"Power tends to corrupt, and absolute power corrupts absolutely."

                                                                                            – Baron Acton

 Financial abuse of the elderly is a crime. Michael Ostrowski, a 42-year-old from New York, was appointed as temporary guardian for his grandfather who has dementia. While serving as guardian, he misappropriated over $300,000 and lied to the probate court (we call that perjury) and insurance companies. He took $250,000 from his grandfather’s bank account and did not file a 2006 federal income tax return.

This is an Al Capone story. Remember the notorious gangster in the Prohibition-Era Chicago? He is perhaps most infamous for his alleged involvement in the St. Valentine’s Day Massacre in which 7 victims were murdered, not to mention scores of other crimes. What did he go to jail for? Income tax evasion.

The thieving grandson in our story was charged by the U.S. attorney with mail fraud, conspiracy, interstate transportation of stolen property, receipt, possession, concealment and disposition of stolen property having crossed a state boundary; engaging in a monetary transaction in property derived from specified unlawful activity; and failure to file an income tax return. He pleaded guilty to all these items.

Michael was sentenced to two years in prison followed by 3 years of supervised release. He was ordered to pay restitution in the amount of $100,459 to MassHealth and $85,751 to the IRS. The Judge also ordered forfeiture of $179,000 and the things he had purchased with his ill-gotten gains: a Sony Bravia flat-panel television, a 39mm semi-automatic assault rifle; and a $37,000 GMC Sierra pickup truck.

Since the grandfather was in Massachusetts, and Ostrowski took the stolen money back to New York where he lived, the diversity of jurisdictions made it eligible to be a federal matter. Not filing an income tax return is also a federal charge. So the fed’s involvement was necessary. But there is no mention of state involvement for the mismanagement, amounting to fraud, by means of the Power of Attorney.

Financial abuse of the elderly is a huge problem. The National Center on Elder Abuse (NCEA) published a report and recommendations entitled "Forgotten Victims of Elder Financial Crime and Abuse." They describe many challenges. "Many elderly victims fail to report crimes or abuse to the police or even to their own families out of shame or embarrassment."

Law enforcement personnel sometimes fail to recognize crimes when they see them. When abuse involves the misuse of legal documents, (e.g. the forging of wills or powers of attorney, or inducing mentally incapacitated persons to transfer titles of their homes), it is often viewed as a "civil matter." Investigators may be well into cases before it occurs to them to find out if victims are being over medicated or under-medicated (homicide cases involving victims who are poisoned or starved for financial gain are becoming increasingly common).

Unless these patterns are recognized, victims may be dead and cremated before the investigator makes the connection."

Financial crimes are often very difficult to prove. Important documents may have been destroyed.. Many victims do not make good witnesses owing to the same dementia that rendered them susceptible to abuse in the first place.

Investigating and prosecuting financial crimes is very time-consuming and labor intensive. These property crimes are often viewed as "less serious" than violent crime.

What is the answer? Some commentators suggest that there needs to be more up-front monitoring, instead of punishing people after the fact. The durable power of attorney is popular technique for incapacity planning. But it comes with grave danger of abuse. However, the use of a power of attorney allows complete control of the principal’s assets. Special care should be given to granting the agent the authority to make gifts.

Here are some steps that could help: 1) require registration of powers of attorney in the same jurisdiction in which a guardianship action would be brought so there is notice of who is acting for whom; 2) once the principal becomes incapacitated, require the agent to file an annual accounting; 3) require an agent to produce an accounting on the death of the principal. The flexibility of the durable power of attorney and its usefulness in avoiding guardianship are very important. But the power is so broad and sweeping that abuse is rampant. What other fiduciary is permitted to act without providing accountings?

True, any of these steps make the duties of the honest agent more burdensome. It is ever so. Good people do not need laws to tell them to act responsibly. The law needs to prevent the bad people from abusing the elderly.