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WELL-BEINGANDBEINGSAFE:FINDINGA BALANCE

Notice: Published in Alzheimer's Care Today, Sept. 2007, Vol. 8, No.3; pp 265-277. Copyright 2007 Wolters Kluwer Health/Lippincott

Williams & Wilkins. Reprinted with permission for the benefit of participantsin the FTC Fraud Forum, Washington, DC, February 2009.

Further reproduction and distribution without the publisher's permission is prohibited.

Fraud, Vulnerability;

and Aging

CaseStudies

By VIRGINIA H. TEMPLETON, MD, AND DAVID N. KIRKMAN,JD

Defrauding older consumers has become a multi-billion dollar industry. Employing the latest in

communication and funds transfer technologies, organized fraud groups now spot vulnerable older

adults and exploit them from several continents away. In this article, a geriatrician and a consumer

fraud prosecutor from North Carolina describe the vulnerabilities of victims they have encountered

and the techniques by which the fraud groups exploit those vulnerabilities repeatedly. One technique,

"reloading," sometimes costs victims their homes or their life's savings. Readers also will learn the telltale signs of repeat victimization plus techniques for addressing the problem. Brief cases histories

illustrate the authors' comments. t Key words: elder fraud, reloading, repeat victimization scams, "super victims"

For centuries, certain individuals have been willing

to exploit the age-related vulnerabilities of older

adults and steal their life's savings. Traditionally,

these criminals have interacted with their victims face-toface. This exploitation problem has become severe in recent years. The generation that overcame the Great

Depression, won WorldWar II and the ColdWar,ended segregation, and introduced us to so many new forms of music, technology and medical treatment now is being

preyed upon by a sophisticated multi-billion dollar "elder

fraud' industry. Thanks to the technologies developed by

the generation upon which they prey, these criminals

need not defraud their victims face-to-face. From several

continents away,they can identify vulnerable seniors, contact them, and induce them to part with their savings.

In this article, a geriatrician and a consumer protection

enforcement attorney from North Carolina describe this

fraud industry, the vulnerabilities of its victims and the

techniques the scammers have devised to exploit those

Fraud, Vulnerability, and Aging

t

vulnerabilities. The information they share was compiled

from fraud incidents and prosecutions in North Carolina.

Specific victimizations are illustrated in case history boxes

that appear throughout the article. Some of the victims discussed in this article were encountered by both authors in

their day-to-day professional endeavors. The incidents described are not unique to North Carolina. Many of the same

fraud groups prey upon older adults throughout the world.

The worst of this fraud i~dustry's crimes involve repeat victimization of the same vulnerable consumer. Examples of these frauds are listed in Box L' To illustrate

'A much longer list compiled by the North Carolina Attorney General

and entitled "Frauds, Scams and Questionable Business Practices

Cun-entIyTargeting Our Seniors" is available at http://www.ncdoj.com/

seniors/ifs_senior_scams.jsp.

Alzheimer's Care Today 2007;8(3):265-277

Copyright @2007Wolters Kluwer Health Ilippincott Williams &Wilkins

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BOX 1.

Repeat Victimization Scams

Targeting Seniors

.Sweetheart Scams

. Powerof AttorneyAbuses

.Counterfeit Checks

. Nigerian Money

Transfer Scams

.Overseos Sweepstakes

. Overseas Lotteries

. PhonyCharities

.Telephone Psychics

. Home Repair

. Identity Theft

.EstatePlanningScams

. Internet Fraud

.Clergy Scams

.OverseasPaymentAgent

the scammers' techniques and the victims' vulnerabilities,

this article focuses upon 2 cross-border scams (contest

awards and trapped funds) and 1 domestic scam (home

repair). It is hoped that this article will better equip readers to

+

1. recognize the telltale signs that an older client,

relative or friend is being exploited or is about to be

exploited;

2. understand what the criminals behind the scams are

looking for and what they are likely to attempt next;

3. understand age-related changes being experienced

by the victims and exploited by the criminals, and

4. take steps to get vulnerable older adult out of harm's

way.

MEMORY,AGING, AND DEMENTIA

Some may dismiss elder fraud incidents as evidence that

older adults are less capable than they were in their

younger years, but such an assumption would be inaccurate. It is true that older adults often are targeted by scammers and are frequently victimized. Approximately once a

week, the North Carolina Attorney General learns of an

older consumer who has lost more than $10,000 through

a series of telemarketing cons. His staff refers to them as

"super victims." Every 6 or 7 weeks, they encounter another super victim who has lost in excess of $100,000.

Such victims are, overwhelmingly, retired professionals

whose sharp memories, executive decision-making skills

and financial sophistication enabled them to amass such

nest-eggs in the first place. The question thus becomes,

what is behind their decisions to engage in these scandalous transactions, and who among the older adults is particularly at risk? To address this question, it may help to

+

discuss changes in thinking that happen with normal aging

and changes that happen with early dementia.

With normal aging, the brain processes information at

a measurably slower rate but the overall mechanism of

making memories is intact. Each step of making a memory-putting information into the brain, storing it into

long-term memory, and recalling it-requires more focus

than in younger years and takes longer to accomplish.

Older adults are more easily distracted, which can

lengthen the memory-making process. This change in

pace may increase susceptibility to errors in judgment,

especially those judgments requiring quick decisions.

But with concentration older adults can learn new information and grow in intelligence until they die. They can

also learn from mistakes they make. In someone with a

memory disorder, this process is disrupted and the person becomes significantly more vulnerable to the techniques of scammers.With decreased ability to learn from

mistakes, the risk of becoming a "super victim" is greatly

increased.

