made that big and difficult decision, 

sold their beloved home in order to make the whole thing possible, 

the provision of care for their remaining years, and my parents 

would moved into the facility July 7, 2011. 

I filled out the paperwork required by the VA for my parents. I 

did not find the paperwork terribly complicated, and went through 

all the written requirements, and my father appeared, to me, to 

meet them all. I have provided copies of the presentation documents that were given to me for the use of the committee. 

One of the requirements was that I needed to send a letter to the 

VA from the independent living facility. I remember picking up this 

letter from the facility. I read it prior to sending it in with the rest 

of the paperwork. I did see for the first time, when I read the letter, ‘‘Our staff is available 24 hours a day to assist Henry with any 

emergency that may arise. In addition to providing meal preparation, transportation, weekly housekeeping, and any other medical 

needs that are prescribed, numerous healthcare providers work 

with our residents in providing medication monitoring, assisting 

with bathing, dressing, feeding, and et cetera.’’ It had certainly 

been my understanding that those services would be provided when 

they were needed. 

I discovered later, as my mother grew more ill, that the independent living facility actually does not supply any medically necessary help for its residents. If the residents need help, they’re required to search out companies as sources for a supply of such 

services. 

In the end, I had very little time to cope with these issues, because my dear mother only lived for 5 days when she left her home 

and moved into the facility that we thought would be providing her 

necessary care before passing away. 

At that time, I forwarded all documents to the VA, so that they 

knew that from that time forward only my father would be needing 

the benefit and continuing to live in the institutional independent 

living facility. Shortly after I sent those documents, my father received a letter of denial. Only after my father received the letter 

of denial were we told that in order to qualify for VA Aid and Attendance pension program, the person needed to require daily assistance in dressing, feeding himself, and bathroom chores. It was 

never addressed or set forth as a requirement in the seminar that 

we attended, in the written paperwork, or any other forms that I 

filled out for my parents. 

My father’s relatively healthy condition was clear when we met 

with the attorney and when the independent living facilities staff 

person was called to discuss the $4,000 fee. It was clear to both the 

attorney and the staff person that my father would be selling my 

parents’ house in order to be able to pay their portion of the monthly rent. 
13 

As I speak to you before you today, my father, heartbroken at the 

loss of his life partner, to whom he was married for 57 years, is 

also in limbo, or worse, not knowing how to proceed. My father has 

worked hard his whole life. He has never asked for a handout from 

anyone. He thought he was doing right by his beloved wife, as well 

as making certain that he would not become a burden on his children with his eventual health decline. By selling his home and 

moving into this facility as part of the VA Aid and Attendance pension program, he made this decision based on the advice of someone who held himself out as an attorney certified by the VA Aid 

and Attendance pension program, and was provided independent 

reliable advice. 

When I received the information of denial, I was horrified. I informed Aspen View that I would be appealing. Then I went directly 

to Senator Tester’s office, in Billings, for assistance. He was here, 

together with Senator Kohl, Senator Corker, and Senator Wyden 

who asked me to appear here today to tell my story and that of my 

family. The staff at Aspen View has not yet approached my father 

and demanded that the balance of the difference of what the VA 

was understood by them and by me to be paid. But I know that 

they will. In fact, some friends of my parents, in their nineties, are 

in this very same situation with the VA Aid and Attendance pension program, have been ousted from what they thought was their 

final residence for their declining years. 

It appears to me that Aspen View does not actually comply with 

the requirements of the VA Aid and Attendance pension program. 

It also appears to me that senior citizen veterans are being lured 

into disposing of their limited assets by paying exorbitant amount 

for services and then only after it is too late, being denied any benefits, whatsoever, by the VA and are being left with no place to 

live. 

I do not know fully who is at fault. I only know that for my father this is a terrible miscarriage of justice. I have come all the 

way from Montana to Washington, D.C., to the most powerful institution in the world, to ask for help for my father and others in this 

situation. I ask that you get to the bottom of what has happened, 

discover who is at fault, and set things right for the remaining 

years of the veteran whose stability has been so threatened. 

I thank you so very sincerely for allowing me to appear today on 

behalf of those who tend to be so much older than I and so much 

less able to travel to meet with you and speak with you themselves. 

I will be honored to answer any questions that you may have. 

Senator WYDEN. Ms. Schaffer, thank you very much for a very 

powerful statement. I heard you early on say, I think in your 

words, you said you felt stupid. You were dealing with your mom, 

and your dad, and your mom passed away just a few days after she 

was forced to leave her place, and I sure would like to make it 

clear, not only do I not think you’ve been stupid, your folks have 

been very lucky to have you, because it’s clear your love and your 

commitment to them can be seen by everybody up here on this side 

of the dais. 

You asked at the end of your statement that this committee stay 

on it until we get to the bottom of this and get it fixed, and I can 

tell you, your Senator, John Tester, and the other members of the 
14 

committee, that’s exactly what we’re going to do for Montana families and Montana veterans until we get this corrected. So, thank 

you for an excellent statement. I’ve worked in the aging field a lot 

of years, and what you’ve said is going to make a big, big difference, and I thank you. 

Let’s hear from Senator Nelson. 

Senator NELSON. Mr. Chairman, what we’ve heard is an outrage. 

There’s no other commentary that can be applied. And so what I 

want to know, is the Department of Veterans Affairs asleep at the 

switch? And I’m looking forward to that, and I don’t want to take 

more time. I want to hear the rest of the testimony. I will insert 

some remarks later on. 

Senator WYDEN. Thank you, Senator Nelson. And we are going 

to hear from the Veterans Affairs Department here in the next few 

minutes, but our next witness is Ms. Emily Schwarz. She’s the 

President of Veterans Financial, Incorporated, in Villanova, Pennsylvania. And she’s expanded into one of the largest companies 

making presentations on aid and attendance nationwide. 

Ms. Schwarz, please proceed. 

STATEMENT OF EMILY SCHWARZ, PRESIDENT, VETERANS 

FINANCIAL, INC., VILLANOVA, PA 

Ms. SCHWARZ. I’d like to start by taking a moment to thank the 

Special Committee on Aging, including Senator Bob Casey, from 

my great State of Pennsylvania, who, unfortunately, is not here 

today, for inviting Veterans Financial, Incorporated, to address the 

GAO’s veterans’ pension benefits report. While I concur with many 

of the issues and concerns raised, as well as some of the recommendations, I believe my testimony will give the Senators a better understanding of how private companies are playing a key role 

in educating veterans about this VA benefit to which they are entitled. 

Let me first give you a brief background on my company, Veterans Financial. We’re a national organization, as Senator Wyden 

mentioned, working throughout the country. To date, we have educated just over 69,000 families about the VA’s Aid and Attendance 

pension from the Department of Veterans Affairs. Callers are referred to our 800 number from a variety of sources, but primarily 

assisted living directors, other care professionals, workshops, and 

the internet. All 69,000 families have been helped at no cost to the 

family or any third party, and without regard for their need of financial planning services. 

The majority of families we come in contact with did not know 

there were VA benefits available to pay for long-term care expenses 

prior to being referred to our company. Yet, it has always been Veterans Financial’s belief that the VA wants all who are entitled to 

aid and attendance to receive it. Veterans Financial and the 200 

other companies and attorneys surveyed for today’s report are creating an awareness that wouldn’t exist. However, as with any industry, there are those who perform their duties with responsibility 

and diligence, and others who are more concerned with what is in 

their best interests rather than their client’s. 

Several such examples are referenced in the GAO’s report, including advising claimants to report erroneous care expenses, fail-
15 

ing to submit an application once the VA—failing to submit an application to the VA, because the family did not take the planner’s 

advice, and charging astronomical fees for trusts or other work. 

This behavior is despicable and embarrassing to companies like 

mine who go to great pains to ensure that things were done ethically and in compliance with VA regulations. 

