Financial Exploitation of Elderly: Criminal Acts and Civil Injury Claims

Financial exploitation of the elderly can involve many things.  The National Institute on Aging (NIA) explains that elder financial abuse occurs when “… money or belongings are stolen from an older adult. It can include forging checks, taking someone else’s retirement or Social Security benefits, or using a person’s credit cards and bank accounts without their permission. It also includes changing names on a will, bank account, life insurance policy, or title to a house without permission.”

According to the NIA, financial exploitation involves any misuse, mismanagement, or manipulation of the elder person’s property, belongings, or assets without their consent, under false pretense, or through intimidation or deceit.

Financial exploitation of older adults and taking financial advantage of the elderly is rising trend and growing problem in the United States.  In October 2020, the Advisory Council for ERISA of the U.S. Department of Labor heard testimony from a representative of the American Institute of Certified Public Accountants (AICPA) Forensic and Litigation Services Fraud Task Force, who testified that “[i]t is estimated that 10% of elderly people in North America have already been victims of financial abuse with total reported yearly financial losses of over $2.9 billion.”

Who is an Elder?

Texas law has defined an “elderly individual” as “a person 65 years of age or older” in Texas Penal Code §22.04.  The National Council on Aging (NCOA) and some states define an elder as anyone who is at least 60 years old.

Texas Elder Financial Exploitation Crimes: Forms of Criminal Fraud or Theft

Elder financial exploitation, when discovered, can be prosecuted as a serious criminal charge under state law.  The Texas Legislature has passed specific criminal statutes designed to punish those who financially abuse the elderly.  Among these state laws are two provisions of Chapter 32 of the Texas Penal Code, which outlaws various forms of fraud.  They are:

• Texas Penal Code §32.45, entitled “Misapplication of Fiduciary Property or Property of Financial Institution” and
• Texas Penal Code §32.53, entitled “Exploitation of Child, Elderly Individual, or Disabled Individual.”

“Exploitation” here has been statutorily defined as “the illegal or improper use of a child, elderly individual, or disabled individual or of the resources of a child, elderly individual, or disabled individual for monetary or personal benefit, profit, or gain.”  Texas Penal Code §32.53(a)(2).

Texas laws against theft also provide for criminal prosecution of elder financial exploitation.  They include Texas Penal Code § 31.01 and Texas Penal Code § 31.03(3), as detailed by the United States Department of Justice Prosecutors’ Manual for the Elder Justice Initiative.

Federal laws are also on the books allowing for the prosecution of elder financial abuse in the federal courts.  Among the federal criminal statutes defining illegal elder financial exploitation is the Elder Justice Act (EJA), which became law as part of the Patient Protection and Affordable Care Act in 2010 and is currently before Congress as the “Elder Justice Reauthorization Act of 2020.”

Common Examples of Elder Financial Exploitation

There is no easy, cookie-cutter example of elder financial exploitation because it can happen in all sorts of situations, involving all kinds of property and assets.  However, a common denominator in all elder financial exploitation situations involves the wrongdoer being trusted by the elder either because of their personal relationship or because he or she holds official responsibility for certain aspects of the elder’s life.

Examples here include the following:

• Family members
• Friends
• Neighbors
• Caregivers
• Church officials
• Volunteer visitors
• Bank employees
• Insurance agents
• Health care providers
• Health care employees
• Health care administrators
• Nursing Home employees
• Nursing Home administrators.

When someone’s mental or physical abilities find making decisions about their finances or dealing with daily chores like paying bills or making deposits more and more challenging, then they become vulnerable to financial exploitation.

Sometimes, this involves informal scenarios where a family member is skimming money out of a checking account, or takes property from the elder’s home without permission.  It may also involve formal situations where the elder’s condition has advanced to the extent that they need someone appointed with specific legal authority to act on their behalf (e.g., under a trust, guardianship, or power of attorney).  Here, for instance, a nursing home staff administrator may assume control over the entirety of a resident’s finances without permission and in excess of any specific need to pay for the elder’s nursing home expenses.