Dementia is defined as progressive memory loss significant enough to impair functional skills such as shopping for groceries, organizing meals, managing finances,

taking medications, driving, or other activities. Memory

loss is a cardinal feature of dementia, but judgment, reasoning, decision-making skills, ability to learn new information, orientation, and other skills are also affected. At

early stages, changes in memory and thinking can be

quite subtle, making it a challenge to distinguish a true

memory disorder from the slowing seen with normal aging. Even with a medical evaluation by specially trained

staff, an accurate diagnosis is difficult, particularly at the

early stages. Many people with memory disorders are

genuinely not aware that they have a problem, so they

are unable to give their physicians information needed

to make a diagnosis. And because of privacy laws and a

cultural emphasis on autonomy and independence, information from other sources that could help the diagnostic process is at times unavailable or limited.

Dementia is not a normal part of aging. But age is

among the greatest risk factors for developing a memory

disorder. The risk of developing Alzheimer's disease increases significantly with each decade of life with close to

50% of those older than 85 showing signs of the disease1;

in North Carolina, the Alzheimer's Association estimates

that 132,329 residents have Alzheimer's disease." This

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.Alzheimer's Association information sheet, Incid<mce of Alzheimer's

Disease Using 2000 Census Figures. Based on USCensus Bureau's

PPL-47Report projections using EastBoston Studies percentages.

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under states the total number of dementia cases as

Alzheimer's disease is only one of many different types

of dementia. Alzheimer's disease is the most common

and well known of the disorders (-60%) but there is also

vascular dementia, Lewy Body disease, fronto-temporal

disease, and many others.

Experience teaches us that those with mild dementia

tend to be the most vulnerable (Box 2). During the transition from nonnal aging to having a diagnosable memory disorder, there is a period of time when no one yet knows the

person needs help.When cognitive changes are subtle, even

with the knowledge that a loved one is falling for scams,

families often struggle to know when it is time to intervene.

Many with mild dementia still have advanced cognitive skills

that enable them to manage higher level interactions (such

as overseas money wires) that can mask the underlying illness and ultimately increase their losses.

Even when they possess a clear understanding that there

is a cognitive problem, many families hesitate to become involved in an elder's financial affairs. This may be out of deference to the person, respect for their privacy and

independence, reluctance to take on the responsibility, avoidance of the issue, or other reasons. Stepping in means acknowledging there may be cognitive impairment, which can

be clifficult for family members and is often resented by the

person.The cost of intervention to relationships can be very

real and for some not worth the price. ClarifYing a high functioning person's capacity to manage his or her own business

affairs can be extremely clifficult to accomplish. But if the

person resists involvement of others in his or her affairs and

is repeatedly falling victim to fraudulent claims, the question

of capacity becomes an important issue to address. For some

families, preventing victimization is a priority long before

there is a problem; for others, it is discovering the repeat victimization to scams that makes the necessity of intervention

clear.

BOX2.

Vulnerabilities With Aging

.Childrengrown-fewer

financialresponsibilities

. Financialliquidity-easy

access

.Limitedincome-looking

far a break

.Loneliness/isolation

.Age itself

.Medications/medication

cycles

.Chronic illness

. Physicalfrailty

.Depression

.Riskof cognitive

impairment

Fraud, Vulnerability, and Aging

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When asked why "super victims" fall for the same

scams repeatedly, there are several possibilities. They

may forget what happened. They may remember what

happened but think it could never happen again. They

could realize it might happen again but enjoyed the interaction enough to be willing to suffer the consequences even though they could lose their home or be

unable to pay for food, medications, or other. They may

also feel sorry for the scammers and believe the scammer needs the money more than they do. The isolation

many experience with aging (from retiring to new communities, living far from family, loss of spouse and

friends, and more), may contribute to a willingness to entertain conversation with the strangers and increase the

chance of falling for a scam. In these cases, it is not just

memory loss but changes in judgment and reasoning

skills that increase vulnerability. At times, it is the repeated participation is such interactions and inability to

learn from the mistakes that helps make a diagnosis of

dementia.

No two people are alike in how they express the disease of dementia, but the potential safety concerns are

present for all. Involvement of family or trusted individuals throughout the aging process can minimize the potential dangers by facilitating a means for those involved

to know when help is needed. Knowing when to intervene is a much-needed start for improving a person with

dementia's safety. But because dementia is a progressive

illness with no cure, the expectation is that the need for

help will increase and become more pronounced over

time. With support, many with dementia can remain

safely in their homes for the majority of their lives.Without such involvement and support, independence is often compromised much sooner (Box 3).

A MULTI-BILLION DOLLAR FRAUD INDUSTRY

The federal government has determined that fraudulent

telemarketers alone rake in more than $40 billion each

year.2 Studies have shown that most of the money lost to

telemarketing fraud is lost by seniors.3,4 For other forms of

elder fraud, statistics are harder to come by, as such crimes

are very much underreported.5 In North Carolina, the statistics on home repair fraud can be considered only partial,

yet they are disturbing. During the 1990s, a home repair

fraud ring based in the Rocky Mount, NC, area plagued elderly consumers from the mountains to the coast and all the

way up to northern Virginia. It collected as much as a quarter of a million dollars from some elderly victims. It employed up to 150 workers. Each week it sent as many as

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BOX 3,

Case 1: MW: Retired Librarian

. SS-year-old retired librarian. widow. No children.

Has a niece she sees once a month

. MW asked niece to check her bank stubs one day.

Niece found she

- was 10 days from foreclosure on her house.

- had spent her entire life savings.

- had tapped out her overdraft protection of $1 OK.

- had maxed-out on 3 different credit cards.

. After obtaining power of attorney, niece found MW

- was sending money to more than 90 psychics

and sweepstakes.

- had applied for more credit cards.

- did not understand this was a problem.