I trust that you have selected my company to testify today, because you believe we have acted in good faith with our marketing 

efforts, promise of genuine assistance, and excellent follow-through 

to all veteran families. You can see today’s exhibits, for example, 

the full disclosure in our marketing materials. 

While I cannot speak to the experiences of other organizations 

and attorneys, the typical caller to Veterans Financial is not similar to those referenced in the GAO report that transferred $500,000 

or $1 million prior to applying for benefits. Our typical caller is the 

child of a veteran or surviving spouse who’s begun the search for 

assisted living or home care, and realized the monthly fees far exceed their parents’ income, and have savings significantly lower 

than the VA’s arbitrary threshold of $80,000. 

For these families, Veterans Financial becomes a source of invaluable information, and a great relief when they learn mom or 

dad may be eligible for aid and attendance, and, therefore, can afford the care they need without going into a Medicaid nursing 

home, somewhere they don’t currently belong. 

To this point, we have countless letters of thanks and praise 

from people in all walks of life. The GAO’s report suggests that the 

type of financial planning my firm does, as well as trust creation 

by attorneys, is a rampant practice. The reality is the average assisted-living resident is 87 years old, with $1,583 of monthly income, according to data provided by ALFA. At the same time, 

they’re paying $3,300 a month for assisted living, according to 

Genworth’s 2012 cost of care survey, which does not include Medicare supplements, prescription medications, co-pays, and other expenses, while having long since diminished or exhausted whatever 

savings they had when they retired at 65. 

Of the tens of thousands of families we have spoken with, less 

than 2 percent transfer assets out of their name in order to become 

eligible. The other 98 percent were financially eligible without 

transferring assets or had significant assets and elected not to 

apply for benefits. 

I also see that the report references attorneys who promote the 

use of trusts for VA planning, while warning that annuities make 

people ineligible for Medicaid. It is necessary to point out to the 

committee that a transfer to an annuity into the children’s names 

starts the same 5-year look-back that a transfer to a trust does. 

Those strategies create a period of ineligibility, and in both cases, 

the family has to wait no longer to become Medicaid eligible than 

had they done no planning at all. 

It is also key to understand that permitting families to receive 

aid and attendance as early as possible allows seniors to remain 

private pay significantly longer. Forcing them to wait until they’re 

nearly destitute will mean that aid and attendance is too little too 

late. Social Security and VA pension is not enough to pay for care. 
16 

Without adequate savings to supplement their expenses, most will 

have no care options other than a Medicaid facility. 

It seems as if in this conversation Medicaid is seen as the optimum alternative to private pay assisted living, when in reality, the 

cost of skilled care is nearly double that of a private pay assisted 

living. Changes to the current system will not save the government 

money, but instead cause more seniors to join the Medicaid rolls, 

adding additional stress to our current budgetary constraints. 

I would propose to the committee that the VA work with the private sector to develop a best practices policy which will ensure our 

nation’s veterans receive only ethical accountable assistance, as 

well as to level the playing field from provider to provider. Families 

should not have to search to find a company or attorney charging 

the lowest fees, as if they were shopping for a new car. I would personally offer my experience and time to work with the Office of 

General Counsel in developing such a system and means for implementation across the United States. 

One final thought. All veteran benefits, including compensation, 

pension, housing, healthcare, job training, and education programs 

have been set in place to prevent our nation’s veterans and their 

families from becoming destitute. As John Gingrich, Department of 

Veterans Affairs Chief of Staff, expounded in his reply last month 

to the GAO, ‘‘VA’s improved pension program was designed by Congress to promote economic security to financially disadvantaged 

wartime veterans and their surviving spouses without delay.’’ Be 

very cautious about turning this valuable pension into a welfare 

program, with an arduous approval process that only helps those 

completely impoverished. Our veterans, who risk their lives for this 

country and our freedom, deserve better than that. 

Senator WYDEN. Ms. Schwarz, thank you. I know we’ll have some 

questions for you in a moment. We appreciate your testimony. 

Mr. McLenachen, we appreciate your coming. We’ve already introduced you, and I’ll look forward to your testimony. And I will 

tell you, I think the committee is especially interested in what Senator Nelson was talking about, and that is how it was that the 

number of these firms, these pension poachers, has mushroomed 

into several hundred, and where was the VA in terms of trying to 

address these issues. So, we welcome your testimony. 

STATEMENT OF DAVID MCLENACHEN, DIRECTOR, PENSION 

AND FIDUCIARY SERVICE, OFFICE OF DISABILITY ASSISTANCE, U.S. DEPARTMENT OF VETERANS AFFAIRS, WASHINGTON, DC 

Mr. MCLENACHEN. Yes, sir. Thank you. 

Chairman Kohl, Ranking Member Corker, and members of the 

committee, thank you for the opportunity to discuss the Department of Veterans Affairs’ pension program. The VA’s pension program provides supplement income to wartime veterans who are either 65 years of age and older, or permanently and totally disabled, 

due to non-service-connected disabilities, and meet certain income 

and net worth requirements. 

From its inception in 1979, VA’s improved pension program has 

been designed to provide economic security to financially disadvantaged wartime veterans and their survivors by paying pension ben-
17 

efits quickly, and without the extensive development of evidence 

often required with VA’s disability compensation program. The VA paid over $4.5 billion in pension benefits to almost 

314,000 veterans and 202,000 survivors in 2011. During that year 

alone, VA completed nearly 50,000 original claims for veterans’ 

pension and over 60,000 for survivor’s pension, while maintaining 

an accuracy rate of nearly 98 percent. 

In addition to the basic rates, pension program provides for enhanced rates, which have become known by the type of disability 

required to establish an entitlement for each, aid and attendance 

and housebound. These are not unique benefits, but rather increased monthly pension amounts paid to veterans and surviving 

spouses, based on additional disability. VA provides pension at the 

aid and attendance rate to persons who require assistance with activities of daily living, are bedridden, a patient in a nursing home, 

or have severe vision disability. Between 2007 and 2011, VA granted over 144,000 veterans’ claims and over 137,000 survivors’ claims 

for pension at the aid and attendance rate. 

In its recent report, titled, ‘‘Improvements Needed to Ensure 

Only Qualified Veterans and Survivors Receive Benefits,’’ GAO concluded that the design and management of the pension program 

did not limit pension to only those with financial need, and that 

many organizations helped pension claimants transfer assets in 

order to meet the net worth limitations for pension. VA generally 

agrees with the GAO’s conclusions. 

GAO’s first recommendation was that VA modify its pension application and eligibility verification report forms to ensure that 

claimants and beneficiaries have space to report transfers of assets 

and to specify the type of assets transferred. VA concurred with 

this recommendation, and has already begun the process to revise 

the relevant forms. GAO’s second recommendation was that VA 

verify financial information during the initial application process 

by requesting additional supplementing documentation, such as 

bank statements or tax returns, or using automated databases. 

VA’s priority goal is to decide claims within 125 days, while 

maintaining 98 percent accuracy. Accordingly, VA concurs in principle with this recommendation, but believes that further analysis 

is required to determine the best way to conduct additional upfront 

verification of income and assets without delaying the adjudication 

of claims or unnecessarily burdening pension claimants and beneficiaries, many of whom are elderly. 

VA also concurred with GAO’s third recommendation that VA 

improve coordination between its pension and fiduciary programs 

to identify unreported assets, but requested that VA close the recommendation, because current procedures require VA’s fiduciary 

field examiners to report to the Veterans Benefits Administration 

Pension Management Centers any credible net worth and income 

information that would affect a beneficiary’s pension benefit. 

Finally, GAO’s fourth recommendation was that VA should revise its procedures manual regarding the types of assets, such as 

annuities and trusts that should be counted as part of net worth, 

and establish criteria for spending down net worth before becoming 

eligible for pension benefits. VA concurs with GAO’s recommendation, but disagrees with the proposed method of implementation. 
18 

VBA’s adjudication procedures manual interprets VA regulations 

and establishes non-substantive policies and procedures for personnel to follow in adjudicating benefit claims. 

