Daughter charged with Elder Abuse
James Ash is in his mid-70s. Living in a Victorian nursing home, he suffers from Parkinson’s disease. Before losing mental capacity, he appoints his daughter, Vanessa, as his Power of Attorney. Vanessa is a financial planner and a lawyer.
Shortly after, Dad is declared mentally incompetent. Vanessa takes control of her Dad’s bank accounts. She also controls his Family Trust and his Self-Managed Superannuation Fund. The SMSF exceeds $1.2 million.
What started as a kind act for her father, quickly turns into a malicious abuse of power.
Vanessa (and her recently bankrupted husband) operate a business called Ostrava. This is a financial planning business. Together they transfer Dad’s funds to Ostrava. They also sell his shares and invest the cash into Ostrava. Though Ostrava the couple invest his life savings into risky and speculative ventures.
They lose all of Dad’s money.
Vanessa’s sister became aware of the abuse and mistreatment of her Dad. She brought an action in the Victorian Court to stop Vanessa “wasting away” their Father’s money. The sister argued that Vanessa had:
* placed herself in a position of conflict; and
* had breached her fiduciary duties, by profiting from her position.
However, Vanessa has been protecting herself from the beginning. She was an experienced lawyer. She produced several documents all signed by her Dad. These included documents authorising:
* the conflict of interest
* her profiting from her position
* nominating her as Appointor of the Family Trust (the Appointor position controls the Trustee and the Family Trust)
With the support of these documents, Vanessa put forward three defences;
- All her actions were done with the informed consent of her Dad
- Her conduct was fulfilling the wishes of her Dad
- That she owed no fiduciary duties as she was acting in the capacity of his daughter and not his attorney
The Court disagreed
Justice McMillan disagreed with her. The Judge held that:
1. the fiduciary duties attached to her actions
2. Dad placed ‘full trust and confidence’ in his daughter
3. Dad believed his daughter would protect his interests.
Therefore, the fiduciary duty owed as Power of Attorney extended to all her actions relating to her father’s financial affairs. Further, the court held Dad could not have provided informed consent. Given his fragile state, he was unable to comprehend the documents produced by Vanessa.
Therefore, Vanessa’s actions were declared invalid. Her father was granted financial compensation. But by that stage, sadly, there was no money left.
Around the same time, Ostrava went into liquidation. The company was worthless. ASIC started an investigation. It took the matter to the Federal Court. The Court held Vanessa and her husband had misled their investors. The Court prohibited them from giving financial service advice for 20 years.
Dad eventually received some financial compensation. This was because Vanessa still owned her law firm and was getting an income.
WHAT IS ELDER ABUSE?
Elder Abuse is growing in ‘epidemic proportions’ since the early 2000’s. One in twenty elderly Australians experiences abuse. The culprit? Often, someone, the person trusts.
Like James Ash, this has severe ramifications for your client’s financial assets and independence. It affects the ability to pay for services such as medicine and healthcare. Elderly people are less likely to report abuse by relatives. This is out of fear that they will completely lose their finances and independence. Commonly, the perpetrators threaten their victims. For example through withholding access to grandchildren.
Financial Planners and Accountants are best placed to expose children and strangers, taking control of their client’s assets. They are in the best position to protect their client’s assets and put safeguards, such as POA’s, in place. You can build these online here.
Signs to look out for:
Warning signs include:
- a single, or repeated act or lack of appropriate action
- often occurring within a trusted relationship
- an expectation of trust between the parties
- the older person experiences harm or distress
Financial is the most common form of abuse. The studies suggest up to 5% of Australia’s elderly population falling victim. It accounts for 40% of all reports made to the Elder Abuse Prevention Helpline (EAPU).  Financial Abuse often co-exists with psychological abuse. This is as children groom their parents to gain control over their finances. 
Although Australia has seen few Cases, incidents of abuse, including by Legal and Financial Advisors, is becoming more prominent. Worldwide, 1 in 6 Elders experienced abuse in the past year.
Merle Peterson and her husband, Donald, were married for 55 years. Within days, tragedy struck. Her husband suffered Alzheimer’s. And then her only child died.
At the age of 78, Merle was alone. Vulnerable.
Thankfully, her nephew Patrick McComb entered her life. He filled the void. Merle transferred $147,000 to him. She took out a loan of $250,000 and gave the money to the nephew to invest in a nightclub.
The lawyer, Eddie Jamison, represented both Merle and her Nephew. This is unusual as it is a conflict of interest. The lawyer selected the lender and completed all documents for the above loan. The lawyer even got a ‘referral fee’ of $4,000! He allowed himself to take $10,000 from the loan payout, to cover a loan owed by the nephew.
There was clearly a conflict of interest. Yet, the lawyer never disclosed this to Merle. He did not tell her to seek independent advice.
Merle, at age 78, now had a loan of $250,000. In the next month, her nephew took the money and disappeared. Merle had nothing.
Merle defaulted on the first payment. The lender initiated foreclosure on her home.
Merle died shortly after, leaving behind a debt of over $350,000.
Financial and Legal Advisors need to look after their clients – if not, the Court hold them accountable. Eddie, Merle’s “lawyer”, had knowingly aided and abetted Merle’s nephew. The lawyer failed to protect her best interests. He did not disclose the conflicts of interest.
Make sure you protect your client’s financial assets. Do not let them be the subject of elder abuse.
HOW TO PROTECT YOUR CLIENT?
We recommend that Financial Planners and Accounts watch out for warnings signs of elder abuse. These include;
- Unpaid bills when your client has designated someone else to pay
- Missing Property
- Large or unexplained withdrawals of money
- New authorised signers on your client’s bank accounts
- Sudden changes in banks or attorneys
- Changes in spending patterns
- Excessive interest in your client’s finances by their children, relatives, and friends
Financial Planners and Accountants are in the position to be able to recognise these signs. They are able to help their client create a plan if they become incapacitated. Ensure your client has a signed Enduring Power of Attorney and Medical Power of Attorney. This allows you as their advisor to contact the right person if you suspect abuse.
At Legal Consolidated, we also provide the tools for your client to build their POA. This will allow your client to appoint the best person to make decisions regarding their assets. It makes sure that they act in your client’s best interest. Client unsure about whom to appoint as your POA? We can help you answer the online question.
 Ash v Ash  VSC 577.
 Mitchell Freedman, ‘The CPA’s role in the battle with financial elder abuse’ (2004) 18(5) Accounting Today 18, 18.
 Australian Law Reform Commission, Elder Abuse, Report No 47 (2016).
 Wainer J, Darzins P and Owada K, Prevalence of Financial Elder Abuse in Victoria: Protecting Elder’s Asset Study’ (2010) Monash University. <www.eapu.com.au/uploads/research_resources/VIC-Prevalence_of_FInancial_Elder_Abuse_MAY_2010-Monash.pdf>.
 Ron Acierno et al, ‘Prevalence and correlates of emotional, physical, sexual, and financial abuse and potential neglect in the United States: The National Elder Mistreatment Study (2010) 100(2) American Journal of Public Health 292.
 Craig Wood, as Trustee v Eddie B. Jamison No. B196898 167 Cal.App.4th 156, Court of Appeal, Second District, Division 6.
 Note, ‘Protecting mom & dad’s money’ (2013) 78(1) Consumer Reports 23.
Written by Adjunct Professor, Dr Brett Davies and UWA JD student Tayla Byatt