. MW asked her to please pay the psychics because

"they are my friends."

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5 crews to cities like Charlotte, Raleigh, Fayetteville, and

Richmond (VA),with individual crews scamming seniors

in several other communities. According to Special Agent

in Charge, Karen Nenstiel, Director of the Financial Crimes

Section of the North Carolina State Bureau of Investigations, more than 400 felony convictions have been entered

against members of that home repair fraud ring since

1998. Those convictions represent only a fraction of the

fraud incidents perpetrated by that group. Better known

and much larger itinerate home repair groups continue to

victimize elderly home owners throughout the nation.

With overseas money transfer schemes, sometimes referred to as "trapped funds" or "Nigerian 419" schemes, the

data on victimizations are even more difficult to come by.

The North Carolina Attorney General seldom encounters

victims willing to admit that they were defrauded in these

transactions. When he does learn about them, he notices

that those with losses in excess of $10,000 tend to be

older consumers in their seventies and eighties. One such

victim is a retired manager for an international construction firm who has lost over $200,000. He made so many

wire transfers to Nigeria and other countries that the

banks and wire service companies, recognizing that he

was being defrauded, refused to transfer funds for him anymore. In response to those steps, he hired former employees to wire his funds in their names.

The increasing life expectancies and financial resources

of older adults appear to have created a burgeoning numor,

--$-

ber of targets for these criminals and a substantial pool of

wealth to be stolen. Other societal trends may be contributing to the problem, such as our mobile national work

force and the fact that more elderly citizens are spending

their final years far from their children and grandchildren.

In addition, the perpetrators of many of these frauds have

become more organized and scientific in the ways they

target and exploit vulnerable seniors.The same can be said

about their techniques for collecting victims' funds and

avoiding detection and prosecution.

THE EXCITING OR ALARMING

ANNOUNCEMENT

Older adults are not the only consumers whom fraud

artists target successfully. Younger consumers fall for a

wide array of scams and frauds.The scammers push certain

emotional hot buttons to make consumers suspend their

natural skepticism and buy into the questionable scheme.

In doing so, they exploit feelings of personal desperation

(eg, baldness cures, diet pills, loan scams), instinctive appreciation for good deals or windfalls (eg, "Free;'"50% off,"

and "You have won!"), fear (certain fire or burglar alarm

systems), or personal animosities (eg, offshore investment

scams touted as ways to defeat the hated tax man).

In cases wherein elderly victims are defrauded repeatedly and systematically, these same hot buttons are employed over and over, often to the point that one might

wonder why the victims keep falling for it. While interviewing victims and perpetrators of home repair and

telemarketing fraud during the 1990s, state and federal

agents from Virginia and North Carolina quickly learned

that an exciting or alarming statement was the con

artists' most important tool. The criminals stated that

greatly alarming or exciting the victims knocked them

off balance emotionally. By putting them in such a state,

the scammers taxed their victims' decision-making skills,

made them less skeptical, and rendered them more

amenable to suggestions and directions.

For the home repair con artists, the initial alarming statement typically was 1 of 2 things:"Your roof isso rotten that

my leg went right through it!"or "Your chimney is about to

come lose and collapse onto your neighbor's property!"To

punctuate the statement and give the matter even more urgency, the scammers liked to add, "There is a building inspector in the neighborhood right now who might

condemn the house if it is not fixed right away" (Box 4).

Cross-border phone fraud groups begin their conversations with,"Congratulations!You have won!"As soon as the

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BOX4.

Case2: Retired Executiveof Top-10

Corporation

. 80-year-old retired executiveof a multinational

company

. Married; avid golfer; appears very sharp; "high

functioning"; and self-assured

.Wired $135K overseasthinking he had won an

international lottery; more than 20 money transfers

in 7 months

. Sent additional $15K in cash via FedExafter banks

and wire transfer companies cut him off

. Ignored all advice from family, CPA, an Assistant

Attorney General, and an FBIagent and demanded

they prove to him each caller was a crook

. Kept send ing money

. Trained fraud victim assistancevolunteer assigned.

Helped him look for signs of fraud rather than signs

the callers were legitimate

. Transfers stopped

+

victim wires money to Canada or Jamaica or some other

country (to pay required taxes on the award in accordance

with the scammer's instructions), the scammers call back

again and again with similar exciting comments followed

by directives to wire more money somewhere else. The

first follow-up call may be from one of the scammers posing as a US Customs Officer: "I have your package containing a $250,000 check here in my warehouse, which I can

release to you once you wire $25,000 to cover the customs

duties"'The second follow-up call might be from a phony

FedEx, DHL,or UPS official with news that is exciting and

alarming at the same time: the prize package is on one of

their trucks but it must be returned to the overseas sweepstakes or lottery company unless additional thousands of

dollars are wired immediately to cover insurance premiums securing the delivery.

With Nigerian 419 and other overseas money transfer

scams, the initial exciting message is that the consumer

can receive one quarter of a large sum of money, typically $10 million to $25 million. The callers or e-mail correspondents claim that the funds are trapped in another

'A recording of such a call from a Canadian phone fraud artist posing

as a US Customs officer in New York and urging a North Carolina man

to wire money to a Montreal customs agent to cover duties on the

award can be heard by calling the North Carolina Attorney General's

consumer information line, 919-716-6001 ,and selecting option #3. The

recording iasts approximately 18 minutes.

Fraud, Vulnerability, and Aging

--$--

country by corrupt officials. All the consumer has to do

is let the sender of the exciting e-mail or letter utilize

the consumer's bank account to get the funds into the

United States. Recent versions of these scams feature

disturbing representations about the sender of the message being targeted for persecution by the corrupt officials because he or she is a practicing Christian or a

Western property owner in a country where neither is

in favor.