Unlike regulations, manual provisions are not binding on the 

agency or claimants, and cannot be used to impose obligations on 

claimants. For this reason, we began drafting proposed regulations 

in March, which would address the effect of pre-filing asset transfers on pension eligibility. Upon completion of this rulemaking, we 

will amend our manual provisions consistent with the new regulations. 

In conclusion, I want to affirm VA’s commitment to improving 

customer service for our pension beneficiaries, while also improving 

the integrity of the program. Before GAO issued its report, VA 

began work to revise the program integrity measures needed to ensure that only veterans and their survivors with demonstrated financial need receive the benefits and services they have earned. 

The interest in our program expressed by GAO and this committee 

reflects the importance of this effort. 

Mr. Chairman, this concludes my prepared remarks. I would be 

happy to address any questions or comments regarding my testimony here today. 

Senator WYDEN. Mr. McLenachen, thank you very much for your 

testimony. I want to let my colleagues ask questions before I do. 

I will tell you, Mr. McLenachen, I did read that you agree with the 

Government Accountability Office’s recommendations, but I’m still 

puzzled about why we had to get to the point where the Government Accountability Office had to make recommendations to clean 

up this program that you-all run. And I’m going to ask you some 

questions about that after my colleagues have had a chance. And 

we’ll start with Senator Corker. 

Senator CORKER. Thank you, Mr. Chairman, and thanks for your 

leadership, and all of you on this issue, and certainly, the witnesses 

provide quite a context here, and I thank you. And I’m certainly 

sorry, Ms. Schaffer, for the experiences your family have been 

through. 

Ms. Schwarz, I know that you run a company that’s a national 

company. You mentioned that, you know, you do not charge an upfront fee to talk with veterans and talk to them about what services might be available. How does your company make money? 

What are the products that you offer? 

Ms. SCHWARZ. We’re incredibly upfront about how we make 

money, and so that’s a very valid question. My company is a private financial services company. So, we do sell the annuities that 

are mentioned in the report, but responsibly. So, we are selling immediate and deferred annuities, under VA guidelines, to help families become eligible, but not the typical $500,000 or $1 million that 

were referenced in the GAO report. 

Senator CORKER. So, you were talking about the gaps, I think, 

between what the cost of the services are, not counting—not services. I’m talking about being able to stay in a home, not counting 

all the costs of prescriptions and everything else to go with it. 

So, explain the typical structure of a deal that, where someone 

comes in, you take application, you sell them annuity that fills the 

gap, I guess, by using their existing assets, is that correct? 
19 

Ms. SCHWARZ. Uh-huh. 

Senator CORKER. Walk us through that. 

Ms. SCHWARZ. Sure. 

Senator CORKER. Just so we understand it. 

Ms. SCHWARZ. So, let’s say you have a typical client, typical per- son who wants to apply. They probably have $200,000. They have 

the $200,000, because, like Ms. Schaffer’s family, they sold a home, 

and that’s where the primary amount of the assets come from. 

They’re moving into an assisted living, as opposed to an independent living. 

Senator CORKER. Right. 

Ms. SCHWARZ. With those $200,000, we would recommend that 

they put some of it in a reserve account, obviously, for additional 

expenses, some in a reserve account, typically, a money market account or a checking account, easily accessible, in the children’s 

name as well, probably do an immediate annuity that would provide them some additional income, which you reference as that gap. 

They need to bring in another $1,000 or $2,000 a month to pay 

their assisted living, because $3,300 is the average. However, we 

see it more in the $4,000 or $5,000 range, depending on the level 

of care that somebody moves into, or starts at. And then whatever 

was left will put into a deferred annuity, in the children’s name, 

which would, yes, make them eligible. 

The products that we choose to use have a lot of liquidity, and 

there was reference in the GAO report that people are not able to 

get in any of their funds until after the veteran is deceased. That 

would be irresponsible planning. And so, I am in total agreement 

that there are planners that are doing that, and I would recommend that that does get looked at. However, that’s not my company. 

Senator CORKER. So, the annuity is liquid, because once it’s not 

being utilized by the senior, you can then sell it. Is that what 

you’re saying? 

Ms. SCHWARZ. No. If you use correct products, that have a 10 

percent withdrawal, penalty-free, there are products that have up 

to 50 percent withdrawal, penalty-free, cumulative up to 5 years. 

So, in the fifth year, someone can actually take 50 percent of their 

annuity out. 

The other thing that a financial planner should do, to be responsible, is look at what the person’s needs are for the next 5 years. 

We’ve talked about Medicaid briefly. That is the look-back for Medicaid, and to move forward with planning if there are not enough 

liquid assets or ways to tap into the annuity during those 5 years, 

if the care expense increases, is irresponsible. 

Senator CORKER. And you are aware then, though, there are 

practices out there by companies that apparently don’t operate the 

same way that you do, that are ripping off senior veterans. 

Ms. SCHWARZ. Absolutely. I think they’re looking at annuities 

that are in the agent’s best interest, higher commissions. They’re 

not focusing on the long-term plan, a five-year plan, or longer. Yes. 

Senator CORKER. And what would be the best way to keep the 

kind of thing that happened to Ms. Schaffer from happening? 

Ms. SCHWARZ. Well, as I was proposing, it would be wonderful 

if companies like us could contract with the VA, work under some 
20 

certification program through the VA. An analogy to that would be 

the VA contracts with homecare agencies. Homecare agencies provide aids to veterans that need homecare. They’re paid by the VA. 

They’re contracted with the VA. That would be a great way for private companies to continue working in this arena, and have oversight by the VA. 

Senator CORKER. And do you have to have some kind of agreement with the VA to provide the kind of services that you do right 

now to veterans? 

Ms. SCHWARZ. Currently, there’s nothing available such as that. 

No. 

Senator CORKER. So, let me ask you this. Why is it that so many 

entities are springing up, and why is there such a need for seniors 

to have this kind of financial advice? I mean is there something 

that we’re not doing right on our side of the equation, as it relates 

to making these services available in such a way that seniors don’t 

have to go outside the norm to have them provided? 

Ms. SCHWARZ. I think that’s a two-part question, so let me answer the first. I think it’s springing up, because it seems like it’s 

an easy way to earn a dollar. Quite frankly, it’s not. You need to 

really pay attention to these families year-in and year-out, and 

have a staff that’s happy to support them. That’s how we’re structured. Some people are doing it, because they think it’s a one-time 

fill out an application, do the annuity, and then you’re done. Make 

the commission. 

Senator CORKER. To your knowledge, whose responsibility is it to 

make sure these shady operators are not doing what they’re doing? 

Ms. SCHWARZ. I think the only body that could probably do that 

would be the VA. I don’t know who the responsible body would be 

to weed out the shady operators. I think if we were allowed to be 

certified or contracted, checked out, audited. My office is always 

open. People are welcome to come and visit. That would be a way. 

Senator CORKER. If I could ask maybe one more question. 

Senator WYDEN. Of course. 

Senator CORKER. From our VA representative, is that you-all’s 

responsibility, to weed out shady operators? 

Mr. MCLENACHEN. Sir, the problem with that suggestion is, VA 

is in the business of delivering benefits to our veterans. We’re not 

in the business of regulating the healthcare industry, the financial 

services industry, and I think that’s the one thing that we have to 

understand here, is that, you actually asked a very good question, 

is who should be responsible for monitoring the type of activity 

that we’re talking about today. 

If there are people in the financial services industry, the legal 

services industry, anyone else involved in this that are basically 

violating the law that’s established by the State in which they’re 

doing it, they should be prosecuted, or charged, or some kind of 

civil penalties should be provided for that activity. 