Civil Injury Claims Based Upon Elder Financial Exploitation

Once again, it is important to point out that the prosecution of criminal charges in either state or federal courts does not allow for the victim to obtain financial relief: government prosecutions focus upon convictions that result in sentencing of one or more individuals that can include imprisonment and fines, although there is the possibility of a judge ordering restitution as part of the sentence.  See, Cabla v. State, 6 S.W.3d 543, 545-6 (Tex. Crim. App. 1999).

For most victims of financial exploitation and their loved ones, justice must be sought in the civil justice system, with private lawsuits filed based upon common law causes of action.  These include lawsuits based upon:

• Breach of Fiduciary Duty;
• Undue Influence;
• Conversion;
• Fraud; and
• Breach of Contract.

1.  Elder Financial Exploitation: Breach of Fiduciary Duty

Fiduciary relationships can be officially created in a contract or other formal device (like a trust) as a “matter of law,” or they may exist based upon the particular factual circumstances of the case.  Meyer v. Cathey, 167 S.W.3d 327, 330 (Tex.2005).

In an elder financial exploitation case for breach of fiduciary duty, the elder as plaintiff must establish this legal relationship existed and was thereafter breached to the elder’s detriment.  The elements of a breach of fiduciary duty claim are:

(1) a fiduciary relationship between the plaintiff and defendant;

(2) a breach by the defendant of his fiduciary duty to the plaintiff; and

(3) an injury to the plaintiff or benefit to the defendant as a result of the defendant’s breach.

See Jones v. Blume, 196 S.W.3d 440, 447 (Tex.App.-Dallas 2006, pet. denied); Punts v. Wilson, 137 S.W.3d 889, 891 (Tex.App.-Texarkana 2004, no pet.).

Texas courts will not recognize a fiduciary relationship lightly. Willis v. Donnelly, 199 S.W.3d 262, 278 (Tex.2006).  The elder will have to provide sufficient admissible evidence of its existence. Cotten v. Weatherford Bancshares, Inc., 187 S.W.3d 687, 698 (Tex.App.-Fort Worth 2006, pet. denied).  The elder may prove the existence of an informal fiduciary relationship and corresponding fiduciary duty through evidence of a “moral, social, domestic, or purely personal relationship of trust and confidence” where influence has been acquired and abused and confidence has been extended and betrayed. Cotten, 187 S.W.3d at 698; see Thigpen v. Locke, 363 S.W.2d 247, 253 (Tex. 1962).

2.  Elder Financial Exploitation: Undue Influence

There may be situations where the elder readily agrees to the wrongdoer’s actions, much to the concern and consternation of loved ones.  Here, for instance, there may be an injury claim based upon undue influence upon the death of the elder and the revelation of the disposition of property under the Last Will and Testament.

To establish undue influence, it must be shown that there was:

(1) the existence and exertion of an influence;

(2) the effective operation of such influence so as to subvert or overpower the mind of the testator at the time of the execution of the testament; and

(3) the execution of a testament which the maker thereof would not have executed but for such influence.

 Rothermel v. Duncan, 369 S.W.2d 917, 922 (Tex. 1963).

This must be an extreme situation.  As the Texas Supreme Court explains:  “… [i]nfluence is not undue unless the free agency of the testator was destroyed and a testament produced that expresses the will of the one exerting the influence.” Rothermel, 369 S.W.2d at 922.

3.  Elder Financial Exploitation: Conversion

When the wrongdoer takes and uses the elder’s property, then there may be a civil injury claim for conversion.  For instance, if a caretaker decides to use the elder’s car as her own, without permission, and refuses to stop or return the vehicle, then the elder may have a conversion case.

Under Texas law, “conversion” is the unauthorized and unlawful assumption and exercise of dominion and control over the personal property of another to the exclusion of, or inconsistent with, the owner’s rights.  Waisath v. Lack’s Stores, Inc., 474 S.W.2d 444, 446 (Tex. 1971).