CULTIVATINGAFFECTIONS:

SELLINGTHE FANTASY

Cultivating the affections and trust of their older victims is an important technique of the scammers, as one

might guess. In the North Carolina and Virginia home repair fraud cases mentioned above, state and federal officials were quite startled by the victims' affections for and

loyalty to their victimizers. One of the few exceptions to

that trend was a blind, 92-year-old retired Army Colonel

named Vachel Watley. He lost more than $227,000 to the

fraud ring in 1994 and 1995. He conceded to one of the

coauthors that he had been defrauded and wanted to help

with the prosecution. The morning after Hurricane Fran

devastated his Raleigh neighborhood in 1996, however,

the first people he sought out for help were not the honest contractors who were addressing the scammers' bogus repairs. He contacted the scammers themselves. They

took him for another $22,000.

Also important to the fraud artists is developing and reinforcing certain powerful images in the minds of their victims. For the lottery and sweepstakes scammers, the image

is that of a large sum of prize money making its way slowly

to the victim's doorstep from overseas but encountering

roadblocks and impediments along the way. The overseas

money transfer scammers cultivate the same imagery (eg,

"Sir, the money is in London's Heathrow Airport but a corrupt customs agent there is demanding $10,000 before he

releases the money to your bank. ...") For the home repair

con attists, it is the image of a home badly needing and receiving repairs so its occupant might continue living there

and pass it onto his or her chiidren.The excited or alarming

statements, however, kick off most frauds and are injected

again and again to keep the series of scams going (Box 5).

COUNTERFEITCHECK5-A NEW AND

EFFECTIVETOOL

Those who defraud older consumers from outside the country have discovered a powerful new tool: the counterfeit

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80X5.

Case 3: 118uddy"

. 70-year-old divorced male with longstanding bipolar disorder that has been controlled for years with

medications: no current psychiatrist

. Estranged daughter now involved in care, designated

as power of attorney and willing to participote

. Followed in Memory Clinic for one full year; found

to be stable; no diagnosis of dementia given

. lost $125,000 in phony overseas sweepstakes.

Refused to listen to daughter, lawyer, or local police

. Became famous among scammers who used his

name when calling other victims

. Diagnosed with dementia 1 year later based on his

dealings with lottery scams-still scored well on testing

+

check. In recent years, older consumers have taken to

heart repeated warnings never to send money to receive a

prize or award. The criminals have countered these warnings by sending seniors checks that bear the names, logos,

and account numbers of legitimate companies or banks.

They remind their intended victims that it is, in fact, illegal

for any sweepstakes company to require an upfront payment before releasing an award. They claim that the check

represents an advance on the sweepstakes or lottery prize,

an advance that is meant to cover taxes, insurance premiums, or customs duties on the award.

The checks are counterfeit, but the consumers' banks

seldom spot the fraud until harm has been done. As for

the targets of these scams, there could not be a more effective "excited utterance" than an unexpected check for

thousands of dollars combined with the promise that 100

times that amount is on its way.Between the time that the

check is first delivered and the bank learns that it is counterfeit, the fraud artists will have contacted the elderly

person, given directives to deposit the check immediately, and repeatedly had him or her to use the proceeds

of the check to wire funds overseas to cover taxes, insurance premiums, administrative fees, etc.

Nigerian 419 money transfer fraud rings now employ

the counterfeit check tool as well.They tell their target to

deposit the check, then immediately wire the proceeds of

the check overseas to cover taxes, fees, duties, or even

bribes that must be addressed before millions in funds can

be transferred into the target's US bank account.

The problems created by these counterfeit checks became so acute last year that many North Carolina banks

+

and credit unions began posting in their lobbies and on

tellers' counters special FBI posters warning about such

frauds. Anecdotal information coming to the North

Carolina Attorney General from members of the banking

community indicates that the excitement generated by

these checks and the verbal and written representations

by the criminals easily counteract the effectiveness of the

FBIposters and the personal pleas by bank employees.

RELOADS AND RECOVERY SCAMS

It appears that one of the surest ways to become a

personal fraud victim is to have been a victim.

-Richard M.Titus, PhD6

The staff of the North Carolina Attorney General knows of

one victim of telemarketing fraud in the state who tried to

wire $250,000 to Canadian can artists in a single transaction. Reports of that kind of telemarketing scam remain

quite rare. What the Attorney General and his law enforcement colleagues throughout North America usually observe is that elderly super victims of fraud lose their funds

in a long series of transactions. The fraud artists accomplish this through a technique they call "reloading." Examples of this are the follow-up phone calls from the phony

Customs agents or FedEx officials described above.

Each scam in the series sets up the next. When directing

the victims to wire money overseas to pay taxes on the

award, the scammer may mention "other expenses" that

might arise before the prize is delivered, such as customs duties or insurance fees. Later in the series of scams, when the

victim expresses skepticism or claims to be out of funds, the

criminals shift tactics and exploit the victim's anxiety over

having lost so much money already.The ensuing reloads are

called recovery scams. In reloading the victim for yet another round of fraud, the scammers may claim to be foreign

lawyers or law enforcement officials who have shut down

the fraudulent operation and recovered the victim's money

and prizes. They state that all the victim needs to do to recover his or her lost payments and undelivered prizes is to

pay the taxes on the prizes, duties on the check, retainer fees

for the phony lawyer, insurance on the delivery of the prize,

etc. The North Carolina Attorney General's Office has encountered desperate victims who mortgaged their homes to

make these requested payments.

I didn't want the one-time (victim), I didn't

want the two-timer. I wanted to sell these peoPle

10 times!7

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-Interview quote from a telemarketing con artist

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In home repair fraud transactions, the scammers reload

by asking to visit another part of the home to determine

whether additional repairs are needed. They repeatedly invoke the specter of water intrusion and water damage.