Senator CORKER. But, you believe that to be external to the 

charge, if you will, that you’re given at the VA? 

Mr. MCLENACHEN. Yes, sir. With this one exception. The Department of Veterans Affairs does accredit individuals to provide representation, claims assistance type services for our veterans and 
21 

their survivors. So, individuals that have been accredited for that 

purpose are authorized by VA to provide that type of service. 

If they violate the standards of conduct that we have in place for 

providing that type of service, we can suspend or cancel their accreditation. That program is run by the Office of General Counsel. 

But, with that exception, our focus has to be on delivering benefits 

in a timely and efficient manner to our veterans and beneficiaries. 

Senator CORKER. Mr. Chairman, thank you for the time. And I 

would say to Ms. Schwarz, as we move ahead with this, I would 

certainly love to have input as to how to weed out slackly operators. I assume by virtue of you being here you may not be considered one of those. I have no knowledge of that, by the way. But I 

know that for people who do conduct themselves in a responsible 

way, assuming that’s who you-all are, I know having people who 

don’t candidly hurts tremendously, and I welcome your input, and 

the input of any of you if you move ahead. So, thank you. 

Senator WYDEN. Thank you, Senator Corker. 

Senator Nelson. 

Senator NELSON. Thank you, Mr. Chairman. Mr. McLenachen? 

Mr. MCLENACHEN. Yes, sir? 

Senator NELSON. Are you a veteran? 

Mr. MCLENACHEN. Yes, I am. 

Senator NELSON. Do you have immediate family that are veterans as well? 

Mr. MCLENACHEN. Yes, I do. 

Senator NELSON. I would assume since you’re a veteran and you 

would have immediate family, that to hear a story like Mrs. 

Schaffer’s, you would be outraged. 

Mr. MCLENACHEN. I am. Yes, I am. 

Senator NELSON. And yet, this happened, and it is one of the reasons that this committee has been called to examine. So, you have 

seemed to put some distance between the department and the responsibility to see that these veteran benefit programs are being 

conducted so that the veteran is getting the benefit. Why do you 

think that the department doesn’t have a responsibility to check 

these programs? 

Mr. MCLENACHEN. Well, Senator, let me clarify it. I’m glad 

you’re giving me that opportunity, if I was unclear. Let me say that 

I’m very pleased that the committee is holding this hearing. And 

the reason why I say that is that I’m proud to have the opportunity 

to take on this position, because one of the issues I really wanted 

to address when I took this position on was this very issue that 

we’re discussing today. I was aware of it when I took this position, 

and just to be clear, we did not wait for the GAO to come out with 

its report. 

As I stated in my testimony, we’ve been working on this issue, 

and we already have draft regulations that we’re looking at now 

that deal with these very issues. 

Senator NELSON. Okay. Please clarify. The question is: Do you 

think it’s the responsibility of the department to make sure that 

these programs are working? 

Mr. MCLENACHEN. Yes, sir. To make sure that the programs are 

working, yes, sir, it is. 
22 

Senator NELSON. And so you said that you’ve addressed these 

problems through formulating regulations, because does that mean 

that you recognize that some of these programs are not working? 

Mr. MCLENACHEN. We recognize, sir, that there are individuals 

who may have been granted benefits. We don’t have good information either from GAO or from us internally how much that has occurred, but we agree that it has occurred. And to the extent it has 

occurred, that’s not the purpose of this program. And that is what 

we have recognized, and that’s what we’re addressing. 

My comment earlier was, to the extent that the problem is that 

financial planners are taking advantage of veterans, or facilities 

are taking advantage of them, VA doesn’t have any authority to 

regulate those industries. What we do have authority to do, sir, is 

to make sure that we close what was referred to earlier as a loophole, to close that up, so that everybody out there knows that there 

is a look-back period, that there are rules against transferring assets to qualify for the benefits. 

Now, there’s been some discussion about attorneys who are advising individuals to structure their assets. Well, if there’s a clear 

regulation or statute on the books that identifies the rules regarding those transfers, I would feel pretty good about saying that attorneys are not going to be advising people, hey, transfer your assets, because that will help you apply for benefits. 

Senator NELSON. I’m going to interrupt you, because time is running out. And you’re talking about rules and regulations, and so 

forth. What about just plain communication? 

Mr. MCLENACHEN. Yes, sir. 

Senator NELSON. What is the VA doing to communicate sufficiently for veterans so that they’re not taken advantage of. 

Mr. MCLENACHEN. Sir, there’s a number of steps we’re taking. 

As, I believe it was Senator Wyden mentioned, that the important 

element is education. I agree with that completely. The number of 

steps that were taken, for example, is even something down to as 

basic as the COLA letters, the cost of living adjustment letters that 

we’re sending out. We’re putting information in those letters about 

enhanced pension benefits. We’re making contact with industry 

groups, professional groups that work in the healthcare industry, 

to go out and meet with them, do presentations about our benefit 

program. 

Senator NELSON. And is part of that communication, be on the 

lookout for crooks? 

Mr. MCLENACHEN. Yes, sir. And we think that that’s a critical 

component, is to tell people about what’s required for the benefit, 

who can represent you, who can charge fees, whether you can 

transfer assets. We think that’s an important component of it. So, 

all of our outreach activities are going to be geared toward delivering that type of message. 

We have a benefits assistance service that is helping us develop 

products for doing that, so it’s not just going out and meeting people face to face, but developing things like short video clips that explain this information that could be distributed nationally to nursing homes and other facilities. What we really need to do is reach 

family members. 
23 

Senator NELSON. Ms. Schaffer, and I’ll conclude with this, what 

do you think the VA could have done that would have alerted your 

family so that your father would not have been taken advantage 

of? 

Ms. SCHAFFER. First of all, one of the reasons that we actually 

went with this program was because the attorney represented himself as being accredited by the VA. We took that at heart, saying 

that it had been looked at, that it was okay. It was something that 

we could follow-through with. Maybe looking into more how people 

are accredited, and how they take that accreditation and present 

it to the public. 

Senator WYDEN. Thank you, Senator Nelson. 

Senator Tester. 

Senator TESTER. Yes. Thank you, Mr. Chairman. I will start out 

with you, Mr. McLenachen. Thank you for your service. We appreciate your service to this country. 

Mr. MCLENACHEN. Thank you. 

Senator TESTER. You said you agreed with the GAO recommendations. Can you tell me when they’ll be implemented? 

Mr. MCLENACHEN. I can’t give you an exact date, sir, but I can 

tell you that right now we’re working on the forms that they recommended that we revise. That’s a critical component of this. My 

staff has draft regulations ready. 

Senator TESTER. Okay. 

Mr. MCLENACHEN. We have draft regulations all ready. We’ve 

been working on them for months. 

Senator TESTER. Okay. What I just need to know from you is, if 

you could get back to Chairman Wyden on when you anticipate 

those recommendations, a timeline for them to be implemented, 

that would be great. 

Senator TESTER. I assume you’re working on it. It sounds like 

you are. 

Mr. MCLENACHEN. Yes, sir. 

Senator TESTER. Claim assistance. Ms. Schaffer talked about the 

fact that they dealt with an organization that had been accredited 

in claims assistance. I don’t know if you’ve had a chance to look 

at her testimony or not, but did the VA accredit the outfit that took 

her dad and mom to the cleaners? 

Mr. MCLENACHEN. I can’t answer the question of whether, I believe it was an attorney, was the testimony, and actually, yes, sir, 

I did. Before I came to testify, I checked the general counsel’s web 

site, and that attorney is accredited by VA. 

Senator TESTERS. Okay. What are the ramifications of that attorney now? What process do you go through to determine if Ms. 

Schaffer’s accusations are accurate? And then what do you go 

through to determine what you’re going to do with him? 

Mr. MCLENACHEN. The Office of the General Counsel has authority to suspend or cancel that attorney’s accreditation. 