To prove a claim for conversion, the elder as plaintiff must provide admissible evidence that:

(1) the plaintiff owned or had possession of the property or entitlement to possession;

(2) the defendant unlawfully and without authorization assumed and exercised control over the property to the exclusion of, or inconsistent with, the plaintiff’s rights as an owner;

(3) the plaintiff demanded return of the property; and

(4) the defendant refused to return the property.

Stroud Prod., L.L.C. v. Hosford, 405 S.W.3d 794, 811 685*685 (Tex. App.-Houston [1st Dist.] 2013, pet. denied) (citing Khorshid, Inc. v. Christian, 257 S.W.3d 748, 759 (Tex. App.-Dallas 2008, no pet.)).

4.  Elder Financial Exploitation: Fraud

Elder financial exploitation involving fraud can involve all manner of scams and grifting scenarios.  NCOA lists the following as its Top 10 Money Management Scams involving Seniors:

• Medicare/health insurance scams
• Counterfeit prescription drugs
• Funeral & cemetery scams
• Fraudulent anti-aging products
• Telemarketing/phone scams – The pigeon drop; The fake accident ploy; Charity scams
• Internet fraud – Email/phishing scams
• Investment schemes
• Homeowner/reverse mortgage scams
• Sweepstakes & lottery scams
• The grandparent scam.

These are all various forms of fraud involving intent to deceive the elder for financial gain.  In Texas, the elder as a civil plaintiff must prove with admissible evidence the following elements to establish fraud against the wrongdoer:

(1) a material representation was made;

(2) the representation was false;

(3) when the speaker made the representation, he knew it was false or made it recklessly without knowledge of the truth and as a positive assertion;

(4) the speaker made it with the intention that it should be acted upon by the party;

(5) the party acted in reliance upon it;  and

(6) the party thereby suffered injury.

In re FirstMerit Bank, N.A., 52 S.W.3d 749, 758 (Tex.2001) (orig.proceeding); Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41, 47 (Tex. 1998).

5. Elder Financial Exploitation: Breach of Contract

If the circumstances of financial exploitation are based upon a written or oral contract entered into between the elder and the wrongdoer, then the elder can meet their burden of proof in a civil injury claim by establishing with admissible evidence that: (1) there was a legal contract; (2) the elder complied with its terms; (3) the wrongdoer breached the agreement; and (4) there was a resulting harm to the elder.

Here, the elder need not prove any intent to do harm on the part of the wrongdoer; the facts to establish a breach of contract case will look solely to the contract itself and its terms and conditions.

For instance, if the administration exceeded the terms of the nursing home contract with the elder in how finances were accessed or spent, then the elder may have a viable breach of contract case evidenced by elder financial exploitation.

Personal Injury Claims of Financial Exploitation of the Elderly in Texas

For anyone who suspects that they may have been manipulated or deceived to their financial detriment, there may be a basis for filing a civil claim for injuries against the person (or persons) who committed the wrongdoing.  However, when that individual is at least 60 years old, then he or she may have special civil claims to advance as an “elder” under the law.

An older person who has claims of being financially exploited may pursue legal action based on a variety of legal bases under Texas law.  In some situations, their loved ones or personal representatives may seek to institute a formal civil suit based upon one or more civil causes of action.  Damages can include financial reimbursement, as well as other forms of injury including attorneys’ fees and court costs as well as punitive or exemplary damages in instances of egregious bad acts or gross negligence.

These claims will advance independently of any criminal investigations or prosecutions; however, the evidence obtained by law enforcement may be available to support the elder’s injury claims and help to meet his or her burden of proof in the civil matter.

For more on instances where criminal prosecutions dovetail with civil injury causes of action, read:

• Crimes of Sexual Assault or Rape: Texas Injury Claims Based Upon Premises Liability Law;
• Shoplifting: The “Shopkeeper’s Privilege” in Texas and Civil Personal Injury Claims;
• Sexual Harassment: Sexual Assault Personal Injury Claims in Texas; and
• Child Abuse Crimes, Civil Claims, and Homeowner’s Insurance.

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For more information, check out our web resources, read Michael Lowe’s Case Results, and read his in-depth article,” Pre-Arrest Criminal Investigations.”