They will ask to visit the attic to determine whether the

same water seepage that necessitated a new roof has damaged the rafters and the roof trusses inside the attic. As

they emerge from the attic, they lie to the home owner

about the rafters and trusses needing extensive bracing

and, thereby, gain permission to start another expensive

and unneeded project. Later, after invoking the specter of

possible water damage yet again, they visit basements and

other parts of the house, returning with warnings about

other needed repairs'.

Home repair scammers, like fraudulent telemarketers,

execute recovery scams.Typically they are initiated via the

Inspector Scam, wherein a member of the fraud group

never seen by the victim arrives and saysthat the earlier repairs were done incorrectly and could result in the house

being condemned if not redone immediately. Then other

members of the fraud ring show up and perform the same

unnecessary repairs all over again.

The story, above, about the supposed customs official in

London's Heathrow Airport is just one example of the

many "reload" ploys executed by the Nigerian 419 fraud

groups. In 2005, the staff of the North Carolina Attorney

General encountered citizens to whom these scammers

represented themselves as officials with the Department

of Homeland Security. Attempting a new form of reload

scam, the bogus officials told them that the funds were

sequestered in a special Treasury Department account in

Washington, DC, that the funds' origins appeared unusual,

and that a special audit needed to be conducted to ensure

that they did not represent the proceeds of drug trafficking or fundraising for terrorists. Then they informed their

victims that they had to pay the costs of the special audit

themselves if they wanted the funds released, otherwise it

would be sent back to the country of origin. The costs had

to be wired to Washington, DC, immediately. Making this

ploy even more believable was the ability of the overseas

scammers to "spoof" phony caller ID displays on the

victims" phone sets. It read "Dept. of Homeland Security"

and gave aWashington, DC area code, 202 (Box 6).

"SIR, YOU FORGOT TO PAY ME"

Another technique common to these 3 types of fraud involves a false claim that the older victim promised to wire

money or write a check yet failed to do so.There may have

Fraud, Vulnerability, and Aging

+

BOX6.

Case 4: The Florida-Mountains Resident

. 82-year-old part-time resident of NC mountains with

background in finance; very bright; lives alone;

resides half the year in Florida.

. lost $11 OKto overseas sweepstakes and lottery

scammers; poised to wire $30K more but bank

convinced her to call state Attorney General first

.She told scammers the Assistant Attorney General

had convinced her they were frauds; they called

her back and convinced her they were the Assistant

Attorney General and told her to "Go ahead and

wire the money!"

. Real Assistant Attorney General then called; convinced her again not to send money

. Local fraud victim assistance volunteer placed with

her that same day

. Transfers ceased

never been such a promise at all, or the requested payment

might have been made the day before. Nevertheless, the

victim promptly writes a check to the criminals or wires

them money. Sometimes, the victims are simply frightened

into doing this, such as when a large, angry man is standing

at the front door complaining that he was not paid for repair work.This may be the first time the man has set a foot

on the property, yet he walks away with a check. On other

occasions, victims will wire the money or write the check

without being confronted in an angry or intimidating manner at all. They know they are having trouble with failing

memories. Often, they assume that the pending request for

payment represents another embarrassing episode of

forgetfulness.

TARGETING TECHNIQUES OF THE CRIMINALS

The perpetrators of these 3 types of fraud employ an

assortment of techniques to locate vulnerable older

adults. Most sophisticated are those employed by the

overseas sweepstakes and lottery scammers.Via the Internet, they obtain lists of potential targets from US-based list

brokers. These brokers have compiled the names, phone

numbers, and addresses of seniors who responded to

sweepstakes or contest entries sent to them in the mail.

Mass-mail facilities, many of which are owned by the list

brokers themselves, send hundreds of thousands of these

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mailings to seniors here and abroad each month. If an

older adult responds to the contest or sweepstakes mailing by returning the accompanying claim form, he or she

will be contacted by a phone fraud artistclaiming to be

with that contest or sweepstakes company. The callmay

be placed as quickly as 3 days afterthe older adult drops

the claim form in the mail.

Less efficient,yet quite effective, is the overseas

money transfer con artists'main technique for locating

vulnerable older adults. Many consumers in their late

seventies and eighties now have e-mail accounts. The

scammers purchase CDs containing thousands upon

thousands of random e-mail addresses, load them into

their computers, and blast out their Request for Assistance e-mails to strangers around the globe.To most peo-

.pIe, these "spam" e-mail messages are an annoyance.

Vulnerable older adults,however, often provide the I response out of 50,000 e-mail messages that makes the

fraud scheme so lucrative(Box 7).

Home repair fraud rings physically prowl for victims

the old-fashioned way. An FBI informant working inside

the North Carolina home repair fraud ring told officials

that they drove around looking for older homes in established neighborhoods, homes where elderly persons

might live.They considered aluminum awnings over windows and Astroturf on the front steps (a common slipand-fallprevention measure) to be good indicators that a

very elderlyperson resided in a particularhome.An older

car out front with a handicapped placard was something

they looked for,as well. Members of this fraud ring did

not eschew other forms of research. They often were

found with citydirectoriesin theirtrucks.These were reverse look-up phone directoriesthat allowed one to see

the names of each telephone subscriber at a specificadBOX 7.

Case 5: "Mrs. D"

. In her early eighties

. No support network-left church; no family neorby

. Repeat sweepstakes fraud victim; aware of it

. Attorney General investigator intercepted and

returned a $1 OK check she had written to the

scammers; made her promise to call him before

sending money again

. "Oh, I've learned my lesson!"