Senator TESTER. Is there anything else other than that? 

Mr. MCLENACHEN. Other than that, no sir. That’s the limit of 

VA’s authority. 

Senator TESTER. Okay. So, what you are saying is, a person could 

go out and make a claim that they were accredited to a veteran, 

and not be accredited, or be accredited, and be a crooked person 
24 

that’s accredited, and the only thing that happens to them is they 

just pull their accreditation? 

Mr. MCLENACHEN. That’s the limit of our authority right now. 

Senator TESTER. Who gives you that authority? 

Mr. MCLENACHEN. Congress does, sir. 

Senator TESTER. Okay. We might want to look at that. Ms. 

Schwarz, you talked a little bit about 98 percent, and I’m just kind 

of quoting by the notes I got off your testimony. Thank you-all for 

being here, by the way. All of you. 98 percent are financially eligible right away. That means when they walk through the door to 

your organization, or you walk through their door, representing 

your organization, whichever it may be, that 98 percent of the folks 

don’t have to have a reserve account, immediate annuity, or deferred annuity. They’re already eligible. 

Ms. SCHWARZ. Yes. Most of our seniors, the average amount of 

savings, excuse me, median liquid assets of a senior 87 years old 

living in a facility, is $125,000. 

Senator TESTER. Yes. So, you don’t have to do a darn thing. 

Ms. SCHWARZ. Correct. 

Senator TESTER. They’re ready to go. 

Ms. SCHWARZ. Yes. 

Senator TESTER. So, you’re basically saying out of the 69,000 

families that you’ve dealt with, 1,380 of them are ones that you’ve 

had to really work with. 

Ms. SCHWARZ. Yes. We have not done—as I was making my 

statement, it’s not as rampant—— 

Senator TESTER. So, the rest of them, you’re not recommending 

to get into annuities or anything. 

Ms. SCHWARZ. Right. 

Senator TESTER. You’re just helping them access the program. Is 

that correct? 

Ms. SCHWARZ. Absolutely. Yes. 

Senator TESTER. Okay. Could you give me any idea, Mr. 

McLenachen, have you been in contact with the veteran service organizations, as far as letting them know about the programs, and 

what’s out there, and potential rules out there. 

Mr. MCLENACHEN. Yes, sir. We regularly attend veteran service 

organization conferences. They meet with us at VBA headquarters. 

Just yesterday, I was up in Atlantic City. 

Senator TESTER. So, this is regular communication with the 

VSOs, right? 

Mr. MCLENACHEN. Yes, sir. 

Senator TESTER. Ms. Perkio, from your perspective, does the VA 

work with the American Legion so that you can educate veterans? 

And I don’t want to get you two in a fight here. Just tell me what’s 

going on. 

Ms. PERKIO. This was not brought to my attention. When I put 

out my request throughout the American Legion, this was not 

brought up that it had been put out there. So, it may just be a communication issue on my part, but it wasn’t—this was not anything 

that I had heard before. 

Senator TESTER. Okay. Well, I want to go back with what Senator Nelson said, and that is, I think, communication is critically 

important. And the VSOs, by the way, I believe, are an untapped 
25 

group of folks out there that just have an incredible opportunity to 

do outreach and let people know what’s going on. 

I had a question for Ms. Schwarz. Are you accredited as claim 

assistance? 

Ms. SCHWARZ. The company is not. Private companies are not yet 

allowed to be accredited. No. 

Senator TESTER. Well, hold it. Lawyers aren’t exactly, they’re not 

public entities. They’re private entities. You’re a credit lawyer, 

right? 

Ms. SCHWARZ. I’m not. 

Senator TESTER. So why don’t they accredit you. 

Ms. SCHWARZ. They’re not allowing companies to become accredited. 

Senator TESTER. Talk to me about this. 

Mr. MCLENACHEN. Sir, let me explain. Congress has given us authority to recognize veteran service organizations. Those are the 

only organizations that we accredit. However, individuals can be 

accredited, non-attorneys, to be claims agents. So, Ms. Schwarz 

could apply to be a claims agent and represent veterans in the 

process. 

Senator TESTER. Why haven’t you? By your testimony, you’re one 

of the good guys. 

Ms. SCHWARZ. Uh-huh. I have. 

Senator TESTER. You have. 

Ms. SCHWARZ. And I have not been approved. 

Senator TESTER. You’ve been turned down. 

Ms. SCHWARZ. Correct. 

Senator TESTER. When did you apply? 

Ms. SCHWARZ. I don’t have the date off the top of my head. I 

don’t want to give you misinformation. I’d be happy to provide it 

to you. 

Senator TESTER. A month ago? Six months ago? Year ago? 

Ms. SCHWARZ. Year ago. Years ago. Yes. 

Senator TESTER. Years ago? 

Ms. SCHWARZ. I have a file. I could give it to you. 

Senator TESTER. Typically, how long does it take to get accredited, Mr. McLenachen? 

Mr. MCLENACHEN. I don’t have that information with me, sir, 

but it depends on whether it’s an attorney, a claims agent. A 

claims agent actually has to take a test and pass a test to be accredited. 

Senator TESTER. Okay. Just real quick in closing, and I want to 

thank the chairman. I went over time, and I don’t even belong in 

this committee, but I appreciate your guys’ flexibility to allow me 

to ask some questions. 

I don’t care what happens in life, it seems like there’s people who 

play by the rules and there’s people who don’t. And if you’re unfortunate enough to get hooked up with somebody who doesn’t play 

by the rules, you can lose, in your case, a lifetime, your parents’ 

lifetime of savings. We’ve got to figure out how to fix it. 

I, quite frankly, think that you ought to have greater authority 

than just pulling their accreditation, if, in fact, somebody you accredit does something that’s inherently bad to our veterans, because that’s not the trust you place in them initially, and I think 
26 

that that’s not a big enough penalty to stop people from doing stuff, 

if they’re inherently crooked. 

And so, I appreciate the work this committee is doing, Mr. Chairman. I just think that it’s good, and I think that the fact you had 

Senator Burr here earlier, Senator Murray, the chairman of VA 

Committee, if there’s things we can do to work with you, since I’m 

a member of that committee, too, to make sure that we minimize 

this, in fact, wipe it out, count me in. 

Thank you-all for your testimony. 

Senator WYDEN. Thank you, Senator Tester. And we talked earlier, when Senator Burr was here, I mean the fact that under the 

leadership of Senator Murray and Senator Burr, the Veterans 

Committee and this committee are teaming up. As we know, you 

don’t see this kind of cooperation all the time here in the United 

States Senate, and we really appreciate your leadership. 

Let me begin with some questions, particularly for you, Ms. 

Schaffer, and you, Ms. Perkio, and we’ll just get all of you involved 

in the discussion. Obviously, Ms. Schaffer, you now are very much 

aware of the eligibility requirements for aid and attendance. The 

pension poacher, in your particular case, in effect, that was Mr. 

Ocker, as I understand it, guaranteed acceptance for your father. 

Do you think there is any way he could have filled out the paperwork to get your father that benefit without providing inaccurate 

or misleading information? 

Ms. SCHAFFER. I personally cannot answer for what Mr. Ocker 

would have done. I do know that he wanted the $4,000. My father 

did not have $4,000 to give him. But, his personal guarantee, and 

the fact that he brought in the gentleman from the facility and told 

him that my father did qualify, like I say, I cannot answer how he 

would have done it, but he did tell us that we had everything 

there, my father passed all of the eligibilities that he would need 

to, and that he definitely would have qualified. 

Senator WYDEN. My sense was, as I listened to you and heard 

from the staff, was that he would have had to lie to qualify your 

father for aid and attendance. Do you think that’s by and large correct? 