. Called investigator the following morning: "I think I

made another mistake last night "

--$-

dress on a given street, together with the number of years

an occupant had possessed that phone number. They

would knock on the doors of addresses listed with names

that people age 70 or younger seldom possessed. They

would knock on certain doors if the city directory reflected telephone service at that number for several

decades. And, of course, if they spotted an elderly home

owner in the yard, they would approach.

SOME TRAITS AND BEHAVIORS OF

"SUPER VICTIMS"

In the course of investigating and prosecuting the crimes

described above, North Carolina law enforcement officials

have encountered certain patterns among the repeat victims.These patterns include the following:

- Victims tend to be bright, accomplished and capable of

conducting their day-to-day affairs without assistance.

- Victims tend to be in their late 70s or older.

- Victims often live alone.

- Victims are familiar with warnings about con artists who

might prey upon the elderly.

- Victims might acknowledge being scammed in earlier incidents, yet succumb to a similar fraud later that same

day.

- Victims often are quite secretive about their transactions.

- Victims might promise to call law enforcement officials if

the scammers contact them again, yet they fail to do so.

- Many victims neglect their family, church or community

activities as they await another call or visit from the con

artists.

t - Most repeat home repair fraud victims are quite fond of

their victimizers and resistant suggestions that they have

been cheated.

- In the middle and latter stages of a series of scams, many

victims respond as if by rote when directed to wire more

money overseas or to pay for another home repair.

- Most victims are worried about the adequacy of their

savings or their abilities to remain in their own homes.

- Repeat victims of phone fraud or home repair fraud often are victims of the other forms of elder fraud.

- Victims worry about their adult children's reactions to

the transactions and seem primed to believe that warnings about their victimizers from children or law enforcement are motivated by the latter's greed or

officiousness.

- Victims seldom complain to law enforcement about being defrauded; reports often are submitted by others

who spot the signs of fraud.

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-Repeat victims tend to receive enormous numbers of

pitches for lotteries, sweepstakes, and other contests in

the mail; these mailings are openly displayed in their

homes.

- Cross-border fraud victims make repeated visits to

MoneyGram or Western Union wire

transfer counters at their local grocery store.

- Home repair fraud victims often have

the same trucks and vans parked in

front of their homes; the "tradesmen"

who own those vehicles often drive

off when the home owner has a

visitor.

+

- In a strategy, they often refer to as

"blocking the exits," the scammers

frequently persuade victims that it is

a bad idea to mention the transactions to anyone. For example:

- Telling friends about the pending

arrival of a big prize check could

cause one to be robbed while taking the check to the bank.

- Telling local officials about home

repairs could cause them to send

the building inspector out, and he

might condemn the house before it

is fIxed.

- Telling family members about the

transactions might cause them to

take the checkbook away.

- Asking a consumer protection

agency about the company could

cause the agency to seize the

check before it is delivered to ensure payment of state taxes.

Canada using the Western Union system, approximately 1

transfer out of 3 was induced by fraud, usually telemarketing fraud. Almost 60 cents on every dollar of those personto-person wire transfers went to fraud artists, according to

the survey results. At the time when the transfers were

made to Canada, a large segment of the

telemarketing fraud industry was based

there.

In November of 2005, Western

Union,46 states, and the District of Columbia executed an agreement to address this cross-border fraud problem.

The company introduced clear and

prominent fraud warnings on its send

forms. It enhanced training for its

agents, so they can better spot the telltale signs that elderly and other consumers may be transferring money to

fraud artists. It shares information on

fraud incidents with state authorities

and cuts off transfers to problematic locations and recipients. It is funding an

$8.2 million AARP Foundation fraud

prevention program aimed at vulnerable seniors, including seniors whose

names have been found on the criminals' target lists. The agreement allows

an Attorney General to ask Western

Union to block future money transfers

by an elderly fraud victim residing in

his or her state.

The overseas con artists have learned

how to debit their victims' bank accounts through the services of US-based

third party payment processors. The

processors can place Automated Clearing House (ACH) electronic debits

against those accounts or they can present bank drafts that

resemble personal checks and contain the words "payment

authorized by depositor" rather than a customer's signature.

To place these debits, all they need is the victim's contact information and bank account numbers. Many of the contest

mailings mentioned above request that the recipient return

their entry form with a check for processing fees, usually in

a small amount such as $12.The checks defray the costs of

the mailings. They also contain the transit numbers and

other information needed to initiate a fraudulentACH debit

or bank draft for a much larger sum of money.

Banks and federal bank regulators have moved to reduce these abuses of the banking system. The bank trade

The North Carolina

Division of Aging and

the North Carolina

Attorney General

secured a 2-year

Governor's Crime

Commission grant to

train and place special

volunteers with elderly

repeat victims of

telemarketing fraud

last year. The grant is

funded through the

federal Victims of

C rime Act. 8

PAYMENT COLLECTIONTECHNIQUESNEWAVENUESTOPROTECTVICTIMS

In recent months, there have been important developments in the fIght to separate overseas con artists from

their elderly victims and their funds. Directing an elderly

target to wire money overseas from the Western Union or

MoneyGram counter at their local grocery store has been

a favored ploy of the scammers for the past decade. A survey conducted by the Attorneys General of North Carolina

and 6 other states in 2003 showed that for person-to-person transfers over $300 to the 4 largest provinces in

Fraud, Vulnerability, and Aging

+

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association that regulates ACH debits, the National Automated Clearing House Association, adopted rules to prevent the use of ACH debits in most outbound

telemarketing transactions and to make it easier for consumers' banks to recourse unauthorized debits to the merchant banks or payment processors for

the scam artists." In 2006, the Federal

Reserve Board of Governors adopted

amendments to its Regulation CC,

amendments making it easier for a consumer's bank to recourse unauthorized

or fraudulent paper demand drafts to

the scammers' payment processing

agents or their merchant banks. These

developments mean that victims, their

families and law enforcement officials

now have better opportunities to undo

these damaging debits.

NORTH CAROLINA'S SENIOR

FRAUD VICTIMS ASSISTANCE

PROJECT

t

4. Help victims to obtain charge-backs on unauthorized bank debits or to reverse wire transfers that

have not been picked up by the scam artists.

5. Place victims' phone numbers in the national Do

Not Call Registry and their mailing addresses in the

Direct Marketing Association's Do Not

Mail Registry; impress upon victims

that marketers who contact them are

not honoring those registries and

should not be trusted.

6. Spot other frauds and scams that

might be occurring and report them

to authorities.

11111111

The fraud industly has

learned how to spot

olde I' consu mers

whose judgment,

memory or executive

decision-mahing shills

might be impaired.

They have developed

(lnd refined their

techniques for exploiting those imp(lirments.

The North Carolina Division of Aging

and the North Carolina Attorney General secured a 2-year Governor's

Crime Commission grant to train and

place special volunteers with elderly

repeat victims of telemarketing fraud

last year. The grant is funded through

the federal Victims of Crime Act.s The volunteers' responsibilities are as follows:

1. Become friends with the victims and counteract the

false friendship that the scammers employ.

2. Help victims to recognize the telltale signs that a

pitch may be fraudulent rather than looking for the

signs (created by the scammers themselves) that the

pitch may be legitimate.t

3. Help victims to change bank accounts and phone

numbers, thereby severing important links with the

scammers.

'Operating .Rules of the National Automated Clearing House

Association, Art. 14, Subsection 1.57 ("Tel" entry).

tFor more on tbe failure of certain seniors to recognize tbe warning

signs that a pitch is fraudulent, see American Association of Retired

Persons 1996 srudy, Telemarketing Fraud and Older Americans: an

AARP Study, conducted by Princeton Survey RescarchAssociates.

--+-

This program, still in its early stages,

has produced some promising results.

Of the 9 victims who have been assigned volunteers since the initiation of

the program, only 1 has been revictimized by telemarketing con artists. In one

instance, a volunteer was placed with

an SO-year-old retired executive of a

Top-10 corporation. He had wired more

than $130,000 to overseas scammers

who had convinced him he had won

millions in a sweepstakes contest. His

wire transfer attempts eventually were

blocked by the banks and wire transfer

companies, so he resorted to sending

bundles of cash to the scammers via

overnight courier. Visits from an FBI

agent and one of the authors of this article could not dissuade him from engaging in such transactions.As soon as a

Victims'Assistance Volunteer began working with him last

summer, the transactions ceased (see Case 2 in Box 4; see

also Case 4 in Box 6).

[II]

CONCLUSION

t

Like most people, older consumers tend to learn from

their experiences once they have been scammed. They do

not engage in similar transactions again. With elderly

repeat victims of fraud, however, the opposite appears to

be the case. The fraud industry has learned how to spot

older consumers whose judgment, memory or executive

decision-making skills might be impaired. They have developed and refined their techniques for exploiting those impairments. Most of the repeat victims of fraud encountered

by the authors of this article were victimized well before

they were evaluated by a doctor and found to have such

Alzheimer's Care Today I July-September 2007
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impairments. The tell-tale signs of repeat victimization

should be signals that more attention should be focused on

the activities and health of the older adult. This is so, not

because their lifestyle and independence needs to be restricted and controlled by the courts or their families, but

to avoid financial devastation and unhealthy codependent

relationships with people who are criminals.

The involvement of trusted individuals throughout the

aging process, early medical evaluation and treatment, and

freedom from these scams, offers the best opportunity for

older adults to maintain their regular activities and their

fmancial independence.

Virginia H. Templeton, MD, is Associate Director of MemoryCare, a nonprofit organization providing medical

services to those with memory disorders, support to caregivers, and community education.

David N.Kirkman, jD, has been an enforcement attorney with the North Carolina Attorney General's Office

since 1987. He works to stop organized groups that target and defraud older consumers.

The views expressed in this article are those of the authors and

not of MemoryCare, the Attorney General of North Carolina,

or the North Carolina Department of Justice.

Address correspondence to: Virginia H. Templeton, MD.

E-mail: templeton@memorycare.org.

Fraud, Vulnerability, and Aging

+

REFERENCES

1. Evans DA, Funkenstein HH, Albert MS, et aI. Prevalence of Alzheimer's disease in a community population of older persons: higher than previously

reported.jAMA.1989;262:2552-2556.

2. Pub L No. 103-297,August 16,1994; Congressional

findings in creating Telemarketing Consumer Fraud

and Abuse Prevention Act of 1994, 15 USC 6101

et seq.

3. Elder Fraud and Abuse: New Challenges in the Digital Economy: Hearing before the Senate Special

Committee on Aging, 106th Congress (2000).

4. Lewis T.Fifty ways to exploit your grandmother: the

status of financial abuse of the elderly in Minnesota. William Mitchell Law Rev. 2001; 28(2):927.

5. Johnson KD. Financial crimes against the elderly.

2003:4. Available at: http://www.popcenter.org/

Problems/problem-financial_crimes.hrm

6. Titus R. The victimology of fraud. Paper presented

at: the Restoration of Victims of Crime Conference;

September 1999; Meibourne,Australia.

7. Shover N, Coffee GS. The Origins, Pursuits and

Careers of Telemarketing Predators. Final Report

to the National Institute of Justice. US Department

of Justice; 2002.

8. 42 USC §10601 et seq.

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1117 /07

APPENDIX 1

12 Signs That an Elderly Person May Have Been

Targeted by Telephone Con Artists"

+

1. Frequent visitsto the person's home by overnight

courier services.