Ms. SCHAFFER. To be honest with you, I would hate to think that 

someone would lie in order to get benefits of any sort. I cannot, 

once again, speak for him, whether or not he would have, but sitting in the meeting with him and the manager from the facility, 

and he said that my father would qualify, I don’t know how he 

would have—what he would have done in order to assure that. 

Senator WYDEN. Okay. Ms. Perkio, you all, at the Legion, do a 

terrific job for the vets, and, of course, your service, in terms of assisting these veterans, is free of charge. What do you think of this 

practice of charging fees for financial instruments like deferred annuities and that sort of thing? What do you-all think of that there 

at the Legion? 

Ms. PERKIO. The American Legion finds that abhorrent. It’s taking advantage of a system that is designed to work for our permanently disabled and elderly veterans who are wartime, and their 

widows. The American Legion does not agree with being able to basically hide an asset to qualify. 
27 

Senator WYDEN. What I said, I ran the legal aid program for senior citizens for a number of years before I came, you know, to the 

Congress, and listening to all of you just reaffirmed that it seemed 

to me that the work you do and other congressionally chartered organizations ought to be the norm. Now, there may be exceptional 

circumstances and the like for going to some of these financial 

planners and paid firms, but I’m certainly going to do everything 

I can to get across the principle to the VA and others that your 

kind of services that you do day-in and day-out for veterans, and 

have for many years, ought to be the norm. That ought to be the 

standard. And under general rule, we want veterans to pursue 

that. 

Now, Mr. Bertoni, I’d like to turn to you and go to an example 

from your testimony and your report. You said your investigators 

contacted suspected pension poachers, posing as the adult child of 

an 86-year-old veteran with enough assets to be disqualified for the 

Aid and Attendance pension. You referenced a company that proposed the purchase of a deferred annuity that would likely not generate payments during the veteran’s lifetime. Can you give us the 

name of the company in this particular example? 

Mr. BERTONI. That’s correct. It was Veterans Financial, Ms. 

Schwarz’s company. We had between $350,000 and $500,000 in assets. 

Senator WYDEN. Okay. Ms. Schwarz, you provided us a timely response with respect to our initial request for information. We do 

have, as you know, additional questions, based on the original response. We have not, to date, gotten answers to those questions. 

We would hope that you’d commit to providing us a response for 

the record. And there are a couple of questions that I just need to 

ask to get into the issues that I think are appropriate this afternoon. 

Business records indicate that Veterans Financial, Inc. was established in 2008 by Emily Newmark. Is that you? 

Ms. SCHWARZ. Yes. 

Senator WYDEN. Okay. What is your relationship with Brian 

Newmark, who founded Veterans Financial Services, Inc. in 2004 

and is currently incarcerated for fraud? 

Ms. SCHWARZ. Why is that relevant to the conversation that 

we’re having about asset transfer today? 

Senator WYDEN. Well, I’ll make my own judgments about why 

something is relevant. And if you would just answer the question 

that I posed, that would be helpful this afternoon. 

Ms. SCHWARZ. I think my marital status is a protection by privacy, and I don’t feel that I should have to answer my marital status. 

Senator WYDEN. Besides Victoria Larson, and John White, and 

Mary Chiaveroli, are there any other Veteran Financial employees 

or associated independent contractors who have been indicted for 

fraud or named in class action lawsuits? 

Ms. SCHWARZ. I don’t know the answer. To be specific, we do 

have a few employees from the prior company, but I can’t tell you, 

to be exact. I’d be happy to provide you that answer, but I don’t 

have it at the moment. 
28 

Senator WYDEN. We would like that. And when would you be 

able to provide that? 

Ms. SCHWARZ. I could provide it this week to you. 

Senator WYDEN. Very good. Thank you. 

Ms. Schwarz, I’d now like to refer to an enlarged version of a promotional material from your company, where it’s highlighted, it 

says, and I quote, ‘‘With proper planning, most can become eligible, 

and Veterans Financial, Inc. specializes in this type of planning.’’ 

You stated in your written testimony that, ‘‘Charging astronomical fees for trusts or other work is despicable and embarrassing 

behavior.’’ Yet, you’ve reported to this committee 4-year earnings 

on commissions from annuity sales of over $9 million, based on 

sales of 479 annuities or other insurance-type products. This type 

of planning, your specialty, according to your own ad, averages just 

over $19,000 per sale, according to your firm’s numbers, and that 

is almost double the highest fees mentioned in the GAO report. 

Now, you have said your company provides full disclosure. Do the 

veterans who come to you for help, based on advertising like this, 

know how much you are likely to gain from your business with 

them? 

Ms. SCHWARZ. Are you asking if we give them our commission 

statements? 

Senator WYDEN. Yes. 

Ms. SCHWARZ. We would give them our commission statement, if 

they asked for it, yes. We’re not trying to hide that we are earn 

an insurance commission from doing an annuity sale. 

Senator WYDEN. Would they understand before the sale—the reason I feel strongly about this is that we have so many organizations who do this for free. Do these veterans have a sense, prior 

to doing business with you, what kind of money you’re likely to 

make off of them? You’ve said that you’ll give it to them if they 

ask. 

Ms. SCHWARZ. I think I need to make something clear, though. 

An annuity commission does not come out of the senior’s assets. If 

they put $100,000 in the account, the company is compensated approximately 6 percent. 3 percent of that goes to the agent. 3 percent stays with the company. There’s not 6 percent taken out of 

that $100,000. There’s nothing coming from the senior. So, we do 

not charge them fees, as I stated. 

Senator WYDEN. Well, the Government Accountability Office 

talks about fees that are charged, and the type of specialty that 

you offer, according to your ad, averages just over $19,000 per sale, 

according to your numbers. And it just seems to me that a veteran 

ought to know what you’re likely to make off them. 

Now, let’s go to another visual, again, with a page from your web 

site. This page titled ‘‘Assisted Living Community Staff Training’’ 

lists training available from your company. The highlighted section 

includes the offering, ‘‘How to Use the Benefit as a Marketing and 

Sales Tool.’’ Now, you heard Mr. Bertoni’s testimony earlier on the 

intent of this program, and the VA’s policy on estate preservation 

and asset protection. 

Now, your own web site shows that you specialize, you specialize 

in moving assets to make financially over-qualified veterans eligible, and offer training on how to advertise aid and attendance to 
29 

maximize enrollment rates at assisted living facilities. And I’m just 

trying to figure out how that is in the spirit of the aid and attendance, you know, program. 

This is a program for very frail, vulnerable seniors who served 

our country. We’ve heard from the American Legion that they can 

provide these services free. We’ve asked experts at some length 

that the norm ought to be for a veteran to get these services free 

of charge. And I’m just trying to get a sense of how what you-all 

do is consistent with the intent of the program. 

The intent of the program, I don’t see anything in this program 

that talks about how to be a specialist, a specialist in moving assets around to make financially overqualified veterans eligible, and 

offer training on how to advertise aid and attendance to maximize 

enrollment rates. So, tell me how what you-all do is consistent with 

the spirit of this program. 

Ms. SCHWARZ. So, I think it’s a two-part question, or a multiplepart question. First of all, the training that we have offered for senior living professionals is about the VA benefit, about the four criteria and the eligibility. It’s not training on marketing on how to 

get people to move in with the benefit. It’s about the four criteria, 

which unfortunately is not being provided to them by any other 

sources. 

They’re coming to us, asking for information about the criteria, 

because a lot of the people in the assisted living industry are new 

to the industry, and they’re not familiar with it. It is a short presentation about how to understand the benefit, so they can explain 

it to a senior. 

I’m trying to think of the rest of your question. 

Senator WYDEN. Well, the rest of the question, ma’am, deals with 

the fact that on your web site you say you specialize in moving assets to make financially over-qualified veterans eligible. 

Ms. SCHWARZ. I think the web site is exactly what my testimony 

said. We do understand how to make families, whose asset level is 

not destitute, eligible for VA benefits, under the current regulations. If the regulations are changed and you do a 3-year look-back, 

as was testified by Senator Burr, we’re going to have to work within the regulations. 

Senator WYDEN. Ms. Schwarz, that’s simply not accurate. Let me 

just read you from their policy manual, or as it’s been cited in 

the—— 

Ms. SCHWARZ. Okay. 

Senator WYDEN [continuing]. GAO report. ‘‘VA’s policy manual 

specifically states that the VA pension program is not intended to 

protect substantial assets or preserve an estate for a beneficiary’s 

heirs.’’ And that’s the policy manual. 

Ms. SCHWARZ. The GAO’s report just stated that it was legal to 

do —— 

Senator WYDEN. Right. 

Ms. SCHWARZ [continuing]. The planning, and if the Senators 

choose to change that, we will absolutely abide by it. 

Senator WYDEN. But, the GAO says that the pension program is 

not intended to do what you say you specialize in, and that’s what 

concerns me. And I guess I’m just going to wrap it up. 
30 

You heard what Mr. Bertoni said about their investigators, looking at suspected pension poachers, posing as the adult child of an 

86-year-old veteran, with enough assets to be disqualified for the 

aid and attendance pension. And he said it was your company. Any 

reaction to that? 

Ms. SCHWARZ. My honest reaction is, I don’t understand why my 

company is sitting here, being asked these questions, without attorneys, 8,000 accredited attorneys doing trusts, usually of much larger value than anything that we’re writing, are not sitting on this 

panel. That would be an objective panel. I am the only person from 

this side of the table discussing this. I know we do a good job for 

our families. I know my staff is very proud of the work we do, and 

we have a lot of very happy people. It sounds like there are other 

very unhappy people. But, those folks that have done that are not 

here. 

Senator WYDEN. Well, Ms. Schwarz, when the Government Accountability Office describes particular situations, that certainly 

generates interest on my behalf and others, and that’s why you 

were asked to come. 

Let me ask you a question, if I might, Mr. McLenachen. The VA 

IG has been getting complaints about this for years. Is it correct 

that the agency has known about this problem for some time? I 

mean we’ve heard about that from those at the agency. Is that correct? 

Mr. MCLENACHEN. Sir, I know that in my former position, before 

I came to this position in the General Counsel’s office, we became 

aware of this issue, and I would say that it was within the year 

or two before I came to this new position we first started hearing 

about this, probably related to the change in law that allowed attorneys and claims agents to charge fees at an earlier point in the 

process. I imagine that’s probably about the time where this started popping. 

Senator WYDEN. So, you’re saying that the agency knew about it 

a couple of years before it began to take steps, or you weren’t in 

the position that you hold now, so you have authority to take these 

steps. Because, I will tell you, we have heard from those who are 

very familiar with this program that the VA had known about 

these complaints for years before action was taken. Is that right? 

Mr. MCLENACHEN. Sir, what I can tell you is what I have knowledge of, and what I have knowledge of is when we got these type 

of complaints forwarded to us by the Veterans Benefits Administration, and when I was in the General Counsel’s office, was our policy 

to advise the attorney general, the State where the incident occurred, of this issue, and to have them look into it. That was our 

policy at that time. 

Senator WYDEN. Senator McCaskill has arrived, and I just want 

to make it clear to all of you that it’s my view that this program 

has become a magnet for sleazy con men and rip-off artists who 

would exploit frail and vulnerable veterans. And there are two consequences of this. 

First, you know, veterans get hurt, and we saw that with this 

really shameful example that you’ve given us this afternoon, Ms. 

Schaffer, with respect to your folks. And that was just about as 

outlandish as anything I’ve heard about over the years. And as 
31 

you’ve heard me say, this has really been an area that I focused 

on. So, you see veterans hurt. 

And second, it seems to me that when the Federal budget is facing what’s ahead, with budget sequestration and all of these tough 

decisions, the Federal Government and the Senate has a special obligation to protect a program that ought to be a lifeline for the 

needy. That’s what this program is all about. This program is for 

people who need it, rather than people who fleece it, and as I listen 

to these accounts and people trying to manipulate these assets to 

qualify people who are not going to be qualified under normal circumstances, and sell products like deferred annuities that the 

American Legion thinks are simply, you know, a rip-off, this has 

got to get corrected, because if it’s not, in this kind of financial climate, you’re going to see people say, ‘‘Well, maybe this is a program we shouldn’t have, shouldn’t have it, because it’s going to be 

ripped off.’’ 

We want to help needy people, but we don’t want to see taxpayers ripped off. So, it’s time to drain the swamp. And we are very 

fortunate here that one of our best investigators, and a strong advocate for veterans, who has been doing this kind of work for a 

number of years, has joined us, Senator McCaskill, and we welcome any comments you’d like to make, any questions you’d like for 

the panel. 

Senator MCCASKILL. Thank you, Senator Wyden, and thank you 

for spearheading this effort. I think there’s a special place in hell 

for companies that take advantage of veterans in this way. And 

they are taking advantage of veterans, because I have to believe— 

and let me ask the American Legion representative, Ms. Perkio, do 

you think these veterans understand that they’re being asked to 

hide things, because if they didn’t hide them they wouldn’t qualify 

for these benefits. Do you think the veterans understand that 

they’re being asked to commit a form of fraud? 

Ms. PERKIO. No. No, ma’am. From my investigation, in looking 

into this, veterans don’t realize—they’re taking the word of that 

lawyer, or whoever they’re dealing with, and when they’re told they 

don’t need to report it, they don’t think that they’ve done anything 

wrong. And then when they get contacted by the VA, asking for 

more information, because the claim was typically incomplete, 

that’s when it comes out that it should have been reported, and 

then they end up in the situation that we’ve heard about today. 

But I don’t believe that they know that they’re doing something 

wrong. 

Senator MCCASKILL. So, the United States Government, and 

those of us who are privileged to serve it, in whatever capacity that 

we serve it, and you certainly serve it, and the folks at GAO certainly serve it, and obviously, no one serves it better than our veterans, we’re trying to make sure that we honor these people by 

making sure that when they’re old, they are not destitute. And 

some sleazy folks have figured out that they can make money off 

of it. And in the process, they are compromising the integrity of 

these very, very proud men. 

And this is a generation that I’m very familiar with. My dad was 

in World War II, and he didn’t talk much about it. We didn’t even 

know he had a bronze star until after he died, because he was not 
32 

somebody who thought that it was special. He was very humble 

about it. And I guarantee you, the people, I’m sure, Ms. Schaffer, 

that the description I’m doing right now, I think probably sounds 

familiar to you. 

Ms. SCHAFFER. Yes, ma’am, it does. My father doesn’t speak of 

it very often. 

Senator MCCASKILL. So, let me ask GAO—first of all, good work. 

Mr. BERTONI. Thank you. 

Senator MCCASKILL. As you know, I’m a weirdo. I love auditors. 

In fact, when I first came to Washington, David Walker teased me, 

because I have a place that looks over your building, and he said, 

‘‘Let me see if I can get this straight. It was as close as you could 

get to being a government auditor without being a government 

auditor,’’ by where I located my residence here in D.C. This is a 

good report. 

Let me ask you about whether or not we should look at criminalizing this behavior with some more specificity. It seems to me this 

is really a kissing cousin of criminal fraud, if it isn’t out and out 

fraud. Could you speak to that? 

Mr. BERTONI. Sure. Fraud is very difficult to prove. It’s a high 

bar. Right now, the financial planners and attorneys are working 

within—they’re playing the edges. They’re playing the fine lines in 

this program. And they’re very clear in their web sites and in recorded conversations, the 19 recorded conversations that we had, to 

signal that this is allowed under the current framework, and that 

they’re accredited, and that gives them some additional authority 

or reason for you to trust them, but it’s skirting the lines of sort 

of credibility, and they’re still able to work within those confines. 