2. Numerous cheap prizesin the home (eg,plastic

cameras, gold-plated jewelry, vacation certificates,

small television sets).

3. Phone billsshowing a sudden, unexplained increase

in long distance callsto other countries.

4. Several colorful mailings in the home re international lotteries, puzzle-solving contests.

5. Questions about other countries, fOreign taxes, lloyd's

of London insurance policies, wire transfers, "barris.-

ters;' customs duties, registering bonds overseas.

6. Checking and credit card accounts showing sudden

increases in transactionswith wire services,numerous unexplained debits or charges from out of state,

purchases of money orders or counter checks in

largeamounts.

7. Wife transferreceipts showing large sums going to

areas near the Canadian border and to various foreign countries.

8. Unexpected or unexplained borrowing patterns;an unexpected inabilityto pay billsor meet livingexpenses.

9. A sudden reluctance to be away from home or to

have visitorsin the home.

10. Visitsto wire transferoutletsby a person who normally does not use such services.

II. Unexpected secretiveness or defensiveness regarding any of the above.

12. Social withdrawal, depression, anxiety that cannot

be attributed to other events or conditions, together

with any of the above.

APPENDIX 2

Reacting Positively and Proactively: 20 Steps to Take

Upon Discovering That an Older Client or Loved One

Has Been Targeted Successfully by Fraud Groups

1. Remain calm, supportive, and nonjudgmental. (eg,

"These groups are very persuasive. They have taken

advantage of lots of bright people.")

'Source: Consumer Protection Division, North Carolina Department

of Justice.

-+-

2.Make sure that others in the client or loved one's

family do the same. Harsh or judgmental reactions

by loved ones often drive victims even farther into

the psychological grips of the con artists.

3. Knowthat the scarnmers will try and strike again.

4. Try and get the client or loved one out of harm's

way.

5. Enroll his or her phone number in the Do Not Call .

Registry. Call 1-888-382-1222 or enroll online at

http://donotcall.gov.

6. Reduce "junk mail." Help the client or loved one

draft and sign a letter to the Mail Preference Service,

Direct Marketing Association, PO Box 643, Carmel,

NY 10512, requesting to be taken off the mailing

lists of the association's members. Make sure the letter contains his full address and name.

7. Discuss changing phone numbers and email addresses and switching the mailing address toa Post

Office Box where a trusted person can screen

sweepstakes, contestand other suspicious mailings.

8. Help the client or loved one to view with suspicion

any mail solicitations and phone calls from people

who are !lot honoring the do-not-call registry or

their mailing list requests mentioned above.

9. Help the victim to understand that responding to

sweepstakes, lottery, and other contest mailings gets

them on target lists that are purchased by scam

artists or, at the very least, increases the number of

telemarketing calls they will receive.

10. Negate the false friendships being offered by the

scammers. Strengthen the victim's network of

friends and their social activities. Visit or call

frequently. Seek out "senior companion" or fraud

victims' assistance programs that can work with the

victim regularly.

11. If one type of fraud has been spotted, look for signs

that other types of scams might be occurring.

12. If fraud artists obtained the victim's funds via wire

transfer, contact security department of wire services (eg, MoneyGram, Western Union; Ph. Number

on the wire transfer receipt). Report the fraud and

request a block on future transfers by the client or

loved one. Request return of the current transfer if it

has not been picked up by recipient. Request a refund of transfer fees for fraud-induced transfer that

has already been completed. (Note: wire services

sometimes do the latter on a discretionary basis.)

13. If electronic Automated Clearing House (ACH) debits have been placed against the client or loved one's

bank account by the fraud group, help him or her

+

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contact security at the his or her bank, report the

fraud, and close the account to prevent further debits. Request a charge-back of the fraudulent or unauthorized debit. Request a fraud affidavit for the victim

to execute. If the bank contends the victim's debit

authorization was recorded by the telemarketer, ask

the bank to obtain and share a copy of the recorded

authorization. Often there is no such recording or

the recording shows that the charge in question was

not, in fact, authorized. If these steps do not resolve

the problem, contact the merchant bank used by the

scam group or the ACH processor the scam group

employed to debit the victim's account electronically. This information appears on the bank statement. Report the fraud and request a refund check.

Do not request an electronic credit to the old account, since it has been closed as a precaution.

14. If paper demand drafts (look like personal checks

but are not signed) have been presented and paid

out of the client or loved one's bank account, follow

the procedure found in the preceding paragraph.

15. If home repair con artists or other have been preying

on the client or loved one face to face, let his or her

local bank manager know, as well as local law enforcement. Bank personnel often provide police with

important tips that enable them to catch the culprits.

Fraud, Vulnerability, and Aging

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16. With the client or loved one's permission, let state

and federal law enforcement agencies know of the

fraud incidents. The best way to report to the largest

number of agencies is through the Consumer Sentinel fraud database, http://www.consumer.gov/

sentinel/ Reports filed here are nonpublic.

17. Canadian citizens who have been defrauded over

the phone, and citizens of the United States or other

countries who have been scammed by phone fraud

groups situated in Canada, should also contact the

PhoneBusters law enforcement task force,

http://www.phonebusters.com/.

18. If your client or loved one shows a tendency to keep

falling for the frauds, consider the following:

a. Discuss future planning needs, such as advance

directives, healthcare power of attorney.

b. Recommend an evaluation by geriatrician.

c. Recommend that power of attorney or joint control over checking accounts be given to trusted

family member.

19. Contact local law enforcement if you suspect faceto-face scams are occurring. Notify Adult Protective

Services where appropriate or required by law.

20. Do not do nothing. The scammers are counting

on that.

+

II

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