I really do think that VA needs to look at its accreditation process to weed out those folks who are not providing the products that 

they should be. Criminality is being pursued at the State level. We 

know the State attorneys general are looking at this on an individual level. But, it really is on an individual basis. 

Right now, it is legal. I think statutorily, if you put a look-back 

period, and write this into the law, you could prevent a lot of the 

money-driven transactions and sometimes scams that are happening now. 

Senator MCCASKILL. Have you got legislation drafted, Senator 

Wyden? Do we criminalize it? 

Senator WYDEN. What we’re going to propose, and we would very 

much like to work with the Senator from Missouri, because you 

spent so much time on these issues, Senator Burr and I have been 

working on trying to put forward a look-back approach to make 

sure that people are trying to gain these assets. And, you know, the 

pension poachers, who try to take people who are overqualified, 

and dupe them into signing up for these investments, that we’d 

have a chance to look back and unravel some of these rip-offs. 

That, of course, is what’s done in Medicaid. 

Senator MCCASKILL. Right. Isn’t there a criminal penalty for 

someone who knowingly tries to hide assets for purposes of qualification for a government program in many of our other government programs? 

Senator WYDEN. There is, and you bump up against exactly what 

Mr. Bertoni was talking about with respect to proving intent and 
33 

this high bar for fraud. But, if anybody can figure out how to make 

sure—— 

Senator MCCASKILL. Let’s work on it. 

Senator WYDEN [continuing]. That we take the toughest, most 

aggressive approach to these pension poachers, it will be the Senator from Missouri, and if you would like to pursue this, we’ll talk 

to Senator Burr, and we’re getting ready to put that in. 

Senator MCCASKILL. Well, and also, I think if we draft this appropriately, so that we would have to have a ‘‘knowing’’ standard. 

You would have to knowingly, and I’m not talking about the veteran being criminalized here. I’m talking about the adviser who is 

advising someone that they need to transfer assets or buy these 

certain products in order to qualify for a government benefit. If we 

can draft that carefully enough, I think typically the bar is fairly 

high in these cases. It might not be quite as high in these cases, 

because at the end of the day the people who decide if the evidence 

is there beyond a reasonable doubt are 7, or 10, or 12, depending 

on the State, how many jurors there are in a criminal case or in 

a Federal case. 

These are the kinds of facts that infuriate people. I mean it’s like 

veterans who lie and say they’re disabled veterans, in order to get 

advantages in the law. You know, people do that, also. The fact 

that the class of people that’s being taken advantage of here, as it 

relates to accessing these benefits, are these veterans, I think make 

these very powerful cases. And I think the deterrent effect would 

be enormous, if we could criminalize some of this behavior. 

Mr. BERTONI. If I could add just one thing. Right now, because 

it is such a high bar, I think that’s going to be a difficult thing to 

do. I really do think that if you keep this in the arena of the lookback period, you can allow folks financial planning for estate planning, for retirement purposes, to have an income stream going forward. We all should be doing that. It’s when you are doing it for 

the sole purpose of qualifying for a benefit where it becomes very 

abusive. And we have cases where individuals are going into trusts, 

converting into annuities weeks and just a month before applying 

for benefits. Those are the cases where I think you can make the 

case for fraud. 

Senator MCCASKILL. Well, I think that you could. And by the 

way, we went through a lot of these same issues in the same hearing room on reverse mortgages, when you had people out hawking 

reverse mortgages and to the very same person they sold a reverse 

mortgage to, that was 80-some years old, they sold him a lifetime 

annuity at the age of 82 or 83. You know, obviously, an inappropriate financial product for that person, but it was done in connection with marketing the reverse mortgage, because it doubled up 

the commission for the people that were selling the reverse mortgages. 

So, I thank all of you for being here. I thank the Senator and 

Senator Burr, both, for doing this, and I congratulate GAO on a 

strong audit. And you given me two or three good under-covers, 

and you’ve give me some of these people that are selling this stuff, 

and I know what GAO got on tape, I think some under-covers could 

do a really good job of exposing even more of this, if we looked at 

whether or not, in the most egregious circumstances, we could put 
34 

some criminal behavior in association with this, to protect these 

veterans. 

Senator WYDEN. Look, pension poachers better look out, because 

Senator McCaskill is going to be coming after them. 

Senator MCCASKILL. Well, I think the United States Senate 

should be coming after them. It’s not me. This is really about, I 

hurt for the men and women who might be taken advantage of 

here, because the last thing in the world they want to end their 

life with is being accused of taking something they don’t deserve. 

And that’s what this is really about. I mean this program is supposed to be for poor people, not for people who transfer assets. I 

just hate it, for the integrity of these men and women who have 

served our country that they would have, at the end of their life, 

the notion that somehow they cheated. It’s just not fair to them, 

because most of them, I don’t think, would even be interested in 

doing it for the extra money if they hadn’t been told that it was 

appropriate. 

And thank you for sharing the story of your family. Sometimes 

it’s embarrassing to say, when your family, in many ways, has been 

taken advantage of, but I thank you, Ms. Schaffer, for doing it. And 

I thank you all for being here. 

Senator WYDEN. Senator, you just touched on a point that ironically in 2-and-a-half hours never really got made, and it deals with 

this question of this being a program for people who need it. 

What’s striking about this is seniors who have assets, they have no 

problem at all finding reputable financial planners, and lawyers, 

and counselors. What this has been about is essentially a pattern 

of abuse by people who aren’t either well off, you know, financially, 

under, you know, general circumstances, or have access to these 

professionals. These are about people who are vulnerable, and 

they’re being ripped off, and you’ve made that distinction, and I appreciate it. 

I’ve only one other question for you, Mr. Bertoni, at the GAO. 

One of the practices we heard about fairly late in our inquiry 

struck me as, again, really outlandish, and that was, we heard discussion of those who went to pension poachers, of course, and basically said to the senior, ‘‘You ought to sign up right now, because 

this is what you’re going to have to do to get a good deal. You’re 

going to get a discount.’’ They, in effect, made up this, you know, 

deadline, or hyped a particular, you know, promotion, and, in effect, it’s sort of a twofer, you know, abuse. Again, it’s misrepresentation, but it also discourages veterans from going to the legitimate 

service organizations, such as Ms. Perkio’s and the folks at the Legion. 

Did you find that kind of a problem when you-all were doing 

your inquiry? 

Mr. BERTONI. At least in regard to our 19 calls, we weren’t getting to sort of get the deal of the day to sign up. We are aware in 

our travels and our interviews where folks have been, I don’t want 

to say coerced, but sort of pressured to, you know, do this quickly, 

especially if you want to apply quickly, we can get this done, we 

can have you apply for benefits the next day. 

We do know that some of these organizations have very official 

sounding names. They oftentimes don’t acknowledge that they are 
35 

not representative of the government, and people can be led to believe they are. Again, aggressively promoting the accreditation, 

which lends an aura of trust to what they are telling you, and I 

think it’s a vulnerability in the program. 

As far as deals or sort of what they’re telling clients, we don’t 

know. We’re not privy to those conversations, but we do know that 

the facilities, as well as the providers, are developing relationships, 

and there are referrals going back and forth both ways, from the 

facilities to the providers, to the providers, to the facilities, and we 

know in some cases that there are finders’ fees going back and 

forth. So, there’s clearly a relationship, and the independence here 

is becoming a bit murky. 

Senator WYDEN. The slide that the staff is holding up is essentially one of people pretending to be part of the VA, and obviously, 

these kinds of misrepresentations, people, you know, pretending to 

offer these services that would be of real value to veterans, rather 

than these deferred annuities are exactly what we want to deal 

with. 

We thank you all. We’ve had a good hearing. We appreciate all 

of the witnesses. And with that, the Committee on Aging is adjourned. 

[Whereupon, at 4:00 p.m., the hearing was adjourned.] 

(37) 

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